<PAGE>
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
-------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from to
------------------------ -----------------------
Commission File Number: 0-16760
--------------------------------------------------------
MGM GRAND, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 88-0215232
- --------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 891-3333
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 8, 2000
- ------------------------------------ -----------------------------------------
Common Stock, $.01 par value 158,399,686 shares
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
FORM 10-Q
I N D E X
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the Three Months Ended
March 31, 2000 and March 31, 1999.............. 1-2
Condensed Consolidated Balance Sheets
at March 31, 2000 and December 31, 1999........ 3
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 2000 and March 31, 1999.............. 4
Notes to Condensed Consolidated Financial
Statements .................................... 5-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations ................................. 11-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................. 15
Item 6. Reports on Form 8-K............................ 15
Signatures..................................... 16
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES:
Casino $304,635 $138,053
Rooms 67,333 54,839
Food and beverage 51,126 34,447
Entertainment, retail and other 53,031 40,422
Income from unconsolidated affiliate - 6,084
------------ ------------
476,125 273,845
Less: promotional allowances 33,253 22,478
------------ ------------
442,872 251,367
------------ ------------
EXPENSES:
Casino 143,358 72,635
Rooms 19,496 14,718
Food and beverage 27,546 20,990
Entertainment, retail and other 28,467 25,271
Provision for doubtful accounts and discounts 14,926 11,395
General and administrative 64,463 33,620
Preopening, restructuring and other non-recurring expenses 6,488 8,810
Depreciation and amortization 39,871 20,892
------------ ------------
344,615 208,331
------------ ------------
OPERATING PROFIT BEFORE CORPORATE EXPENSE 98,257 43,036
Corporate expense 5,817 5,094
------------ ------------
OPERATING INCOME 92,440 37,942
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 763 327
Interest expense, net of amounts capitalized (22,089) (8,186)
Interest expense from unconsolidated affiliate - (1,058)
Other, net (162) (201)
------------ ------------
(21,488) (9,118)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 70,952 28,824
Provision for income taxes (26,647) (10,333)
------------ ------------
NET INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 44,305 18,491
Extraordinary loss on early extinguishment of debt, net of $484 tax benefit - (898)
Cumulative effect of change in accounting principle for preopening, net
of $4,399 tax benefit - (8,168)
------------ ------------
NET INCOME $ 44,305 $ 9,425
============ ============
NET INCOME $ 44,305 $ 9,425
Currency translation adjustment 3,812 (1,451)
------------ ------------
COMPREHENSIVE INCOME $ 48,117 $ 7,974
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-1-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
PER SHARE OF COMMON STOCK
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
2000 1999
------------- -------------
<S> <C> <C>
PER SHARE OF COMMON STOCK:
Basic:
Net income per share before extraordinary item and
cumulative effect of change in accounting principle $ 0.39 $ 0.17
Extraordinary item, net - (0.01)
Cumulative effect of change in accounting principle, net - (0.07)
------------- -------------
Net income per share $ 0.39 $ 0.09
============= =============
Weighted Average Shares Outstanding (000's) (1) 112,819 110,752
============= =============
Diluted:
Net income per share before extraordinary item and
cumulative effect of change in accounting principle $ 0.38 $ 0.16
Extraordinary item, net - (0.01)
Cumulative effect of change in accounting principle, net - (0.07)
------------- -------------
Net income per share $ 0.38 $ 0.08
============= =============
Weighted Average Shares Outstanding (000's) (1) 115,438 113,292
============= =============
</TABLE>
Note:
(1) All references to share and per share data herein have been adjusted
retroactively to give effect to the 2 for 1 stock split effective on
February 10, 2000.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-2-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 98,080 $ 121,522
Accounts receivable, net 75,308 83,101
Prepaid expenses and other 29,634 32,598
Inventories 12,143 15,240
Deferred tax asset 5,645 17,452
------------ ------------
Total current assets 220,810 269,913
------------ ------------
PROPERTY AND EQUIPMENT, NET 2,411,940 2,390,524
OTHER ASSETS:
Investments in unconsolidated affiliates, net 12,632 12,485
Excess of purchase price over fair market value
of net assets acquired, net 36,294 36,550
Deposits and other assets, net 51,388 51,271
------------ ------------
Total other assets 100,314 100,306
------------ ------------
$2,733,064 $2,760,743
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 30,334 $ 38,018
Construction payable 5,424 7,896
Income taxes payable 14,000 3,296
Dividend payable - 11,388
Current obligation, capital leases 5,132 5,145
Current obligation, long term debt 7,284 7,852
Accrued interest on long term debt 8,758 18,915
Other accrued liabilities 169,347 197,580
------------ ------------
Total current liabilities 240,279 290,090
------------ ------------
DEFERRED REVENUES 4,776 4,241
DEFERRED INCOME TAXES 105,716 108,713
LONG TERM OBLIGATION, CAPITAL LEASES 11,558 12,864
LONG TERM DEBT 1,334,000 1,310,989
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 300,000,000 shares authorized,
138,897,662 and 138,445,048 shares issued and outstanding) 1,389 1,384
Capital in excess of par value 1,268,912 1,261,625
Treasury stock, at cost (27,059,000 and 24,565,200 shares) (558,403) (505,824)
Retained earnings 311,529 267,165
Other comprehensive income 13,308 9,496
------------ ------------
Total stockholders' equity 1,036,735 1,033,846
------------ ------------
$2,733,064 $2,760,743
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 44,305 $ 9,425
