<PAGE>
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-16760
MGM MIRAGE
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(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)
3600 LAS VEGAS BOULEVARD SOUTH, LAS VEGAS, NEVADA 89109
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(Address of principal executive offices - Zip Code)
(702) 693-7120
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 10, 2000
Common Stock, $.01 par value 159,102,366 shares
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
FORM 10-Q
I N D E X
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PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations for the Three Months and Nine Months
Ended September 30, 2000 and September 30, 1999........................................... 1-2
Consolidated Balance Sheets at September 30, 2000 and
December 31, 1999......................................................................... 3
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and September 30, 1999................................................. 4
Condensed Notes to Consolidated Financial Statements...................................... 5-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................................. 11-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders....................................... 20
Item 6. Exhibits and Reports on Form 8-K.......................................................... 21-22
Signatures................................................................................ 23
</TABLE>
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ------------------------------
2000 1999 2000 1999
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
Casino $ 613,650 $ 265,897 $ 1,297,515 $ 586,556
Rooms 211,873 67,262 402,363 197,007
Food and beverage 177,526 43,291 317,785 117,841
Entertainment, retail and other 179,978 54,428 316,525 142,116
Income from unconsolidated affiliates 9,014 -- 11,754 6,084
------------- ----------- ------------ -------------
1,192,041 430,878 2,345,942 1,049,604
Less: promotional allowances 101,367 30,471 185,056 78,500
------------- ----------- ------------ -------------
1,090,674 400,407 2,160,886 971,104
------------- ----------- ------------ -------------
EXPENSES:
Casino 288,474 121,356 609,912 278,362
Rooms 64,724 24,328 124,924 67,495
Food and beverage 109,468 27,294 193,257 73,063
Entertainment, retail and other 111,360 28,971 190,819 80,362
Provision for doubtful accounts and discounts 32,412 11,168 66,241 35,553
General and administrative 148,518 63,348 296,461 141,599
Preopening expenses and other 1,609 45,863 3,808 68,780
Restructuring costs -- -- 23,520 --
Write-downs and impairments -- -- 102,225 --
Depreciation and amortization 97,298 37,174 197,096 87,616
------------- ---------- ------------ -------------
853,863 359,502 1,808,263 832,830
------------- ----------- ------------ -------------
OPERATING PROFIT BEFORE CORPORATE EXPENSE 236,811 40,905 352,623 138,274
Corporate expense 11,985 2,279 24,156 11,515
------------- ----------- ------------ -------------
OPERATING INCOME 224,826 38,626 328,467 126,759
------------- ----------- ------------ -------------
OTHER INCOME (EXPENSE):
Interest income 2,553 750 10,278 1,447
Interest expense, net (104,876) (19,476) (174,336) (39,627)
Interest expense from unconsolidated affiliates (921) -- (1,194) (1,058)
Other, net (185) (205) (694) (738)
------------- ----------- ------------ -------------
(103,429) (18,931) (165,946) (39,976)
------------- ----------- ------------ -------------
INCOME BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 121,397 19,695 162,521 86,783
Provision for income taxes (49,283) (7,090) (64,363) (31,581)
------------- ----------- ------------ -------------
INCOME BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 72,114 12,605 98,158 55,202
Extraordinary loss on early extinguishment of debt, net of
$2,521 (three months) and $2,983 (nine months) tax
benefit in 2000 and $484 tax benefit in 1999 (4,683) -- (5,416) (898)
Cumulative effect of change in accounting principle for
preopening, net of $4,399 tax benefit -- -- -- (8,168)
------------- ----------- ------------ -------------
NET INCOME $ 67,431 $ 12,605 $ 92,742 $ 46,136
============= =========== ============ =============
NET INCOME $ 67,431 $ 12,605 $ 92,742 $ 46,136
Currency translation adjustment (2,213) (319) (2,537) 1,873
------------- ----------- ------------ -------------
COMPREHENSIVE INCOME $ 65,218 $ 12,286 $ 90,205 $ 48,009
============= =========== ============ =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
-1-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
PER SHARE OF COMMON STOCK:
Basic:
Income per share before extraordinary item and
cumulative effect of change in accounting principle $ 0.45 $ 0.11 $ 0.70 $ 0.47
Extraordinary item, net (0.03) -- (0.04) (0.01)
Cumulative effect of change in accounting principle, net -- -- -- (0.07)
---------- ---------- ---------- ---------
Net income per share $ 0.42 $ 0.11 $ 0.66 $ 0.39
========== ========== ========== =========
Weighted Average Shares Outstanding (000's)(1) 158,848 117,612 140,649 117,524
========== ========== ========== =========
Diluted:
Income per share before extraordinary item and
cumulative effect of change in accounting principle $ 0.45 $ 0.10 $ 0.69 $ 0.46
Extraordinary item, net (0.03) -- (0.04) (0.01)
Cumulative effect of change in accounting principle, net -- -- -- (0.07)
---------- ---------- ---------- ---------
Net income per share $ 0.42 $ 0.10 $ 0.65 $ 0.38
========== ========== ========== =========
Weighted Average Shares Outstanding (000's)(1) 162,367 121,366 143,326 121,010
=========== =========== =========== ===========
</TABLE>
--------------
Note:
(1) All references to share and per share data herein have been adjusted
retroactively to give effect to the February 10, 2000 2-for-1 stock
split.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-2-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- --------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 211,272 $ 121,522
Accounts receivable, net 178,139 83,101
Inventories 85,156 15,240
Prepaid expenses and other 65,893 32,598
Income tax receivable 9,698 --
Deferred tax asset 146,713 17,452
--------------- -------------
Total current assets 696,871 269,913
--------------- -------------
PROPERTY AND EQUIPMENT, NET 9,195,936 2,384,772
OTHER ASSETS:
Investments in unconsolidated affiliates 395,674 12,485
Excess of purchase price over fair value of net
assets acquired, net 53,979 31,683
Deposits and other assets, net 358,180 44,601
--------------- -------------
Total other assets 807,833 88,769
--------------- -------------
$ 10,700,640 $ 2,743,454
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 56,591 $ 38,018
Construction payable 7,341 7,896
Income taxes payable -- 3,296
Dividend payable -- 11,388
Current obligation, capital leases 5,945 5,145
Current obligation, long term debt 6,725 7,852
Accrued interest on long term debt 60,206 18,915
Other accrued liabilities 528,826 197,580
--------------- -------------
Total current liabilities 665,634 290,090
--------------- -------------
DEFERRED REVENUES 3,801 4,241
DEFERRED INCOME TAXES 1,682,598 108,713
LONG TERM OBLIGATION, CAPITAL LEASES 8,132 12,864
LONG TERM DEBT, NET 6,026,922 1,304,345
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 300,000,000 shares authorized,
