<PAGE>
REGISTRATION FILED PURSUANT TO RULE 424(b)2
REGISTRATION NUMBER 333-33200
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus Dated May 5, 2000)
$710,000,000
[LOGO APPEARS HERE]
9 3/4% Senior Subordinated Notes due 2007
-------------------
The Company:
. MGM Grand, Inc. is a leading operator of first class hotel/casino resorts
with an emphasis on the total gaming and entertainment experience. We own
and operate the MGM Grand Las Vegas and the New York-New York Hotel and
Casino, two of the most prominent hotel/casino resorts on the Las Vegas
Strip. In addition, we own and operate three hotel/casino resorts in Primm,
Nevada, the MGM Grand Detroit interim casino in Detroit, Michigan and the
MGM Grand Hotel and Casino in Darwin, Australia. We also operate three
casinos in South Africa.
. On March 6, 2000, we entered into a definitive merger agreement with Mirage
Resorts, Incorporated, under which we will acquire Mirage, and Mirage's
shareholders will receive $21 per share in cash. The merger will have a
total equity value of approximately $4.4 billion. In addition, we will
assume or refinance Mirage's outstanding debt of approximately $2.0 billion.
The Senior Subordinated Notes:
. Maturity: The notes will mature on June 1, 2007.
. Interest Payments: The notes will pay interest semi-annually in cash in
arrears on June 1 and December 1, starting on December 1, 2000.
. Ranking: The notes and guarantees will be general unsecured senior
subordinated obligations of MGM Grand and each guarantor, respectively. The
notes and guarantees will rank junior to all existing and future senior
indebtedness and will rank pari passu with or senior to all other existing
or future indebtedness of MGM Grand and each guarantor, respectively.
. Guarantees: The notes will be unconditionally guaranteed, jointly and
severally, on a senior subordinated basis by certain of our existing and
future subsidiaries.
. Optional Redemption: We may redeem the notes in whole, but not in part, at
any time prior to their maturity at the redemption prices described more
fully in this prospectus supplement.
This investment involves risks. See "Risk Factors" beginning on page S-13.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Price to Underwriting Proceeds to
Public Discount (1) MGM Grand (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............................... 98.763% 1.610% 97.153%
Total................................... $701,217,300 $11,431,000 $689,786,300
- --------------------------------------------------------------------------------
</TABLE>
(1) Reflects an underwriting discount of 1.75% with respect to all notes
other than up to $60.0 million of the notes sold to certain of our and
Mirage's directors and senior management which will be purchased and sold
by the underwriters at the price to public.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus to which it relates
is truthful or complete. Any representation to the contrary is a criminal
offense.
None of the Nevada Gaming Commission, the Nevada State Gaming Control
Board, the New Jersey Casino Control Commission, the Michigan Gaming Control
Board, the Mississippi Gaming Commission nor any other gaming authority has
passed upon the accuracy or adequacy of this prospectus supplement or the
accompanying prospectus or the investment merits of the securities offered.
Any representation to the contrary is unlawful.
The Attorney General of the State of New York has not passed upon or
endorsed the merits of this offering. Any representation to the contrary is
unlawful.
Banc of America Securities LLC expects to deliver the notes to purchasers
on May 31, 2000.
Joint Book Running Managers
Banc of America Securities LLC Deutsche Banc Alex. Brown
-------------------
Co-Lead Manager
Morgan Stanley Dean Witter
Banc One Capital Markets, Inc.
Bear, Stearns & Co. Inc.
CIBC World Markets
Commerzbank Capital Markets Corp.
Merrill Lynch & Co.
Salomon Smith Barney
Scotia Capital
SG Cowen
Wasserstein Perella Securities,
Inc.
The date of this prospectus supplement is May 22, 2000.
<PAGE>
Pictures of MGM Grand and Mirage Hotel/Casinos
<PAGE>
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TABLE OF CONTENTS
----------------
Prospectus Supplement
----------------
<TABLE>
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Page
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<S> <C>
Summary.................................................................. S-1
Risk Factors............................................................. S-13
Use of Proceeds.......................................................... S-18
Capitalization........................................................... S-19
Dividend Policy.......................................................... S-20
Unaudited Pro Forma Financial Statements................................. S-21
Selected Consolidated Financial and Other Data........................... S-26
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... S-30
Business and Properties.................................................. S-40
Regulation and Licensing................................................. S-49
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Description of the Notes.................................................. S-60
Underwriting.............................................................. S-76
Legal Matters............................................................. S-77
Experts................................................................... S-78
Forward-Looking Statements................................................ S-78
Where You Can Find More Information....................................... S-79
Incorporation of Certain Information by Reference......................... S-79
Appendix I: Mirage Resorts, Incorporated--Management's Discussion and
Analysis of Financial Condition and Results of Operations................ I-1
</TABLE>
----------------
Prospectus
----------------
<TABLE>
<CAPTION>
Page
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<S> <C>
About this Prospectus.................................................... 2
Forward-Looking Statements............................................... 2
The Company.............................................................. 3
Use of Proceeds.......................................................... 4
Ratio of Earnings to Fixed Charges....................................... 4
Summary Historical Financial Data........................................ 5
Summary Unaudited Pro Forma Data......................................... 6
Comparative Historical and Pro Forma Selected Consolidated Financial
Data.................................................................... 7
Unaudited Pro Forma Financial Statements................................. 8
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Description of Our Long Term Debt.......................................... 12
Description of Debt Securities............................................. 17
Description of Common Stock................................................ 24
Plan of Distribution....................................................... 25
Legal Matters.............................................................. 26
Experts.................................................................... 26
Where You Can Find More Information........................................ 26
Incorporation of Certain Information by Reference.......................... 27
</TABLE>
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- -------------------------------------------------------------------------------
You should rely only on the information incorporated by reference or
provided in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone else to provide you with different information. We
are offering the notes and seeking offers to buy the notes only in
jurisdictions where offers and sales are permitted. You should not assume that
the information in this prospectus supplement and the accompanying prospectus
is accurate as of any date other than the date on the front of these documents
regardless of the time of delivery of this prospectus supplement or any sale
of the notes.
i
<PAGE>
SUMMARY
This summary is not complete and may not contain all of the information that
may be important to you. You should read the entire prospectus supplement and
accompanying prospectus carefully, including the financial data and related
notes, as well as the documents incorporated by reference, before making an
investment decision. In this prospectus supplement, except where the context
otherwise requires, we will collectively refer to MGM Grand, Inc. and its
direct and indirect subsidiaries as "MGM Grand," "we," "our" and "us."
MGM Grand, Inc.
MGM Grand is a leading operator of first class hotel/casino resorts with an
emphasis on the total gaming and entertainment experience. We own and operate
the MGM Grand Las Vegas and the New York-New York Hotel and Casino, two of the
most prominent hotel/casino resorts on the Las Vegas Strip. We believe the MGM
Grand Las Vegas is one of the largest hotel/casino resorts in the world with
5,034 rooms, approximately 171,500 square feet of gaming space and one of the
largest entertainment venues in Las Vegas. In 1999, we completed an approximate
$570 million master plan that expanded and transformed the MGM Grand Las Vegas
into "The City of Entertainment." Our New York-New York hotel/casino resort has
2,024 hotel rooms and approximately 84,000 square feet of gaming space. In
Primm, Nevada, we own and operate the three hotel/casino resorts that travelers
first encounter on the principal route from Southern California to Las Vegas.
On July 29, 1999, we opened the MGM Grand Detroit interim casino in Detroit,
Michigan. We also own and operate the MGM Grand Hotel and Casino in Darwin,
Australia and operate three casinos in South Africa.
Mirage Transaction Overview
On March 6, 2000, we entered into a definitive merger agreement with Mirage,
under which we will acquire Mirage, and Mirage shareholders will receive $21
per share in cash. The merger will have a total equity value of approximately
$4.4 billion. In addition, Mirage has outstanding debt of approximately $2.0
billion. 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 mid-2000. As a result of the merger, Mirage will become our wholly
owned subsidiary.
Mirage owns and operates hotel/casino resorts on the Las Vegas Strip that
include: Bellagio, a European-style luxury resort; The Mirage, a tropically-
themed destination resort; Treasure Island at the Mirage, a pirate-themed
hotel/casino resort; and the Holiday Inn(R) Casino Boardwalk. Mirage also owns
a 50% interest in the joint venture that owns and operates the Monte Carlo
Resort & Casino, a palatial-style hotel/casino on the Las Vegas Strip. Mirage
also owns and operates The Golden Nugget, a hotel/casino in downtown Las Vegas,
The Golden Nugget-Laughlin, located near the center of the tourist strip in
Laughlin, Nevada, and Beau Rivage, a beachfront resort located in Biloxi,
Mississippi. Mirage is also developing a hotel/casino resort in the Marina
district of Atlantic City, New Jersey on a joint venture basis with Boyd Gaming
Corporation. Mirage has historically built and operated theme-based, "one-of-a-
kind" hotel/casino resorts that provide customers a variety of world-class
gaming and entertainment attractions.
Reasons for the Mirage Merger
We believe the Mirage merger will achieve the following business objectives:
. control several of the premier gaming properties on the Las Vegas Strip;
. position us with a significant focus on the Nevada gaming market;
. provide us with selective geographic diversity while maintaining
leadership positions in several major domestic and international gaming
markets;
. focus on the most profitable customer segment, enabling us to leverage
multiple revenue streams and cross-marketing opportunities from the
combined customer base; and
. provide significant operational synergies and cost savings
opportunities.
S-1
<PAGE>
The Mirage merger will allow us to control several of the premier gaming
properties on the Las Vegas Strip into one company, including MGM Grand Las
Vegas, New York-New York, Bellagio, The Mirage and Treasure Island, as well as
Monte Carlo in which Mirage has a 50% ownership interest. We believe that these
properties are among the most recognized hotel/casino resorts on the Las Vegas
Strip and that they are among the most visited "must-see" attractions on the
Las Vegas Strip. We believe these properties collectively generate more revenue
than the Las Vegas Strip properties of any other gaming operator and that the
consolidation of these properties will position us as the dominant competitor
in the upper-middle and premium segments of the Las Vegas gaming market.
A principal element of our strategy is to maintain a focus on the Nevada
gaming market, the largest and most widely recognized gaming market in the
world. We view Nevada's gaming market as the industry's most
attractive market due to the state's stable legal and regulatory environment,
the significant concentration of hotel/casino resorts on the Las Vegas Strip,
the steady growth of the Las Vegas gaming market and the strength of the
state's secondary gaming markets. Since late 1998, four hotel/casino resorts
have opened on the Las Vegas Strip: Bellagio, Mandalay Bay Resort & Casino, The
Venetian and Paris Las Vegas. These new resorts were absorbed by the market and
fueled a 10.5% increase in the number of visitors to the Las Vegas Strip in
1999. With the exception of the planned opening of Aladdin Casino in 2000, we
are unaware of any other publicly announced new hotel/casino resort under
development on the Las Vegas Strip, which should enable us to continue to
experience favorable occupancy rates. McCarran International Airport is
expected to continue to expand by adding 24 more gates in the next two years
while construction and development of the beltway, the largest transportation
improvement project ever undertaken by Clark County, is expected to commence
this year. In addition to the Las Vegas Strip, significant Nevada gaming
markets in which MGM Grand and Mirage have properties are Downtown Las Vegas,
Primm and Laughlin. Following the Mirage merger, we believe that we will be
well positioned in the Nevada market, with a total of 12 properties.
We also anticipate that the Mirage merger will fortify our position in
gaming markets outside Nevada. MGM Grand and Mirage collectively operate gaming
properties domestically in Detroit, Michigan and Biloxi, Mississippi and
internationally in Australia and South Africa. We believe that our presence in
these domestic and international gaming markets serves to hedge the economic
and general business risk we face in the Nevada gaming market. We believe this
selective geographic diversification adds ancillary revenue streams and
provides marketing opportunities for our other hotel/casino resort properties.
We believe that the Mirage merger will provide us further penetration and
dominance of our target high-end customer base, as well as further
diversification of overall customer demographics. The combined portfolio will
have hotel/casino resorts with global brand names that serve diverse customer
profiles. We believe MGM Grand Las Vegas, Bellagio and The Mirage will attract
premium customers and New York-New York, Treasure Island and Monte Carlo will
attract upper-middle customers. A greater number of properties in each market
segment allows for cross-marketing to the same type of customer. We intend to
leverage this larger customer base by cross-marketing other products and
services, including restaurants, entertainment venues and golf courses.
Similar to our acquisition of Primadonna, we believe that the Mirage merger
will provide significant economic and operational benefits to us resulting from
opportunities to (i) eliminate redundant operating costs; (ii) utilize
economies of scale and best practices; and (iii) implement revenue enhancement
strategies. We believe that several opportunities exist to reduce the combined
cost structure of MGM Grand and Mirage through the elimination of duplicative
and redundant operating costs, particularly related to overlapping corporate
functions and duplicative sales and marketing offices throughout the world. We
expect to realize annual cost savings of approximately $95.0 million
specifically related to these initiatives upon full integration of the Mirage
merger. Furthermore, we expect to achieve economies of scale in other areas
such as payroll, purchasing, centralized room reservation systems and high-end
marketing opportunities. We also believe that the Mirage merger will present
the combined company with the opportunity to enhance revenue growth through
cross-marketing room reservations, restaurants, live entertainment, leisure
activities and gaming affinity programs. A primary goal of
S-2
<PAGE>
our senior management team will be to scrutinize the operating efficiency of
the newly acquired properties, and focus the entire company on achieving the
highest EBITDA margins in the gaming industry. In addition, the sale of non-
strategic assets could result in significant proceeds available for immediate
debt reduction.
Hotel/Casino Resort Properties
We have provided below certain information about our hotel/casino resort
properties and the Mirage properties. Except as otherwise indicated, we or
Mirage wholly own and operate these properties.
<TABLE>
<CAPTION>
Approximate
Number of Casino Gaming
Name and Location Rooms/Suites Square Footage Slots (1) Tables (2)
----------------- ------------ -------------- -------- ---------
<S> <C> <C> <C> <C>
Domestic Casinos:
Las Vegas Strip, Nevada
MGM Grand Las Vegas..... 5,034 171,500 3,589 152
Bellagio*............... 3,005 155,000 2,485 139
The Mirage*............. 3,044 107,200 2,300 122
New York-New York....... 2,024 84,000 2,250 70
Treasure Island*........ 2,885 83,800 1,940 83
Monte Carlo (3)*........ 3,002 102,000 2,100 71
Boardwalk*.............. 654 32,000 605 20
------ --------- ------ -----
Subtotal.............. 19,648 735,500 15,269 657
------ --------- ------ -----
Downtown Las Vegas,
Nevada
The Golden Nugget*...... 1,907 38,000 1,255 56
Laughlin, Nevada
The Golden Nugget-
Laughlin*.............. 300 32,000 1,185 13
Primm, Nevada
Buffalo Bill's Resort &
Casino................. 1,239 46,000 1,527 40
Primm Valley Resort &
Casino................. 626 51,000 1,394 33
Whiskey Pete's Hotel &
Casino................. 777 36,400 1,355 30
------ --------- ------ -----
Subtotal.............. 2,642 133,400 4,276 103
------ --------- ------ -----
Detroit, Michigan
MGM Grand Detroit (4)... NA 75,000 2,435 86
Biloxi, Mississippi
Beau Rivage*............ 1,780 80,000 1,995 89
------ --------- ------ -----
Total Domestic........ 26,277 1,093,900 26,415 1,004
------ --------- ------ -----
International Casinos:
Darwin, Northern
Territory, Australia
MGM Grand Australia..... 96 23,800 360 32
South Africa
Nelspruit (5)........... NA 13,000 298 12
Witbank (5)............. NA 15,500 360 12
Johannesburg (5)........ NA 58,000 1,700 50
------ --------- ------ -----
Grand Total........... 26,373 1,204,200 29,133 1,110
====== ========= ====== =====
</TABLE>
- --------
* Represents a Mirage-owned property prior to the merger.
(1) Includes slot machines and other coin-operated devices.
(2) Generally includes blackjack ("21"), baccarat, craps, pai gow poker,
Caribbean stud poker, wheel of fortune and roulette.
(3) Owned and operated by a 50-50 joint venture between Mirage and Mandalay
Resort Group.
(4) On July 29, 1999, we opened our interim casino facility in Detroit,
Michigan.
(5) Referenced properties are governed by a joint venture agreement among MGM
Grand, Southern Sun Group and Tsogo Investment Holding Company, under which
MGM Grand earns fees for the management of all casino operations.
S-3
<PAGE>
Recent Developments
New Senior Credit Facilities. On April 11, 2000, we announced the execution
of agreements with a group of banks to provide $4.3 billion in new senior
credit facilities. The new senior credit facilities consist of a $2.0 billion
five-year revolving credit facility, a $1.0 billion 364-day revolving credit
facility and a $1.3 billion one-year term loan. We expect to draw on these new
senior credit facilities in connection with the pending Mirage merger.
Private Placement. On April 18, 2000, we completed a private placement of
46.5 million shares of our common stock for a total purchase price of $1.23
billion. On May 18, 2000, as required by the private placement agreement, we
filed a shelf registration statement to register the resale of these shares
although we do not know when or if any such resales may occur. Tracinda
Corporation, our largest stockholder, purchased 23 million shares in the
private placement. As a result of the private placement, the percentage
ownership of our outstanding shares by Tracinda and its sole stockholder
decreased from approximately 64% to 60%.
Cash Flow Uses. As a result of the pending merger with Mirage, we announced
on April 19, 2000, that our previously declared quarterly dividend policy was
discontinued. Also, we have suspended our previously announced share repurchase
program. We intend to focus on utilizing all available free cash flow to repay
indebtedness as well as finance our ongoing operations.
Regulatory Approval. On May 18, 2000, the Mississippi Gaming Commission
granted us the necessary regulatory approvals so that we may consummate the
Mirage merger.
Directed Purchases. On May 18, 2000, we announced the intentions of certain
of our and Mirage's directors and senior management to purchase up to $60.0
million of the notes offered hereby at the price to public.
S-4
<PAGE>
The Offering
The summary below describes the principal terms of the notes. The terms and
conditions described below are subject to important limitations and exceptions.
The "Description of the Notes" section of this prospectus supplement contains a
more detailed description of the terms and conditions of the notes.
<TABLE>
<C> <S>
Issuer......................... MGM Grand, Inc.
Securities..................... $710.0 million in principal amount of 9 3/4%
senior subordinated notes due 2007.
Maturity....................... June 1, 2007.
Interest....................... Annual rate: 9 3/4%.
Payment frequency: every six months on June 1
and December 1.
First payment: December 1, 2000.
Guarantee...................... The notes will be unconditionally guaranteed,
jointly and severally, on a senior
subordinated basis by all of our wholly owned
U.S. subsidiaries except for U.S. holding
companies of our foreign subsidiaries.
Ranking........................ The notes and guarantees will be general
unsecured senior subordinated obligations of
MGM Grand and each guarantor, respectively,
and will rank junior to all existing and
future senior indebtedness and pari passu
with or senior to all other existing or
future indebtedness of MGM Grand and each
guarantor, respectively.
As of March 31, 2000, after giving effect to
the Mirage merger and the related financing
transactions, the notes and guarantees would
have been subordinated to approximately $5.8
billion of senior indebtedness, including
$4.3 billion of borrowings under our new
senior credit facilities and $1.5 billion
under our and Mirage's existing senior notes,
and effectively subordinated to $179.3
million of indebtedness of our subsidiaries
that are not guarantors.
Optional Redemption............ We may redeem the notes in whole, but not in
part, at any time prior to their maturity at
the redemption prices described in the
section "Description of the Notes--Optional
Redemption."
Change of Control.............. If we experience specific kinds of changes of
control, we must offer to repurchase the
notes at the price described in the section
"Description of the Notes--Repurchase at the
Option of Holders Upon a Change of Control."
Basic Covenants of the We will issue the notes under an indenture
Indenture..................... with The Bank of New York, as trustee. The
indenture will, among other things, restrict
our and the subsidiary guarantors' ability
to:
. incur liens on assets to secure debt;
. enter into certain sale and lease-back
transactions; and
. merge or consolidate with another company
or sell substantially all assets.
</TABLE>
S-5
<PAGE>
<TABLE>
<C> <S>
Use of Proceeds................ We plan to use the net proceeds from the
offering of the notes to repay, upon
consummation of the Mirage merger, a portion
of the outstanding borrowings under Mirage's
existing senior credit facility. In addition,
we will use the proceeds from our initial
borrowings under our new senior credit
facilities, together with the proceeds from
our recently completed private placement of
common stock, to:
. consummate the Mirage merger;
. refinance our existing senior credit
facility;
. refinance the remainder of Mirage's
existing senior credit facility; and
. pay related fees and expenses.
</TABLE>
You should refer to the section entitled "Risk Factors" for an explanation
of certain risks of investing in the notes.
S-6
<PAGE>
Summary Unaudited Pro Forma Financial and Other Data
The summary unaudited pro forma financial and other data gives effect to the
Mirage merger and the financing transactions associated therewith. The Mirage
merger will be accounted for as a "purchase," which means that the purchase
price will be preliminarily allocated to assets acquired and liabilities
assumed based on their estimated fair values at the time the companies are
combined. We are providing the following financial information to assist you in
your analysis of the financial aspects of the Mirage merger. We derived this
information from audited financial statements for the fiscal year ended
December 31, 1999 and unaudited financial statements for the three months ended
March 31, 2000 for both MGM Grand and Mirage. The information is only a summary
of the unaudited pro forma financial information presented on pages S-21 to
S-25 and you should read it in conjunction with our historical financial
statements and related notes contained in the annual reports and other
information incorporated herein by reference. Certain of Mirage's financial
information has been reclassified to conform with our presentation.
While this pro forma financial information has been prepared based upon
currently available information using assumptions which we believe are
appropriate, you should be aware that this pro forma information may not be
indicative of what actual results will be in the future or would have been for
the periods presented. You should read the notes to the summary unaudited pro
forma financial statements beginning on page S-24 for further discussion of the
assumptions we made to prepare this information.
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1999 March 31, 2000
----------------- ------------------
(in thousands,
except for other operating data)
<S> <C> <C>
Statement of Income Data:
Net revenues.............................. $3,826,432 $ 1,107,160
Operating income (1)...................... 504,765 210,092
Income before income taxes, extraordinary
item and cumulative effect of change in
accounting principle..................... 121,587 96,253
Net income before extraordinary item and
cumulative effect of change in accounting
principle................................ 71,189 58,861
Other Financial Data:
EBITDA (2)................................ $1,026,756 $ 332,801
EBITDA Margin............................. 26.8% 30.1%
Cash flows from operating activities...... $ 719,043 $ 230,630
Cash flows from investing activities...... (893,907) (83,327)
Cash flows from financing activities...... 279,104 (169,215)
Depreciation and amortization............. 344,223 98,920
Ratio of earnings to fixed charges (3).... 1.04x 1.53x
Other Operating Data (end of period):
Rooms....................................................... 26,373
Casino square footage....................................... 1,204,200
Number of slot machines..................................... 29,133
Number of table games....................................... 1,110
Balance Sheet Data (end of period):
Cash and cash equivalents................................... $ 197,110
Total assets................................................ 10,765,071
Total debt (4).............................................. 6,534,206
Total stockholders' equity.................................. 2,232,985
</TABLE>
- --------
See footnotes on following page.