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 40,049 21,095
Amortization of debt offering costs 490 490
Provision for doubtful accounts and discounts 14,926 11,395
Loss on early extinguishment of debt - 1,382
Cumulative effect of accounting change - 12,567
Earnings in excess of distributions-unconsolidated affiliate - (5,026)
Deferred income taxes 11,984 3,740
Change in assets and liabilities:
Accounts receivable (7,133) 16,139
Inventories 2,837 1,279
Prepaid expenses and other 2,964 (6,184)
Income taxes payable 10,704 5,638
Accounts payable, accrued liabilities and other (51,084) (41,139)
Currency translation adjustment 1,076 (127)
-------- ---------
Net cash from operating activities 71,118 30,674
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (62,401) (117,257)
Acquisition of Primadonna Resorts, Inc., net - (13,345)
Disposition of property and equipment, net 198 4,691
Change in construction payable (2,472) 4,779
Change in deposits and other assets, net 1,552 9,880
-------- ---------
Net cash from investing activities (63,123) (111,252)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to banks and others (1,821) (2,593)
Issuance of long term debt - -
Borrowings under bank line of credit 90,000 450,000
Extinguishment of long term debt - (374,500)
Repayments of bank lines of credit (63,000) (15,000)
Purchase of treasury stock (52,579) -
Cash dividend paid (11,329) -
Issuance of common stock 7,292 6,484
-------- ---------
Net cash from financing activities (31,437) 64,391
-------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (23,442) (16,187)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 121,522 81,956
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 98,080 $ 65,769
======== =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-4-
<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, 2000, approximately 64.4%
of the outstanding shares of the Company's common stock were owned by Kirk
Kerkorian and Tracinda Corporation ("Tracinda"), a Nevada corporation
wholly owned by Kirk Kerkorian.
Through its wholly-owned subsidiary, MGM Grand Hotel, Inc., the
Company owns and operates the MGM Grand Hotel and Casino ("MGM Grand Las
Vegas"), a hotel, casino and entertainment complex in Las Vegas, Nevada.
Prior to March 1, 1999, the Company and Primadonna Resorts, Inc.
("Primadonna") each owned 50% of New York-New York Hotel and Casino, LLC
("NYNY LLC"). On March 1, 1999, the Company completed its acquisition (the
"Acquisition") with Primadonna Resorts, Inc., and as part of the
Acquisition, acquired Primadonna's 50% ownership interest in NYNY LLC,
which owns and operates the destination resort called New York-New York
Hotel and Casino ("NYNY") in Las Vegas, Nevada (see Note 6). Consequently,
as of March 1, 1999, Primadonna and NYNY LLC are wholly-owned subsidiaries
of the Company. The Acquisition also gave the Company ownership of three
hotel and casinos located in Primm, Nevada at the California/Nevada
stateline, which includes: Whiskey Pete's, Buffalo Bill's and the Primm
Valley Resort (the "Primm Properties"), as well as two championship golf
courses located one mile from the Primm Properties.
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 ("MGM
Grand Detroit"), at an approximate cost of $800 million. On November 20,
1997, the Company was chosen to construct, own and operate one of Detroit's
three new casinos. Construction of the new hotel/casino 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 allowed the issuance of casino licenses to
conduct gaming operations in temporary facilities. On July 28, 1999, the
Michigan Gaming Control Board issued a casino license to MGM Grand Detroit,
LLC to conduct gaming operations in it's interim facility ("MGM Grand
Detroit Casino"), which commenced operations on July 29, 1999. The MGM
Grand Detroit Casino is located directly off of the Lodge freeway in
downtown Detroit, Michigan.
Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the
Company owns and operates the MGM Grand Hotel and Casino in Darwin,
Australia ("MGM Grand Australia"), which is located on 18 acres of
beachfront property on the north central coast of Australia.
Through its wholly-owned subsidiary, MGM Grand South Africa, Inc., the
Company manages one permanent and two temporary casinos in two provinces of
the Republic of South Africa. The Company managed a temporary facility in
Nelspruit from October 15, 1997 to November 17, 1999, at which time a
permanent casino began operations, the temporary casino in Witbank began
operations on March 10, 1998 and the temporary casino in Johannesburg began
operations on September 28, 1998. The Company receives management fees
from its partner, Tsogo Sun Gaming & Entertainment, which is responsible
for providing all project costs.
Through its wholly-owned subsidiary, MGM Grand Atlantic City, Inc.,
the Company has announced plans 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. Through March 31, 2000, approximately $70 million was
expended, with $69.1 million capitalized and $.9 million expensed by the
Company for the project.
As permitted by the rules and regulations of the Securities and
Exchange Commission, certain information and footnote disclosures normally
included in the financial statements prepared in accordance
-5-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 1. Organization and Basis of Presentation (continued)
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 1999 Annual Report included in the Company's Form 10-K/A.
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, 2000, and the results of operations for
the three month periods ended March 31, 2000 and 1999. 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 the 1999 financial
statements to conform to the 2000 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, 2000 and 1999, cash payments made
for interest, net of amounts capitalized, were $31.6 million and $1.6
million, respectively.
Cash payments made for state and federal taxes for the three months
ended March 31, 2000 and 1999 were $3.6 million and $2 million,
respectively.
As a result of the Acquisition (see Note 6), the Company issued stock
to Primadonna shareholders in the amount of approximately $243.6 million
and assumed long term debt totaling $315.2 million.