158,997,609 and 113,879,848 shares outstanding) 1,631 1,384
Capital in excess of par value 2,039,337 1,261,625
Treasury stock, at cost (4,059,000 and 24,565,200 shares) (83,683) (505,824)
Retained earnings 359,954 267,165
Other comprehensive income (3,686) (1,149)
--------------- -------------
Total stockholders' equity 2,313,553 1,023,201
--------------- -------------
$ 10,700,640 $ 2,743,454
=============== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-3-
<PAGE>
MGM MIRAGE AND SUBIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 92,742 $ 46,136
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and amortization 197,323 87,729
Amortization of debt offering costs 19,645 1,469
Provision for doubtful accounts and discounts 66,241 35,553
Loss on early extinguishment of debt 8,399 1,382
Cumulative effect of accounting change -- 12,567
Restructuring costs 23,520 --
Write-downs and impairments 102,225 --
Income from unconsolidated affiliates (10,560) (5,026)
Distributions from unconsolidated affiliates 15,000 --
Deferred income taxes 4,102 11,166
Change in assets and liabilities, net of effect of
business acquisitions
Accounts receivable (22,995) (1,722)
Inventories 7,011 (966)
Prepaid expenses and other (13,705) (26,543)
Income taxes receivable and payable 73,476 (2,581)
Accounts payable, accrued liabilities and other 37,037 14,641
--------------- ---------------
Net cash from operating activities 599,461 173,805
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (232,959) (296,654)
Acquisition of Primadonna Resorts, Inc., net of cash acquired -- (13,346)
Acquisition of Mirage Resorts, Incorporated, net of cash acquired (5,315,466) --
Proceeds from disposition of property and equipment 73,460 6,193
Change in construction payable (11,466) (10,159)
Change in deposits and other assets, net (109,725) 7,419
--------------- ---------------
Net cash used in investing activities (5,596,156) (306,547)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank facilities 4,354,000 946,000
Issuance of long term debt, net 1,546,612 --
Extinguishment of long term debt -- (374,500)
Repayments of bank facilities and other (2,002,929) (162,992)
Purchase of treasury stock (52,579) (294,172)
Sale of treasury stock 474,720 --
Cash dividend paid (11,338) --
Issuance of common stock 777,959 44,203
--------------- ---------------
Net cash from financing activities 5,086,445 158,539
--------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 89,750 25,797
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 121,522 81,956
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 211,272 $ 107,753
=============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-4-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
MGM MIRAGE (the "Company"), formerly known as MGM Grand, Inc., is a
Delaware corporation, incorporated on January 29, 1986. As of September 30,
2000, approximately 59.8% 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 located on the Las Vegas Strip in Las
Vegas, Nevada.
On May 31, 2000, the Company completed the acquisition (the "Mirage
Acquisition") of Mirage Resorts, Incorporated ("Mirage") (see Note 2). Mirage
owns and operates the following hotel, casino and entertainment resorts:
Bellagio, a European-style luxury resort; The Mirage, a tropically-themed
destination resort; Treasure Island at The Mirage, a pirate-themed hotel and
casino resort; and the Holiday Inn(R) Casino Boardwalk, all of which are located
on the Las Vegas Strip. Mirage also owns a 50% interest in the joint venture
that owns and operates the Monte Carlo Resort & Casino, a palatial-style hotel
and casino also located on the Las Vegas Strip. Mirage also owns and operates
the Golden Nugget, a hotel and casino in downtown Las Vegas, the Golden
Nugget-Laughlin, located in Laughlin, Nevada, and Beau Rivage, a beachfront
resort located in Biloxi, Mississippi. The Company is developing The Borgata, a
hotel and casino resort in the Marina District of Atlantic City, New Jersey in a
50-50 joint venture with Boyd Gaming Corporation. Including The Borgata site,
the Company owns approximately 120 acres in the Marina District of Atlantic City
available for future development. The aforementioned properties are collectively
referred to herein as the "Mirage Properties."
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 "Primadonna
Acquisition") of Primadonna, and as part of the Primadonna Acquisition, acquired
Primadonna's 50% ownership interest in NYNY LLC, which owns and operates the New
York-New York Hotel and Casino ("NYNY") on the Las Vegas Strip (see Note 2).
Consequently, as of March 1, 1999, Primadonna and NYNY LLC became wholly-owned
subsidiaries of the Company. The Primadonna Acquisition also gave the Company
ownership of three resorts located in Primm, Nevada at the California/Nevada
stateline: Whiskey Pete's, Buffalo Bill's and the Primm Valley Resort (the
"Primm Properties"), as well as two championship golf courses located near the
Primm Properties.
The Company, through its wholly-owned subsidiary, MGM Grand Detroit, Inc.,
and its local partners in Detroit, Michigan formed MGM Grand Detroit, LLC, to
develop a hotel, casino and entertainment complex ("MGM Grand Detroit"). The
plans for MGM Grand Detroit 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 28, 1999, the Michigan Gaming Control Board issued
a casino license to MGM Grand Detroit, LLC to conduct gaming operations in its
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.
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.
-5-
<PAGE>
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 anticipates that the Johannesburg permanent casino will begin
operations in the fourth quarter of 2000. The Company receives management fees
from its partner, Tsogo Sun Gaming & Entertainment ("Tsogo Sun"), which is
responsible for providing all project costs. Tsogo Sun has been granted
additional licenses for Durban and East London, and the Company anticipates
temporary casinos will be opened in those locations in 2001.
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 with generally accepted
accounting principles have been condensed or omitted. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Form 10-K/A for
the year ended December 31, 1999.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the Company's financial
position as of September 30, 2000, and the results of its operations for the
three month and nine month periods ended September 30, 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. In addition, the accompanying financial
statements reflect certain adjustments to amounts related to other
comprehensive income. The adjustments reduce previously reported
comprehensive income by $0.8 million for the three months ended September 30,
1999 and increase previously reported comprehensive income by $5.0 million
for the nine months ended September 30, 1999, but have no effect on
previously reported net income.
NOTE 2. ACQUISITIONS
On May 31, 2000, the Company completed the Mirage Acquisition whereby
Mirage shareholders received $21 per share in cash. The acquisition had a total
equity value of approximately $4.4 billion. In addition, the Company assumed
approximately $2.0 billion of Mirage's outstanding debt, of which approximately
$1.0 billion was refinanced and $950 million remains outstanding. 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 acquisition.