S-7
<PAGE>
- --------
(1) Includes preopening, restructuring and other of $113.6 million and $8.9
million for the year ended December 31, 1999 and the three months ended
March 31, 2000, respectively.
(2) EBITDA consists of operating income plus depreciation and amortization,
one-time charges (which consist of master plan asset disposition and
preopening, restructuring and other) and corporate expense. On a pro forma
basis corporate expense for the year ended December 31, 1999 and three
months ended March 31, 2000 would have been $64.1 million and $14.9
million, respectively. On a pro forma basis depreciation and amortization
reported as corporate expense for the year ended December 31, 1999 and the
three months ended March 31, 2000 would have been $12.4 million and $3.3
million, respectively. EBITDA should not be construed as an alternative to
operating income, as an indicator of our operating performance or as an
alternative to cash flows generated by operating, investing or financing
activities as an indicator of cash flows, or a measure of liquidity, or as
any other measure of performance determined in accordance with generally
accepted accounting principles. In addition, it should be noted that not
all gaming companies that report EBITDA calculate this measure in the same
manner as MGM Grand, and therefore, our measure of EBITDA may not be
comparable to similarly titled measures used by other gaming companies.
(3) For purposes of computing the ratio of earnings to fixed charges: (i)
"earnings" consist of income from continuing operations before income taxes
and fixed charges, adjusted to exclude capitalized interest and (ii) "fixed
charges" consist of interest, whether expensed or capitalized, amortization
of debt discount and issuance costs and MGM Grand's proportionate share of
interest cost of 50%-owned joint ventures.
(4) Includes current and long term portions of capitalized lease obligations
and long term debt.
S-8
<PAGE>
Summary Historical Financial and Other Data
MGM Grand, Inc.
We have derived the following summary historical financial and other data as
of and for each of the three fiscal years ended December 31, 1999 from audited
consolidated financial statements included in our Annual Reports on Form 10-K
for the fiscal years then ended. Our summary historical financial and other
data presented in the table below as of and for the three months ended March
31, 1999 and March 31, 2000 is unaudited. However, in management's opinion, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for these periods have been included. The
results of operations for the three months ended March 31, 2000 may not be
indicative of results of operations for the full year. The table should be read
together with the other information appearing in this prospectus supplement or
incorporated herein by reference.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------------------- ----------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------
(in thousands, except for other operating data)
<S> <C> <C> <C> <C> <C>
Statement of Income
Data:
Net revenues............ $ 827,597 $ 773,863 $1,391,650 $ 251,367 $ 442,872
Operating income (1).... 190,970 131,574 209,868 37,942 92,440
Income before income
taxes, extraordinary
item and cumulative
effect of change in
accounting principle... 180,301 109,528 150,153 28,824 70,952
Income before
extraordinary item and
cumulative effect of
change in accounting
principle.............. 115,256 68,948 95,124 18,491 44,305
Other Financial Data:
EBITDA (2).............. $ 287,064 $ 218,547 $ 421,805 $ 72,738 $ 144,616
EBITDA Margin........... 34.7% 28.2% 30.3% 28.9% 32.7%
Cash flows from
operating activities... $ 184,012 $ 171,680 $ 289,877 $ 30,674 $ 71,118
Cash flows from
investing activities... (201,778) (405,733) (386,693) (111,252) (63,123)
Cash flows from
financing activities... (9,040) 281,403 136,382 64,391 (31,437)
Depreciation and
amortization........... 64,104 76,284 125,985 20,892 39,871
Capital expenditures
(3).................... 227,756 361,942 375,260 117,257 62,401
Ratio of earnings to
fixed charges (4)...... 10.11x 2.94x 2.73x 2.69x 3.86x
Other Operating Data
(end of period):
Rooms................... 7,134 7,134 9,796 9,767 9,796
Casino square footage... 292,336 365,836 574,236 499,236 574,200
Number of slot
machines............... 6,728 8,793 15,451 15,497 15,268
Number of table games... 268 326 514 508 517
Balance Sheet Data (end
of period):
Cash and cash
equivalents............ $ 34,606 $ 81,956 $ 121,522 $ 65,769 $ 98,080
Total assets............ 1,389,816 1,768,958 2,760,743 2,538,855 2,733,064
Total debt (5).......... 68,365 552,827 1,336,850 1,012,117 1,357,974
Total stockholders'
equity................. 1,101,622 964,381 1,033,846 1,222,306 1,036,735
</TABLE>
- --------
See footnotes on following page.
S-9
<PAGE>
- --------
(1) Includes master plan asset disposition costs of $28.6 million in 1997.
Includes preopening and other of $71.5 million, $8.8 million and $6.5
million for 1999, the three months ended March 31, 1999 and the three
months ended March 31, 2000, respectively. Includes corporate expense of
$3.4 million, $10.7 million, $14.5 million, $5.1 million and $5.8 million
for 1997, 1998, 1999, the three months ended March 31, 1999 and the three
months ended March 31, 2000, respectively.
(2) EBITDA consists of operating income plus depreciation and amortization,
one-time charges (which consist of master plan asset disposition and
preopening, restructuring and other) and corporate expense. EBITDA should
not be construed as an alternative to operating income, as an indicator of
our operating performance or as an alternative to cash flows generated by
operating, investing or financing activities as an indicator of cash flows,
or a measure of liquidity, or as any other measure of performance
determined in accordance with generally accepted accounting principles. In
addition, it should be noted that not all gaming companies that report
EBITDA calculate this measure in the same manner as MGM Grand, and
therefore, our measure of EBITDA may not be comparable to similarly titled
measures used by other gaming companies.
(3) During 1997, $174.1 million and $16.5 million was expended on the MGM Grand
Las Vegas master plan and the development of MGM Grand Atlantic City,
respectively. During 1998, $304.8 million, $5.5 million and $5.0 million
was expended on the master plan, the development of MGM Grand Atlantic City
and the development of the MGM Grand Detroit interim casino, respectively.
During 1999, $83.1 million, $14.7 million and $161.9 million was expended
on the master plan, the development of MGM Grand Atlantic City and the
development of the MGM Grand Detroit interim casino, respectively. During
the three months ended March 31, 1999, $40.7 million, $1.2 million and
$50.9 million was expended on the master plan, the development of MGM Grand
Atlantic City and the development of the MGM Grand Detroit interim casino,
respectively. During the three months ended March 31, 2000, $7.5 million,
$1.9 million and $16.4 million was expended on the new golf course at MGM
Grand Las Vegas, the development of MGM Grand Atlantic City and the
completion of the MGM Grand Detroit interim casino, respectively.
(4) For purposes of computing the ratio of earnings to fixed charges: (i)
"earnings" consist of income from continuing operations before income taxes
and fixed charges, adjusted to exclude capitalized interest and (ii) "fixed
charges" consist of interest, whether expensed or capitalized, amortization
of debt discount and issuance costs and our proportionate share of interest
cost of 50%-owned joint ventures.
(5) Includes current and long term portions of capitalized lease obligations
and long term debt.
S-10
<PAGE>
Summary Historical Financial and Other Data
Mirage Resorts, Incorporated
The summary historical financial and other data for Mirage as of and for
each of the three fiscal years ended December 31, 1999 have been derived from
the audited consolidated financial statements included in Mirage's Annual
Reports on Form 10-K for the fiscal years then ended. Mirage's summary
historical financial and other data presented in the table below as of and for
the three months ended March 31, 1999 and March 31, 2000 is unaudited. The
results of operations for the three months ended March 31, 2000 may not be
indicative of results of operations for the full year. The table should be read
together with the other information appearing in this prospectus supplement or
incorporated herein by reference. Certain of Mirage's financial information has
been reclassified to conform with our presentation.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------ ----------------------
1997 1998 1999 1999 2000
----------- ----------- ---------- ---------- ----------
(in thousands, except for other operating data)
<S> <C> <C> <C> <C> <C>
Statement of Income
Data:
Net revenues............ $ 1,424,016 $ 1,526,803 $2,434,782 $ 590,299 $ 664,288
Operating income (1).... 331,506 155,179 307,972 75,857 120,921
Income before income
taxes, extraordinary
item and cumulative
effect of change in
accounting principle... 325,079 135,178 218,090 49,639 86,965
Income before
extraordinary item and
cumulative effect of
change in accounting
principle.............. 209,803 85,225 140,968 32,070 55,782
Other Financial Data:
EBITDA (2).............. $ 448,655 $ 397,743 $ 604,951 $ 162,402 $ 188,185
EBITDA Margin........... 31.5% 26.1% 24.8% 27.5% 28.3%
Cash flows from
operating activities... $ 293,957 $ 279,855 $ 429,166 $ 101,590 $ 159,512
Cash flows from
investing activities... (1,196,421) (1,280,404) (507,214) (188,664) (20,204)
Cash flows from
financing activities... 919,893 976,026 142,722 130,583 (137,778)
Depreciation and
amortization........... 87,956 105,298 205,163 43,832 55,780
Capital expenditures
(3).................... 1,058,900 1,158,497 509,399 157,896 60,298
Ratio of earnings to
fixed charges (4)...... 4.38x 1.27x 2.21x 1.94x 3.03x
Other Operating Data
(end of period):
Rooms................... 11,222 14,881 16,577 16,655 16,577
Casino square footage... 351,000 538,000 630,000 630,000 630,000
Number of slot
machines............... 8,830 12,005 13,865 13,724 13,865
Number of table games... 377 530 593 596 593
Balance Sheet Data (end
of period):
Cash and cash
equivalents............ $ 99,337 $ 74,814 $ 139,488 $ 118,323 $ 141,018
Total assets............ 3,347,350 4,530,202 4,804,306 4,653,008 4,719,682
Total debt (5).......... 1,397,655 2,378,911 2,210,279 2,493,436 2,068,644
Total stockholders'
equity................. 1,512,484 1,601,837 2,023,902 1,619,466 2,083,625
</TABLE>
- --------
See footnotes on following page.
S-11
<PAGE>
- --------
(1) Includes preopening and related promotional expense of $88.3 million, $42.1
million, $31.5 million and $2.5 million for 1998, 1999, the three months
ended March 31, 1999 and the three months ended March 31, 2000,
respectively. Includes corporate expense of $29.2 million, $49.0 million,
$49.7 million, $11.3 million and $9.0 million for 1997, 1998, 1999, the
three months ended March 31, 1999 and the three months ended March 31,
2000, respectively.
(2) EBITDA consists of operating income plus preopening and related promotional
expense plus corporate expense plus depreciation and amortization. EBITDA
should not be construed as an alternative to operating income, as an
indicator of Mirage's operating performance, or as an alternative to cash
flows generated by operating, investing or financing activities as an
indicator of cash flows, or a measure of liquidity, or as any other measure
of performance determined in accordance with generally accepted accounting
principles. In addition, it should be noted that not all gaming companies
that report EBITDA calculate this measure in the same manner as shown
herein, and therefore, EBITDA may not be comparable to similarly titled
measures used by other gaming companies.
(3) During 1997, capital expenditures include $728.9 million related to the
construction of Bellagio and $172.3 million related to the construction of
Beau Rivage. Capital expenditures in 1997 also include $29.5 million for
the acquisition of corporate aircraft, $27.6 million for the purchase of
land on the Las Vegas Strip and $18.8 million associated with a hotel lobby
remodel project at Treasure Island. During 1998, $617.4 million relates to
the completion of Bellagio, and $268.0 million relates to the ongoing
construction of Beau Rivage. The 1998 amount also includes $118.8 million
associated with land acquisitions on the Las Vegas Strip and $42.7 million
for the purchase of corporate aircraft. During 1999, capital expenditures
include $176.7 million for the completion of Beau Rivage, $57.2 million
associated with a room enhancement project at Treasure Island and
$40.1 million for the acquisition of fine art. The 1999 annual amount also
includes $22.8 million associated with construction projects at The Mirage,
including a new theatre and additional convention, meeting and exhibit
space. For the three months ended March 31, 1999, capital expenditures
included $81.8 million related to the completion of Beau Rivage and $12.6
million associated with the room refurbishment project at Treasure Island.
For the three months ended March 31, 2000, capital expenditures include
$27.8 million associated with certain projects at The Mirage.
(4) For purposes of computing the ratio of earnings to fixed charges: (i)
"earnings" consist of income from continuing operations before income taxes
and fixed charges, adjusted to exclude capitalized interest and (ii) "fixed
charges" consist of interest, whether expensed or capitalized, amortization
of debt discount and issuance costs and Mirage's proportionate share of
interest cost of 50%-owned joint ventures.
(5) Includes current maturities of long term debt.
S-12
<PAGE>
RISK FACTORS
Before you invest in the notes, you should be aware that such investment
carries various risks, including those described below. We urge you to
carefully consider these risk factors, together with all of the other
information included and incorporated by reference in this prospectus
supplement and the accompanying prospectus, before you decide to invest in the
notes.
Risks Related to the Notes
The right to receive payments on the notes and the guarantees will be junior
to most of our existing and future borrowings.
The notes and guarantees will rank behind all existing and future senior
indebtedness of MGM Grand and each guarantor, respectively, including the debt
incurred under our new senior credit facilities. As of March 31, 2000, after
giving effect to the Mirage merger and the related financing transactions, the
notes and guarantees would have been subordinated to approximately $5.8
billion of senior indebtedness and effectively subordinated to $179.3 million
of indebtedness of our subsidiaries that are not guarantors. The indenture
governing the notes does not limit our ability to incur substantial additional
senior indebtedness, including under the new senior credit facilities or other
subsidiary indebtedness. If we file for bankruptcy, liquidate or dissolve, our
assets would be available to pay obligations in respect of the notes only
after we pay all of our senior indebtedness. We may not have sufficient assets
remaining to make any payments in respect of the notes. In addition, if we
default on our senior indebtedness, we may be prohibited, under the terms of
the notes and guarantees from making any payments on the notes and guarantees.
The term "senior indebtedness," as it applies to the notes and guarantees, is
defined in "Description of the Notes--Certain Definitions." The indenture does
not limit liens securing senior indebtedness and, in the event of certain
downgradings by rating agencies, the terms of our new senior credit facilities
and outstanding senior notes would require us to grant liens securing such
indebtedness.
Our substantial indebtedness after the Mirage merger could adversely affect
our operations and financial results and impair our ability to satisfy our
obligations under the notes.
After the Mirage merger, we will have approximately $6.5 billion of
indebtedness. See "Capitalization."
The notes will not restrict our ability to borrow substantial additional
funds in the future that may be senior to the notes, and they provide holders
only limited protection should we be involved in a highly leveraged
transaction. If we incur additional indebtedness following or prior to the
acquisition, it could increase the related risks that we face.
Our indebtedness could have important consequences to you. For example, it
could:
. increase our vulnerability to general adverse economic and industry
conditions;
. require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate activities;
. limit our flexibility in planning for, or reacting to, changes in our
business and industry;
. limit our ability to borrow additional funds; and
. place us at a competitive disadvantage compared to other less leveraged
competitors.
S-13
<PAGE>
Servicing our indebtedness will require a significant amount of cash and our
ability to generate sufficient cash depends on many factors some of which are
beyond our control.
Our ability to make payments on and to refinance our indebtedness and to
fund planned capital expenditures depends on our ability to generate cash flow
in the future. This, to some extent, is subject to general economic,
financial, competitive, legislative and regulatory factors and other factors
that are beyond our control. In addition, our ability to borrow funds under
our new senior credit facilities in the future will depend on our meeting the
financial covenants in the agreements, including a minimum interest coverage
test and a maximum leverage ratio test. We cannot assure you that our business
will generate cash flow from operations or that future borrowings will be
available to us under our new senior credit facilities in an amount sufficient
to enable us to pay our indebtedness or to fund our other liquidity needs. As
a result, we may need to refinance all or a portion of our indebtedness on or
before maturity. Our $1.0 billion 364-day senior revolving credit facility and
our $1.3 billion senior term loan facility mature during 2001. We cannot
assure you that we will be able to refinance any of our indebtedness on
favorable terms or at all. Our inability to generate sufficient cash flow or
refinance our indebtedness on favorable terms could have a material adverse
effect on our financial condition.
Fraudulent conveyance statutes allow courts, under specific circumstances, to
avoid subsidiary guarantees.
Various fraudulent conveyance and similar laws have been enacted for the
protection of creditors and may be utilized by courts to avoid or limit the
guarantees of the notes by our subsidiaries. The requirements for establishing
a fraudulent conveyance vary depending on the law of the jurisdiction that is
being applied. Generally, if in a bankruptcy, reorganization or other judicial
proceeding, a court were to find that the guarantor received less than
reasonably equivalent value or fair consideration for incurring indebtedness
evidenced by guarantees, and either
. was insolvent at the time of the incurrence of such indebtedness,
. was rendered insolvent by reason of incurring such indebtedness,
. was at such time engaged or about to engage in a business or transaction
for which its assets constituted unreasonably small capital, or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured,
such court could, with respect to the guarantor, declare void in whole or in
part the obligations of such guarantor under the guarantees. Any payment by
such guarantor pursuant to its guarantee could also be required to be returned
to it, or to a fund for the benefit of its creditors. Generally, an entity
will be considered insolvent if the sum of its respective debts was greater
than the fair saleable value of all of its property at a fair valuation or if
the present fair saleable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts, as they
become absolute and mature.
We, meaning only MGM Grand, have no operations of our own and derive all of
our revenue from our subsidiaries. If a guarantee of the notes by a subsidiary
were avoided as a fraudulent transfer, holders of other indebtedness of, and
trade creditors of, that subsidiary would generally be entitled to payment of
their claims from the assets of the subsidiary before such assets could be
made available for distribution to us to satisfy our own obligations. The
indenture for the notes will not limit the incurrence of additional
indebtedness by us and our subsidiaries or limit investments by us in our
subsidiaries.
We may require you to dispose of your notes or redeem your notes if any gaming
authority finds you unsuitable to hold them.
We may require you to dispose of your notes or redeem your notes if any
gaming authority finds you unsuitable to hold them or in order to otherwise
comply with any gaming laws to which we or any of our subsidiaries are or may
become subject, as more fully described in the sections entitled "Regulation
and Licensing" and "Description of the Notes--Mandatory Disposition Pursuant
to Gaming Laws."
S-14
<PAGE>
We may be unable to raise the funds necessary to finance a change of control
offer required by the indenture.
Upon the occurrence of certain change of control events, we will be
required to offer to repurchase all outstanding notes at a price equal to 101%
of the principal balance of the notes, plus accrued and unpaid interest, if
any. It is possible that we will not have sufficient funds at the time of the
change of control to make the required repurchase of the notes. Certain of our
senior indebtedness may require prepayment before funds may be used to
repurchase the notes in the event of a change of control.
An active trading market may not develop for these notes.
Prior to this offering, there was no public market for the notes. We have
been informed by the underwriters that they intend to make a market in the
notes after we complete this offering. However, the underwriters may cease
their market-making activities at any time. In addition, the liquidity of the
trading market in these notes, and the market price quoted for these notes,
may be adversely affected by changes in the overall market for these types of
securities and by changes in our financial performance or prospects or in the
prospects for companies in our industry generally. As a result, you cannot be
sure that an active trading market will develop for these notes.
Risks Related to MGM Grand and the Gaming Industry
The gaming industry is highly competitive.
To the extent that hotel room capacity is expanded by others in a city
where our hotel/casinos are located, competition will increase. The completion
of a number of room expansion projects and the opening of new hotel/casinos
led to an approximate 10% increase in hotel room capacity in Las Vegas in 1999
compared to 1998, thereby increasing competition in all segments of the Las
Vegas market. Three new mega-resorts opened in Las Vegas in 1999, and one is
scheduled to open in 2000. New additions to the Las Vegas market could
adversely impact our future results. The business of our Nevada hotel/casinos
might also be adversely affected if gaming operations of the type conducted in
Nevada were to be permitted under the laws of other states, particularly
California. Similarly, legalization of gaming operations in any jurisdiction
located near Detroit, Michigan or Atlantic City, New Jersey, or the
establishment of new large-scale gaming operations on nearby Native American
tribal lands, could adversely affect our Detroit casino or our planned
Atlantic City operations. Any expansion of gaming activities in the Gulf Coast
region could also have an adverse effect on Mirage's Beau Rivage hotel/casino
in Biloxi, Mississippi.
Gaming referenda have been voted on or are being proposed in Mississippi and
California and adoption of these referenda could have a material adverse
effect on our business.
Voters in California approved an amendment to the California constitution
on March 7, 2000 that would give Native American tribes in California the
right to offer a limited number of slot machines and a range of house-banked
card games. A number of Native American tribes have begun signing gaming
compacts with the State of California. If the compacts are subsequently
approved by the federal government, casino-style gaming will be legal in
California on those tribal lands. At this time, we cannot determine the impact
this will have on our Nevada casinos.
In Mississippi, in three separate instances, referenda were proposed which,
if approved, would have amended the Mississippi constitution to ban gaming in
Mississippi and would have required all currently legal gaming entities to
cease operations within two years of the ban. All three of the proposed
referenda have been ruled illegal by Mississippi state trial court judges. The
proponents of the most recent referendum filed a notice of appeal of the trial
court ruling with the Mississippi Supreme Court, where the matter is pending.
Any such referendum must be approved by the Mississippi Secretary of State and
signatures of approximately 98,000 registered voters must be gathered and
certified in order for such a proposal to be included on a statewide ballot
for consideration by the voters. The next election for which the proponents
could attempt to place such a proposal on the ballot would be in November
2002. While it is too early in the process for us to make any predictions
S-15
<PAGE>
with respect to whether such a referendum will appear on a ballot or the
likelihood of such a referendum being approved by the voters, if such a
referendum were passed and gaming were prohibited in Mississippi, it would
have a material adverse effect on Mississippi gaming operations.
The gaming industry is highly regulated and we must adhere to various
regulations and maintain our licenses to continue our operations.
The ownership, management and operation of gaming facilities are subject to
extensive federal, state, provincial, tribal and/or local laws, regulations
and ordinances, which are administered by the relevant regulatory agency or
agencies in each jurisdiction. These laws, regulations and ordinances vary
from jurisdiction to jurisdiction, but generally concern the responsibility,
financial stability and character of the owners and managers of gaming
operations as well as persons financially interested or involved in gaming
operations. For a summary of gaming regulations that affect our business, see
"Regulation and Licensing." The regulatory environment in any particular
jurisdiction may change in the future and any such change could have a
material adverse effect on our results of operations.
The National Gambling Impact Study Commission's recommendations may adversely
affect the gaming industry and our operations.
A National Gambling Impact Study Commission was established by the U.S.
Congress to conduct a comprehensive study of the social and economic impact of
gaming in the U.S. On April 28, 1999, the National Commission voted to
recommend that the expansion of gaming be curtailed. In June 1999, the
National Commission issued a final report of its findings and conclusions,
together with recommendations for legislative and administrative actions.