Note 3. Long Term Debt and Notes Payable
Long term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Senior Reducing Revolving Credit Facility $ 662,000 $ 612,000
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
MGM Grand Detroit, LLC Credit Facility, due April 1, 2003 146,000 169,000
Australian Bank Facility, due December 1, 2004 (US$) 33,284 37,841
----------- -----------
1,341,284 1,318,841
Less: Current Maturities (7,284) (7,852)
----------- -----------
$1,334,000 $1,310,989
=========== ===========
</TABLE>
Total interest incurred for the first three months of 2000 and 1999
was $24.1 million and $13.1 million, respectively, of which $2 million and
$4.9 million were capitalized in the 2000 and 1999 periods, respectively.
Also, during the first three months of 1999, the Company recognized
interest expense from its unconsolidated affiliate of $1.1 million.
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
-6-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 3. Long Term Debt and Notes Payable (continued)
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. Quarterly reductions of $62.5
million begin on December 23, 2001. On May 4, 1999, two letters of credit
totaling $49.9 million were issued under the New Facility to support
municipal financing used in connection with the proposed Detroit permanent
casino. During the three months ended March 31, 2000, $80 million was
drawn down and $30 million was repaid on the New Facility and $662 million
remained outstanding.
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. The 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 (including New York-New York,
The Primadonna Company, LLC, PRMA, LLC, New PRMA Las Vegas, Inc., MGM Grand
Detroit II, LLC, MGM Grand-Bally's Monorail LLC, MGM Grand Australia Pty
Ltd and the non-U.S. subsidiaries of the Company and their U.S. holding
companies which have no other assets or operations (see Note 8)).
The Australian bank facility originally provided a total
availability of approximately $63.7 million (AUD $105 million), which has
been reduced by principal payments totaling $33.3 million (AUD $50.2
million) made in accordance with the terms of the bank facility, including
$1.8 million (AUD $3.0 million) during the three months ended March 31,
2000. As of March 31, 2000, $33.3 million (AUD $54.8 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. During 1999, the maturity of the facility was extended from
December 2002 to December 2004. The indebtedness has been guaranteed by the
Company.
MGM Grand Australia has a $12.1 million (AUD $20 million)
uncommitted standby line of credit, with a funding period of 91 days for
working capital purposes. No amounts were borrowed under the line of credit
and no amount was outstanding during the three months ended March 31, 2000.
On March 31, 1999, MGM Grand Detroit, LLC, through its wholly-
owned subsidiary, MGM Grand Detroit II, 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 metropolitan area. The Detroit
Facility will be used to finance the development and construction of the
interim 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 interim facility and is guaranteed by the Company. The
Detroit Facility matures in April 2003. During the three months ended March
31, 2000, $10 million was drawn down and $33 million was repaid on the
Detroit Facility and $146 million remained outstanding.
As of March 31, 2000, the Company was in compliance with all
covenant provisions associated with the aforementioned obligations.
Note 4. Stockholders' Equity
On June 23, 1998, the Company announced a $17.50 per share cash
tender offer for up to 12 million shares of the Company's common stock as
part of a 24 million share repurchase program. The offer commenced on July
2, 1998 and expired on July 31, 1998. A total of 21.6 million shares of the
Company's common stock were tendered and, accordingly, the shares were
prorated. The total acquisition cost of the 12 million shares was
approximately $210.6 million.
-7-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 4. Stockholders' Equity (continued)
On March 1, 1999, the Company issued 19 million shares of the
Company's common stock valued at approximately $243.6 million in connection
with the Primadonna Acquisition (see Note 6).
On June 10, 1999, the Company announced a $25.00 per share cash tender
offer for up to 12 million shares of the Company's common stock. The offer
commenced on June 17, 1999 and expired on July 23, 1999. A total of 30.2
million shares of the Company's common stock were tendered, and
accordingly, the shares were prorated. The total acquisition cost of the 12
million shares was approximately $282 million. The Company recognized
certain non-recurring compensation costs totaling approximately $18.5
million related to exercisable options that were tendered. This tender
offer completed the acquisition of the remaining 12 million shares offered
in the 24 million share repurchase program announced on June 23, 1998.
On August 5, 1999, the Company announced a twelve-month stock
repurchase program for up to 10 million shares of the Company's common
stock. The purchases will be made from time to time in the open market or
through privately negotiated transactions as market conditions warrant.
Through March 31, 2000, the Company purchased 3.1 million shares for an
approximate cost of $65.8 million.
On December 13, 1999, the Board of Directors approved a two-for-one
split of the Company's common stock and declared an initial quarterly cash
dividend of $0.10 per share, after giving effect to the stock split. The
additional shares were distributed on February 25, 2000 to stockholders of
record on February 10, 2000. The cash dividend totaling $11.3 million was
paid on March 1, 2000 to stockholders of record on February 10, 2000. All
references to share and per share data herein have been adjusted
retroactively to give effect to the stock split. Concurrently, the Board
of Directors increased the number of authorized shares of the Company's
common stock from 75 million shares to 300 million shares.
As a result of the pending merger with Mirage, the Company announced
on April 19, 2000, that the previously declared quarterly dividend policy
was discontinued. Also, the Company has determined to suspend the
previously announced share repurchase program (see Note 7).
Note 5. Earnings per Share
The Company accounts for earnings per share ("EPS") 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 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 assumption that options issued to employees are exercised and
repurchased at the average price for the periods presented. Weighted
average diluted shares include the following: options to purchase 2,619,000
and 2,540,000 shares issued to employees for the three month periods ended
March 31, 2000 and 1999, respectively.