The operating results for Mirage are included in the Consolidated Statements of
Operations from the date of acquisition.
On March 1, 1999, the Company completed the Primadonna Acquisition 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 share 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 Primadonna Acquisition. The operating results for Primadonna are included in
the Consolidated Statements of Operations from the date of acquisition.
-6-
<PAGE>
The following unaudited pro forma consolidated financial information for
the Company has been prepared assuming both the Primadonna Acquisition and
Mirage Acquisition had occurred on January 1, 1999 (IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS):
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
2000 1999
--------------- ----------------
<S> <C> <C>
Net Revenues $ 3,249,672 $ 2,826,317
=============== ================
Operating Income $ 502,461 $ 348,711
=============== ================
Income before Extraordinary Item and Cumulative Effect of
Change in Accounting Principle $ 124,367 $ 41,579
=============== ================
Basic Earnings per Share before Extraordinary Item and
Cumulative Effect of Change in Accounting Principle $ 0.78 $ 0.25
=============== ================
Weighted Average Basic Shares Outstanding 158,874 167,634
=============== ================
Diluted Earnings per Share before Extraordinary Item and
Cumulative Effect of Change in Accounting Principle $ 0.77 $ 0.24
=============== ================
Weighted Average Diluted Shares Outstanding 161,551 171,750
=============== ================
</TABLE>
This unaudited pro forma consolidated financial information is not
necessarily indicative of what the Company's actual results would have been had
the acquisitions been completed on January 1, 1999, or of future results.
NOTE 3. LONG TERM DEBT
Long term debt consisted of the following (IN THOUSANDS):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- ----------------
<S> <C> <C>
$1.25 Billion Revolving Credit Facility $ -- $ 612,000
$2.0 Billion Revolving Credit Facility 1,753,000 --
$1.3 Billion Term Loan 461,000 --
$1.0 Billion Revolving Credit Facility 822,500 --
$300 Million 6.95% Senior Notes, due 2005, net of discount 296,358 295,728
$200 Million 6.875% Senior Notes, due 2008, net of discount 197,848 197,628
$200 Million 6.625% Senior Notes, due 2005, net of discount 180,520 --
$250 Million 7.25% Senior Notes, due 2006, net of discount 224,511 --
$200 Million 6.75% Senior Notes, due 2007, net of discount 172,364 --
$200 Million 6.75% Senior Notes, due 2008, net of discount 170,746 --
$100 Million 7.25% Senior Debentures, due 2017, net of discount 79,325 --
$710 Million 9.75% Senior Subordinated Notes, due 2007, net of discount 701,636 --
$850 Million 8.50% Senior Notes, due 2010, net of discount 844,976 --
MGM Grand Detroit, LLC Credit Facility, due 2003 101,000 169,000
Australian Bank Facility, due 2004 (US$) 26,446 37,841
Other Notes 1,417 --
--------------- ----------------
6,033,647 1,312,197
Less Current Obligation (6,725) (7,852)
--------------- ----------------
$ 6,026,922 $ 1,304,345
=============== ================
</TABLE>
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<PAGE>
Total interest incurred for the three month periods ended September 30,
2000 and 1999 was $142.9 million and $22.2 million, respectively, of which $38.0
million and $2.7 million, respectively, was capitalized. Total interest incurred
for the nine month periods ended September 30, 2000 and 1999 was $228.2 million
and $52.8 million, respectively, of which $53.9 million and $13.2 million,
respectively, was capitalized.
On April 11, 2000, the Company entered into three senior credit
agreements providing for bank financing totaling $4.3 billion from syndicates
of banks each led by Bank of America, N.A. (collectively, the "New Senior
Facilities"). The New Senior Facilities consist of (1) a $2.0 billion senior
revolving credit facility which matures on May 31, 2005 (the "$2.0 billion
Revolving Credit Facility") which amended, extended and increased a $1.25
billion facility; (2) a $1.0 billion senior revolving credit facility which
matures on April 6, 2001 (the "$1.0 billion Revolving Credit Facility"); and
(3) a $1.3 billion senior term loan which matures on April 6, 2001 (the "$1.3
billion Term Loan"). These New Senior Facilities contain certain covenants,
including the requirement to maintain certain financial ratios. On May 31,
2000, the Company borrowed $4.21 billion under the New Senior Facilities to
fund the Mirage Acquisition, refinance certain indebtedness of Mirage and the
Company, pay fees and expenses in connection with the Mirage Acquisition and
for general corporate purposes. On September 15, 2000, the Company used the
proceeds from the issuance of senior notes to repay $839 million of the $1.3
billion Term Loan. The Company intends to refinance the remaining balance of
the $1.3 billion Term Loan prior to its maturity through the issuance of debt
or equity securities under the previously filed $2.75 billion Shelf
Registration Statement or through other financing alternatives. The Company
currently has financing commitments in place that could be used to refinance
the remaining balance of the $1.3 billion Term Loan. Also, stand-by letters
of credit totaling $54.7 million were outstanding as of September 30, 2000
under the $2.0 billion Revolving Credit Facility, principally to support
municipal financing used in connection with the proposed MGM Grand Detroit
permanent casino.
On May 5, 2000, the Company's Shelf Registration Statement, which allows
the Company to issue up to $2.75 billion of debt and equity securities from
time to time in public offerings, was declared effective by the Securities
and Exchange Commission. On May 31, 2000, the Company issued under the Shelf
Registration Statement $710 million of Senior Subordinated Notes, which carry
a coupon of 9.75% and are due on June 1, 2007. These Senior Subordinated
Notes contain certain basic covenants consistent with this type of indenture.
Proceeds from this offering were used to repay a portion of the then
outstanding borrowings under Mirage's senior credit facility. On September
15, 2000, the Company issued under the Shelf Registration Statement $850
million of Senior Notes, which carry a coupon of 8.50% and are due on
September 15, 2010. These Senior Notes contain covenants consistent with the
Company's other Senior Notes. Proceeds from this offering were used to repay
a portion of the $1.3 billion Term Loan as discussed above. Any future public
offering of securities under the Shelf Registration Statement will only be
made by means of a prospectus supplement.
On May 31, 2000, the $300 million 6.95% Senior Notes due 2005 and the $200
million 6.875% Senior Notes due 2008 each received investment grade ratings from
both Moody's and Standard & Poor's. As a result, concurrently with the Mirage
Acquisition, the collateral previously securing these obligations was released.