Below are highlights of some of those recommendations:
. Legal gaming should be restricted to those at least 21 years of age;
. Betting on college and amateur sports should be banned;
. The introduction of casino-style gaming at pari-mutuel racing facilities
for the primary purpose of saving the pari-mutuel facility financially
should be prohibited;
. Internet gaming should be banned within the U.S.;
. The types of gaming activities allowed by Native American tribes within
a given state should not be inconsistent with the gaming activities
allowed to other persons in that state; and
. State, local and tribal governments should recognize that casino gaming
provides economic development, particularly for economically depressed
areas. The National Commission differentiated casino gaming from stand-
alone slot machines (e.g., in convenience stores), internet gaming and
lotteries which the National Commission stated do not provide the same
economic development.
Any additional regulation of the gaming industry which may result from the
National Commission's report may have an adverse effect on the gaming
industry, including us.
Tracinda Corporation owns a majority of our common stock and may influence our
Board of Directors and affairs.
Tracinda Corporation and its sole stockholder beneficially own
approximately 60% of our outstanding common stock. Tracinda has the ability to
elect our entire Board of Directors and determine the outcome of other matters
submitted to our stockholders, such as the approval of significant
transactions.
Risks Related to the Mirage Merger
We may experience difficulties integrating Mirage into our operations.
After consummation of the Mirage merger, we intend to integrate the
operations of Mirage with ours. We cannot assure you that we will be able to
integrate these operations without encountering difficulties. These
difficulties could include integrating different business strategies with
respect to marketing, integrating personnel with disparate business
backgrounds and corporate cultures, integrating different reservations systems
and other
S-16
<PAGE>
technology and managing relationships with other business partners. We have
accrued $175.0 million for costs associated with the Mirage merger and related
integration activities. We cannot assure you that this accrual will be
adequate to cover all of the cost associated with the integration of Mirage
into our operations. Furthermore, the integration of operations may
temporarily distract management from our day-to-day business after the Mirage
merger. We also may lose key Mirage or MGM Grand personnel because of the
Mirage merger and the consolidation of our corporate headquarters. For these
reasons, we cannot assure you that we will be able to integrate successfully
the Mirage operations.
We may not achieve the expected synergies from the Mirage merger.
Our management believes that the Mirage merger will allow us to achieve
cost savings related to duplicative departments, redundant infrastructure and
operating efficiencies upon full integration of Mirage as well as revenue
enhancement opportunities. However, the anticipated benefits are based on
projections and assumptions, not actual results. As a result, we cannot assure
you that we will realize the anticipated benefits. Our ability to realize
these benefits could be adversely impacted by difficulties in integrating
Mirage and MGM Grand, the inability to achieve certain economies of scale and
other risks associated with achieving expected revenue enhancements and cost
savings.
Our ability to consummate the Mirage merger depends on, among other things,
all closing conditions being met including receipt of regulatory approval in
various jurisdictions and the absence of any court order enjoining the Mirage
merger.
Consummation of the Mirage merger is subject to numerous conditions,
including the receipt of regulatory approval in various jurisdictions.
Although we anticipate that such regulatory approvals will be obtained before
the closing of this offering, this offering may close before the Mirage
merger. If the offering closes but the Mirage merger fails to close, we would
not thereby acquire Mirage and would have significant cash available. In such
circumstances, no assurance can be given as to the manner in which we may use
the proceeds of the offering. Moreover, several lawsuits have been filed
seeking to enjoin the Mirage merger on various grounds as referenced in our
Form 10-Q Quarterly Report for the three months ended March 31, 2000. In the
event a court issues an injunction preventing or delaying the Mirage merger,
we can give no assurance that the Mirage merger will, in fact, be consummated.
S-17
<PAGE>
USE OF PROCEEDS
We plan to use the net proceeds from the offering of the notes to repay,
upon consummation of the Mirage merger, a portion of the outstanding
borrowings under Mirage's existing senior credit facility. In addition, we
will use the proceeds from our initial borrowings under our new senior credit
facilities, together with the proceeds from our recently completed private
placement of common stock, to:
. consummate the Mirage merger;
. refinance our existing senior credit facility;
. refinance the remainder of Mirage's existing senior credit facility; and
. pay related fees and expenses.
A summary of sources and uses of funds, estimated as of the date hereof, is
as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Sources of Funds:
----------------
New senior credit facilities (1)............................. $4,256,344
Private equity placement (2)................................. 1,232,250
9 3/4% senior subordinated notes due 2007.................... 701,217
----------
Total Sources............................................... $6,189,811
==========
Uses of Funds:
-------------
Acquisition of Mirage........................................ $4,394,811
Refinance certain Mirage indebtedness (3).................... 1,045,000
Refinance certain MGM Grand indebtedness (4)................. 650,000
Estimated fees and expenses.................................. 100,000
----------
Total Uses.................................................. $6,189,811
==========
</TABLE>
- --------
(1) Reflects borrowings under the five-year revolving credit facility, the
364-day revolving credit facility and the one-year term loan facility.
Total commitments under these facilities amount to $4.3 billion.
(2) On April 18, 2000, we completed a private placement of 46.5 million shares
of our common stock.
(3) Reflects the repayment of borrowings under Mirage's existing senior credit
facility which matures in March 2002 and has a weighted average interest
rate of 6.92% per annum.
(4) Reflects the repayment of borrowings under MGM Grand's existing senior
credit facility which matures in December 2002 and has a weighted average
interest rate of 6.79% per annum.
S-18
<PAGE>
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization as
of March 31, 2000 on a historical basis and after giving effect to the Mirage
merger and the related financing transactions and the application of the
proceeds therefrom as described in "Use of Proceeds."
<TABLE>
<CAPTION>
March 31, 2000
---------------------
Pro Forma
As
Actual Adjusted
---------- ----------
(in thousands)
<S> <C> <C>
Cash and cash equivalents............................. $ 98,080 $ 197,110
========== ==========
Long term debt (including current maturities):
Existing senior credit facilities................... $ 662,000 $ --
New senior revolving credit facilities (1).......... -- 3,000,000
New senior term loan facility....................... -- 1,300,000
MGM Grand Detroit, LLC credit facility.............. 146,000 146,000
Australian bank facility............................ 33,284 33,284
Capitalized lease obligations....................... 16,690 16,690
Existing MGM Grand bonds (2):
6.95% senior collateralized notes due 2005........ 300,000 300,000
6.875% senior collateralized notes due 2008....... 200,000 200,000
Existing Mirage bonds (3):
6.625% notes due 2005............................. -- 200,000
7.25% notes due 2006.............................. -- 250,000
6.75% notes due 2007.............................. -- 200,000
6.75% notes due 2008.............................. -- 200,000
7.25% debentures due 2017......................... -- 100,000
Mirage debt discount (4).......................... -- (112,985)
Notes offered hereby:
9.75% senior subordinated notes due 2007.......... -- 710,000
MGM Grand debt discount (5)....................... -- (8,783)
---------- ----------
Total long term debt............................ 1,357,974 6,534,206
Total stockholders' equity (6).................. 1,036,735 2,232,985
---------- ----------
Total capitalization............................ $2,394,709 $8,767,191
========== ==========
</TABLE>
- --------
(1) Includes borrowings under the five-year senior revolving credit facility
and the 364-day senior revolving credit facility. Subsequent to March 31,
2000, we repaid $85.6 million of outstanding borrowings under our and
Mirage's existing senior credit facilities.
(2) The existing MGM Grand bonds will be guaranteed on a senior basis
following the date of the Mirage merger by all wholly owned U.S.
subsidiaries of MGM Grand except for U.S. holding companies of foreign
subsidiaries.
(3) The existing Mirage bonds will be guaranteed on a senior basis following
the date of the Mirage merger by MGM Grand and each MGM Grand subsidiary
which guarantees the existing MGM Grand bonds (other than Mirage, which
will remain the primary obligor under the Mirage bonds).
(4) The debt discount reflects a purchase accounting adjustment which is based
upon the fair market value of the existing Mirage bonds as of March 31,
2000.
(5) The debt discount reflects the notes' 98.763% offering price to the
public.
(6) Pro forma as adjusted reflects our private placement of 46.5 million
shares of common stock for total proceeds of $1.23 billion, net of costs.
S-19
<PAGE>
DIVIDEND POLICY
On March 31, 2000, we paid approximately $11.3 million ($.10 per share) in
cash dividends to our stockholders of record on February 10, 2000. As a result
of the Mirage merger, our Board of Directors discontinued the previously
announced dividend policy on April 17, 2000. For the foreseeable future, we do
not anticipate paying additional dividends. We intend to retain any earnings
to fund the operation of our business and to service and repay our debt rather
than pay cash dividends to our stockholders. Furthermore, as a holding company
with no independent operations, our ability to pay dividends will depend upon
the receipt of dividends or other payments from our subsidiaries. Our new
senior credit facilities contain financial covenants that could restrict our
ability to pay dividends.
S-20
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
MGM GRAND, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
MGM Grand
MGM Grand Mirage Pro Forma as
Historical Historical Adjustments Adjusted
(Note 1) (Note 1) (Note 2) for Merger
---------- ---------- ----------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Casino................... $304,635 $346,472 $ -- $ 651,107
Rooms.................... 67,333 142,543 -- 209,876
Food and beverage........ 51,126 129,433 -- 180,559
Entertainment, retail and
other................... 53,031 111,927 -- 164,958
Income from
unconsolidated
affiliate............... -- 8,374 -- 8,374
-------- -------- -------- ----------
476,125 738,749 -- 1,214,874
Less: Promotional
allowances.............. 33,253 74,461 -- 107,714
-------- -------- -------- ----------
442,872 664,288 -- 1,107,160
-------- -------- -------- ----------
Expenses:
Casino................... 143,358 198,861 -- 342,219
Rooms.................... 19,496 39,371 -- 58,867
Food and beverage........ 27,546 73,480 -- 101,026
Entertainment, retail and
other................... 28,467 82,642 -- 111,109
Provision for doubtful
accounts and discounts.. 14,926 7,377 -- 22,303
General and
administrative.......... 64,463 74,372 -- (a) 138,835
Preopening, restructuring
and other............... 6,488 2,450 -- 8,938
Depreciation and
amortization............ 39,871 55,780 3,269 (b) 98,920
-------- -------- -------- ----------
344,615 534,333 3,269 882,217
-------- -------- -------- ----------
Operating Profit Before
Corporate Expense ....... 98,257 129,955 (3,269) 224,943
Corporate expense........ 5,817 9,034 -- (a) 14,851
-------- -------- -------- ----------
Operating Income.......... 92,440 120,921 (3,269) 210,092
-------- -------- -------- ----------
Nonoperating Income
(Expense):
Interest income.......... 763 1,515 -- 2,278
Interest expense, net of
amounts capitalized..... (22,089) (29,553) (58,395)(c) (110,037)
Interest expense from
unconsolidated
affiliate............... -- (813) -- (813)
Other, net............... (162) (5,105) -- (5,267)
-------- -------- -------- ----------
(21,488) (33,956) (58,395) (113,839)
-------- -------- -------- ----------
Income Before Income
Taxes.................... 70,952 86,965 (61,664) 96,253
Provision for income
taxes................... (26,647) (31,183) 20,438 (d) (37,392)
-------- -------- -------- ----------
Net Income................ $ 44,305 $ 55,782 $(41,226) $ 58,861
======== ======== ======== ==========
Per Share of Common Stock:
Net income per basic
share................... $ 0.39 $ 0.37 (a)
======== ==========
Net income per diluted
share................... $ 0.38 $ 0.36 (a)
======== ==========
Basic Shares Outstanding.. 112,819 46,500 (e) 159,319
======== ======== ==========
Diluted Shares
Outstanding.............. 115,438 46,500 (e) 161,938
======== ======== ==========
</TABLE>
S-21
<PAGE>
MGM GRAND, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
MGM Grand
MGM Grand Mirage Pro Forma as
Historical Historical Adjustments Adjusted
(Note 1) (Note 1) (Note 2) for Merger
---------- ---------- ----------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Casino................. $ 873,781 $1,243,625 $ -- $2,117,406
Rooms.................. 251,207 522,566 -- 773,773
Food and beverage...... 161,301 456,811 -- 618,112
Entertainment, retail
and other............. 211,837 426,850 -- 638,687
Income from
unconsolidated
affiliate............. 6,084 32,109 -- 38,193
---------- ---------- --------- ----------
1,504,210 2,681,961 -- 4,186,171
Less: Promotional
allowances............ 112,560 247,179 -- 359,739
---------- ---------- --------- ----------
1,391,650 2,434,782 -- 3,826,432
---------- ---------- --------- ----------
Expenses:
Casino................. 417,491 690,179 -- 1,107,670
Rooms.................. 75,064 164,610 -- 239,674
Food and beverage...... 100,871 314,689 -- 415,560
Entertainment, retail
and other............. 119,324 300,052 -- 419,376
Provision for doubtful
accounts and
discounts............. 47,157 31,911 -- 79,068
General and
administrative........ 209,938 328,390 -- (a) 538,328
Preopening and other... 71,495 42,130 -- 113,625
Depreciation and
amortization.......... 125,985 205,163 13,075 (b) 344,223
---------- ---------- --------- ----------
1,167,325 2,077,124 13,075 3,257,524
---------- ---------- --------- ----------
Operating Profit Before
Corporate Expense...... 224,325 357,658 (13,075) 568,908
Corporate expense...... 14,457 49,686 -- (a) 64,143
---------- ---------- --------- ----------
Operating Income........ 209,868 307,972 (13,075) 504,765
---------- ---------- --------- ----------
Nonoperating Income
(Expense):
Interest income........ 2,142 6,620 -- 8,762
Interest expense, net
of amounts
capitalized........... (59,853) (117,525) (233,581)(c) (410,959)
Interest expense from
unconsolidated
affiliate............. (1,058) (2,945) -- (4,003)
Other, net............. (946) 23,968 -- 23,022
---------- ---------- --------- ----------
(59,715) (89,882) (233,581) (383,178)
---------- ---------- --------- ----------
Income Before Income
Taxes, Extraordinary
Item and Cumulative
Effect of Change in
Accounting Principle... 150,153 218,090 (246,656) 121,587
Provision for income
taxes................. (55,029) (77,122) 81,753 (d) (50,398)
---------- ---------- --------- ----------
Income Before
Extraordinary Item and
Cumulative Effect of
Change in Accounting
Principle.............. $ 95,124 $ 140,968 $(164,903) $ 71,189
========== ========== ========= ==========
Per Share of Common
Stock:
Income per basic share
before extraordinary
item and cumulative
effect of change in
accounting principle.. $ 0.82 $ 0.44 (a)
========== ==========
Income per diluted
share before
extrtaordinary item
and cumulative effect
of change in
accounting principle.. $ 0.80 $ 0.43 (a)
========== ==========
Basic Shares
Outstanding............ 116,580 46,500 (e) 163,080
========== ========= ==========
Diluted Shares
Outstanding............ 120,086 46,500 (e) 166,586
========== ========= ==========
</TABLE>
S-22
<PAGE>
MGM GRAND, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
MGM GRAND MIRAGE PRO FORMA MGM GRAND
HISTORICAL HISTORICAL ADJUSTMENTS AS ADJUSTED
(NOTE 1) (NOTE 1) (NOTE 3) FOR MERGER
---------- ---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equiva-
lents................. $ 98,080 $ 141,018 $ (41,988) (n) $ 197,110
Accounts receivable,
net................... 75,308 144,432 -- 219,740
Prepaid expenses and
other................. 29,634 30,782 -- 60,416
Inventories............ 12,143 86,786 -- 98,929
Deferred tax asset..... 5,645 29,208 -- 34,853
---------- ---------- ---------- -----------
Total current as-
sets................ 220,810 432,226 (41,988) 611,048
---------- ---------- ---------- -----------
PROPERTY AND EQUIPMENT,
NET.................... 2,411,940 4,056,090 2,628,543 (f) 9,096,573
OTHER ASSETS:
Investments in uncon-
solidated affili-
ates.................. 12,632 96,856 228,750 (g) 338,238
Excess of purchase
price over fair mar-
ket value of net as-
sets acquired, net.... 36,294 6,903 442,998 (h) 486,195
Deposits and other as-
sets, net............. 51,388 127,607 54,022 (i) 233,017
---------- ---------- ---------- -----------
Total other assets... 100,314 231,366 725,770 1,057,450
---------- ---------- ---------- -----------
$2,733,064 $4,719,682 $3,312,325 $10,765,071
========== ========== ========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....... $ 30,334 $ 33,716 $ -- $ 64,050
Construction payable... 5,424 10,323 -- 15,747
Income taxes payable... 14,000 10,519 -- 24,519
Current obligation,
capital leases........ 5,132 -- -- 5,132
Current obligation,
long term debt........ 7,284 204 -- 7,488
Accrued interest on
long term debt........ 8,758 21,092 -- 29,850
Other accrued liabili-
ties.................. 169,347 230,652 175,000 (j) 574,999
---------- ---------- ---------- -----------
Total current liabil-
ities............... 240,279 306,506 175,000 721,785
---------- ---------- ---------- -----------
DEFERRED REVENUES....... 4,776 -- -- 4,776
DEFERRED INCOME TAXES... 105,716 247,696 917,112 (k) 1,270,524
LONG TERM OBLIGATION,
CAPITAL LEASES......... 11,558 -- -- 11,558
LONG TERM DEBT.......... 1,334,000 2,068,440 3,107,588 (l)(n) 6,510,028
OTHER LIABILITIES....... -- 13,415 -- 13,415
COMMITMENTS AND CONTIN-
GENCIES
STOCKHOLDERS' EQUITY:
Common stock........... 1,389 940 (475) (m) 1,854
Capital in excess of
par value............. 1,268,912 1,084,435 111,350 (m) 2,464,697
Treasury stock, at
cost.................. (558,403) (313,420) 313,420 (m) (558,403)
Retained earnings...... 311,529 1,311,670 (1,311,670) (m) 311,529
Other comprehensive
income................ 13,308 -- -- 13,308
---------- ---------- ---------- -----------
Total stockholders'
equity.............. 1,036,735 2,083,625 (887,375) 2,232,985
---------- ---------- ---------- -----------
$2,733,064 $4,719,682 $3,312,325 $10,765,071
========== ========== ========== ===========
</TABLE>
S-23
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Note 1--Historical financial information for MGM Grand and Mirage for the year
ended December 31, 1999 and as of and for the three months ended March 31,
2000 have been derived from the MGM Grand and Mirage historical financial
statements. Included in the historical financial information for MGM Grand are
the operating results of Primadonna and New York-New York since their
acquisition on March 1, 1999.
Note 2--The following table sets forth the determination and preliminary
allocation of the purchase price based on the $21.00 per share to be paid by
MGM Grand to Mirage shareholders.
<TABLE>
<CAPTION>
Amount
--------------
(in thousands)
<S> <C>
Merger consideration (189.9 million shares of Mirage common
stock plus 36.5 million Mirage stock options)............. $4,394,811
Estimated fair value of Mirage debt assumed by MGM Grand... 1,955,659
Estimated transaction costs and expenses................... 13,000
Other adjustments, net..................................... 175,000
----------
$6,538,470
==========
The preliminary allocation of the pro forma purchase price
is as follows:
Land....................................................... $3,513,400
Buildings, furniture, fixtures and equipment............... 3,171,233
Goodwill................................................... 442,998
Other, net................................................. (589,161)
----------
$6,538,470
==========
</TABLE>
The final purchase price and its allocation will be based on appraisals,
discounted cash flows, quoted market prices and estimates by management and is
expected to be completed within one year of the closing of the Mirage merger.
The following are brief descriptions of the pro forma adjustments to the
statements of income to reflect MGM Grand's acquisition of Mirage.
(a) Pro forma results do not reflect any cost savings of duplicative
departments and redundant infrastructure, the benefit of operational
efficiencies or revenue enhancement opportunities which we expect to achieve
after the Mirage merger. We expect to realize annual pre-tax cost savings of
approximately $95 million (post-tax of approximately $61.8 million or
$0.38 per diluted share) related to duplicative departments and redundant
infrastructure upon full integration of Mirage. These estimated benefits are
based on projections and assumptions, not actual results. As a result, our
ability to realize these benefits could be adversely impacted by difficulties
integrating Mirage into MGM Grand, the inability to achieve certain economies
of scale or other risks associated with achieving these projected cost
savings. We cannot assure you that these cost savings will be achieved.
(b) Represents the amortization of goodwill and other intangible assets to
which the purchase price is allocated. The amortization of goodwill is on a
straight-line basis over 40 years and the amortization of other intangibles
(which include customer lists and trademarks) is on a straight-line basis over
five years.
(c) Represents the additional interest expense based upon anticipated
borrowings under our new senior credit facilities and proceeds from the
offering of the notes totaling approximately $5.0 billion minus the interest
on the MGM Grand and Mirage existing senior credit facilities which will be
extinguished (see Note l). Also includes approximately $113.0 million of
Mirage debt discount amortized over six years, offset by additional
capitalized interest on Mirage projects in development.
(d) Represents the tax effect of the pro forma adjustments at the 35%
statutory tax rate.
S-24
<PAGE>
(e) Represents the number of MGM Grand shares issued based upon the April
18, 2000 private equity placement of $1.23 billion at $26.50 per share.
Note 3--The following are brief descriptions of the pro forma adjustments to
the balance sheet to reflect the acquisition by MGM Grand of Mirage.
(f) Represents the net increase to Mirage's carrying value of land,
buildings, furniture, fixtures and equipment to adjust those assets to their
estimated fair market value.
(g) Represents the net increase in the fair value of Mirage's investment in
unconsolidated affiliate based upon the fair value of the assets and
liabilities of the unconsoliated affiliate.
(h) Represents the estimated goodwill created by the Mirage merger after
allocating the purchase price to the fair value of Mirage's assets and
liabilities.
(i) Represents debt offering costs and the net increase in the fair value
of other intangible assets such as customer lists and trademarks.
(j) Represents an accrual for the estimated costs of the Mirage merger.
(k) Records the deferred tax effect of the pro forma balance sheet
adjustments, primarily related to land, buildings and equipment.
(l) Represents the anticipated proceeds from borrowings under our new
senior credit facilities and proceeds from the offering of the notes of
approximately $5.0 billion of which $3.2 billion is for the purchase of the
Mirage shares, $1.8 billion is for the repayment of the MGM Grand and Mirage
existing senior credit facilities, and $100 million is for transaction costs.
This amount is offset by the debt discount of $113.0 million on the Mirage
bonds.
(m) Represents the issuance of 46.5 million shares of MGM Grand common
stock for $26.50 per share as well as the elimination of Mirage's equity
balances.
(n) Represents the use of cash on hand to fund a portion of the Mirage
merger.
S-25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
MGM Grand, Inc.