Note 6. Primadonna Acquisition
On March 1, 1999, the Company completed the Acquisition of Primadonna
Resorts, Inc. for 19 million shares of the Company's common stock valued at
approximately $243.6 million plus the assumption of debt totaling $315.2
million. Primadonna shareholders received .66 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 allocated to the
underlying assets acquired and liabilities assumed based upon their
estimated fair values at the date of the Acquisition. 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)
Note 6. Primadonna Acquisition (continued)
The following unaudited pro forma consolidated financial information
for the Company has been prepared assuming that the Acquisition had
occurred on the first day of the following respective periods (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Net Revenues $442,872 $318,465
======== ========
Operating Income $ 92,440 $ 47,799
======== ========
Net Income before Extraordinary Item and
Cumulative Effect of Change in Accounting Principle $ 44,305 $ 22,414
======== ========
Basic Earnings per Share before Extraordinary Item
and Cumulative Effect of Change in Accounting Principle $ 0.39 $ 0.18
======== ========
Weighted Average Basic Shares Outstanding (000's) 112,819 123,220
======== ========
Diluted Earnings per Share before Extraordinary Item
and Cumulative Effect of Change in Accounting Principle $ 0.38 $ 0.18
======== ========
Weighted Average Diluted Shares Outstanding (000's) 115,438 125,946
======== ========
</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 7. Mirage Merger
On March 6, 2000, the Company announced the signing of a definitive
merger agreement with Mirage Resorts, Incorporated ("Mirage"), under which
the Company will acquire all of the outstanding shares of Mirage for $21
per share in cash. The transaction will have a total equity value of
approximately $4.4 billion. In addition, the Company will assume the
outstanding debt of Mirage of approximately $2.0 billion. The Company
intends to finance this acquisition and all costs related to the merger
through new $4.6 billion bank credit facilities and debt and equity
securities, of which the Company has already raised $1.23 billion of new
equity through the private placement of 46.5 million shares of MGM Grand,
Inc.'s common stock on April 18, 2000. Any public offering of securities
will only be made by means of a prospectus supplement. The merger is
subject to the approval of Mirage shareholders and to the satisfaction of
customary closing conditions contained in the merger agreement, including
the receipt of all necessary regulatory and governmental approvals. The
merger will be accounted for as a purchase and is anticipated to close in
2000.
-9-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 8. Subsidiary Guarantors
The Company's subsidiaries (excluding New York-New York, The Primadonna
Company, LLC, PRMA, LLC, New PRMA Las Vegas, Inc., MGM Grand Detroit II, LLC,
MGM Grand-Bally's Monorail LLC, MGM Grand Australia Pty Ltd and the non-U.S.
subsidiaries of the Company and their U.S. holding companies which have no
other assets or operations) have unconditionally guaranteed payment of the
Senior Collateralized Notes and the New Facility. The guaranty given by MGM
Grand Detroit, LLC and the pledge of its assets, are limited to the amount
borrowed under the credit facility which is made available to MGM Grand
Detroit, LLC. All material non-guarantor subsidiaries were acquired or
established during 1999, accordingly comparative information has not been
provided as prior to that time all material subsidiaries were guarantors.
MGM Grand, Inc.
Consolidating Condensed Financial Information
As of and for the three months ended March 31, 2000
(In thousands)
<TABLE>
<CAPTION>
MGM Grand, Guarantor Non-Guarantor
Inc. Subsidiaries Subsidiaries Elimination Consolidated
----------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet
- -------------
Current assets $ 234,772 $ 166,792 $ 63,440 $ (244,194) $ 220,810
Property and equipment, net 11,060 1,590,265 822,553 (11,938) 2,411,940
Investment in subsidiaries 1,234,982 - - (1,234,982) -
Investment in unconsolidated affiliates 127,902 - 226,895 (342,165) 12,632
Intercompany note receivable 254,376 - (254,376) - -
Other non-current assets 11,060 26,128 50,494 - 87,682
----------- ----------- ---------- ------------ -----------
$ 1,874,152 $ 1,783,185 $ 909,006 $ (1,833,279) $ 2,733,064
=========== =========== ========== ============ ===========
Current liabilities $ 146,493 $ 421,964 $ 95,200 $ (423,378) $ 240,279
Long term obligation, capital leases - 3,784 7,774 - 11,558
Long term debt 1,162,000 146,000 26,000 - 1,334,000
Other non-current liabilities 75,127 4,776 25,355 5,234 110,492
Stockholders' equity 490,532 1,206,661 754,677 (1,415,135) 1,036,735
----------- ----------- ---------- ------------ -----------
$ 1,874,152 $ 1,783,185 $ 909,006 $ (1,833,279) $ 2,733,064
=========== =========== ========== ============ ===========
Statement of Operations
- -----------------------
Revenues:
Casino $ - $ 225,838 $ 78,797 $ - $ 304,635
Rooms - 46,094 21,275 (36) 67,333
Food and beverage - 39,478 11,697 (49) 51,126
Entertainment, retail and other 475 32,044 21,040 (528) 53,031
Income from unconsolidated affiliate - - - - -
----------- ----------- ---------- ------------ -----------
475 343,454 132,809 (613) 476,125
Less: Promotional allowances - 25,401 7,852 - 33,253
----------- ----------- ---------- ------------ -----------
475 318,053 124,957 (613) 442,872
----------- ----------- ---------- ------------ -----------
Expenses:
Casino - 114,219 29,139 - 143,358
Rooms - 11,234 8,262 - 19,496
Food and beverage - 20,684 6,862 - 27,546
Entertainment, retail and other - 19,594 8,919 (46) 28,467
Provision for doubtful accounts
and discounts - 14,804 122 - 14,926
General and administrative - 40,653 23,810 - 64,463
Depreciation and amortization - 28,527 11,433 (89) 39,871
Preopening, restructuring and
other non-recurring expenses - 5,920 568 - 6,488
Corporate expense 6,385 - - (568) 5,817
----------- ----------- ---------- ------------ -----------
6,385 255,635 89,115 (703) 350,432
----------- ----------- ---------- ------------ -----------
Operating income (loss) (5,910) 62,418 35,842 90 92,440
Interest expense, net (13,485) (2,493) (5,348) - (21,326)
Other, net 11,280 (8,434) (3,008) - (162)
----------- ----------- ---------- ------------ -----------
Income before income taxes,
extraordinary item and
cumulative effect of change in
accounting principle (8,115) 51,491 27,486 90 70,952
Provision for income taxes (26,647) - - - (26,647)
----------- ----------- ---------- ------------ -----------
Net income (loss) before extraordinary
item and cumualtive effect of
change in accounting principle $ (34,762) $ 51,491 $ 27,486 $ 90 $ 44,305
=========== =========== ========== ============ ===========
Statement of Cash Flows
- -----------------------
Net cash provided by (used in)
operating activities $ (7,826) $ 40,773 $ 39,442 $ (1,271) $ 71,118
Net cash provided by (used in)
investing activities (960) (57,895) (5,178) 910 (63,123)
Net cash provided by (used in)
financing activities 25,505 (21,075) (36,224) 357 (31,437)
</TABLE>
-10-
<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 2000 were $442.9 million,
representing an increase of $191.5 million (76.2%) when compared with
$251.4 million during the same period last year. The increase in net
revenues was due to strong casino and hotel volumes, as well as the
addition of NYNY and the Primm Properties effective with the March 1, 1999
Acquisition of Primadonna (see Note 6) and the continued contribution from
the MGM Grand Detroit Casino which opened on July 29, 1999.
Consolidated casino revenues for the first quarter of 2000 were $304.6
million, representing an increase of $166.5 million (120.6%) when compared
with $138.1 million during the same period in the prior year. MGM Grand
Las Vegas casino revenues were $127.9 million, representing an increase of
$20.7 million (19.3%) when compared with $107.2 million during the same
period in the prior year. The increase in casino revenues at MGM Grand Las
Vegas was a result of increased baccarat volume and win percentage, in
addition to an increase in slots volume. MGM Grand Australia reported
casino revenues of $7.8 million, representing an increase of $1.2 million
(18.2%) when compared with $6.6 million during the same period in the prior
year. This increase was largely due to an increase in slots volume, in
addition to an increase in tables games and keno volume. NYNY and the
Primm Properties reported casino revenues of $29.6 million and $41.5
million, respectively, in the current quarter compared with $10.3 million
and $13.9 million, respectively, during the same period in the prior year.
The increase at both properties was primarily due to the current year's
quarter receiving a full three month contribution from the Acquisition on
March 1, 1999 compared to the prior year's quarter which only received a
partial contribution. MGM Grand Detroit Casino contributed $98 million to
casino revenues during the quarter as a result of the opening of the
property on July 29, 1999.
Consolidated room revenues were $67.3 million for the first quarter of
2000 compared with $54.8 million in the prior year's first quarter,
representing an increase of $12.5 million (22.8%). MGM Grand Las Vegas
room revenues were $46.1 million, representing a decrease of $.7 million
(1.5%) when compared with $46.8 million in the same period of the prior
year. The decrease was primarily due to a room renovation currently
underway which resulted in approximately 13,000 room nights out of service
in the current quarter. The decreased room nights were somewhat offset by
a higher occupancy of 97.2% in the first quarter of 2000 compared with
96.5% in the prior year and a higher average daily room rate of $110 in the
first quarter of 2000 compared with $109 in the 1999 period. MGM Grand
Australia room revenues were $.4 million, representing an increase of $.1
million (33.3%) when compared with $.3 million in the same period of the
prior year. The increase was due to a higher average room rate for the
2000 first quarter of $60 compared with $57 in the prior year, as well as
an increase in occupancy to 67.6% compared with 53.8% in the prior year.
NYNY and the Primm Properties reported room revenues of $14.9 million and
$6.0 million, respectively, in the current year's quarter compared with
$5.9 million and $1.9 million, respectively, for the first quarter of 1999.
The increase at both properties was primarily due to the current year's
quarter receiving a full three month contribution from the Acquisition on
March 1, 1999 compared to the prior year's quarter which only received a
partial contribution.
Consolidated food and beverage revenues were $51.1 million in the
first quarter of 2000, representing an increase of $16.7 million (48.5%)
when compared with $34.4 million in the first quarter of the prior year.
MGM Grand Las Vegas reported food and beverage revenues of $33.7 million
during the first quarter of 2000, representing an increase of $3.8 million
(12.7%) when compared with $29.9 million in the first quarter of 1999.