The Senior Notes are pari passu with the New Senior Facilities and contain
various restrictive covenants, similar to the New Senior Facilities.
In connection with the May 31, 2000 Mirage Acquisition, all of the
outstanding Mirage senior notes and debentures remained outstanding obligations.
The notes and debentures are in various tranches as follows: (1) $200 million
6.625% senior notes due February 2005; (2) $250 million 7.25% senior notes due
October 2006; (3) $200 million 6.75% senior notes due August 2007; (4) $200
million 6.75% senior notes due February 2008; and (5) $100 million 7.25% senior
debentures due August 2017 (collectively, the "Mirage Notes").
-8-
<PAGE>
The Company and each of its material subsidiaries, including Mirage,
unconditionally guarantees the New Senior Facilities, the Senior Notes, the
Mirage Notes and the Senior Subordinated Notes.
As of September 30, 2000, the Company was in compliance with all covenant
provisions associated with the aforementioned obligations.
NOTE 4. STOCKHOLDERS' EQUITY
On March 1, 1999, the Company issued 19 million shares of its common stock
valued at approximately $243.6 million in connection with the Primadonna
Acquisition (see Note 2).
On June 23, 1999, the Company completed a $25.00 per share cash tender
offer for 12 million shares of its common stock. The total acquisition cost of
the 12 million shares was approximately $282 million.
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 Company
purchased a total of 3.1 million shares for an approximate cost of $65.8 million
through February 2000. The repurchase program was suspended as a result of the
Mirage Acquisition and has now expired.
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 Mirage Acquisition, the Company announced on April
19, 2000, that the previously declared quarterly dividend policy was
discontinued.
On April 18, 2000, the Company completed a private placement of 46.5
million shares of the Company's common stock for a total purchase price of $1.23
billion. On May 18, 2000, as required by the private placement agreement, the
Company filed a shelf registration statement to register the resale of these
shares. Tracinda purchased 23 million shares in the private placement.
NOTE 5. STATEMENTS OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES
For the nine months ended September 30, 2000 and 1999, cash payments made
for interest, net of amounts capitalized, were $180.8 million and $45.3 million,
respectively.
Cash payments made for state and federal income taxes for the nine months
ended September 30, 2000 and 1999 were $28.7 million and $17.7 million,
respectively.
As a result of the Primadonna Acquisition (see Note 2), the Company issued
stock to Primadonna shareholders valued at approximately $243.6 million and
assumed long term debt totaling $315.2 million.
NOTE 6. COMPANY RESTRUCTURING PLANS
During the three months ended March 31, 2000, management initiated and
completed a restructuring plan designed to consolidate certain general and
administrative functions at NYNY and MGM Grand Las Vegas. This restructuring
resulted in a one-time charge against earnings in the first quarter of 2000
totaling $5.5 million ($3.6 million, net of income tax). Approximately 70 people
were affected by the reductions, primarily at the Company's operating properties
(excluding the Mirage Properties).
-9-
<PAGE>
In connection with the Mirage Acquisition, management initiated a
comprehensive restructuring plan designed to reduce costs and improve
efficiencies of the combined operations of the Company. This restructuring
resulted in a one-time charge against earnings in the second quarter of 2000
totaling $18.0 million ($11.7 million, net of income tax), primarily related to
the accrual of costs associated with contract terminations and staffing
reductions of approximately $5.7 million, the buyout of various leases of
approximately $11.1 million and other related restructuring costs of $1.2
million. Approximately 125 people were affected by the reductions, primarily at
the Company's operating properties (excluding the Mirage Properties) relating to
duplicative functions within marketing, entertainment, retail, information
systems and human resources. Approximately $15 million of the accrued costs
remained unpaid as of September 30, 2000.
NOTE 7. ASSET WRITE-DOWNS AND IMPAIRMENTS
During June 2000, the Company determined to write off various assets and
recorded a charge against earnings totaling $102.2 million ($66.4 million, net
of income tax). The charge included approximately $49.5 million of costs
associated with projects previously under development, approximately $19.0
million of costs associated with the divesting of certain non-strategic assets
and $33.7 million of costs associated with re-evaluation of certain assets as a
result of the Mirage Acquisition.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
QUARTER VERSUS QUARTER
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------
2000 1999
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
REVENUES:
Casino:
MGM "same store" properties (a) $ 180,691 $ 196,656
MGM Grand Detroit (b) 102,059 69,241
Mirage Properties (c) 330,900 --
------------ -----------
613,650 265,897
------------ -----------
Non-casino:
MGM "same store" properties 172,568 160,553
MGM Grand Detroit 8,593 4,571
Mirage Properties 388,430 --
Eliminations (214) (143)
------------ -----------
569,377 164,981
------------ -----------
Promotional allowances:
MGM "same store" properties 29,156 28,679
MGM Grand Detroit 3,962 1,792
Mirage Properties 68,249 --
------------ -----------
101,367 30,471
------------ -----------
Income from unconsolidated affiliates:
Monte Carlo 9,014 --
------------ -----------
Total Net Revenues:
MGM "same store" properties 324,103 328,530
MGM Grand Detroit 106,690 72,020
Mirage Properties 651,081 --
Income from unconsolidated affiliates 9,014 --
Eliminations (214) (143)
------------ -----------
$ 1,090,674 $ 400,407
============ ===========
</TABLE>
--------------
(a) MGM "same store" properties consist of MGM Grand Las Vegas, NYNY, the
Primm Properties, MGM Grand Australia and MGM Grand South Africa.
(b) MGM Grand Detroit commenced operations on July 29, 1999.
(c) The Mirage Properties were acquired on May 31, 2000.
-11-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------
2000 1999
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
EXPENSES:
Casino (including provision for doubtful accounts and discounts):
MGM "same store" properties (a) $ 96,223 $ 100,586
MGM Grand Detroit (b) 46,887 31,938
Mirage Properties (c) 177,776 --
------------ -----------
320,886 132,524
------------ -----------
Non-casino:
MGM "same store" properties 77,674 76,830
MGM Grand Detroit 3,539 3,809
Mirage Properties 204,385 --
Eliminations (46) (46)
------------ -----------
285,552 80,593
------------ -----------
General and administrative 148,518 63,348
Preopening expenses and other 1,609 45,863
Depreciation and amortization 97,298 37,174
------------ -----------
$ 853,863 $ 359,502
============ ===========
</TABLE>
--------------
(a) MGM "same store" properties consist of MGM Grand Las Vegas, NYNY, the
Primm Properties, MGM Grand Australia and MGM Grand South Africa.