Our selected consolidated financial and other data presented below as of
and for the five years ended December 31, 1999 have been derived from our
audited consolidated financial statements. Our audited consolidated financial
statements were audited by Arthur Andersen LLP, independent public
accountants. The selected consolidated financial and other data as of and for
the three months ended March 31, 1999 and March 31, 2000 have been derived
from our unaudited condensed consolidated financial statements and include all
adjustments (consisting only of normal recurring adjustments) which are, in
our opinion, necessary for a fair presentation of our financial position at
such dates and results of operations for such periods. The results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of the results for the full year.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
----------------------------------------------------------- ----------------------
1995 1996 1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------- ---------- ----------
(in thousands, except for other operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Gross revenues.......... $ 774,756 $ 856,438 $ 891,330 $ 840,082 $ 1,504,210 $ 273,845 $ 476,125
Less: Promotional
allowances............ (55,975) (56,249) (63,733) (66,219) (112,560) (22,478) (33,253)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net revenues............ 718,781 800,189 827,597 773,863 1,391,650 251,367 442,872
Operating expenses..... (604,876) (603,604) (604,637) (631,600) (1,095,830) (199,521) (338,127)
Master plan asset
disposition........... -- (49,401) (28,566) -- -- -- --
Preopening,
restructuring and
other................. -- (7,868) -- -- (71,495) (8,810) (6,488)
Corporate expense...... (10,082) (10,022) (3,424) (10,689) (14,457) (5,094) (5,817)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Operating income........ 103,823 129,294 190,970 131,574 209,868 37,942 92,440
Interest income........ 2,896 4,247 1,268 12,997 2,142 327 763
Interest expense, net
of amounts
capitalized........... (59,329) (33,778) (1,242) (24,613) (59,853) (8,186) (22,089)
Interest expense from
unconsolidated
affiliate............. -- -- (9,891) (8,376) (1,058) (1,058) --
Other, net............. (825) (612) (804) (2,054) (946) (201) (162)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income before income
taxes, extraordinary
item and cumulative
effect of change in
accounting principle... 46,565 99,151 180,301 109,528 150,153 28,824 70,952
Provision for income
taxes................. -- (24,634) (65,045) (40,580) (55,029) (10,333) (26,647)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ 46,565 $ 74,517 $ 115,256 $ 68,948 $ 95,124 $ 18,491 $ 44,305
========== ========== ========== ========== =========== ========== ==========
Net income.............. $ 46,565 $ 43,706 $ 111,018 $ 68,948 $ 86,058 $ 9,425 $ 44,305
========== ========== ========== ========== =========== ========== ==========
Diluted income per share
before extraordinary
item and cumulative
effect of change in
accounting principle... $ 0.48 $ 0.68 $ 0.98 $ 0.61 $ 0.80 $ 0.16 $ 0.38
Cash dividends per
common share........... $ -- $ -- $ -- $ -- $ -- $ -- $ 0.10
Other Financial Data:
EBITDA (1).............. $ 169,837 $ 258,781 $ 287,064 $ 218,547 $ 421,805 $ 72,738 $ 144,616
EBITDA Margin........... 23.6% 32.3% 34.7% 28.2% 30.3% 28.9% 32.7%
Cash flows from
operating activities... 114,544 245,151 184,012 171,680 289,877 30,674 71,118
Cash flows from
investing activities... (166,034) (120,815) (201,778) (405,733) (386,693) (111,252) (63,123)
Cash flows from
financing activities... 85,648 (172,941) (9,040) 281,403 136,382 64,391 (31,437)
Depreciation and
amortization........... 55,315 62,196 64,104 76,284 125,985 20,892 39,871
Capital expenditures
(2).................... 37,447 84,775 227,756 361,942 375,260 117,257 62,401
Ratio of earnings to
fixed charges (3)...... 1.65x 2.78x 10.11x 2.94x 2.73x 2.69x 3.86x
Other Operating Data
(end of period):
Rooms................... 5,102 5,101 7,134 7,134 9,796 9,767 9,796
Casino square footage... 195,336 195,336 292,336 365,836 574,236 499,236 574,200
Number of slot
machines............... 3,877 4,113 6,728 6,793 15,451 15,497 15,268
Number of table games... 190 198 268 326 514 508 517
Balance Sheet Data (end
of period):
Cash and cash
equivalents............ $ 110,017 $ 61,412 $ 34,606 $ 81,956 $ 121,522 $ 65,769 $ 98,080
Total assets............ 1,275,883 1,275,121 1,389,816 1,768,958 2,760,743 2,538,855 2,733,064
Total debt (4).......... 563,712 94,022 68,365 552,827 1,336,850 1,012,117 1,357,974
Total stockholders'
equity................. 584,548 973,382 1,101,622 964,381 1,033,846 1,222,306 1,036,735
</TABLE>
- -------
See footnotes on following page.
S-26
<PAGE>
- --------
(1) EBITDA consists of operating income plus depreciation and amortization,
one-time charges (which consist of master plan asset disposition,
preopening, restructuring and other, cumulative effect of change in
accounting principle and extraordinary items) and corporate expense.
EBITDA should not be construed as an alternative to operating income, as
an indicator of our operating performance, or as an alternative to cash
flows generated by operating, investing or financing activities as an
indicator of cash flows, or a measure of liquidity, or as any other
measure of performance determined in accordance with generally accepted
accounting principles. In addition, it should be noted that not all
gaming companies that report EBITDA calculate this measure in the same
manner as MGM Grand, and therefore, our measure of EBITDA may not be
comparable to similarly titled measures used by other gaming companies.
(2) During 1996, $16.1 million, $13.1 million and $29.7 million was expended
on the MGM Grand Las Vegas master plan, the refurbishment of MGM Grand
Australia and the development of MGM Grand Atlantic City, respectively.
During 1997, $174.1 million and $16.5 million was expended on the MGM
Grand Las Vegas master plan and the development of MGM Grand Atlantic
City, respectively. During 1998, $304.8 million, $5.5 million and $5.0
million was expended on the master plan, the development of MGM Grand
Atlantic City and the development of MGM Grand Detroit interim casino,
respectively. During 1999, $83.1 million, $14.7 million and
$161.9 million was expended on the master plan, the development of MGM
Grand Atlantic City and the development of MGM Grand Detroit interim
casino, respectively. During the three months ended March 31, 1999,
$40.7 million, $1.2 million and $50.9 million was expended on the master
plan, the development of MGM Grand Atlantic City and the development of
MGM Grand Detroit interim casino, respectively. During the three months
ended March 31, 2000, $7.5 million, $1.9 million and $16.4 million was
expended on the new golf course at MGM Grand Las Vegas, the development
of MGM Grand Atlantic City, and the completion of MGM Grand Detroit
interim casino, respectively.
(3) For purposes of computing the ratio of earnings to fixed charges: (i)
"earnings" consist of income from continuing operations before income
taxes and fixed charges, adjusted to exclude capitalized interest, and
(ii) "fixed charges" consist of interest, whether expensed or
capitalized, amortization of debt discount and issuance costs and our
proportionate share of interest cost of 50%-owned joint ventures.
(4) Includes current and long term portions of capitalized lease obligations
and long term debt.
S-27
<PAGE>
Mirage Resorts, Incorporated
Mirage's selected consolidated financial and other data presented below as
of and for the five years ended December 31, 1999 have been derived from
Mirage's audited consolidated financial statements. Mirage's audited
consolidated financial statements were audited by Arthur Andersen LLP,
independent public accountants. The selected consolidated financial and other
data as of and for the three months ended March 31, 1999 and March 31, 2000
have been derived from Mirage's unaudited condensed consolidated financial
statements and include all adjustments (consisting only of normal recurring
adjustments) which are, in Mirage's opinion, necessary for a fair presentation
of Mirage's financial position at such dates and results of operations for
such periods. The results of operations for the three months ended March 31,
2000 are not necessarily indicative of the results for the full year. Certain
of Mirage's financial information has been reclassified to conform with our
presentation.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- ----------- ---------- ----------
(in thousands, except for other operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Gross revenues.......... $ 1,453,716 $ 1,500,714 $ 1,551,514 $ 1,679,970 $ 2,681,961 $ 648,791 $ 738,749
Less: Promotional
allowances............ (122,972) (128,813) (127,498) (153,167) (247,179) (58,492) (74,461)
----------- ----------- ----------- ----------- ----------- ---------- ----------
Net revenues............ 1,330,744 1,371,901 1,424,016 1,526,803 2,434,782 590,299 664,288
Operating expenses..... (1,010,629) (1,023,294) (1,063,317) (1,234,358) (2,034,994) (471,729) (531,883)
Corporate expense...... (36,028) (31,580) (29,193) (48,953) (49,686) (11,258) (9,034)
Preopening and other
related promotional
expense............... -- -- -- (88,313) (42,130) (31,455) (2,450)
----------- ----------- ----------- ----------- ----------- ---------- ----------
Operating income........ 284,087 317,027 331,506 155,179 307,972 75,857 120,921
Interest expense....... (32,799) (31,106) (70,350) (130,598) (147,359) (38,302) (36,770)
Interest capitalized... 9,616 24,281 62,673 97,870 29,834 11,722 7,217
Interest expense from
unconsolidated
affiliate............. -- (4,357) (5,465) (3,074) (2,945) (728) (813)
Income from terminated
acquisition effort.... -- -- -- -- 24,462 -- --
Other, including
interest income....... 4,357 12,563 6,715 15,801 6,126 1,090 (3,590)
----------- ----------- ----------- ----------- ----------- ---------- ----------
Income before income
taxes, extraordinary
item and cumulative
effect of change in
accounting principle... 265,261 318,408 325,079 135,178 218,090 49,639 86,965
Provision for income
taxes................. (95,313) (112,363) (115,276) (49,953) (77,122) (17,569) (31,183)
----------- ----------- ----------- ----------- ----------- ---------- ----------
Income before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ 169,948 $ 206,045 $ 209,803 $ 85,225 $ 140,968 $ 32,070 $ 55,782
=========== =========== =========== =========== =========== ========== ==========
Net income.............. $ 163,163 $ 206,045 $ 207,578 $ 81,704 $ 110,391 $ 1,493 $ 55,782
=========== =========== =========== =========== =========== ========== ==========
Diluted income per share
before extraordinary
item and cumulative
effect of change in
accounting principle... $ 0.88 $ 1.05 $ 1.09 $ 0.45 $ 0.70 $ 0.17 $ 0.28
Cash dividends per
share.................. $ -- $ -- $ -- $ -- $ -- $ -- $ --
Other Financial Data:
EBITDA (1).............. $ 406,338 $ 435,268 $ 448,655 $ 397,743 $ 604,951 $ 162,402 $ 188,185
EBITDA Margin........... 30.5% 31.7% 31.5% 26.1% 24.8% 27.5% 28.3%
Cash flows from
operating activities... 326,954 331,880 293,957 279,855 429,166 101,590 159,512
Cash flows from
investing activities... (200,092) (383,369) (1,196,421) (1,280,404) (507,214) (188,664) (20,204)
Cash flows from
financing activities... (125,978) 85,371 919,893 976,026 142,722 130,583 (137,778)
Depreciation and
amortization........... 86,223 86,661 87,956 105,298 205,163 43,832 55,780
Capital expenditures
(2).................... 182,993 407,276 1,058,900 1,158,497 509,399 157,896 60,298
Ratio of earnings to
fixed charges (3)...... 8.15 x 8.37 x 4.38 x 1.27 x 2.21 x 1.94 x 3.03 x
Other Operating Data
(end of period):
Rooms................... 8,229 11,222 11,222 14,881 16,577 16,655 16,577
Casino square footage... 255,900 337,900 351,000 538,000 630,000 630,000 630,000
Number of slot
machines............... 7,070 9,125 8,830 12,005 13,865 13,724 13,865
Number of table games... 316 382 377 530 593 596 593
Balance Sheet Data (end
of period):
Cash and cash
equivalents............ $ 48,026 $ 81,908 $ 99,337 $ 74,814 $ 139,488 $ 118,323 $ 141,018
Total assets............ 1,791,713 2,143,490 3,347,350 4,530,202 4,804,306 4,653,008 4,719,682
Total debt (4).......... 249,063 468,593 1,397,655 2,378,911 2,210,279 2,493,436 2,068,644
Total stockholders'
equity................. 1,209,343 1,290,883 1,512,484 1,601,837 2,023,902 1,619,466 2,083,625
</TABLE>
- -------
See footnotes on following page.
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<PAGE>
- --------
(1) EBITDA consists of operating income plus preopening and related
promotional expense plus corporate expense plus depreciation and
amortization. EBITDA should not be construed as an alternative to
operating income, as an indicator of Mirage's operating performance, or as
an alternative to cash flows generated by operating, investing or
financing activities as an indicator of cash flows, or a measure of
liquidity, or as any other measure of performance determined in accordance
with generally accepted accounting principles. In addition, it should be
noted that not all gaming companies that report EBITDA calculate this
measure in the same manner as shown herein, and therefore, EBITDA may not
be comparable to similarly titled measures used by other gaming companies.
(2) Capital expenditures in 1995 include $59.3 million associated with room
enhancement projects at The Mirage and the Golden Nugget in Las Vegas. The
1995 amount also includes $25.1 million relating to the design and
construction of Bellagio and $23.2 million associated with the acquisition
of land in Biloxi, Mississippi for the site of Beau Rivage. Additionally,
capital expenditures in 1995 include $17.2 million for the purchase of
corporate aircraft. During 1996, capital expenditures include $266.2
million and $31.8 million associated with the construction and development
of Bellagio and Beau Rivage, respectively. During 1997, capital
expenditures include $728.9 million related to the construction of
Bellagio and $172.3 million related to the construction of Beau Rivage.
Capital expenditures in 1997 also include $29.5 million for the
acquisition of corporate aircraft, $27.6 million for the purchase of land
on the Las Vegas Strip and $18.8 million associated with a hotel lobby
remodel project at Treasure Island. During 1998, $617.4 million relates to
the completion of Bellagio, and $268.0 million relates to the ongoing
construction of Beau Rivage. The 1998 amount also includes $118.8 million
associated with land acquisitions on the Las Vegas Strip and $42.7 million
for the purchase of corporate aircraft. For the year ended December 31,
1999, capital expenditures include $176.7 million for the completion of
Beau Rivage, $57.2 million associated with a room enhancement project at
Treasure Island and $40.1 million for the acquisition of fine art. The
1999 annual amount also includes $22.8 million associated with
construction projects at The Mirage, including a new theatre and
additional convention, meeting and exhibit space. For the three months
ended March 31, 2000, capital expenditures include $27.8 million
associated with these projects at The Mirage.
(3) For purposes of computing the ratio of earnings to fixed charges: (i)
"earnings" consist of income from continuing operations before income
taxes and fixed charges, adjusted to exclude capitalized interest and (ii)
"fixed charges" consist of interest, whether expensed or capitalized,
amortization of debt discount and issuance costs and Mirage's
proportionate share of interest cost of 50%-owned joint ventures.
(4) Includes current maturities of long term debt.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MGM Grand
Results of Operations
MGM Grand, through its wholly owned subsidiaries, owns and operates the MGM
Grand Hotel and Casino in Las Vegas, Nevada, which commenced operations on
December 18, 1993, the New York-New York Hotel and Casino in Las Vegas,
Nevada, which commenced operations on January 3, 1997, and was 50% owned until
March 1, 1999 when we acquired the remaining 50%, Whiskey Pete's, Buffalo
Bill's and the Primm Valley Resort in Primm, Nevada, which were acquired
through the merger between Primadonna Resorts, Inc. and MGM Grand on March 1,
1999, and the MGM Grand Hotel/Casino in Darwin, Australia, which was acquired
on September 7, 1995, and manages three casinos throughout various provinces
of the Republic of South Africa. MGM Grand and its local partners own and
operate an interim gaming facility in Detroit, Michigan, which commenced
operations on July 29, 1999. Additionally, our wholly owned subsidiaries, MGM
Grand Detroit, Inc. and MGM Grand Atlantic City, Inc. are in the development
stage, with plans to construct permanent hotel/casino and entertainment
facilities in Detroit, Michigan and Atlantic City, New Jersey, respectively.
On December 13, 1999, the Board of Directors approved a two-for-one split
of our 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 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 our common
stock from 75 million shares to 300 million shares.
First Quarter 2000 Compared with First Quarter 1999
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 New York-New
York and the Primm properties effective with the March 1, 1999 Primadonna
merger and the continued contribution from the MGM Grand Detroit interim
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. New York-New York 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 Primadonna merger on March 1, 1999 compared
to the prior year's quarter which only received a partial contribution. The
MGM Grand Detroit interim 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
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<PAGE>
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.
New York-New York 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 Primadonna merger
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 nightclub
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. New York-New York 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 Primadonna merger on March 1, 1999 compared
to the prior year's quarter which only received a partial contribution. MGM
Grand Detroit interim 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.
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. We
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. New York-New
York 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 Primadonna merger on March 1, 1999 compared to the prior year's
quarter which only received a partial contribution. MGM Grand Detroit interim
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 our 50% share of New York-New York's operating income.
As a result of the Primadonna merger, on March 1, 1999, New York-New York
became our 100% owned subsidiary and as such its results of operations have
been consolidated with ours 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 the 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. New York-New York and the
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<PAGE>
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 Primadonna merger 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
interim 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 interim casino, as well as debt assumed in the Primadonna
merger on March 1, 1999. Additionally, we 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 New York-New York
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 benefit, reflects our adoption of Statement of
Position 98-5 ("SOP 98-5") which requires that costs associated with start-up
activities must be expensed as incurred.
1999 Compared with 1998
Net revenues for the year ended December 31, 1999 were $1,391.7 million,
representing an increase of $617.8 million (79.8%) when compared with $773.9
million during the prior year. The increase in net revenues was due to growth
in every revenue segment at existing properties, as well as the addition of
the remaining 50% share of New York-New York and the Primm properties
effective with the March 1, 1999 merger with Primadonna and the successful
opening of MGM Grand Detroit interim casino on July 29, 1999.
Consolidated casino revenues for the year ended December 31, 1999 were
$873.8 million, representing an increase of $463.2 million (112.8%) when
compared with $410.6 million during the prior year. MGM Grand Las Vegas casino
revenues were $447.2 million, representing an increase of $63.9 million
(16.7%) when compared with $383.3 million during 1998. The increase in casino
revenues at MGM Grand Las Vegas was primarily a result of higher table games
volume (excluding baccarat), a more normalized table games and baccarat win
percentage, and increased slots volume. MGM Grand Australia reported casino
revenues of $30.9 million, representing an increase of $3.6 million (13.2%)
when compared with $27.3 million during the prior year. The increase in casino
revenues at MGM Grand Australia was primarily a result of higher slots volume.
New York-New York and the Primm properties contributed $94.6 million and
$134.6 million, respectively, to casino revenues for the year as a result of
the Primadonna merger on March 1, 1999. MGM Grand Detroit interim casino
contributed $166.4 million to casino revenues during the year as a result of
the opening of the property on July 29, 1999.
Consolidated room revenues for 1999 were $251.2 million, representing an
increase of $79.9 million (46.6%) when compared with $171.3 million during
1998. MGM Grand Las Vegas room revenues were $179.7 million in 1999,
representing an increase of $10 million (5.9%) when compared with $169.7
million in the prior year. The increase was due to a higher occupancy of 96.3%
in 1999 when compared with 94.4% in
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<PAGE>
1998, in addition to a higher average daily room rate of $103 in 1999 versus
$99 in 1998. MGM Grand Australia room revenues were $2 million for the year
ended December 31, 1999, representing an increase of $.2 million (11.1%) when
compared with $1.8 million for the prior year. The increase was due to a
higher occupancy of 77.5% in 1999 when compared with 74.8% in 1998, in
addition to a higher average daily room rate of $67 in 1999 compared with $61
in 1998. New York-New York and the Primm properties reported room revenues of
$50.1 million and $19.5 million, respectively, since the Primadonna merger on
March 1, 1999.
Consolidated food and beverage revenues for 1999 were $161.3 million,
representing an increase of $55.4 million (52.3%) when compared with $105.9
million for the prior year. The increase was partially attributable to MGM
Grand Las Vegas which had food and beverage revenues of $112 million during
1999, an increase of $11.7 million (11.7%) when compared with $100.3 million
in 1998. This increase resulted from additional banquet revenues generated
from a full year of operation at the MGM Grand Conference Center, which opened
on April 16, 1998, increased revenue from the Studio 54 nightclub and revenue
from the Grand Buffet which was closed for remodeling during part of 1998.
This increase was somewhat offset by decreased revenue from the Studio Cafe
due to its closure for remodeling during part of 1999. MGM Grand Australia
reported food and beverage revenues of $5.8 million, representing an increase
of $.1 million (1.8%) when compared with $5.7 million during the prior year as
a result of higher food covers in the current year. New York-New York and the
Primm properties contributed food and beverage revenues of $10.2 million and
$23.3 million, respectively, since the Primadonna merger on March 1, 1999. MGM
Grand Detroit interim casino contributed $10.2 million to food and beverage
revenues since the opening of the property on July 29, 1999.
Consolidated entertainment, retail and other revenues increased $97.9
million (86%) from $113.9 million in 1998 to $211.8 million in 1999. MGM Grand
Las Vegas reported entertainment, retail and other revenues of $134.4 million
during 1999, an increase of $26 million (24%) when compared with $108.4
million in 1998. This increase was the result of higher entertainment revenues
in 1999, which included two heavyweight boxing matches, as well as increased
tenant rental and spa revenues and the addition of the Wedding Chapel and
other amenities in 1999. The increase was somewhat offset by lower theme park
revenues due to management's decision to further reduce the theme park's
operational schedule, resulting in fewer operating days in the current year
compared with the prior year. We had increased management and development fees
from MGM Grand South Africa of $8.7 million during 1999 compared with $6
million in 1998, due to the opening of the Johannesburg temporary casino in
September 1998. Since the Primadonna merger on March 1, 1999, New York-New
York and the Primm properties contributed entertainment, retail and other
revenues of $33.1 million and $34.8 million, respectively. MGM Grand Detroit
contributed $1 million to entertainment, retail and other revenues since the
opening of the interim casino on July 29, 1999.
Income from unconsolidated affiliate, representing our 50% share of
operating income, was $6.1 million representing a decrease of $32.3 million
when compared with $38.4 million during the prior year. The reduction in
earnings from New York-New York is a result of the Primadonna merger on March
1, 1999, whereby New York-New York became our 100% owned subsidiary, and as
such, its results of operations have been consolidated with ours since that
time.
Consolidated operating expenses (before preopening, other non-recurring
charges and corporate expense) for 1999 were $1,095.8 million, representing an
increase of $464.2 million (73.5%) when compared with $631.6 million for 1998.
MGM Grand Las Vegas operating expenses increased $63 million (10.4%) from
$604.5 million in 1998 to $667.5 million in 1999. The increase was primarily
due to increased casino expenses resulting from higher gaming taxes and
marketing expenses on the increased revenues, and an increase in the provision
for doubtful accounts. In addition, expenses increased due to costs associated
with the two heavyweight boxing matches held in the current year, and higher
food and beverage expenses from increased revenues primarily from the Grand
Buffet, which was closed during part of the 1998 period. MGM Grand Australia
operating expenses increased $2.5 million (9.6%) from $26 million in 1998 to
$28.5 million in 1999. These increases were primarily due to increased casino
expenses resulting from higher gaming taxes related to increased revenues and
a higher gaming tax rate of 20% compared to 17.5% in the prior year. New York-
New York and the Primm properties added operating expenses of $116.8 million
and $154.9 million, respectively, since the
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<PAGE>
Primadonna merger on March 1, 1999. The MGM Grand Detroit interim casino added
$127.5 million in operating expenses since the opening of the property on July
29, 1999.