This increase resulted from increased revenue in the Conference Center,
Studio 54 night club and the Grand Buffet. MGM Grand Australia reported
food and beverage revenues of $1.2 million, representing an increase of $.2
million (20.0%) when compared with $1.0 million in the first quarter of
1999, due to increased banquet revenue in the current year. NYNY and the
Primm Properties reported food and beverage revenues of $3.4 million and
$7.1 million, respectively, for the first quarter of 2000 compared with
$1.2 million and $2.4 million, respectively, during the prior year. The
increase at both properties was primarily due to the current year's quarter
receiving a full three month contribution from the Acquisition on March 1,
1999 compared to the prior year's quarter which only received a partial
contribution. MGM Grand Detroit Casino contributed $5.7 million to food
and beverage revenues during the quarter as a result of the opening of the
property on July 29, 1999.
-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)
Consolidated entertainment, retail and other revenues increased $12.6
million (31.2%) from $40.4 million in the 1999 period to $53 million in the
2000 period. MGM Grand Las Vegas entertainment, retail and other revenues
increased $.4 million (1.3%) from $31.1 million in the first quarter of
1999 to $31.5 million in the first quarter of 2000. This increase was the
result of higher tenant rental and retail and spa revenues in 2000, as well
as the addition of the Mansion and Wedding Chapel which both opened in June
1999. The Company had decreased management fees from MGM Grand South Africa
of $1.3 million in the 2000 period compared with $2.6 million in the prior
year. NYNY and the Primm Properties reported entertainment, retail and
other revenues of $9.5 million and $10.3 million, respectively, for the
first quarter of 2000 compared with $3.4 million and $3.4 million,
respectively, during the prior year's quarter. The increase at both
properties was primarily due to the current year's quarter receiving a full
three month contribution from the Acquisition on March 1, 1999 compared to
the prior year's quarter which only received a partial contribution. MGM
Grand Detroit Casino contributed entertainment, retail and other revenues
of $.5 million as a result of the opening of the property on July 29, 1999.
Income from unconsolidated affiliate was $6.1 million for the first
quarter of 1999, representing the Company's 50% share of NYNY's operating
income. As a result of the Acquisition of Primadonna, 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 Corporate expense) were $344.6
million in the first quarter of 2000, representing an increase of $136.3
million (65.4%) when compared with $208.3 million for the same period last
year. MGM Grand Las Vegas expenses increased $14.0 million (8.4%) from
$165.8 million in the 1999 period to $179.8 million in the 2000 period.
The increase is primarily due to increased casino expenses for gaming
taxes, airfare and marketing expenses pertaining to the increased casino
revenues, increased provision for doubtful accounts and higher
entertainment, retail and other expenses related to the Lion Habitat and
Mansion. MGM Grand Australia operating expenses increased from $6.3
million in the 1999 period to $7.1 million in the 2000 period primarily due
to higher casino taxes from increased revenue and tax rates. NYNY and the
Primm Properties added operating expenses of $36.6 million and $45.3
million, respectively, during the first quarter of 2000 compared with $16
million and $16.3 million, respectively, during the prior year. The
increase at both properties was primarily due to the current year's quarter
receiving a full three month contribution from the Acquisition on March 1,
1999 compared to the prior year's quarter which only received a partial
contribution. As a result of the opening of the property on July 29, 1999,
MGM Grand Detroit Casino added $75.8 million in operating expenses during
the first quarter of 2000.
Corporate expense for 2000 was $5.8 million compared with $5.1 million
in 1999, representing an increase of $.7 million. The increase in the
current quarter was attributable to higher airplane costs, in addition to
higher legal and outside service expenses related to the stock dividend and
split.
Interest income of $.8 million for the three months ended March 31,
2000, increased by $.5 million from $.3 million in the first quarter of
1999. The increase was attributable to higher invested cash balances
compared to the prior year.
Interest expense in the first quarter of 2000 was $22.1 million (net
of amounts capitalized) compared with $8.2 million in the first quarter of
1999, reflecting increased outstanding loan balances relating to
construction of the MGM Grand Detroit Casino, as well as debt assumed in
the Acquisition of Primadonna on March 1, 1999. Additionally, the Company
recognized interest expense from unconsolidated affiliate of $1.1 million
during the 1999 period.
Extraordinary loss of $.9 million in 1999, net of income tax benefit,
reflects the write-off of unamortized debt costs from the NYNY LLC bank
facility, which was extinguished on March 31, 1999.
Cumulative effect of change in accounting principle of $8.2 million in
1999, net of income tax
-12-
<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)
benefit, reflects the Company's adoption of Statement of Position 98-5
("SOP 98-5") which requires that costs associated with start-up activities
must be expensed as incurred.
Liquidity and Capital Resources
As of March 31, 2000 and December 31, 1999, the Company held cash and
cash equivalents of $98.1 million and $121.5 million, respectively. Cash
provided by operating activities for the first three months of 2000 was
$71.1 million compared with $30.7 million for the same period of 1999.
During the three months ended March 31, 2000, $80 million was drawn
down and $30 million was repaid on the New Facility and $662 million
remained outstanding at the end of the period. During the three months
ended March 31, 2000, $10 million was drawn down and $33 million was repaid
on the Detroit Facility and $146 million remained outstanding at the end of
the period.
As of March 31, 2000, the Company was in compliance with all covenant
provisions associated with the aforementioned obligations.