(b) MGM Grand Detroit commenced operations on July 29, 1999.
(c) The Mirage Properties were acquired on May 31, 2000.
Net revenues for the third quarter of 2000 were $1.09 billion, an increase
of $690 million, or 172%, over the prior-year third quarter. The increase was
due principally to the May 31, 2000 acquisition of the Mirage Properties. The
wholly-owned Mirage Properties contributed net revenue of $651 million, while
Mirage's 50% interest in the Monte Carlo joint venture added an additional $9
million. Additionally, the 2000 quarter benefited from a full quarter of
operations at MGM Grand Detroit, which operated for 64 days in the prior-year
quarter, following its July 29, 1999 opening.
On a same store basis, excluding the impact of the Mirage Acquisition
and the opening of MGM Grand Detroit, casino revenue for the third quarter of
2000 declined by $16 million, or 8%, from the $197 million achieved in the
1999 third quarter. This decrease is attributable to a significant decline in
table game hold percentage at MGM Grand Las Vegas, offset in part by table
game and slot volume increases at MGM Grand Las Vegas of 3% and 7%,
respectively.
-12-
<PAGE>
Same store non-casino revenue increased by $12 million, or 7%, over the
third quarter of 1999. A $7 million, or 28%, increase in food and beverage
revenue at MGM Grand Las Vegas was particularly notable. This increase is
primarily attributable to a 10% increase in food covers quarter over quarter,
resulting in increased revenue at Studio 54 Night Club, MGM Grand Buffet,
Brown Derby and Grand Wok. Room revenue at MGM Grand Las Vegas also increased
significantly in the 2000 third quarter, despite a 2% reduction in available
room nights due to a room remodeling project which was completed in August
2000. The increase in room revenue is attributable to a 10% increase in
average daily room rate versus the third quarter of 1999. Non-casino revenue
also grew significantly at NYNY, where a 9% quarter over quarter increase was
due primarily to strong increases in room and food and beverage revenue.
Overall operating margins on a same store basis were similar between the
two quarterly periods, as significant improvement in non-casino margins
offset a decline in casino margins resulting from the significant reduction
in table game hold percentage at MGM Grand Las Vegas. Same store non-casino
expenses increased by only 1% despite the 7% increase in same store
non-casino revenues, principally reflecting significant improvement in
operating margins in virtually all categories of non-casino operations at MGM
Grand Las Vegas. Overall operating margins at MGM Grand Detroit improved
sharply over the prior-year quarter, resulting from cost containment measures
and improved operating efficiencies typically achieved following the
commencement of operations at a new facility.
General and administrative expense and depreciation and amortization
expense increased by 134% and 162%, respectively, versus the third quarter of
1999. These increases were almost entirely the result of the Mirage
Acquisition and the opening of MGM Grand Detroit.
Preopening expenses and other of $46 million in the 1999 third quarter
principally represented costs associated with the opening of MGM Grand Detroit
on July 29, 1999, and certain tender offer costs.
The significant increase in corporate expense was primarily due to the
Mirage Acquisition, as well as increased salary, airplane and miscellaneous
expenses at the parent company.
Interest expense, net for the third quarter of 2000 was $105 million,
versus $19 million in the prior-year third quarter. This increase was a function
of substantial increases both in interest cost and interest capitalized, each as
a result of the Mirage Acquisition. Interest cost was $143 million versus $22
million in the third quarter of 1999, as the Company's total debt increased from
$1.34 billion at September 30, 1999 to $6.03 billion at September 30, 2000. This
increase is reflective of the debt issued and assumed in connection with the
Mirage Acquisition. Interest capitalized increased to $38 million from the $3
million recorded in the prior-year third quarter. A substantial majority of the
interest capitalized in the third quarter of 2000 relates to development
projects on the Las Vegas Strip and in the Marina District in Atlantic City, New
Jersey, on development sites acquired in the Mirage Acquisition.
The extraordinary loss of $4.7 million, net of income tax benefit, recorded
in the third quarter of 2000 reflects the write-off of unamortized debt costs
related to the portion of the $1.3 billion Term Loan extinguished during the
period.
-13-
<PAGE>
NINE MONTHS VERSUS NINE MONTHS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
2000 1999
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
REVENUES:
Casino:
MGM "same store" properties (a) $ 363,380 $ 352,884
NYNY and the Primm Properties (b) 213,267 164,431
MGM Grand Detroit (c) 297,557 69,241
Mirage Properties (d) 423,311 --
------------ -----------
1,297,515 586,556
------------ -----------
Non-casino:
MGM "same store" properties 346,194 328,987
NYNY and the Primm Properties 162,005 123,877
MGM Grand Detroit 21,923 4,571
Mirage Properties 507,169 --
Eliminations (618) (471)
------------ -----------
1,036,673 456,964
------------ -----------
Promotional allowances:
MGM "same store" properties 63,140 60,378
NYNY and the Primm Properties 22,744 16,330
MGM Grand Detroit 10,484 1,792
Mirage Properties 88,688 --
------------ -----------
185,056 78,500
------------ -----------
Income from unconsolidated affiliates:
NYNY -- 6,084
Monte Carlo 11,754 --
------------ -----------
11,754 6,084
------------ -----------
Total Net Revenues:
MGM "same store" properties 646,434 621,493
NYNY and the Primm Properties 352,528 271,978
MGM Grand Detroit 308,996 72,020
Mirage Properties 841,792 --
Income from unconsolidated affiliates 11,754 6,084
Eliminations (618) (471)
------------ -----------
$ 2,160,886 $ 971,104
============ ===========
</TABLE>
--------------
(a) MGM "same store" properties consist of MGM Grand Las Vegas, MGM Grand
Australia and MGM Grand South Africa.
(b) NYNY and the Primm Properties became wholly-owned subsidiaries on
March 1, 1999.
(c) MGM Grand Detroit commenced operations on July 29, 1999.
(d) The Mirage Properties were acquired on May 31, 2000.