Preopening and other non-recurring expenses for the year ended December 31,
1999 of $71.5 million represent costs principally associated with opening of
the MGM Grand Detroit interim casino on July 29, 1999, and certain tender
offer costs. These expenses affected net income by $46.5 million or $0.38 per
diluted share, net of taxes.
Corporate expense was $14.5 million in 1999 compared with $10.7 million in
1998, representing an increase of $3.8 million. The increase was largely due
to non-cash amortization expense in the current year associated with our
issuance of stock options to non-employees.
Interest income of $2.1 million for the year ended December 31, 1999,
decreased by $10.9 million from $13 million in 1998. The decrease was
attributable to lower invested cash balances compared with the prior year.
Interest expense for the year ended December 31, 1999 of $59.9 million (net
of amounts capitalized) increased by $35.3 million when compared with $24.6
million in 1998, reflecting increased outstanding loan balances related to
construction of the MGM Grand Detroit interim casino, as well as debt assumed
in the Primadonna merger on March 1, 1999. Also, we incurred additional
interest expense during 1999 due to borrowings related to the repurchase of 12
million shares in July 1999. We recognized interest expense from our
unconsolidated affiliate of $1.1 million during 1999 compared with $8.4
million during 1998. The decrease of $7.3 million was due to the Primadonna
merger on March 1, 1999, at which time New York-New York became our wholly
owned subsidiary, and as such, its results of operations have been
consolidated with ours since that time.
Income tax provision of $55 million has been recorded at a rate of 36.6%
for the year ended December 31, 1999, compared with $40.6 million in 1998 at a
rate of 37%. At December 31, 1999, we believe that it is more likely than not
that our deferred tax assets are fully realizable because of the future
reversal of existing taxable temporary differences and future projected
taxable income. Accordingly, there is no valuation allowance at December 31,
1999.
Extraordinary loss of $.9 million in 1999, net of income tax benefit,
reflects the write-off of unamortized debt costs from the New York-New York
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 benefit, reflects our adoption of Statement of
Position 98-5 which requires that costs associated with start-up activities
must be expensed as incurred.
1998 Compared with 1997
Net revenues for the year ended December 31, 1998 were $773.9 million,
representing a decrease of $53.7 million (6.5%) when compared with $827.6
million during the prior year. The decrease in net revenues was largely due to
lower income from our 50% ownership in New York-New York and decreased casino
revenues largely due to unusually low table game hold percentages, partially
offset by higher food and beverage revenues.
Consolidated casino revenues for the year ended December 31, 1998 were
$410.6 million, representing a decrease of $46.6 million (10.2%) when compared
with $457.2 million during the prior year. MGM Grand Las Vegas casino revenues
were $383.3 million, representing a decrease of $46.6 million (10.8%) when
compared with $429.9 million during 1997. The reduction in casino revenues at
MGM Grand Las Vegas was primarily a result of lower table games and baccarat
win percentages. MGM Grand Australia reported casino revenues of $27.3
million, which were flat when compared with the prior year.
Consolidated room revenues for 1998 were $171.3 million, which were flat
when compared with the prior year. MGM Grand Las Vegas room revenues were
$169.7 million in 1998, representing an increase of $.4 million
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<PAGE>
(.2%) when compared with $169.3 million in the prior year. The increase was
due to a greater number of rooms in service during 1998 compared to 1997
despite lower occupancy of 94.4% in 1998 when compared with 94.5% in 1997, and
a slightly lower average daily room rate of $99 in 1998 versus $100 in 1997.
MGM Grand Australia room revenues were $1.8 million for the year ended
December 31, 1998, representing a decrease of $.4 million (18.2%) when
compared with $2.2 million for the prior year. The decrease was due to a lower
average daily room rate for 1998 of $61 compared with $89 for 1997 resulting
from a lower average exchange rate in the current year when compared with the
prior year, somewhat offset by a higher occupancy of 74.8% for 1998 compared
with 60.5% in 1997.
Consolidated food and beverage revenues for 1998 were $105.9 million,
representing an increase of $13.3 million (14.4%) when compared with $92.6
million for the prior year. The increase was attributable to MGM Grand Las
Vegas which had food and beverage revenues of $100.3 million during 1998, an
increase of $14.2 million (16.5%) when compared with $86.1 million in 1997.
This increase resulted from additional banquet revenues generated from the
Conference Center, which opened on April 16, 1998, and the operation of the
Studio 54 nightclub, which opened in late December 1997. MGM Grand Australia
reported food and beverage revenues of $5.7 million, representing a decrease
of $.9 million (13.6%) when compared with $6.6 million during the prior year
as a result of the lower average exchange rate in the current year.
Consolidated entertainment, retail and other revenues decreased $2.6
million (2.3%) from $116.5 million in 1997 to $113.9 million in 1998. The
decrease was attributable to MGM Grand Las Vegas which had lower theme park
revenues due to management's decision to change the theme park's operational
schedule from a year-round park to a seasonal park. These decreases were
partially offset by increases in entertainment revenues from MGM Grand Garden
Arena and EFX, conference revenue from the opening of the Conference Center
and management and development fees from MGM Grand South Africa.
Income from unconsolidated affiliate, representing our 50% share of New
York-New York's operating income, for 1998 was $38.4 million representing a
decrease of $15.4 million (28.6%) when compared with $53.8 million during the
prior year. The reduction in earnings from New York-New York is a result of
the unprecedented public response New York-New York received during its first
year of operations.
Consolidated operating expenses (before master plan asset disposition and
corporate expense) for 1998 were $631.6 million, representing an increase of
$27 million (4.5%) when compared with $604.6 million for 1997. The increase
was attributable to MGM Grand Las Vegas, offset by decreases at MGM Grand
Australia. The increases at MGM Grand Las Vegas were due primarily to
increased room expenses associated with the higher occupancy and increased
food and beverage expenses associated with the addition of the Studio 54
nightclub and the additional banquet expenses for the Conference Center.
Additionally, the provision for doubtful accounts and discounts increased by
$8.6 million at MGM Grand Las Vegas due to possible changes in anticipated
collectibility of receivables given uncertain economic conditions in Asia,
along with higher depreciation expense due to master plan assets placed in
service. These increases were partially offset by lower casino expenses due to
a reduction in casino taxes and the absence of a championship boxing event in
the current year. MGM Grand Australia operating expenses decreased $4.4
million (14.5%) from $30.4 million in 1997 to $26 million in 1998 as a result
of continuing cost containment efforts and a lower average exchange rate in
the current year.
Master plan asset disposition relates to the write-off of various assets
related to the transformation of MGM Grand Las Vegas into "The City of
Entertainment." The prior year charge of $28.6 million (pre-tax) resulted from
the increase in the scope of the project from $250 million to approximately
$570 million.
Corporate expense was $10.7 million in 1998 compared with $3.4 million in
1997, representing an increase of $7.3 million. The increase was due to higher
operating expenses in the current year and the $5.9 million reversal of stock
price guarantee amortization that occurred in the prior year.
Interest income of $13 million for the year ended December 31, 1998,
increased by $11.7 million from $1.3 million in 1997. The increase was
attributable to higher invested cash balances primarily from the proceeds of
the senior collateralized notes.
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<PAGE>
Interest expense for the year ended December 31, 1998, of $24.6 million
(net of amounts capitalized) increased by $23.4 million when compared with
$1.2 million in 1997. The increase in 1998 was primarily due to the issuance
of the senior collateralized notes. Also, we recognized interest expense from
our unconsolidated affiliate of $8.4 million during 1998 compared with $9.9
million during the same period in 1997. The decrease of $1.5 million was due
to the reduction of debt at New York-New York Hotel and Casino, LLC.
Income tax provision of $40.6 million has been recorded at a rate of 37%
for the year ended December 31, 1998, compared with $65 million in 1997 at a
rate of 36.1%. At December 31, 1998, we believe that it is more likely than
not that its deferred tax assets are fully realizable because of the future
reversal of existing taxable temporary differences and future projected
taxable income. Accordingly, there is no valuation allowance at December 31,
1998.
Extraordinary loss of $4.2 million in 1997, net of income tax benefit,
reflects the write-off of unamortized debt costs from our previous $600
million senior reducing revolving credit facility.
Impact of the Year 2000 Issue
The Year 2000 Issue was the result of computer programs being written using
two digits rather than four digits to define the applicable year, which may
have resulted in system failures and disruptions to operations at January 1,
2000. Our Year 2000 Remediation program required a few enhancements to ensure
there was no disruption to our operations and those enhancements were not
material to our financial position or results of operations. During 1999, we
incurred costs to modify existing computer systems of approximately $2.1
million. Subsequent to January 1, 2000, we have experienced no major
disruptions in operations due to the Year 2000 Issue.
Liquidity and Capital Resources
As of March 31, 2000 and December 31, 1999, we 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 our credit 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 our Detroit
credit facility and $146 million remained outstanding at the end of the
period.
As of March 31, 2000, we were 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
to New York-New York, $2.8 million to the Primm properties, and $.9 million to
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 interim 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 to New York-New York, 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 Mirage merger, we may incur additional
capital expenditures related to the maintenance of the Mirage properties.
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On August 5, 1999, we announced a twelve-month stock repurchase program for
up to 10 million shares of our 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, we purchased 3.1 million
shares for an approximate cost of $65.8 million.
On December 13, 1999, our Board of Directors approved a two-for-one stock
split of our 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 common stock from 75 million shares to 300 million
shares.
We expect 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, MGM Grand and Mirage entered into a definitive merger
agreement whereby MGM Grand 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, we will assume the
outstanding debt of Mirage Resorts of approximately $2.0 billion.
It is expected that we will need approximately $6.2 billion in order to
complete the Mirage merger. This includes payments to be made to Mirage
stockholders 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 merger and funds for general corporate purposes
after the Mirage merger.
On April 11, 2000, we 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. The new senior credit facilities consist of:
(1) a $2.0 billion five-year senior revolving credit facility; (2) a $1.0
billion 364-day senior revolving credit facility; and (3) a $1.3 billion one-
year senior term loan. On April 18, 2000, we also completed a private
placement of 46.5 million shares of our common stock for a total purchase
price of approximately $1.23 billion. We also intend to complete a bond
offering prior to or concurrently with the completion of the Mirage merger,
where the amount of the bond offering would be equal to the difference between
the approximate $6.2 billion needed to finance the Mirage merger and the sum
of the initial borrowings under our new senior credit facilities and the
amount of the equity offering. To the extent that the amount raised under
these facilities and the offering of the notes exceeds the $6.2 billion needed
to finance the Mirage merger, the excess will be used to fund continuing
operations or pay down the indebtedness of the combined company.
Our new senior credit facilities contain terms and conditions customary for
financings in which the borrower has investment grade credit ratings. In
addition, our new senior credit facilities contain representations and
warranties, covenants and events of default customary for financings of this
type. Each new senior credit facility will be unconditionally guaranteed by
Mirage (upon completion of the merger), each of its material subsidiaries and
each of our wholly owned subsidiaries except for non-U.S subsidiaries and
their U.S holding companies.
On March 24, 2000, we filed with the Securities and Exchange Commission a
Shelf Registration Statement. The Shelf Registration Statement allows us to
issue up to $2.75 billion of debt and/or 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.
During the year ended December 31, 1999, capital expenditures totaled
$375.3 million. MGM Grand Las Vegas expended $83.1 million related to the
master plan project and $95.5 million related to general property and
equipment improvements. MGM Grand Australia expended $.5 million for general
property and equipment improvements. Since the Primadonna merger on March 1,
1999, New York-New York expended $11.7 million
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and the Primm properties expended $7.9 million for general property
improvements. MGM Grand Detroit, LLC expended $161.9 million for the
construction of its interim casino facility. MGM Grand Atlantic City continued
the development of its planned new destination resort by expending $14.7
million for land acquisitions and pre-construction activities.
We made no capital contributions to New York-New York LLC during 1999 and
1998. We received no distributions from New York-New York LLC during 1999. We
received $4.1 million in distributions from New York-New York LLC during 1998
to pay taxes on its allocated share of income.
During the year ended December 31, 1998, capital expenditures totaled
$361.9 million. MGM Grand Las Vegas expended $304.8 million related to the
master plan project and $32 million related to general property and equipment
improvements. MGM Grand Australia expended $1.8 million for general property
and equipment improvements. MGM Grand Detroit, LLC expended $5 million for the
construction of its interim casino facility. MGM Grand Atlantic City continued
the development of its planned new destination resort by expending
$5.5 million for land acquisitions and pre-construction activities. We also
expended $12.8 million primarily for the purchase of a corporate jet.
On September 7, 1995, we completed the acquisition of MGM Grand Australia
(formerly the Diamond Beach Hotel/Casino) in Darwin, Australia. The
acquisition cost was financed by an Australian bank facility which provided
total availability of approximately $68.7 million (AUD $105 million) and
includes funding for general corporate purposes. During 1999, the facility was
reduced by principal payments totaling $10 million (AUD $15.3 million) made in
accordance with the terms of the bank facility, and as of December 31, 1999,
$37.8 million (AUD $57.8 million) remained outstanding. Interest on the
Australian facility is based on the bank bill rate and was approximately 5.8%
and 5.3% as of December 31, 1999 and 1998, respectively. The facility matures
in December 2004 and the indebtedness has been guaranteed by us.
MGM Grand Australia has a $13.1 million (AUD $20 million) uncommitted
standby line of credit, with a funding period of 91 days for working capital
purposes. During the year ended December 31, 1999, no amounts were borrowed
under the line of credit and no amounts were outstanding as of December 31,
1999 and 1998, respectively.
On June 23, 1998, we announced a $17.50 per share cash tender offer for up
to 12 million shares of our common stock as part of a 24 million share
repurchase program. The offer commenced on July 2, 1998 and expired on July
31, 1998. Based upon the final results, 21.6 million shares of our common
stock were tendered, and accordingly, the shares were prorated. The total
acquisition cost of the 12 million shares was approximately $210.6 million.
On March 1, 1999, we completed the merger with Primadonna Resorts, Inc. for
19 million shares of our common stock valued at approximately $243.6 million
plus the assumption of debt totaling $315.2 million. Primadonna shareholders
received .66 shares of our common stock for every Primadonna share held.
Following the merger with Primadonna, we used $216.6 million from our existing
senior credit facility to extinguish the Primadonna bank facility on March 31,
1999.
On March 31, 1999, MGM Grand Detroit, LLC, through a wholly owned
subsidiary, secured a $230 million credit 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, as well as for general working
capital purposes. The Detroit facility may be increased to $250 million at our
discretion. The Detroit facility is secured by substantially all of the assets
of the interim facility and is guaranteed by us. During 1999, $181 million was
drawn on the Detroit facility of which $169 million remained outstanding as of
December 31, 1999.
On June 10, 1999, we announced a $25.00 per share cash tender offer for up
to 12 million shares of our common stock. The offer commenced on June 17, 1999
and expired on July 23, 1999. Based upon the final
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results, 30.2 million shares of our common stock were tendered, and
accordingly, the shares were prorated. The total acquisition cost of the 12
million shares was approximately $282 million. We 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, we announced a twelve month stock repurchase program for
up to 10 million shares of our 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 December 31, 1999, we purchased 565,200
shares for an approximate cost of $13.2 million.
On December 13, 1999, the Board of Directors approved a two-for-one split
of our 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 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 our common
stock from 75 million shares to 300 million shares.
As a result of the pending merger with Mirage, we announced on April 19,
2000, that the previously declared quarterly dividend policy was discontinued.
Also, we have determined to suspend the previously announced share repurchase
program. We intend to focus on utilizing all available free cash flow to pay
down debt under existing and future debt obligations, as well as to finance
our ongoing operations.
We expect to finance operations, capital expenditures, existing debt
obligations and future share repurchases through cash flow from operations,
cash on hand, and the bank lines of credit.
On March 6, 2000, we entered into a definitive merger agreement with Mirage
whereby we will acquire all of the outstanding shares of Mirage for $21 per
share in cash plus the assumption of debt. We intend to finance the Mirage
merger and all costs related to the Mirage merger through our new senior
credit facilities and debt and equity securities. Any public offering of
securities will only be made by means of a prospectus.
Market risk is the risk of loss arising from adverse changes in market
rates and prices, foreign currency exchange rates and commodity prices. Our
primary exposure to market risk is interest rate risk associated with our
long-term debt. We attempt to limit our exposure to interest rate risk through
the mix of long-term and short-term borrowings.
Mirage
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Mirage Quarterly Report on Form 10-Q for the
period ended March 31, 2000 and Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 are set forth in Appendix I to this prospectus
supplement.
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<PAGE>
BUSINESS AND PROPERTIES
MGM Grand, Inc.
MGM Grand is a leading operator of first class hotel/casino resorts with an
emphasis on the total gaming and entertainment experience. We own and operate
the MGM Grand Las Vegas and the New York-New York Hotel and Casino, two of the
most prominent hotel/casino resorts on the Las Vegas Strip. We believe the MGM
Grand Las Vegas is one of the largest hotel/casino resorts in the world with
5,034 rooms, approximately 171,500 square feet of gaming space and one of the
largest entertainment venues in Las Vegas. In 1999, we completed an
approximate $570 million master plan that expanded and transformed the MGM
Grand Las Vegas into "The City of Entertainment." Our New York-New York
hotel/casino resort has 2,024 hotel rooms and approximately 84,000 square feet
of gaming space. In Primm, Nevada, we own and operate the three hotel/casino
resorts that travelers first encounter on the principal route from Southern
California to Las Vegas. On July 29, 1999, we opened the MGM Grand Detroit
interim casino in Detroit, Michigan. We also own and operate the MGM Grand
Hotel and Casino in Darwin, Australia and operate three casinos in South
Africa.
Mirage Resorts, Incorporated
Mirage owns and operates hotel/casino resorts on the Las Vegas Strip that
include: Bellagio, a European-style luxury resort; The Mirage, a tropically-
themed destination resort; Treasure Island, a pirate-themed hotel/casino
resort; and the Boardwalk. Mirage also owns a 50% interest in the joint
venture that owns and operates Monte Carlo, a palatial-style hotel/casino on
the Las Vegas Strip. Mirage also owns and operates The Golden Nugget, a
hotel/casino in downtown Las Vegas, The Golden Nugget-Laughlin, located near
the center of the tourist strip in Laughlin, Nevada, and Beau Rivage, a
beachfront resort located in Biloxi, Mississippi. Mirage is also developing a
hotel/casino resort in the Marina district of Atlantic City, New Jersey on a
joint venture basis with Boyd Gaming Corporation. Mirage has historically
built and operated theme-based, "one-of-a-kind" hotel/casino resorts that
provide customers a variety of world-class gaming and entertainment
attractions.
Business Strategy
Our objective is to be the premier gaming company in the world. The key
elements of our strategy are to:
. own and operate "must-see" entertainment destinations;
. maintain a strong focus on the Nevada gaming market with selective
geographic diversity in domestic and international gaming markets;
. target the upper-middle and premium segments of the gaming customer
base; and
. focus on operational cost controls and revenue enhancement opportunities
to achieve superior EBITDA margins.
Over time, the gaming industry has evolved from primarily a gaming business
to a more diverse entertainment and tourism industry. As a result of this
development, traditional casinos have been replaced by larger, more attractive
hotel/casino resorts that appeal to several types of customers. This
transformation has been particularly evident in the Las Vegas Strip gaming
market over the past few years. We believe that our hotel/casino resorts on
the Las Vegas Strip (MGM Grand Las Vegas and New York-New York), as well as
those of Mirage (Bellagio, The Mirage, Treasure Island and Monte Carlo),
represent "must-see" entertainment destinations for a significant portion of
visitors to the Las Vegas Strip. We intend to capitalize on the visitor
attraction to these six properties to generate revenues from gaming,
restaurants, entertainment and other sources.
Both MGM Grand and Mirage generate the majority of their revenue from their
Nevada properties. The Nevada market has displayed steady growth over the past
several years. Most recently, the number of visitors to the Las Vegas Strip
increased 10.5% in 1999 to 33.8 million visitors. Given the strength of each
property in the Nevada gaming market, as well as the growth of this market,
the combined company will maintain its primary
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business focus in this region. In order to diversify our business outside the
Nevada market, particularly the Las Vegas Strip market, and to capitalize on
the strength of other gaming markets, we operate gaming properties in other
locations domestically and internationally. After the Mirage merger, we will
have six major properties on the Las Vegas Strip, five major properties in
other Nevada markets, two properties in other leading domestic gaming markets
(Detroit, Michigan and Biloxi, Mississippi) and four properties in
international gaming markets (Australia and South Africa).
We have historically focused our marketing efforts on the upper-middle and
premium segments of the gaming customer base. We believe that the demographic
elements of these groups, such as amount of disposable income, length of stay
and willingness to spend money, position these segments as the market's most
attractive customers. Given Mirage's similar focus on the upper-middle and
premium segments of the gaming customer base, the Mirage merger should give us
greater access to a larger portion of our target customer base while reducing
redundant costs. We also believe that our hotel/casino resorts have global
brand names which reach the full breadth of this large customer base. We
anticipate opportunities to leverage this larger customer base to generate
additional revenues by cross-marketing other products and services, including
restaurants, entertainment venues and golf courses.
Given the competitiveness of many domestic and international gaming
markets, particularly the Las Vegas gaming market, we believe that operational
efficiency and profitability levels will become increasingly critical to the
success of gaming operators. We seek to manage operating costs and expenses
through various means, such as rigorous capital allocation analysis, well-
designed operational controls, utilization of free cash flow to repay
indebtedness and investments in enhanced management information systems. Our
senior management consistently seeks to maximize cash flow by achieving our
ongoing goal of having the highest EBITDA margins in the gaming industry.
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Hotel/Casino Resort Properties
We have provided below certain information about our hotel/casino resort
properties and the Mirage properties. Except as otherwise indicated, we or
Mirage wholly own and operate these properties.