Capital expenditures during the first three months of 2000 were $62.4
million, of which $30.5 million related to MGM Grand Las Vegas, $2.4
million at NYNY, $2.8 million at Primm Properties, and $.9 million at MGM
Grand Australia for general property improvements. Additionally, $7.5
million was spent for the golf course at MGM Grand Las Vegas, $16.4 million
was incurred at the MGM Grand Detroit Casino for construction activities
and land acquisition and $1.9 million at MGM Grand Atlantic City for land
acquisition costs and pre-construction activities. Anticipated capital
expenditures remaining for 2000 are approximately $192.1 million,
consisting of approximately $69.6 million for MGM Grand Las Vegas, $4.0
million for NYNY, and $6.7 million for the Primm Properties related to
general property improvements, $28.1 million related to the golf course at
MGM Grand Las Vegas, $79.0 million for construction activities related to
the interim and permanent facilities in Detroit, and $4.7 million related
to land acquisitions and pre-construction activities for MGM Grand Atlantic
City. In conjunction with the proposed Merger with Mirage, the Company may
incur additional capital expenditures related to the maintenance of the
Mirage properties.
On August 5, 1999, the Company announced a twelve month stock
repurchase program for up to 10 million shares of the Company's common
stock. The purchases will be made from time to time in the open market or
through privately negotiated transactions as market conditions warrant.
Through March 31, 2000, the Company purchased 3.1 million shares for an
approximate cost of $65.8 million.
On December 13, 1999, the Board of Directors approved a two-for-one
stock split of the Company's common stock and declared an initial quarterly
cash dividend of $0.10 per share, after giving effect to the stock split.
The additional shares were distributed on February 25, 2000 to stockholders
of record on February 10, 2000. The cash dividend totaling $11.3 million
was paid on March 1, 2000 to stockholders of record on February 10, 2000.
All references to share and per share data herein have been adjusted
retroactively to give effect to the stock split. Concurrently, the Board
of Directors increased the number of authorized shares of the Company's
common stock from 75 million shares to 300 million shares.
The Company expects to finance operations, capital expenditures and
existing debt obligations through cash flow from operations, cash on hand,
bank lines of credit and equity offerings.
On March 6, 2000, the Company and Mirage entered into a definitive
merger agreement whereby the Company will acquire all of the outstanding
shares of Mirage for $21 per share in cash. The transaction will have a
total equity value of approximately $4.4 billion. In addition, the Company
will assume the outstanding debt of Mirage Resorts of approximately $2.0
billion (see Note 7).
It is expected that the Company will need approximately $6.2 billion
in order to complete the Merger. This includes payments to be made to
Mirage stockholders and holders of Mirage stock options,
-13-
<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)
refinancing of certain indebtedness of Mirage and MGM Grand, payment of
fees and expenses in connection with the Merger and funds for general
corporate purposes after the Merger.
On April 11, 2000, the Company entered into three new senior credit
agreements providing for bank financing totaling $4.3 billion from
syndicates of banks each led by Bank of America, N.A. In addition, on May
9, 2000, the Company received a commitment for $300 million of additional
bank financing (collectively with the new senior credit agreement, "New
Senior Facilities"). The New Senior Facilities consist of: (1) a $2.0
billion five-year senior revolving credit facility maturing five years from
the closing of the Merger; (2) a $1.0 billion 364-day senior revolving
credit facility maturing 364 days from the closing of the Merger; (3) a
$300 million 364-day senior revolving credit facility maturing 364 days
from the closing of the Merger; and (4) a $1.3 billion twelve-month senior
term loan maturing 12 months from the closing of the Merger. On April 18,
2000, the Company also completed a private placement of 46.5 million
shares of its common stock for a total purchase price of approximately
$1.23 billion. The Company also intends to complete a bond offering prior
to or concurrently with the completion of the Merger where the amount of
the bond offering would be equal to the difference between the approximate
$6.2 billion needed to finance the Merger and the sum of the $4.6 billion
new senior facilities and the amount of the equity offering. To the extent
that the amount raised under these facilities and offering exceeds the $6.2
billion needed to finance the Merger, the excess will be used to fund
continuing operations or pay down the indebtedness of the combined company.
These New Senior Facilities contain terms and conditions customary for
financings in which the borrower has investment grade credit ratings. In
addition, the credit agreements contain representations and warranties,
covenants and events of default customary for financings of this type.
Each senior bank facility will be unconditionally guaranteed by Mirage
(upon completion of the Merger), each of its material subsidiaries and each
of the Company's subsidiaries except for MGM Grand Detroit II, LLC, MGM
Grand-Bally's Monorail LLC, MGM Grand Australia Pty Ltd and non-U.S.
subsidiaries of the Company and their U.S. holding companies.
On March 24, 2000, the Company filed with the Securities and Exchange
Commission a Shelf Registration Statement. The Shelf Registration
Statement allows the Company to issue up to $2.75 billion of debt and
equity securities. The Shelf Registration Statement became effective on
May 5, 2000. Any public offering of securities will only be made by means
of a prospectus supplement.
As a result of the pending Merger with Mirage, the Company announced
on April 19, 2000, that the previously declared quarterly dividend policy
was discontinued. Also, management has determined to suspend the
previously announced share repurchase program. The Company intends to
focus on utilizing all available free cash flow to pay down debt under
existing and future debt obligations, as well as to finance their ongoing
operations.
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>
MGM GRAND, INC. AND SUBSIDIARIES
Part II. OTHER INFORMATION
Items 2, 3, 4, 5 of Part II are not applicable.