-14-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
2000 1999
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
EXPENSES:
Casino (including provision for doubtful accounts and discounts):
MGM "same store" properties (a) $ 230,284 $ 223,718
NYNY and the Primm Properties (b) 77,273 58,292
MGM Grand Detroit (c) 137,946 31,938
Mirage Properties (d) 230,650 --
Eliminations -- (33)
------------ -----------
676,153 313,915
------------ -----------
Non-casino:
MGM "same store" properties 155,405 159,508
NYNY and the Primm Properties 73,768 57,741
MGM Grand Detroit 11,590 3,809
Mirage Properties 268,375 --
Eliminations (138) (138)
------------ -----------
509,000 220,920
------------ -----------
General and administrative 296,461 141,599
Preopening expenses and other 3,808 68,780
Restructuring costs 23,520 --
Write-downs and impairments 102,225 --
Depreciation and amortization 197,096 87,616
------------ -----------
$ 1,808,263 $ 832,830
============ ===========
</TABLE>
--------------
(a) MGM "same store" properties consist of MGM Grand Las Vegas, MGM Grand
Australia and MGM Grand South Africa.
(b) NYNY and the Primm Properties became wholly-owned subsidiaries on
March 1, 1999.
(c) MGM Grand Detroit commenced operations on July 29, 1999.
(d) The Mirage Properties were acquired on May 31, 2000.
Net revenues for the nine months ended September 30, 2000 were $2.16
billion, an increase of $1.19 billion, or 123%, over the comparable prior-year
period. The increase was due principally to the May 31, 2000 acquisition of the
Mirage Properties and the July 29, 1999 opening of MGM Grand Detroit.
Additionally, the 2000 period benefited from a full nine months of operations at
NYNY and the Primm Properties, versus the seven months commencing when these
properties became wholly-owned subsidiaries on March 1, 1999. On a combined
basis, these operations generated $1.50 billion of net revenues in the 2000
period, versus $344 million in 1999.
On a same store basis, excluding the impact of the acquisitions and casino
opening described above, casino revenue for the first nine months of 2000
increased by $10 million, or 3%, from the $353 million achieved in the
comparable 1999 period. This increase was concentrated at MGM Grand Las Vegas,
and was principally the result of a 9% increase in table games volume.
-15-
<PAGE>
Same store non-casino revenue increased by $17 million, or 5%, over the
$329 million recorded in the first nine months of 1999. This increase was
also concentrated at MGM Grand Las Vegas, and was achieved predominately in
the food and beverage area due to higher revenues at the Studio 54 Night
Club, MGM Grand Buffet and Grand Wok, in addition to increased banquet
revenue generated by the Conference Center.
Casino operating margins were essentially unchanged from the 1999
nine-month period on a same store basis, but non-casino margins showed
significant improvement, as the Company continued to focus on enhancing the
profitability of its operations. Combined operating margins at NYNY and the
Primm Properties were similar to those of the prior year, while MGM Grand
Detroit achieved a significant improvement over the margins recorded in its
initial 64 days of operation in the 1999 nine-month period.
During the 2000 period, management implemented comprehensive
restructuring plans designed to reduce costs and improve efficiencies within
the Company. The implementation of such plans resulted in a charge against
earnings in the current year totaling $24 million ($15 million, net of tax),
primarily related to consolidation of certain general and administrative
functions at NYNY and MGM Grand Las Vegas, various contract terminations and
staffing reductions, the buyout of various leases and other related items
(see Note 6). Approximately 195 people were affected by the reductions,
primarily at the Company's operating properties (excluding the Mirage
Properties) relating to duplicative functions within marketing,
entertainment, retail, information systems and human resources. Management
estimates the annualized cost savings resulting from these restructurings to
be approximately $16 million.
During June 2000, the Company recognized a charge against earnings of
$102 million ($66 million, net of tax), primarily related to certain projects
previously under development which management has determined not to pursue,
the divesting of certain non-strategic assets and the re-evaluation of
certain assets, all as a result of the Mirage Acquisition (see Note 7).
The sharp increase in general and administrative expense for the nine
months ended September 30, 2000 is attributable to the Mirage Acquisition,
the July 29, 1999 opening of MGM Grand Detroit and the March 1, 1999
acquisition of NYNY and the Primm Properties. The increase in depreciation
and amortization expense primarily reflects the same factors, and also
includes a $12 million increase at MGM Grand Las Vegas resulting from the
completion of various expansion and remodeling projects.
Preopening expense and other of $69 million for the 1999 nine-month
period principally represented costs associated with the opening of MGM Grand
Detroit, expansion activities at MGM Grand Las Vegas and certain tender offer
costs.
Corporate expense increased by $13 million versus the 1999 nine-month
period. This increase was primarily attributable to the Mirage Acquisition,
and reflects higher corporate operating expenses related to a larger
corporate structure and higher airplane costs due to the operation of two
corporate airplanes in the current year compared to only one in the prior
year.
Interest expense, net for the first nine months of 2000 was $174
million, versus $40 million in the prior-year period. Interest cost and
interest capitalized were $228 million and $54 million, respectively, in the
first nine months of 2000, versus $53 million and $13 million, respectively,
in the first nine months of 1999. These increases were attributable to the
Mirage Acquisition, as discussed previously in comparing the three-month
periods ended September 30, 2000 and 1999.
Extraordinary loss of $5.4 million in 2000, net of income tax benefit,
reflects the write-off of unamortized debt costs from the Company's previous
$1.25 billion revolving credit facility and from the portion of the $1.3
billion Term Loan extinguished during the 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.
-16-
<PAGE>
Cumulative effect of change in accounting principle of $8.2 million in
1999, net of income tax benefit, reflects the Company's adoption of Statement of
Position 98-5 ("SOP 98-5") which requires that costs associated with start-up
activities be expensed as incurred.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000 and December 31, 1999, the Company held cash and
cash equivalents of $211 million and $122 million, respectively. Cash provided
by operating activities for the first nine months of 2000 was $599 million
compared with $174 million for the same period of 1999.
During the nine months ended September 30, 2000, $118 million was drawn
down on the $1.25 billion revolving credit facility and $730 million was
repaid, including a final balance of $700 million that was refinanced via
borrowings under the New Senior Facilities. During the nine months ended
September 30, 2000, $4.21 billion was drawn down and $1.17 billion was repaid
on the New Senior Facilities and $3.04 billion remained outstanding at the
end of the period. During the nine months ended September 30, 2000, $26
million was drawn down and $94 million was repaid on the Detroit credit
facility and $101 million remained outstanding at the end of the period.