<TABLE>
<CAPTION>
Approximate
Number of Casino Gaming
Name and Location Rooms/Suites Square Footage Slots (1) Tables (2)
----------------- ------------ -------------- -------- ---------
<S> <C> <C> <C> <C>
Domestic Casinos:
Las Vegas Strip, Nevada
MGM Grand Las Vegas..... 5,034 171,500 3,589 152
Bellagio*............... 3,005 155,000 2,485 139
The Mirage*............. 3,044 107,200 2,300 122
New York-New York....... 2,024 84,000 2,250 70
Treasure Island*........ 2,885 83,800 1,940 83
Monte Carlo (3)*........ 3,002 102,000 2,100 71
Boardwalk*.............. 654 32,000 605 20
------ --------- ------ -----
Subtotal.............. 19,648 735,500 15,269 657
------ --------- ------ -----
Downtown Las Vegas,
Nevada
The Golden Nugget*...... 1,907 38,000 1,255 56
Laughlin, Nevada
The Golden Nugget-
Laughlin*.............. 300 32,000 1,185 13
Primm, Nevada
Buffalo Bill's Resort &
Casino................. 1,239 46,000 1,527 40
Primm Valley Resort &
Casino................. 626 51,000 1,394 33
Whiskey Pete's Hotel &
Casino................. 777 36,400 1,355 30
------ --------- ------ -----
Subtotal.............. 2,642 133,400 4,276 103
------ --------- ------ -----
Detroit, Michigan
MGM Grand Detroit (4)... NA 75,000 2,435 86
Biloxi, Mississippi
Beau Rivage*............ 1,780 80,000 1,995 89
------ --------- ------ -----
Total Domestic........ 26,277 1,093,900 26,415 1,004
------ --------- ------ -----
International Casinos:
Darwin, Northern
Territory, Australia
MGM Grand Australia..... 96 23,800 360 32
South Africa
Nelspruit (5)........... NA 13,000 298 12
Witbank (5)............. NA 15,500 360 12
Johannesburg (5)........ NA 58,000 1,700 50
------ --------- ------ -----
Grand Total........... 26,373 1,204,200 29,133 1,110
====== ========= ====== =====
</TABLE>
- --------
* Represents a Mirage-owned property prior to the merger.
(1) Includes slot machines and other coin-operated devices.
(2) Generally includes blackjack ("21"), baccarat, craps, pai gow poker,
Caribbean stud poker, wheel of fortune and roulette.
(3) Owned and operated by a 50-50 joint venture between Mirage and Mandalay
Resort Group.
(4) On July 29, 1999, we opened our interim casino facility in Detroit,
Michigan.
(5) Referenced properties are governed by a joint venture agreement among MGM
Grand, Southern Sun Group and Tsogo Investment Holding Company, under which
MGM Grand earns fees for the management of all casino operations.
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MGM Grand Nevada Properties
MGM Grand Las Vegas. MGM Grand Las Vegas, our flagship property, is a
multi-themed destination resort, located on approximately 116 acres, which
management believes is a "must-see" attraction for visitors to Las Vegas. The
resort opened on December 18, 1993, and has over 350 feet of frontage on the
Las Vegas Strip and 1,450 feet of frontage on Tropicana Avenue. The complex is
easily accessible from McCarran International Airport and from Interstate 15
via Tropicana Avenue.
The hotel/casino, which we believe is one of the largest in the world, has
5,034 rooms, including approximately 4,254 tastefully decorated standard guest
rooms. The hotel also has 751 luxury suites, ranging in size from 650 to 6,000
square feet, representing a suite to room ratio which is one of the highest
among the Las Vegas Strip properties. In June 1999, the "Mansion at the MGM
Grand" was completed and opened, which added 29 exclusive suites and villas
ranging in size from 2,400 square feet to 12,000 square feet.
The casino is approximately 171,500 square feet in size, which we believe
is one of the largest casinos in the world. The casino has 3,589 slot machines
and 152 table games, a state of the art baccarat room, including private
premium play facilities, a race and sports book and a keno lounge. The casino
is themed with various entertainment features which enhance the experience of
the casino patron.
In an effort to continue a legacy of providing exceptional entertainment
through the leveraging of our highly recognizable brand name, in mid-1996, we
embarked on an extensive master plan transformation of MGM Grand Las Vegas
into "The City of Entertainment." The master plan program was designed to
enhance the quality of the entertainment experience, through a series of
substantive improvements and additions throughout the 116 acre destination
resort. Master plan projects include a 380,000 square foot state-of-the-art
conference center, a 6.6 acre pool and spa complex, an approximately 50 foot
tall polished bronze lion sculpture on a 25 foot pedestal, which is the
resort's signature and a re-themed entertainment casino that includes a
Rainforest Cafe and a Studio 54 nightclub. Also completed in the master plan
is "Studio Walk," which portrays a Hollywood sound stage and reflects an
appearance that is inspired by a number of Hollywood landmarks, including the
Brown Derby restaurant, the Farmers Market food court and Griffith Park
Observatory retail facilities. The final elements of the master plan were
completed in 1999, which included the "Mansion at the MGM Grand" in June 1999,
the lion habitat in July 1999 and significantly expanded and improved parking
facilities which opened in July 1999.
Other entertainment facilities include: an outdoor amusement zone including
thrill rides such as the 250 foot high SkyScreamer Skycoaster; an 11,700
square foot indoor arcade containing carnival games of skill and an extensive
video arcade including virtual reality simulators; a 660 seat showroom
providing celebrity entertainment; a 1,774 seat showroom specifically designed
for the EFX production show, our original grand spectacle special effects
stage production; 13 restaurants and a food court; 37 retail shopping outlets,
including 20 owned and 17 leased facilities; and a special events center,
which seats a maximum of 16,766 patrons, providing a venue for mega
entertainment such as: the spectacular millennium New Year's concert starring
Barbra Streisand; Tina Turner; Bette Midler; the Rolling Stones; Rod Stewart;
Neil Diamond; Elton John; Billy Joel; Phil Collins; and Luther Vandross, as
well as championship boxing events and various other sporting events.
MGM Grand Las Vegas uses the unique characteristics of the property to
target the following segments of the Las Vegas market: (a) free and
independent travelers; (b) tour and travel; (c) special events/conventions;
(d) high-end gaming; and (e) locals.
New York-New York. New York-New York was completed in December 1996 and
opened to the public on January 3, 1997. The 47 story destination resort
replicates many of Manhattan's landmark buildings and icons, including the
Statue of Liberty, the Empire State Building, Central Park, the Brooklyn
Bridge and a Coney Island-style roller coaster. Our New York-New York
hotel/casino is considered to be one of the most architecturally distinctive
and unique buildings in the world.
The casino is approximately 84,000 square feet in size and has
approximately 2,250 slot machines and 70 table games. The casino features
highly themed interiors: Park Avenue with retail shops, The Financial
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District consisting of the cashiers' cage, a Central Park setting in the
central casino area and Little Italy with its traditional food court set
inside a typical residential neighborhood. New York-New York features 2,024
guest rooms and suites as well as seven specialty leased restaurants.
Primm Properties. We own and operate, through our wholly owned
subsidiaries, three hotel/casinos on both sides of Interstate 15 at the
California/Nevada state line in Primm, Nevada and the Primm Valley Golf Club
nearby in California.
Buffalo Bill's Resort & Casino, Primm Valley Resort & Casino, Whiskey
Pete's Hotel & Casino and the golf club form a major destination location and
offer, to the more than 12 million vehicles traveling through Primm on
Interstate 15, the first opportunity to wager upon entering Nevada and the
last opportunity before leaving. We estimate that more than 27% of all passing
vehicles stopped at the Primm properties in 1999.
The Primm properties appeal to "various" market segments including the
family/entertainment-oriented Buffalo Bill's, the conference/leisure-oriented
Primm Valley and the value-oriented Whiskey Pete's. These hotel/casinos
attract drive-by and overnight customers, and offer good values on dining and
lodging, with an emphasis on service, quality, cleanliness and comfort. The
Primm properties offer an array of amenities and attractions, including
approximately 133,400 square feet of casino space, 2,642 hotel rooms, a 25,000
square foot conference center, ten restaurants and a variety of amusement
rides. The three casinos include 4,276 slot machines, 103 table games, poker,
keno and race and sports books. In addition, the Primm properties offer
swimming pools, a movie theater, motion simulation theaters, an interactive
water flume ride, "The Desperado" roller coaster and the "Turbo Drop" thrill
ride. The 6,100 seat Star of the Desert Arena hosts top-name entertainers and
has allowed the Primm properties to use special events as part of extended
stay packages.
In February 1997, Primadonna opened the championship 18 hole Primm Valley
Golf Club, designed by Tom Fazio, located one mile south of Primm in
California. In the second quarter of 1998, the second championship 18 hole
course opened to the public.
In July 1998, the Fashion Outlet of Las Vegas opened to the public. The
Fashion Outlet is a highly themed shopping experience containing approximately
400,000 square feet of retail space with over 100 retail outlet stores. The
Fashion Outlet is connected to Primm Valley and is owned and operated by
TrizecHahn Factory Shops, Inc.
Mirage Nevada Properties
The following description of the Nevada hotel/casinos of Mirage is derived
from the Mirage 1999 Form 10-K.
Bellagio. Bellagio is an elegant European-style luxury resort located on an
approximately 90 acre site with 1,450 feet of frontage at the center of the
Las Vegas Strip, which opened on October 15, 1998. The resort overlooks an
eight acre lake inspired by Lake Como in Northern Italy. Each day, more than
1,000 fountains in the lake come alive at regular intervals in a choreographed
ballet of water, music and lights. Bellagio features a wide variety of casual
and gourmet restaurants in both indoor and outdoor settings (including the
world-famous Le Cirque, Olives and Aqua restaurants), upscale retail boutiques
(including those leased to Armani, Chanel, Gucci, Hermes, Prada, Fred Leighton
and Tiffany & Co.) and extensive meeting, convention and banquet space.
Bellagio's specially designed theatre offers luxurious seating overlooking a
stage that rises and falls in sections into what Mirage believes to be one of
the world's largest enclosed bodies of water. The theatre is home to the
spectacular new show "O" produced and performed by the talented Cirque du
Soleil organization. The Bellagio Gallery of Fine Art features original
masterpieces by van Gogh, Monet, Manet, Renoir, Picasso and Rembrandt, among
others. The surroundings of Bellagio are lushly landscaped with classical
gardens and European fountains and pools. Inside, a botanical conservatory is
filled with vibrant colors and pleasing scents that change with the seasons.
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The Mirage. The Mirage is a luxurious, tropically-themed destination resort
located on approximately 100 acres with 2,200 feet of frontage shared with
Treasure Island near the center of the Las Vegas Strip. The exterior of the
resort is landscaped with palm trees, abundant foliage and more than four
acres of lagoons and other water features centered around a 54 foot volcano
and waterfall. Each evening, the volcano erupts at regular intervals, sending
blasts of steam and water 40 feet into the air, with flames that spectacularly
illuminate the front of the resort. Inside the front entrance is an atrium
with a tropical garden and additional water features capped by a 100 foot high
glass dome. The atrium has an advanced environmental control system and
creative lighting and other special effects designed to replicate the sights,
sounds and fragrances of the South Seas. Located at the rear of the hotel,
adjacent to the swimming pool area, is a dolphin habitat with seven Atlantic
bottlenose dolphins and The Secret Garden of Siegfried & Roy, an attraction
that allows guests to view the beautiful exotic animals of Siegfried & Roy,
the world-famous illusionists who star in a spectacular show at The Mirage. In
late March 2000, Mirage completed construction of the Danny Gans Theatre in
The Mirage, which showcases this talented singer/impersonator.
Treasure Island at the Mirage. Treasure Island is a pirate-themed
hotel/casino resort located next to The Mirage. Treasure Island and The Mirage
are connected by a monorail. The front of Treasure Island, facing the Las
Vegas Strip, is an elaborate pirate village where full-scale replicas of a
pirate ship and a British frigate regularly engage in a pyrotechnic and
special effects sea battle, culminating with the sinking of the frigate. The
showroom at Treasure Island features Mystere, a unique choreographic mix of
magic, special effects and feats of human prowess produced and performed by
Cirque du Soleil. In recognition of its superior customer service and recently
upgraded guestrooms, Treasure Island was recently awarded the Four Diamond
rating by AAA.
Monte Carlo Resort & Casino. Monte Carlo is located on approximately 46
acres with 600 feet of frontage on the Las Vegas Strip, approximately one-half
mile south of Bellagio. Mirage owns 50% of this resort in a joint venture with
Mandalay Resort Group which manages the resort. Monte Carlo has a palatial
style reminiscent of the Belle Epoque, the French Victorian architecture of
the late 19th century. The resort has amenities such as a brew pub featuring
live entertainment, a health spa, a beauty salon, a 1,200 seat theatre
featuring the world-renowned magician Lance Burton, a large pool area and
lighted tennis courts. Monte Carlo is connected to Bellagio by a monorail.
Holiday Inn(R) Casino Boardwalk. The Boardwalk is located between Bellagio
and Monte Carlo on the Las Vegas Strip. This facility includes 654 hotel rooms
and 32,000 square feet of casino space offering 605 slot machines, 20 table
games and a race and sports book. Other amenities at the Boardwalk include a
coffee shop, a buffet, a snack bar, an entertainment lounge, two bars, a gift
shop, 7,300 square feet of interior meeting space, two outdoor swimming pools
and 1,125 garage and surface parking spaces.
The Golden Nugget. The Golden Nugget is the largest, in terms of number of
guestrooms (according to the Las Vegas Convention and Visitors Authority) and,
Mirage believes, the most luxurious hotel/casino in downtown Las Vegas. The
Golden Nugget, together with its parking facilities, occupies approximately
seven and one-half acres and is located approximately six miles north of
Bellagio and five miles north of The Mirage and Treasure Island. It has
received the AAA Four Diamond Award for 23 consecutive years. The Golden
Nugget has also benefited from the "Fremont Street Experience," a $70 million
entertainment attraction developed by a coalition of several major downtown
Las Vegas hotel/casinos (including the Golden Nugget) in conjunction with the
City of Las Vegas. This attraction converted Fremont Street into a four-block-
long pedestrian mall, topped with a 90 foot by 1,400 foot special effects
canopy. Within the canopy are 2.1 million computer-controlled, four-color
lights and a 540,000 watt sound system.
The Golden Nugget-Laughlin. The Golden Nugget-Laughlin is located on
approximately 13 acres with 600 feet of Colorado River frontage near the
center of the tourist strip in Laughlin, Nevada, 90 miles south of Las Vegas.
The Golden Nugget-Laughlin features a 32,000 square foot casino offering 13
table games and approximately 1,185 slot machines, 300 hotel rooms (including
four suites), three restaurants, three bars, an entertainment lounge, a deli,
an ice cream parlor and two gift and retail shops. Other facilities at the
Golden Nugget-Laughlin include a swimming pool, a parking garage with space
for approximately 1,585 vehicles and
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approximately four and one-half acres of surface parking for recreational
vehicles. Mirage also owns and operates a 78 room motel in Bullhead City,
Arizona, across the Colorado River from the Golden Nugget-Laughlin.
Michigan Property
MGM Grand Detroit Casino. On July 29, 1999, we opened our interim casino
facility in Detroit, Michigan. The building contains 269,000 square feet of
interior space and has parking for approximately 3,170 vehicles in two parking
garages and additional on-site covered parking. The interior is decorated in
an Art Deco motif with a retail outlet, two themed bars, a VIP lounge and four
restaurants: the Java Coast; Grand Buffet; Neyla--A Mediterranean Grill; and
our signature upscale restaurant, The Brown Derby. The casino is approximately
75,000 square feet and offers 2,435 slot machines and 86 table games. The site
is conveniently located off of the Howard Street exit from the John C. Lodge
Expressway in downtown Detroit, Michigan.
Mississippi Property
The following description is derived from Mirage's 1999 Form 10-K.
Beau Rivage. Beau Rivage is a luxurious new beachfront resort located on a
41 acre site with 1,400 feet of frontage where Interstate 110 meets the Gulf
Coast in Biloxi, Mississippi. Beau Rivage opened on March 16, 1999. The
graceful driveway leading to Beau Rivage is lined with intricate gardens and
stately oak trees. Large magnolia trees fill the resort's skylit atrium lobby.
Thirteen distinctive restaurants offer a variety of dining experiences, from a
cafe nestled in the atrium gardens to a steak and seafood restaurant
surrounded by tropical fish and coral reefs. Adjoining its lavish health spa
and salon is a lushly landscaped swimming pool, cafe and special events
pavilion overlooking the Gulf of Mexico. Beau Rivage also offers a state-of-
the-art convention center, a shopping esplanade, a 1,550 seat theatre
featuring Alegria, another spectacular show produced and performed by Cirque
du Soleil and a brew pub with live entertainment nightly. Adjoining the hotel
is a deluxe marina capable of accommodating yachts of up to 125 feet in
length. Mirage is also considering the development of a world-class golf
course on approximately 508 acres of land it owns in the Biloxi area.
Australia Property
MGM Grand Australia. On September 7, 1995, we, through our wholly owned
subsidiary, MGM Grand Australia Pty Ltd., completed the acquisition of the MGM
Grand Australia in Darwin, Northern Territory, Australia. MGM Grand Australia
is located on 18 acres of beachfront property next to the Arafura Sea on the
north central coast. The resort includes a public and private casino, 96
rooms, restaurants and other facilities. Casino operations include
approximately 32 table games, 360 slot machines and a keno lounge. We have
positioned MGM Grand Australia as a multi-faceted gaming and entertainment
facility for the local market and, to a lesser extent, as an exclusive
destination resort for international table game customers.
South Africa Properties
Through our wholly owned subsidiary, MGM Grand South Africa, Inc., we
manage one permanent and two interim casinos in two provinces of the Republic
of South Africa. We managed an interim facility in Nelspruit from October 15,
1997 to November 17, 1999, at which time a permanent casino began operations.
The interim casino in Witbank began operations on March 10, 1998 and the
interim casino in Johannesburg began operations on September 28, 1998. On July
30, 1996, we entered into an agreement with Tsogo Sun Holdings (Pty) Limited,
a joint venture company formed by the Southern Sun Group and Tsogo Investment
Holding Company (Pty) Limited, to act as the exclusive casino project
developer and manager for the joint venture company, which contemplated
applying for up to 15 casino licenses in the Republic of South Africa. Under
the agreement, we will earn fees for the development and management of all
casino operations of Tsogo Sun. Tsogo Sun will provide or procure all of the
financing necessary for the hotel/casino projects.
Expansion Activities
We regularly evaluate possible expansion and acquisition opportunities in
both the domestic and international markets. These opportunities may include
the ownership, management and operation of gaming and
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other entertainment facilities in states other than Nevada or outside of the
United States, including management of Native American gaming facilities. We
may undertake these opportunities either alone or with joint venture partners.
Development and operation of any gaming facility in a new jurisdiction are
subject to many contingencies. Several of these contingencies are outside of
our control and may include the passage of appropriate gaming legislation, the
issuance of necessary permits, licenses and approvals, the availability of
appropriate financing and the satisfaction of other conditions. We cannot be
sure that we will decide or be able to proceed with any of these acquisition
or expansion opportunities.
Detroit, Michigan
The Michigan Gaming Control and Revenue Act provides that not more than
three casinos may be licensed at any one time by the State of Michigan and
that they be located only in the city of Detroit. In November 1997, at the
conclusion of a competitive selection process, the Mayor of Detroit designated
MGM Grand Detroit, LLC to develop one of the three authorized hotel/casino
complexes. MGM Grand Detroit, Inc., our wholly owned subsidiary, holds a
controlling interest in MGM Grand Detroit, LLC and plans to provide a majority
of the equity capital for construction of the permanent facility. A minority
interest in MGM Grand Detroit, LLC is held by Partners Detroit, LLC, a
Michigan limited liability company owned by seven individual residents of the
Detroit metropolitan area. As planned, the Detroit permanent facility is
expected to include a 100,000 square foot casino, an 800 room hotel with
ballroom, convention and meeting rooms, restaurants, bars, entertainment and
retail facilities. The total project cost could exceed $800 million and
development could take up to four years. Development of the permanent facility
will not proceed until after acquisition by MGM Grand Detroit, LLC of the
permanent development site from Detroit, which is in the process of attempting
to acquire the site from a number of independent land owners. The design,
budget and schedule for development of the permanent facility are at a
preliminary stage, and will be subject to the risks attendant to large-scale
projects and may be subject to additional costs and delays beyond preliminary
estimates. No assurance can be given that we will develop a permanent
hotel/casino in Detroit, or if we do, as to its ultimate size, configuration
or costs.
Mirage Atlantic City Plans
The following is reproduced from Mirage's 1999 Form 10-K. In addition, we
are actively exploring the development of a destination resort hotel/casino in
Atlantic City. After completion of the Mirage merger, we may reconsider MGM
Grand's and Mirage's plans.
"In January 1998, the City of Atlantic City deeded to the Company
approximately 180 acres (120 acres of which are developable) in the Marina
area of Atlantic City. In exchange, our Company agreed to develop a hotel-
casino on the site and perform certain other obligations. We also entered into
an agreement with two New Jersey State agencies for the construction and joint
funding of road improvements necessary to improve access to the Marina area.
As called for by the agreement, in October 1997, we funded our $110 million
portion and one of the State agencies funded its $125 million portion of the
$330 million estimated total cost of the road improvements. Each party
deposited its funds into escrow accounts and the funds are restricted for
construction of the road improvement project. The other State agency provided
the remaining $95 million estimated cost of the project. There is a fixed-
price design/build contract for the road improvement project. Groundbreaking
on the project took place in November 1998, and construction is scheduled for
completion in May 2001.
"We are progressing with the design and budgeting of our proposed resort
development for the Marina site. Current plans call for construction of our
own wholly owned hotel-casino resort and a second 50%-owned resort in
partnership with Boyd Gaming Corporation ("Boyd"). We are currently designing
and will develop the master plan improvements for the entire Marina site. In
October 1999, we filed an application for the required major environmental
permit (known as a "CAFRA" permit) for a portion of these improvements. As
part of the agreement with the City to acquire the land, we are required to
remediate environmental contamination at the Marina site, which was a
municipal landfill until 1975. A substantial portion of the remediation work
had been completed at February 1, 2000. Also as part of our agreement with the
City, we have completed demolition of the City-owned facilities previously
located on the site and are in the process of relocating on-site public
utilities.
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"The design, budget and construction schedule for our wholly owned hotel-
casino on the Marina site have not yet been finalized. We intend to file an
application for the CAFRA permit for our resort in the second quarter of 2000.
In July 1998, we entered into an amended and restated 50/50 joint venture
agreement with Boyd for the development of a new hotel-casino resort with
approximately 1,200 guestrooms on a 25-acre portion of the Marina site. Boyd
will oversee the design and construction of the joint venture hotel-casino to
be known as "The Borgata" and operate the resort upon completion. Under the
agreement, subject to the receipt of acceptable financing as described below,
we will contribute the 25 acres of land (valued at $90 million) and $60
million in cash, of which approximately $5 million had been contributed at
February 1, 2000. Boyd will contribute a minimum of $150 million in cash plus
any amounts necessary to fund project costs in excess of $750 million. The
joint venture will attempt to obtain acceptable financing of approximately
$450 million for the remaining cost of the project that is non-recourse to
both our Company and Boyd. We have recently had discussions with Boyd
regarding a possible increase in the size of The Borgata and each partner's
required capital contribution. The joint venture filed an application for the
CAFRA permit for The Borgata in October 1999 and the application is now
pending. If the necessary permits and financing are obtained, construction of
The Borgata could begin by late summer of 2000.