Item 1. Legal Proceedings
On February 23, 2000, MGM Grand, Inc. ("MGM Grand")
announced an offer to acquire Mirage Resorts, Inc. ("Mirage")
in a friendly merger transaction. Within a week, shareholders
of Mirage filed the following ten putative class action
complaints before the Clark County, Nevada District Court:
Ardezzone v. Mirage Resorts, Inc., et al., Case No. A415363;
-----------------------------------------
Crandon Capital Partners v. Wynn, et al., Case No. A415364;
----------------------------------------
J.M.M. Management Corp. v. Mirage Resorts, Inc., et al., Case
-------------------------------------------------------
No. A415355; Yassin v. Mirage Resorts, Inc., et al., Case No.
--------------------------------------
A415354; Zvokel v. Mirage Resorts, Inc., et al., Case No.
--------------------------------------
A415353; Steiner v. Wynn, et al., Case No. A415509; Kavanagh,
----------------------- ---------
et al. v. Mirage Resorts, et al., Case No. A415508; Sklaroff v.
-------------------------------- -----------
Wynn, et al., Case No. A415580; Morgan v. Wynn, et al., Case
------------ ----------------------
No. A415684 and Colangelo v. Wynn, et al., Case No. A415685.
-------------------------
Each of the complaints charges the directors and officers of
Mirage with breaching their fiduciary duties for failing to
properly consider MGM Grand's offer, even though, at the time,
Mirage had not responded thereto. Each of the complaints seeks
unspecified compensatory damages and injunctive relief, as well
as costs and attorneys' fees associated with the action. These
claims most likely will be considered moot, because Mirage
ultimately accepted an enhanced offer by MGM Grand to purchase
all outstanding shares of Mirage for $21 per share. However,
given the early stage of the proceedings, and the ability of
plaintiffs to amend their pleadings, the outcome of this
litigation is impossible to predict. MGM Grand understands that
the directors and officers of Mirage deny any allegations of
wrongdoing and intend to vigorously defend these actions.
The Company understands that an additional lawsuit has
been filed in connection with the Mirage merger. The
description of that lawsuit contained in the Quarterly Report
on Form 10-Q for the period ended March 31, 2000 of Mirage
Resorts, Incorporated is set forth below:
"On March 29, 2000, a stockholder filed a class action
complaint against the Mirage and each of its directors in
District Court for Clark County, Nevada. The complaint alleges
that the directors breached their fiduciary duties to the
stockholders in approving the merger agreement with MGM Grand
by failing to maximize the value that stockholders will receive
in the merger. In particular, the complaint alleges that the
merger agreement grants Stephen A. Wynn the right, under
certain circumstances, to purchase fine art from the Company at
prices significantly less than a buyer might pay on the open
market. The complaint seeks injunctive relief, including an
"appropriate evaluation" of the artwork and orders enjoining
the defendants from breaching their fiduciary duties and
requiring Mr. Wynn to account to stockholders for all damages
which they may suffer as a result of sales of Company artwork
to him. On April 21, 2000, the plaintiff filed a motion to
impose a constructive trust on the Company's artwork. The
Mirage believes that the claims are without merit."
Item 6. Reports on Form 8-K.
1. Report on Form 8-K dated February 23, 2000, filed by the
Company with the Commission on February 23, 2000 in which
events under Item 5, Other Events were reported.
2. Report on Form 8-K/A dated February 23, 2000, filed by the
Company with the Commission on February 23, 2000 in which
events under Item 5, Other Events were reported.
3. Report on Form 8-K dated February 28, 2000, filed by the
Company with the Commission on February 28, 2000 in which
events under Item 5, Other Events were reported.
4. Report on Form 8-K/A dated February 28, 2000, filed by the
Company with the Commission on February 28, 2000 in which
events under Item 5, Other Events were reported.
5. Report on Form 8-K dated March 6, 2000, filed by the Company
with the Commission on March 14, 2000 in which events under
Item 5, Other Events were reported.
-15-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MGM GRAND, INC.
-------------------------------------------
(Registrant)
Date: May 9, 2000 /s/ J. Terrence Lanni
-------------------------------------------
J. Terrence Lanni
Chairman
(Principal Executive Officer)
Date: May 9, 2000 /s/ James J. Murren
-------------------------------------------
James J. Murren
President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
-16-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MGM GRAND, INC.
-------------------------------------------
(Registrant)
Date: May 9, 2000 /s/ J. Terrence Lanni
-------------------------------------------
J. Terrence Lanni
Chairman
(Principal Executive Officer)
Date: May 9, 2000 /s/ James J. Murren
------------------------------------------
James J. Murren
President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
-17-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 98,080
<SECURITIES> 0
<RECEIVABLES> 105,091
<ALLOWANCES> (29,783)
<INVENTORY> 12,143
<CURRENT-ASSETS> 220,810
<PP&E> 2,842,119
<DEPRECIATION> (430,179)
<TOTAL-ASSETS> 2,733,064
<CURRENT-LIABILITIES> 240,279
<BONDS> 500,000
0
0
<COMMON> 1,389
<OTHER-SE> 1,035,346
<TOTAL-LIABILITY-AND-EQUITY> 2,733,064
<SALES> 476,125
<TOTAL-REVENUES> 442,872
<CGS> 0
<TOTAL-COSTS> 329,689
<OTHER-EXPENSES> 5,817
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<INTEREST-EXPENSE> 22,089
<INCOME-PRETAX> 70,952
<INCOME-TAX> 26,647
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