Capital expenditures for the nine months ended September 30, 2000 were $233
million, of which approximately $110 million related to general property
improvements at the Company's resorts, including the recently completed room
refurbishment program at the MGM Grand Las Vegas. Also, the Company incurred
approximately $123 million related to the development of a new golf course, the
acquisition of land by the MGM Grand Detroit Casino and pre-construction
activities and land acquisitions associated with ongoing development projects,
including capitalized interest. Capital expenditures relating to general
property improvements are estimated to be approximately $65 million for the
remainder of 2000. Also, management estimates that the Company may incur
approximately $80 million related to other capital projects for the balance of
2000.
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 Company
purchased a total of 3.1 million shares for an approximate cost of $66 million
through February 2000. The repurchase program was suspended as a result of the
Mirage Acquisition and has now expired.
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 approximately $11
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 Mirage
Acquisition, the Company announced on April 19, 2000, that the previously
declared quarterly dividend policy was discontinued.
On May 5, 2000, the Company's Shelf Registration Statement, which allows
the Company to issue up to $2.75 billion of debt and equity securities from
time to time in public offerings, was declared effective by the Securities
and Exchange Commission. After giving effect to the issuance of $710 million
of Senior Subordinated Notes and $850 million of Senior Notes (see Note 3),
the Shelf Registration Statement has $1.19 billion in remaining capacity for
the issuance of future debt or equity securities. Any future public offering
of securities under the Shelf Registration Statement will only be made by
means of a prospectus supplement.
-17-
<PAGE>
The Company intends to refinance the remaining $461 million balance of the
$1.3 billion Term Loan prior to its maturity through the issuance of debt or
equity securities under the Shelf Registration Statement or through other
financing alternatives. The Company currently has financing commitments in place
that could be used to refinance such balance.
On May 31, 2000, the Company completed the Mirage Acquisition whereby
Mirage shareholders received $21 per share in cash. Funds needed to complete
the acquisition were approximately $6.2 billion. These funds were used for
payments to Mirage shareholders and holders of Mirage stock options,
refinancing of certain indebtedness of Mirage and MGM Grand, payment of fees
and expenses in connection with the Mirage Acquisition and general corporate
purposes. In order to fund the Mirage Acquisition, the Company borrowed $4.21
billion under its New Senior Facilities (see Note 3), completed the private
placement of 46.5 million shares of its common stock for a total purchase
price of approximately $1.23 billion (see Note 4), utilized proceeds from the
issuance of $710 million of Senior Subordinated Notes (see Note 3) and used
cash on hand to fund the remaining balance.
The Company intends to focus on utilizing available free cash flow to
reduce indebtedness, as well as to finance its ongoing operations. The
Company expects to finance operations, capital expenditures and existing debt
obligations through cash flow from operations, cash on hand, bank credit
facilities and, depending on market conditions, public offerings of
securities under the Shelf Registration Statement.
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 competition, development and construction
activities, dependence on existing management, leverage and debt service
(including sensitivity to fluctuations in interest rates), domestic or
international economic conditions (including sensitivity to fluctuations in
foreign currencies), pending or future legal proceedings, 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).
-18-
<PAGE>
PART II. OTHER INFORMATION
Items 2, 3, and 5 of Part II are not applicable.
ITEM 1. LEGAL PROCEEDINGS
On August 28, 2000, the District Court for Clark County, Nevada, in the
case entitled CRANDON CAPITAL PARTNERS V. STEPHEN A. WYNN, ET AL. (one of the
putative class action lawsuits that arose out of the Company's merger with
Mirage), denied the plaintiff's motion to impose a constructive trust on the
Company's artwork and also denied the Company's motion to dismiss the
complaint for failure to state a claim upon which relief may be granted. On
November 13, 2000, the court granted the Company's motion to dismiss the
complaint with prejudice for lack of subject matter jurisdiction.
In December 1997, the trustee of the bankruptcy estate of Ken Mizuno
("Mizuno") filed a complaint against Mirage in the United States Bankruptcy
Court for the Central District of California, which was amended in February
1998. The amended complaint claims that Mizuno, a Japanese national, repaid
various debts to Mirage's casinos prior to the commencement of Mizuno's
bankruptcy case in June 1992 for which Mizuno was not legally liable and
which were not legally collectible under Japanese law. The amended complaint
alleges that these repayments constituted fraudulent transfers under federal
and state law and seeks to require Mirage to pay the value of the transfers,
totaling at least $61,418,250, plus interest, to the bankruptcy trustee. In
August 1998, the Bankruptcy Court granted Mirage's motion to dismiss the
complaint based on the statute of limitations. The plaintiff appealed to the
United States District Court for the Central District of California, which
reversed the dismissal in January 1999. Mirage appealed the District Court's
ruling to the Ninth Circuit Court of Appeal. The underlying adversary
proceeding was transferred to the District of Nevada while the Ninth Circuit
appeal was pending. After the transfer Mirage moved to dismiss the adversary
proceeding on grounds other than those that were on appeal to the Ninth
Circuit. In February 2000, the District Court granted Mirage's motion to
dismiss several counts of the complaint. As a result, the trustee's remaining
claims against Mirage are for recovery of payments by Mizuno of the gaming
debts of others made within one year of the bankruptcy filing, totaling
approximately $5,500,000. The trustee's attempt to obtain an interlocutory
appeal from the Ninth Circuit was denied. In September 2000, the Ninth
Circuit affirmed the District Court's order, which held that the trustee's
original complaint was timely filed. The Company intends to continue to
defend this case vigorously.
A subsidiary of the Company, MGM Dist., Inc. (formerly MGM Desert Inn,
Inc.), is a defendant in an adversary proceeding in a bankruptcy case pending
in the United States Bankruptcy Court for the Central District of California.
The adversary complaint, which was filed on December 12, 1997, alleges that
the debtor, Mizuno, transferred approximately $1.1 million to MGM Desert Inn,
Inc. in 1988 and 1989, in payment of casino debts of various individuals. The
complaint alleges these transfers were fraudulent conveyances and seeks
damages against the Company in an amount not less than approximately $1.1
million. The Company answered the complaint on January 30, 1998, denying the
allegations and asserting that the complaint failed to state a claim upon
which relief could be granted. Also on January 30, 1998, the Company filed a
motion to transfer venue to the United States Bankruptcy Court in the
District of Nevada. The Bankruptcy Court denied this motion without
prejudice. On February 12, 1998, the plaintiff indicated his intent to file
an amended adversary complaint asserting that Mizuno's payment of his own
casino debt at the Desert Inn in the approximate amount of $20 million also
constituted a fraudulent conveyance. On July 20, 1998, the Bankruptcy Court
entered an order granting the Company's motion for dismissal for failure to
state a claim based on statute of limitations grounds. The plaintiff's motion
for reconsideration in Bankruptcy Court was denied on November 11, 1998. The
plaintiff filed a Notice of Appeal to the District Court from the Bankruptcy
Court's order granting the Company's motion for dismissal and the Bankruptcy
Court's denial of the motion for reconsideration. The District Court heard
the appeal while the Mirage appeal on similar issues was before the Ninth
Circuit Court of Appeal. Because of the Ninth Circuit appeal, the District
Court stayed all proceedings pending the ruling of the Ninth Circuit in the
Mirage case. In September 2000, the Ninth Circuit affirmed the District
Court's order in the Mirage case, which had ruled that the trustee's original
complaint was timely filed. As a result, the District Court reversed the
Bankruptcy Court's ruling in the Desert Inn case and remanded the adversary
proceeding to the Bankruptcy Court for further proceedings. The Company
intends to continue to defend this action vigorously.