"Both our Company and the joint venture must apply for and receive numerous
other governmental permits and satisfy other conditions before construction of
either hotel-casino can begin. Additionally, a current Atlantic City hotel-
casino operator and others have filed various lawsuits challenging the
validity of our previous agreement with the City of Atlantic City to acquire
the land and seeking to stop the construction of the road improvements. We
have prevailed in all of these lawsuits that have been finally adjudicated to
date, but a number of lawsuits are still pending in various stages and others
could be filed in the future. As a result of these factors, as well as the
pending merger with MGM Grand discussed under "Recent Developments" [contained
in the Mirage Form 10-K], we cannot be certain of the ultimate development or
timing of construction of the hotel-casinos planned for the Marina site."
The following is reproduced from Mirage's Quarterly Report on Form 10-Q for
the period ended March 31, 2000.
"The pending merger with MGM Grand is not expected to affect plans for our
existing 50-50 joint venture with Boyd Gaming Corporation, which call for the
development of a hotel-casino resort to be known as "The Borgata" on a 25-acre
portion of our Marina site. We are in discussions with Boyd concerning
increasing the size of The Borgata from 1,200 rooms to 2,000 rooms. It is
currently estimated that the larger project size would increase the budgeted
cost from approximately $750 million to slightly in excess of $1.0 billion.
Each partner's cash equity contribution would also increase by $57 million,
thereby requiring total cash contributions of $117 million from us and $207
million from Boyd. At March 31, 2000, we had made cash contributions of
approximately $7 million. We would also contribute the 25-acre site to the
joint venture. The joint venture will attempt to obtain acceptable financing
for the remaining cost of the project that is non-recourse to either partner.
If the necessary permits and financing are obtained, construction of The
Borgata could begin by the end of this year."
Mirage Las Vegas Plans
The following is reproduced from Mirage's 1999 Form 10-K. After completion
of the Mirage merger, we may reconsider Mirage's plans.
"We acquired the Boardwalk and various related properties on June 30, 1998.
Combined with land we own adjacent to the Boardwalk, the acquisition provides
us with an approximately 55-acre site for future development with over 1,200
feet of frontage on the Las Vegas Strip between Bellagio and Monte Carlo. We
are in the very early design phase for a new hotel-casino resort we expect to
ultimately develop on the site. The design, timing and cost of any future
development, however, are still highly uncertain and will depend on several
factors. These factors include the market's absorption of the major new hotel-
casino resorts on the Las Vegas Strip and competition from gaming outside of
Nevada."
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REGULATION AND LICENSING
Nevada Gaming Regulation
The ownership and operation of casino gaming facilities in Nevada are
subject to the Nevada Gaming Control Act and the related regulations and
various local regulations. The gaming operations of MGM Grand and Mirage in
Nevada are subject to the licensing and regulatory control of the Nevada
Gaming Commission, the Nevada State Gaming Control Board, the Clark County
Liquor and Gaming Licensing Board and the City of Las Vegas.
The laws, regulations and supervisory procedures of the Nevada gaming
authorities are based upon declarations of public policy that are concerned
with, among other things:
. the prevention of unsavory or unsuitable persons from having a direct or
indirect involvement with gaming at any time or in any capacity;
. the establishment and maintenance of responsible accounting practices
and procedures;
. the maintenance of effective controls over the financial practices of
licensees, including the establishment of minimum procedures for
internal fiscal affairs and the safeguarding of assets and revenues;
. providing reliable record keeping and requiring the filing of periodic
reports with the Nevada gaming authorities;
. the prevention of cheating and fraudulent practices; and
. providing a source of state and local revenues through taxation and
licensing fees.
Any change in such laws, regulations and procedures could have an adverse
effect on our gaming operations.
MGM Grand Las Vegas, New York-New York and Primm Valley Resort, Buffalo
Bill's and Whiskey Pete's, which we refer to collectively as the Primm
properties, operate casinos and are required to be licensed by the Nevada
gaming authorities. The Mirage, Bellagio, Treasure Island, the Golden Nugget,
the Golden Nugget-Laughlin, the Boardwalk and Monte Carlo also operate casinos
and are required to be licensed by the Nevada gaming authorities. The gaming
licenses require the periodic payment of fees and taxes and are not
transferable. MGM Grand Las Vegas is also licensed as a manufacturer and
distributor of gaming devices, as the operator of a sportspool at New York-New
York, and MGM Grand and an indirect wholly owned subsidiary are licensed as
the two managers of New York-New York. Golden Nugget Manufacturing Corp. is
also licensed as a manufacturer and distributor of gaming devices and the
Boardwalk is also licensed as a distributor of gaming devices. MRGS Corp. is
licensed as a 50% general partner of the joint venture with Mandalay Resort
Group, which owns and operates the Monte Carlo. MGM Grand and Mirage are also
required to be registered by the Nevada Commission as publicly traded
corporations and as such, are required periodically to submit detailed
financial and operating reports to the Nevada Commission and furnish any other
information that the Nevada Commission may require. No person may become a
stockholder or member of, or receive any percentage of profits from, MGM Grand
Las Vegas, New York-New York, the Primm properties, the Mirage, Bellagio,
Treasure Island, the Golden Nugget, the Golden Nugget-Laughlin, the Boardwalk,
Monte Carlo, Golden Nugget Manufacturing or MRGS without first obtaining
licenses and approvals from the Nevada gaming authorities. MGM Grand, Mirage,
MGM Grand Las Vegas, New York-New York, the Primm properties, the Mirage,
Bellagio, Treasure Island, the Golden Nugget, the Golden Nugget-Laughlin, the
Boardwalk, Monte Carlo, Golden Nugget Manufacturing and MRGS have obtained
from the Nevada gaming authorities the various registrations, approval permits
and licenses required in order to engage in gaming activities in Nevada.
On or about March 16, 2000, MGM Grand filed applications with the Nevada
Board and the Nevada Commission to obtain the necessary regulatory approvals
to consummate the Mirage merger. Since MGM Grand is currently registered as a
publicly traded corporation and has been found suitable to own its
subsidiaries that
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have licensed gaming facilities in Nevada, we do not expect significant delays
in obtaining the necessary approvals for the Mirage merger. However, while we
are not aware of any reason we will not receive the requested regulatory
approvals from the Nevada gaming authorities necessary to complete the Mirage
merger, there can be no assurance that we will receive such regulatory
approvals on a timely basis or at all. Furthermore, any such approval, if
granted, does not constitute a finding, recommendation or approval by the
Nevada Board or the Nevada Commission as to the merits of the Mirage merger.
Any representation to the contrary is unlawful.
In seeking approval to acquire control of Mirage, we must satisfy the
Nevada Commission as to a variety of stringent standards. The Nevada Board and
the Nevada Commission will consider all relevant material facts in determining
whether to grant such approval and may consider not only the effects of the
Mirage merger but also any other facts that are deemed relevant. Such facts
may include, among others:
. the business history of MGM Grand, including its record of financial
stability, integrity and success of its operations, as well as its
current business activities;
. the adequacy of the proposed financing; and
. whether the Mirage merger will create a significant risk that MGM Grand,
Mirage or their subsidiaries will not satisfy their financial
obligations as they become due or satisfy all financial and regulatory
requirements imposed by the Nevada gaming laws.
Under the Nevada gaming laws, in every instance where the holder of a
gaming license makes application for an additional license, the Nevada Board
and the Nevada Commission will also consider whether such multiple licensing
is in the best interests of the State of Nevada, having due regard for the
state's public policy concerning gaming. In making this determination, they
may consider among other factors or criteria, whether the acquisition would
pose problems or create a monopoly and what the result of the multiple
licensing would be in respect of the percentage of interest of the applicant
to similarly situated competitors on a statewide, countywide and geographic
location basis in each of the following categories:
. total number of slot machines;
. total number of games;
. total number of tables;
. gross revenue;
. percentage tax;
. casino entertainment tax;
. number of rooms available for the public;
. number of employees hired; and
. total payroll.
These multiple licensing criteria under the Nevada gaming laws are not
technically applicable to the Mirage merger and the acquisition of control of
Mirage by MGM Grand since neither is itself the holder of a gaming license in
the State of Nevada and no application has been made for an additional gaming
license in connection with the Mirage merger. Nevertheless, in connection with
its applications seeking the necessary approvals for the Mirage merger, MGM
Grand has been requested by the chairman of the Nevada Board to examine and
provide information concerning whether its acquisition of control of Mirage is
in the best interests of the State of Nevada under some of these multiple
licensing criteria or factors. We have complied with this request.
The Nevada Commission may, in its discretion, require the holder of any
debt security of MGM Grand or Mirage, including the notes, to file an
application and it may investigate any such holder to determine whether such
holder is suitable to own such debt security. The applicant for a finding of
suitability as the holder of such a debt security must pay all the costs of
investigation incurred by the Nevada gaming authorities. If the Nevada
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Commission determines that such holder is unsuitable to own such debt
security, then under the Nevada gaming laws MGM Grand or Mirage can be
disciplined, including the loss of their approvals, if either without the
prior approval of the Nevada Commission:
. pays that person any dividend, interest or any distribution whatsoever;
. allows that person to exercise, directly or indirectly, any voting right
conferred through such debt securities held by that person;
. pays remuneration in any form to that person; or
. makes any payment to such unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction.
If any notes are held in trust by an agent or by a nominee, the record
holder of any notes may be required to disclose the identity of the beneficial
owner of any notes to the Nevada Board and the Nevada Commission. A failure to
make such disclosure may be grounds for finding the record holder unsuitable.
MGM Grand and Mirage are also required to render maximum assistance in
determining the identity of the beneficial owner.
Neither MGM Grand nor Mirage may make a public offering of any securities
without the prior approval of the Nevada Commission if the securities or the
proceeds therefrom are intended to be used to construct, acquire or finance
gaming facilities in Nevada, or to retire or extend obligations incurred for
such purposes. On August 19, 1999, the Nevada Commission granted MGM Grand
prior approval to make public offerings for a period of 23 months, subject to
certain conditions. However, the shelf approval may be rescinded for good
cause without prior notice upon the issuance of an interlocutory stop order by
the Chairman of the Nevada Board. This offering is being made pursuant to the
shelf approval. The shelf approval does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus supplement or the accompanying
prospectus or the investment merits of the securities offered. Any
representation to the contrary is unlawful.
While such shelf approval includes prior approvals of the subsidiary
guarantees being made by our corporate subsidiaries which are the subsidiary
guarantors under the notes, it does not include approvals for the corporate
subsidiaries of Mirage licensed in Nevada to guarantee MGM Grand's payment
obligations under the notes. Likewise, while such shelf approval includes
prior approvals of restrictions on the transfer of the equity securities of
MGM Grand's corporate subsidiaries licensed in Nevada and agreements not to
encumber such equity securities, in each case in respect of the notes, it does
not include approvals in respect of the equity securities of Mirage's
corporate subsidiaries licensed in Nevada.
Consequently, applications have been filed with the Nevada Board and the
Nevada Commission seeking their approval for the corporate subsidiaries of
Mirage licensed in Nevada to guarantee MGM Grand's payment obligations under
the notes as subsidiary guarantors at and after the Mirage merger, and to
allow restrictions on the transfer of the equity securities of, and agreements
not to encumber the equity securities of, Mirage's corporate subsidiaries
licensed in Nevada, in each case in respect of the notes, to be effective at
and after the time of the Mirage merger. Such guarantees and restrictions on
the transfer of equity securities and agreements not to encumber equity
securities will not be effective in respect of the corporate subsidiaries of
Mirage licensed in Nevada at and after the Mirage merger unless and until they
are approved by the Nevada Board and the Nevada Commission. There can be no
assurance that such approvals will be granted on a timely basis or at all.
For a more detailed description of the various Nevada gaming regulatory
requirements applicable to both MGM Grand and Mirage, see "Item 1. Business--
Hotels and Gaming--Nevada Government Regulation" in MGM Grand's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999, and see "Item 1.
Business--Regulation and Licensing--Nevada" in Mirage's Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
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Michigan Government Regulation and Taxation
The Michigan Gaming Control and Revenue Act subjects the ownership and
operation of casino gaming facilities to extensive state licensing and
regulatory requirements. The Michigan Act also authorizes local regulation of
casino gaming facilities by Detroit, provided that any such local ordinances
regulating casino gaming are consistent with the Michigan Act and rules
promulgated to implement it.
The Michigan Act creates the Michigan Gaming Control Board and authorizes
it to grant casino licenses to not more than three applicants who have entered
into development agreements with Detroit. The Michigan Board is granted
extensive authority to conduct background investigations and determine the
suitability of casino license applicants, affiliated companies, officers,
directors, or managerial employees of applicants and affiliated companies and
persons or entities holding a one percent or greater direct or indirect
interest in an applicant or affiliated company. Institutional investors
holding less than certain specified amounts of debt or equity securities are
exempted from meeting the suitability requirements of the Michigan Act,
provided such securities are issued by a publicly traded corporation, such as
the company, and the securities were purchased for investment purposes only
and not for the purpose of influencing or affecting the affairs of the issuer.
The Michigan Act imposes the burden of proof on the applicant for a casino
license to establish its suitability to receive and hold the license. The
applicant must establish its suitability as to integrity, moral character and
reputation, business probity, financial ability and experience,
responsibility, and other criteria deemed appropriate by the Michigan Board. A
casino license is valid for a period of one year and the Michigan Board may
refuse to renew it upon a determination that the licensee no longer meets the
requirements for licensure.
The Michigan Board may, among other things, revoke, suspend or restrict a
casino license. Substantial fines or forfeiture of assets for violations of
gaming laws or rules may also be levied against a casino licensee. In the
event that a casino license is revoked or suspended for more than 120 days,
the Michigan Act provides for the appointment of a conservator who, among
other things, is required to sell or otherwise transfer the assets of the
casino licensee or former licensee to another person or entity who meets the
requirements of the Michigan Act for licensure.
The Michigan Board has adopted administrative rules, which became effective
on June 23, 1998, to implement the terms of the Michigan Act. Among other
things, the rules impose more detailed substantive and procedural requirements
with respect to casino licensing and operations. Included are requirements
regarding such things as licensing investigations and hearings, record keeping
and retention, contracting, reports to the Michigan Board internal control and
accounting procedures, security and surveillance, extensions of credit to
gaming patrons, conduct of gaming, and transfers of ownership interests in
licensed casinos. The rules also establish numerous Michigan Board procedures
regarding licensing, disciplinary and other hearings, and similar matters. The
rules have the force of law and are binding on the Michigan Board as well as
on applicants for or holders of casino licenses.
The Detroit City Council enacted an ordinance entitled "Casino Gaming
Authorization and Casino Development Agreement Certification and Compliance."
The ordinance authorizes casino gaming only by operators who are licensed by
the Michigan Board and are parties to a development agreement which has been
approved and certified by the City Council and is currently in effect or are
acting on behalf of such party. The development agreement between MGM Grand
Detroit, LLC, Detroit and the Economic Development Corporation of Detroit has
been so approved and certified and is currently in effect. The ordinance
requires each casino operator to submit to the Mayor of Detroit and to the
City Council periodic reports regarding the operator's compliance with its
development agreement or, in the event of non-compliance, reasons of non-
compliance and an explanation of efforts to comply. The ordinance requires the
Mayor of Detroit to monitor each casino operator's compliance with its
development agreement, to take appropriate enforcement action in the event of
default and to notify the City Council of defaults and enforcement action
taken and, if a development agreement is terminated, it requires the City
Council to transmit notice of such action to the Michigan Board within
five business days along with Detroit's request that the Michigan Board revoke
the relevant operator's certificate of suitability or casino license.
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The Michigan Act effectively provides that each of the three casinos in
Detroit shall pay a wagering tax equal to 18% of its adjusted gross receipts,
to be paid 8.1% to Michigan and 9.9% to Detroit, an annual municipal services
fee equal to the greater of $4 million or 1.25% of adjusted gross receipts of
each casino to be paid to Detroit to defray its cost of hosting casinos and an
annual assessment, as adjusted based upon a consumer price index, in the
initial amount of approximately $8.3 million to be paid by each casino to
Michigan to defray its regulatory enforcement and other casino-related costs.
These are in addition to the taxes, fees, and assessments customarily paid by
business entities situated in Detroit.
Mississippi Government Regulation
Following the completion of the Mirage merger, MGM Grand will conduct its
Mississippi gaming operations through an indirect subsidiary, Beau Rivage
Resorts, Inc., which owns and operates the Beau Rivage casino in the City of
Biloxi, Mississippi. The ownership and operation of casino facilities in
Mississippi are subject to extensive state and local regulation, but primarily
the licensing and regulatory control of the Mississippi Gaming Commission and
the Mississippi State Tax Commission.
The Mississippi Gaming Control Act, which legalized dockside casino gaming
in Mississippi, was enacted on June 29, 1990. Although not identical, the
Mississippi Act is similar to the Nevada Gaming Control Act. Effective October
29, 1991, the Mississippi Gaming Commission adopted regulations in furtherance
of the Mississippi Act which are also similar in many respects to the Nevada
gaming regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Gaming Commission seek to:
. prevent unsavory or unsuitable persons from having any direct or
indirect involvement with gaming at any time or in any capacity;
. establish and maintain responsible accounting practices and procedures;
. maintain effective control over the financial practices of licensees,
including establishing minimum procedures for internal fiscal affairs
and safeguarding of assets and revenues, providing reliable record
keeping and making periodic reports to the Mississippi Gaming
Commission;
. prevent cheating and fraudulent practices;
. provide a source of state and local revenues through taxation and
licensing fees; and
. ensure that gaming licensees, to the extent practicable, employ
Mississippi residents.
The regulations are subject to amendment and interpretation by the
Mississippi Gaming Commission. Changes in Mississippi law or the regulations
or the Mississippi Gaming Commission's interpretations thereof may limit or
otherwise materially affect the types of gaming that may be conducted, and,
following the completion of the Mirage merger, could have a material adverse
effect on MGM Grand and its Mississippi gaming operations.
The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Gulf Coast or the
Mississippi River, but only if the voters in such counties have not voted to
prohibit gaming in that county. As of May 1, 2000, dockside gaming was
permissible in nine of the 14 eligible counties in the state and gaming
operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren
and Washington counties. Under Mississippi law, gaming vessels must be located
on the Mississippi River or on navigable waters in eligible counties along the
Mississippi River, or in the waters of the State of Mississippi lying south of
the state in eligible counties along the Mississippi Gulf Coast. The law
permits unlimited stakes
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gaming on permanently moored vessels on a 24-hour basis and does not restrict
the percentage of space which may be utilized for gaming. There are no
limitations on the number of gaming licenses which may be issued in
Mississippi. The legal age for gaming in Mississippi is 21.
Beau Rivage Resorts and Beau Rivage Distribution Corp., a subsidiary of
Beau Rivage Resorts, are subject to the licensing and regulatory control of
the Mississippi Gaming Commission. Beau Rivage Resorts is licensed as a
Mississippi gaming operator, and BRDC is licensed as a Mississippi distributor
of gaming devices. Gaming licenses require the periodic payment of fees and
taxes and are not transferable. Gaming licenses are issued for a maximum term
of three years and must be renewed periodically thereafter. Beau Rivage
Resorts received its Mississippi gaming license on June 20, 1996 and a renewal
on June 21, 1998. BRDC received its Mississippi distributor's license on
August 20, 1998. On May 18, 2000, the Mississippi Gaming Commission renewed
the licenses of both Beau Rivage Resorts and BRDC for terms of three years
each, effective June 22, 2000.
On May 18, 2000, the Mississippi Gaming Commission registered MGM Grand
under the Mississippi Act as a publicly traded holding company of Beau Rivage
Resorts and BRDC. As a registered publicly traded holding company, MGM Grand
is subject to the licensing and regulatory control of the Mississippi Gaming
Commission, and is required periodically to submit detailed financial,
operating and other reports to the Mississippi Gaming Commission and furnish
any other information which the Mississippi Gaming Commission may require. If
MGM Grand is unable to satisfy the registration requirements of the
Mississippi Act, MGM Grand and licensed subsidiaries thereof cannot own or
operate gaming facilities in Mississippi. Beau Rivage Resorts and BRDC are
also required periodically to submit detailed financial, operating and other
reports to the Mississippi Gaming Commission and the Mississippi State Tax
Commission and to furnish any other information required thereby. No person
may become a stockholder of or receive any percentage of profits from a
licensed subsidiary of a holding company without first obtaining licenses and
approvals from the Mississippi Gaming Commission.
On May 18, 2000, the Mississippi Gaming Commission granted the necessary
regulatory approvals to MGM Grand so that it may consummate the Mirage merger,
including approval of the merger itself and MGM Grand's resulting acquisition
of control of Mirage, Beau Rivage Resorts and BRDC.
Certain of MGM Grand's officers, directors and employees must be found
suitable or be licensed by the Mississippi Gaming Commission. MGM Grand
believes that it has applied for all necessary findings of suitability with
respect to these persons, although the Mississippi Gaming Commission, in its
discretion, may require additional persons to file applications for findings
of suitability. In addition, any person having a material relationship or
involvement with MGM Grand may be required to be found suitable, in which case
those persons must pay the costs and fees associated with the investigation.
MGM Grand may be required to disclose to the Mississippi Gaming Commission
upon request the identities of the holders of any debt or other securities. In
addition, under the Mississippi Act, the Mississippi Gaming Commission may, in
its discretion:
. require holders of debt securities of registered corporations to file
applications;
. investigate the holders; and
. require the holders to be found suitable to own the debt securities.
Although the Mississippi Gaming Commission generally does not require the
individual holders of obligations such as notes to be investigated and found
suitable, the Mississippi Gaming Commission retains the discretion to do so
for any reason, including but not limited to a default, or where the holder of
the debt instrument exercises a material influence over the gaming operations
of the entity in question. Any holder of
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debt securities required to apply for a finding of suitability must pay all
investigative fees and costs of the Mississippi Gaming Commission in
connection with the investigation. A finding of suitability requires
submission of detailed personal financial information followed by a thorough
investigation. There can be no assurance that a person who is subject to a
finding of suitability will be found suitable by the Mississippi Gaming
Commission. The Mississippi Gaming Commission may deny an application for a
finding of suitability for any cause that it deems reasonable. Findings of
suitability must be periodically renewed.
If any of MGM Grand's securities are held in trust by an agent or by a
nominee, the record holder may be required to disclose the identity of the
beneficial owner to the Mississippi Gaming Commission. A failure to make that
disclosure may be grounds for finding the record holder unsuitable. MGM Grand
must also render maximum assistance in determining the identity of the
beneficial owner.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi Gaming
Commission may be found unsuitable. Any person found unsuitable and who holds,
directly or indirectly, any beneficial ownership of MGM Grand's debt
securities beyond the time that the Mississippi Gaming Commission prescribes,
may be guilty of a misdemeanor. MGM Grand will be subject to disciplinary
action if, after receiving notice that a person is unsuitable to be a holder
of its debt securities, MGM Grand:
. pays the unsuitable person any dividend, interest or other distribution
whatsoever;
. recognizes the exercise, directly or indirectly, or any voting rights
conferred through such debt securities held by the unsuitable person;
. pays the unsuitable person any remuneration in any form, except in
limited and specific circumstances; or
. makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction.