-19-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's 2000 Annual Meeting of Stockholders was held on August
1, 2000.
(c) At the Annual Meeting, the following individuals were elected to serve
one-year terms as members of the Board of Directors:
<TABLE>
<CAPTION>
NAME SHARES VOTED FOR SHARES WITHHELD
-------------------------- ---------------- ---------------
<S> <C> <C>
James D. Aljian 130,468,999 5,613,689
Robert H. Baldwin 135,849,132 233,556
Fred Benninger 135,828,478 254,210
Terry Christensen 135,750,835 331,853
Glenn A. Cramer 135,920,907 161,781
Willie D. Davis 135,941,784 140,904
Alexander M. Haig, Jr. 135,722,451 360,237
Gary N. Jacobs 135,750,232 332,456
Kirk Kerkorian 135,730,335 352,353
J. Terrence Lanni 135,851,347 231,341
George J. Mason 135,835,688 247,000
James J. Murren 135,847,456 235,232
Ronald M. Popeil 135,941,121 141,567
John T. Redmond 135,851,936 230,752
Walter M. Sharp 135,920,756 161,932
Daniel M. Wade 135,850,736 231,952
Daniel B. Wayson 135,850,756 231,932
Melvin B. Wolzinger 135,918,280 164,408
Alex Yemenidjian 135,936,499 146,189
Jerome B. York 135,842,388 240,300
</TABLE>
At the Annual Meeting, the following actions were also taken: (i) Article I
of the Company's Certificate of Incorporation was amended to change the
Company's name to MGM MIRAGE, by a vote of 136,008,178 shares in favor, 45,584
shares opposed and 35,969 shares abstaining; (ii) the Company's Annual
Performance Based Incentive Plan for Executive Officers was amended, by a vote
of 132,886,424 shares in favor, 1,082,397 shares opposed and 2,120,910 shares
abstaining; (iii) the Company's 1997 Nonqualified Stock Option Plan and 1997
Incentive Stock Option Plan were amended, by a vote of 105,557,782 shares in
favor, 22,682,082 shares opposed, 2,118,047 shares abstaining and 5,731,790
broker non-votes; and (iv) the appointment of Arthur Andersen LLP as the
Company's independent auditors for the year ending December 31, 2000 was
ratified, by a vote of 136,035,980 shares in favor, 18,341 shares opposed and
35,410 shares abstaining.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<S> <C>
3(i).1 Certificate of Incorporation of the Company, as amended
through 1997. Incorporated by reference to Exhibit 3(1) to
Registration Statement No. 33-3305 and to Exhibit 3(a) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.
3(i).2 Certificate of Amendment to Certificate of Incorporation of
the Company dated January 7, 2000 relating to an increase in
the authorized shares of common stock. Incorporated by
reference to Exhibit 3(2) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999 (the
"1999 Form 10-K").
3(i).3 Certificate of Amendment to Certificate of Incorporation of
the Company dated January 7, 2000 relating to a 2-for-1
stock split. Incorporated by reference to Exhibit 3(3) to
the 1999 Form 10-K.
3(i).4 Certificate of Amendment to Certificate of Incorporation of
the Company dated August 1, 2000.
4 Indenture, dated as of September 15, 2000, among the
Company, as issuer, the Subsidiary Guarantors parties
thereto, as guarantors, and U.S. Trust Company, National
Association, as trustee. Incorporated by reference to
Exhibit 4 to the Company's Amended Current Report on Form
8-K/A filed on October 4, 2000.
10.1 Omnibus Amendment Agreement, dated as of September 6, 2000,
among the Company, as Borrower, MGM Grand Atlantic City,
Inc. and MGM Grand Detroit, LLC, as Co-Borrowers, the Banks
therein named and Bank of America, N.A., as Administrative
Agent. Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on September 8,
2000.
10.2 Second Amended and Restated Joint Venture Agreement of
Marina District Development Company, dated
as of August 31, 2000, between MAC, CORP. and Boyd Atlantic
City, Inc. (without exhibits).
10.3 1997 Nonqualified Stock Option Plan, giving effect to
amendment approved by the Company's shareholders on August
1, 2000.
10.4 1997 Incentive Stock Option Plan, giving effect to amendment
approved by the Company's shareholders on August 1, 2000.
10.5 Annual Performance Based Incentive Plan for Executive
Officers, giving effect to amendment approved by the
Company's shareholders on August 1, 2000. Incorporated
by reference to Appendix I to the Company's definitive
Proxy Statement filed under cover of Schedule 14A on
July 6, 2000.
27 Financial Data Schedule.
</TABLE>
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<PAGE>
(b) Reports on Form 8-K.
The Company filed the following Current Reports on Form 8-K during the
quarter ended September 30, 2000.
1. Current Report on Form 8-K, dated July 3, 2000, filed by the
Company on July 6, 2000 in which events under Item 5, Other
Events and Item 7, Financial Statements and Exhibits were
reported.
2. Current Report on Form 8-K, dated September 7, 2000, filed by the
Company on September 8, 2000 in which events under Item 5, Other
Events and Item 7, Financial Statements and Exhibits were
reported.
3. Current Report on Form 8-K, dated September 15, 2000, filed by
the Company on September 15, 2000 in which events under Item 5,
Other Events and Item 7, Financial Statements and Exhibits were
reported.
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<PAGE>
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 MIRAGE
Date: November 13, 2000 By: /s/ J. TERRENCE LANNI
-------------------------------------
J. Terrence Lanni
Chairman (Principal Executive Officer)
Date: November 13, 2000 By: /s/ JAMES J. MURREN
-------------------------------------
James J. Murren
President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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