The Mississippi Act requires that the certificates representing securities
of a registered publicly-traded corporation bear a legend to the general
effect that the securities are subject to the Mississippi Act and the
regulations of the Mississippi Gaming Commission. On May 18, 2000, the
Mississippi Gaming Commission granted MGM Grand a waiver of this legend
requirement. The Mississippi Gaming Commission has the power to impose
additional restrictions on MGM Grand and the holders of MGM Grand's securities
at any time.
Substantially all loans, leases, sales of securities and similar financing
transactions by a licensed gaming subsidiary must be reported to or approved
by the Mississippi Gaming Commission. A licensed gaming subsidiary may not
make a public offering of its securities, but may pledge or mortgage casino
facilities if it obtains the prior approval of the Mississippi Gaming
Commission. MGM Grand may not make a public offering of its securities without
the prior approval of the Mississippi Gaming Commission if any part of the
proceeds of the offering is to be used to finance the construction,
acquisition or operation of gaming facilities in Mississippi or to retire or
extend obligations incurred for those purposes. The approval, if given, does
not constitute a recommendation or approval of the accuracy or adequacy of the
prospectus or the investment merits of the securities subject to the offering.
On May 18, 2000, the Mississippi Gaming Commission granted MGM Grand a waiver
of the prior approval requirement for MGM Grand's securities offerings for a
period of two years, subject to certain conditions. The waiver may be
rescinded for good cause without prior notice upon the issuance of an
interlocutory stop order by the Executive Director of the Mississippi Gaming
Commission.
Under the regulations of the Mississippi Gaming Commission, Beau Rivage
Resorts and BRDC may not guarantee a security issued by MGM Grand pursuant to
a public offering, or pledge their assets to secure payment
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or performance of the obligations evidenced by such a security issued by MGM
Grand, without the prior approval of the Mississippi Gaming Commission.
Similarly, MGM Grand may not pledge the stock or other ownership interests of
Beau Rivage Resorts or BRDC, nor may the pledgee of such ownership interests
foreclose on such a pledge, without the prior approval of the Mississippi
Gaming Commission. Moreover, restrictions on the transfer of an equity
security issued by Beau Rivage Resorts or BRDC and agreements not to encumber
such securities granted by MGM Grand are ineffective without the prior
approval of the Mississippi Gaming Commission. The waiver of the prior
approval requirement for MGM Grand's securities offerings received from the
Mississippi Gaming Commission on May 18, 2000 includes a waiver of the prior
approval requirement for such guarantees, pledges and restrictions of Beau
Rivage Resorts and BRDC, subject to certain conditions.
Neither MGM Grand nor Beau Rivage Resorts may engage in gaming activities
in Mississippi while MGM Grand, Beau Rivage Resorts and/or persons found
suitable to be associated with the gaming license of Beau Rivage Resorts
conduct gaming operations outside of Mississippi without approval of the
Mississippi Gaming Commission. The Mississippi Gaming Commission may require
means for it to have access to information concerning MGM Grand's and its
affiliates' out-of-state gaming operations. Gaming operations in Nevada were
approved when Beau Rivage Resorts was first licensed in Mississippi. MGM Grand
received waivers of foreign gaming approval from the Mississippi Gaming
Commission on May 18, 2000 for the conduct of gaming operations in Michigan,
New Jersey, Northern Territory (Australia), Mpumalanga Province (Republic of
South Africa) and Gauteng Province (Republic of South Africa), and may be
required to obtain the approval or a waiver of such approval from the
Mississippi Gaming Commission before engaging in any additional future gaming
operations outside of Mississippi.
The Mississippi Gaming Commission adopted a regulation in 1994 requiring as
a condition of licensure or license renewal that a gaming establishment's plan
include a 500 car parking facility in close proximity to the casino complex
and infrastructure facilities which will amount to at least 25% of the casino
cost. Infrastructure facilities are defined in the regulation to include a
hotel with at least 250 rooms, theme park, golf course and other similar
facilities. With the opening of its resort hotel and other amenities, Beau
Rivage Resorts is in compliance with this requirement. On January 21, 1999,
the Mississippi Gaming Commission adopted an amendment to this regulation
which increased the infrastructure requirement to 100% from the existing 25%;
however, the regulation grandfathers existing licensees and applies only to
new casino projects and casinos that are not operating at the time of
acquisition or purchase, and would therefore not apply to Beau Rivage Resorts.
In any event, the Beau Rivage would comply with such requirement.
For a more detailed description of the various Mississippi gaming
regulatory requirements applicable to both MGM Grand and Mirage, see "Item 1.
Business--Regulation and Licensing-Mississippi" in Mirage's Annual Report on
Form 10-K, for the fiscal year ended December 31, 1999.
Australia Government Regulation
The Northern Territory of Australia, like Nevada, has comprehensive laws
and regulations governing the conduct of gaming. MGM Grand Australia's
operations are subject to the Gaming Control Act of 1993 and regulations
promulgated thereunder and to the licensing and general control of the
Minister for Racing and Gaming. MGM Grand Australia Pty. Ltd. has entered into
a casino operator's agreement with the Minister pursuant to which MGM Grand
Australia was granted a license to conduct casino gaming on an exclusive basis
through June 30, 2005 in the northern half of the Northern Territory (which
includes Darwin, its largest city, where MGM Grand Australia is located). The
license provides for good faith negotiations to reach agreement on an
extension of the license. The license provides for a tax payable to the
Northern Territory government on gross profits derived from gaming, including
gaming devices. The license is not exclusive with respect to gaming devices,
and the Minister may permit such devices to be placed in limited numbers in
locations not operated by MGM Grand Australia. However, under the license, a
portion of the operators' win on such gaming devices is to be offset against
gaming tax otherwise payable by MGM Grand Australia.
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The license may be terminated if MGM Grand Australia breaches the casino
operator's agreement or the Northern Territory law or fails to operate in
accordance with the requirements of the license. The Northern Territory
authorities have the right under the Northern Territory law, the casino
operator's agreement and the license to monitor and approve virtually all
aspects of the conduct of gaming by MGM Grand Australia.
Additionally, under the terms of the license, the Minister has the right to
approve the directors and corporate secretary of MGM Grand and its
subsidiaries which own or operate MGM Grand Australia, as well as changes in
the ownership or corporate structure of such subsidiaries. MGM Grand is
required to file with the Northern Territory authorities copies of all
documents required to be filed by MGM Grand or any of its subsidiaries with
the Nevada gaming authorities. In the event of any person becoming the
beneficial owner of 10% or more of the outstanding stock of MGM Grand, the
Minister must be so notified and may investigate the suitability of such
person. If the Minister determines such person to be unsuitable and following
such determination such person remains the beneficial owner of 10% or more of
MGM Grand's stock, that would constitute a default under the license.
New Jersey Government Regulation
The ownership and operation of hotel/casino facilities and gaming
activities in Atlantic City, New Jersey are subject to extensive state
regulation under the New Jersey Casino Control Act and the regulations of the
New Jersey Casino Control Commission and other applicable laws. In order to
operate a hotel/casino property in New Jersey, a company must obtain a license
from the New Jersey Commission and obtain numerous other licenses, permits and
approvals from other state as well as local governmental authorities. The New
Jersey Act also established the New Jersey Division of Gaming Enforcement to
investigate all license applications, enforce the provisions of the New Jersey
Act and Regulations and prosecute all proceedings for violations of the New
Jersey Act and Regulations before the New Jersey Commission.
The New Jersey Commission has broad discretion regarding the issuance,
renewal, revocation and suspension of casino licenses. The New Jersey Act and
Regulations concern primarily the good character, honesty, integrity and
financial stability of casino licensees, their intermediary and holding
companies, their employees, their security holders and others financially
interested in casino operations; financial and accounting practices used in
connection with casino operations; rules of games, levels of supervision of
games and methods of selling and redeeming chips; manner of granting credit,
duration of credit and enforceability of gaming debts; and distribution of
alcoholic beverages.
MGM Grand's wholly owned subsidiary MGM Grand Atlantic City, Inc. has
applied to be licensed by the New Jersey Commission to operate a casino, and
MGM Grand has applied to be approved as a qualified holding company. On July
24, 1996, MGM Grand and MGM Grand Atlantic City, Inc., and their then
officers, directors, and 5% or greater stockholders were found suitable for
licensing by the New Jersey Commission. On June 27, 1995, the New Jersey
Commission found Mirage and its then officers, directors and 5% or greater
shareholders suitable for licensing. These findings of suitability are subject
to review and revision by the New Jersey Commission based upon a change in any
material fact that is relevant to the findings. No approvals from the New
Jersey Commission are necessary to consummate the Mirage merger.
The New Jersey Act further provides that each person who directly or
indirectly holds any beneficial interest or ownership of the securities issued
by a casino licensee or any of its intermediary or holding companies, those
persons who, in the opinion of the New Jersey Commission, have the ability to
control the casino licensee or its intermediary or holding companies or elect
a majority of the board of directors of said companies, other than a banking
or other licensed lending institution which makes a loan or holds a mortgage
or other lien acquired in the ordinary course of business, lenders and
underwriters of said companies are required to be qualified by the New Jersey
Commission. However, with respect to a publicly traded holding company such as
MGM Grand, a waiver of qualification may be granted by the New Jersey
Commission, with the concurrence of the Director of the New Jersey Division,
if the New Jersey Commission determines that said persons or entities are not
significantly involved in the activities of a casino licensee and in the case
of security holders, do not have the
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ability to control MGM Grand or elect one or more of its directors. There
exists a rebuttable presumption that any person holding 5% or more of the
equity securities of a casino licensee's intermediary or holding company or a
person having the ability to elect one or more of the directors of such a
company has the ability to control the company and thus must obtain
qualification from the New Jersey Commission.
Notwithstanding this presumption of control, the New Jersey Act provides
for a waiver of qualification for passive "institutional investors," as
defined by the New Jersey Act, if the institutional investor purchased
publicly traded securities for investment purposes only and where such
securities constitute less than 10% of the equity securities of a casino
licensee's holding or intermediary company or debt securities of a casino
licensee's holding or intermediary company representing a percentage of the
outstanding debt of such company not exceeding 20% or a percentage of any
issue of the outstanding debt of such company not exceeding 50%. The waiver of
qualification is subject to certain conditions including, upon request of the
New Jersey Commission, filing a certified statement that the institutional
investor has no intention of influencing or affecting the affairs of the
issuer, except that an institutional investor holding voting securities shall
be permitted to vote on matters put to a vote of the holders of outstanding
voting securities. Additionally, a waiver of qualification may also be granted
to institutional investors holding a higher percentage of securities of a
casino licensee's holding or intermediary company upon a showing of good
cause.
The New Jersey Act requires the certificate of incorporation of a publicly
traded holding company to provide that any securities of such corporation are
held subject to the condition that if a holder is found to be disqualified by
the New Jersey Commission pursuant to the New Jersey Act, such holder shall
dispose of his interest in such company. Accordingly, MGM Grand amended its
certificate of incorporation to provide that a holder of MGM Grand's
securities must dispose of such securities if the holder is found disqualified
under the New Jersey Act. In addition, MGM Grand amended its certificate of
incorporation to provide that MGM Grand may redeem the stock of any holder
found to be disqualified.
If the New Jersey Commission should find a security holder to be
unqualified to be a holder of securities of a casino licensee or holding
company, not only must the disqualified holder dispose of such securities but
in addition, commencing on the date the New Jersey Commission serves notice
upon such a company of the determination of disqualification, it shall be
unlawful for the disqualified holder to:
. receive any dividends or interest upon any such securities;
. to exercise, directly or through any trustee or nominee, any right
conferred by such securities; or
. to receive any remuneration in any form from the licensee for services
rendered or otherwise.
If the New Jersey Commission should find a security holder to be
unqualified to be a holder of securities of a casino licensee or holding
company, the New Jersey Commission shall take any necessary action to protect
the public interest including the suspension or revocation of the casino
license except that if the disqualified person is the holder of securities of
a publicly traded holding company, the New Jersey Commission shall not take
action against the casino license if:
. the holding company has the corporate charter provisions concerning
divestiture of securities by disqualified owners required by the New
Jersey Act;
. the holding company has made good faith efforts including the pursuit of
legal remedies to comply with any order of the New Jersey Commission;
and
. the disqualified holder does not have the ability to control the company
or elect one or more members of the company's board of directors.
If the New Jersey Commission determines that a casino licensee has violated
the New Jersey Act or Regulations, or if any security holder of MGM Grand or a
casino licensee who is required to be qualified under the New Jersey Act is
found to be disqualified but does not dispose of the securities, a casino
licensee could be subject to fines or its license could be suspended or
revoked. If a casino licensee's license is revoked after
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issuance, the New Jersey Commission could appoint a conservator to operate and
to dispose of the hotel/casino facilities operated by such casino licensee.
Net proceeds of a sale by a conservator and net profits of operations by a
conservator, at least up to an amount equal to a fair return on investment
which is reasonable for casinos or hotels, would be paid to MGM Grand.
The New Jersey Act imposes an annual tax of 8% on gross casino revenues, as
defined in the New Jersey Act. In addition, casino licensees are required to
invest 1.25% of gross casino revenues for the purchase of bonds to be issued
by the Casino Reinvestment Development Authority or make other approved
investments equal to that amount. In the event the investment requirement is
not met, the casino licensee is subject to a tax in the amount of 2.5% on
gross casino revenues. The New Jersey Commission has established fees for the
issuance or renewal of casino licenses and casino hotel alcoholic beverage
licenses and an annual license fee on each slot machine.
In addition to compliance with the New Jersey Act and Regulations relating
to gaming, any property built in Atlantic City by MGM Grand Atlantic City,
Inc. or any other subsidiary of MGM Grand must comply with the New Jersey and
Atlantic City laws and regulations relating to, among other things, the
Coastal Area Facilities Review Act, construction of buildings, environmental
considerations and the operation of hotels.
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DESCRIPTION OF THE NOTES
You can find the definitions of certain terms used in this description
under the subheading "--Certain Definitions." In this description, the words
"MGM Grand" refer only to MGM Grand, Inc. and not to any of its Subsidiaries.
MGM Grand will issue the 9 3/4% senior subordinated notes due 2007 under an
indenture among itself, the Subsidiary Guarantors (as defined below) and The
Bank of New York, as trustee. The terms of the notes include those provisions
contained in the indenture and those made part of the indenture by reference
to the Trust Indenture Act of 1939. We refer to the 9 3/4% senior subordinated
notes due 2007 in this section as the "notes."
The notes constitute a series of debt securities (which are more fully
described in the accompanying prospectus). The following description of the
particular terms of the notes supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
debt securities set forth in the accompanying prospectus, to which description
reference is hereby made.
The following description is a summary of the material provisions of the
indenture. This summary does not restate the indenture in its entirety. We
urge you to read the indenture because the indenture, and not this
description, defines your rights as holders of the notes. Copies of the
indenture may be obtained from MGM Grand.
Ranking
The notes will be:
. general unsecured obligations of MGM Grand;
. subordinated in right of payment to all existing and future Senior
Indebtedness of MGM Grand;
. equal in right of payment with all other existing and future
Indebtedness of MGM Grand (except for future Indebtedness that may be
subordinated to the notes); and
. guaranteed on a senior subordinated basis by each of the Subsidiaries of
MGM Grand other than Excluded Subsidiaries (see "--Subsidiary
Guarantees" below)
As of March 31, 2000, on a pro forma basis after giving effect to the
offering of the notes, the Mirage merger, the $1.23 billion private placement
of common stock of MGM Grand and borrowings under the Credit Facilities, MGM
Grand and the Subsidiary Guarantors would have had approximately $5.8 billion
of Senior Indebtedness, including approximately $4.3 billion of borrowings
under the Credit Facilities and $1.5 billion under the Senior Notes (including
the Mirage Notes). Upon consummation of the Mirage merger, MGM Grand and its
Subsidiaries (other than the Excluded Subsidiaries) will guaranty the Mirage
Notes and Mirage and its Subsidiaries will guaranty the other Senior Notes, in
each case on a basis senior to the notes and Subsidiary Guarantees of the
notes.
In addition, as of March 31, 2000 on such pro forma basis, the Subsidiaries
of MGM Grand that are not Subsidiary Guarantors would have had total
Indebtedness of approximately $179.3 million (excluding Indebtedness owed to
MGM Grand or any Subsidiary Guarantor).
The indenture does not contain any limitation on the amount of Indebtedness
of MGM Grand or its Subsidiaries, including Senior Indebtedness under the
Credit Facilities. In addition, the Credit Facilities and the Senior Notes
(including the Mirage Notes) will be equally and ratably secured by
substantially all assets of MGM Grand and its Subsidiaries (other than
Excluded Subsidiaries) in the event of certain downgradings by rating agencies
or possibly in other circumstances. See "Description of Our Long Term Debt" in
the accompanying prospectus. The indenture does not limit liens on Senior
Indebtedness or, if such liens are created, require creation of any
corresponding liens securing the notes and guarantees. Except as described
under "Description of Debt Securities--Merger, Consolidation or Sale of
Assets" in the accompanying prospectus or
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"--Additional Covenants of MGM Grand" below, the indenture does not contain
any other provisions that would afford holders of the notes protection in the
event of (i) a highly leveraged or similar transaction involving MGM Grand or
any of its Subsidiaries or (ii) a reorganization, restructuring, merger or
similar transaction involving MGM Grand or any of its Subsidiaries that may
adversely affect the holders of the notes. In addition, subject to the
limitations set forth under "Description of Debt Securities--Merger,
Consolidation or Sale of Assets" in the accompanying prospectus and under "--
Additional Covenants of MGM Grand" below, MGM Grand or any of its Subsidiaries
may, in the future, enter into certain transactions that would increase the
amount of Indebtedness of MGM Grand or its Subsidiaries or substantially
reduce or eliminate the assets of MGM Grand or its Subsidiaries, which may
have an adverse effect on MGM Grand's ability to service its Indebtedness,
including the notes.
Principal, Maturity and Interest
The indenture provides for the issuance by MGM Grand of notes with a
maximum aggregate principal amount of $710 million. MGM Grand will issue the
notes in denominations of $1,000 and integral multiples of $1,000. The notes
will mature on June 1, 2007.
Interest on the notes will accrue at the rate of 9 3/4% per annum. Interest
will be payable semiannually in arrears on June 1 and December 1, commencing
on December 1, 2000. MGM Grand will make each interest payment to the holders
of record of the notes on the immediately preceding May 15 and November 15.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Subsidiary Guarantees
MGM Grand's payment Obligations under the notes will be jointly and
severally guaranteed (the "Subsidiary Guarantees") by each of the Subsidiaries
of MGM Grand other than the Excluded Subsidiaries (the "Subsidiary
Guarantors"). The Excluded Subsidiaries will include all non-U.S. Subsidiaries
of MGM Grand and of Mirage, and such non-U.S. Subsidiaries' U.S. holding
companies. The Excluded Subsidiaries also include MGM Grand Detroit, LLC and
MGM Grand Detroit II, LLC; MGM Grand Detroit, LLC is a guarantor under the
Credit Facilities but such guarantee is limited to the amount of the proceeds
of borrowings under the Credit Facilities made available to MGM Grand Detroit,
LLC. Each Subsidiary Guarantee will be (i) subordinated to the prior payment
in full of all Senior Indebtedness of the Subsidiary Guarantor on the same
basis as the notes are subordinated to Senior Indebtedness of MGM Grand and
(ii) equal in right of payment with all other existing and future Indebtedness
of the Subsidiary Guarantor (except for future Indebtedness that may be
subordinated to the Subsidiary Guarantee). The obligations of each Subsidiary
Guarantor under its Subsidiary Guarantee will be limited so as not to
constitute a fraudulent conveyance under applicable law. On August 19, 1999,
the Nevada Commission granted MGM Grand prior approval to make public
offerings for a period of twenty-three months, subject to certain conditions
("Shelf Approval"). This offering is being made pursuant to the Shelf
Approval. However, while such Shelf Approval includes prior approvals by the
Nevada Commission of the Subsidiary Guarantees by Subsidiaries of MGM Grand,
it does not include approvals for the Nevada-licensed corporate Subsidiaries
of Mirage to guarantee the payment Obligations of MGM Grand under the notes.
Consequently, applications have been filed with the Nevada Board and the
Nevada Commission seeking their approval for the Nevada-licensed corporate
Subsidiaries of Mirage to guarantee the payment Obligations of MGM Grand under
the notes at and after the Mirage merger. Such guarantees will not be
effective in respect of the corporate Subsidiaries of Mirage licensed in
Nevada at and after the Mirage merger unless and until they are approved by
the Nevada Board and the Nevada Commission. There can be no assurance that
such approvals will be granted on a timely basis or at all. Similar approvals
were obtained from the Mississippi Gaming Commission on May 18, 2000 with
respect to the guarantees by the corporate Subsidiaries of Mirage licensed in
Mississippi. See "Regulation and Licensing--Nevada Gaming Regulation" and "--
Mississippi Government Regulation."
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In addition to the Subsidiary Guarantors named in the indenture on the
closing date, the indenture will provide that, except for Excluded
Subsidiaries, any existing or future Subsidiary of MGM Grand shall become a
Subsidiary Guarantor if such Subsidiary Incurs any Indebtedness or if and for
so long as such Subsidiary provides a guarantee in respect of Senior
Indebtedness of MGM Grand.
No Subsidiary Guarantor will be permitted to consolidate with or merge with
or into (whether or not such Subsidiary Guarantor is the surviving Person)
another corporation, Person or entity whether or not affiliated with such
Subsidiary Guarantor unless:
(i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor under the Subsidiary Guarantee and the indenture pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
trustee; and
(ii) immediately after giving effect to such transaction, no Default or
Event of Default exists.
The indenture will provide that in the event of (a) a sale or other
disposition of all of the assets of any Subsidiary Guarantor, by way of
merger, consolidation or otherwise or (b) a sale or other disposition of all
of the capital stock of any Subsidiary Guarantor, then the Subsidiary
Guarantor (in the event of a sale or other disposition, by way of such a
merger, consolidation or otherwise, of all of the capital stock of such
Subsidiary Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all of the assets of the Subsidiary
Guarantor) will be released and relieved of any obligations under its
Subsidiary Guarantee, except in the event of a sale or other disposition to
MGM Grand, any other Subsidiary Guarantor or any Affiliate thereof.
Optional Redemption
Upon not less than 30 nor more than 60 days' notice, MGM Grand may redeem
the notes in whole but not in part at any time at a redemption price equal to
100% of the principal amount thereof plus the Make-Whole Premium, together
with accrued and unpaid interest thereon, if any, to the applicable redemption
date.
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each holder of notes to be
redeemed at its registered address.
Notes called for redemption become due on the date fixed for redemption. On
and after the redemption date, interest ceases to accrue on notes called for
redemption unless MGM Grand defaults in payment of the redemption price.
Mandatory Redemption
MGM Grand will not be required to make any mandatory redemption or sinking
fund payments in respect of the notes.
Mandatory Disposition Pursuant to Gaming Laws
Each holder, by accepting a note, shall be deemed to have agreed that if
the gaming authority of any jurisdiction in which MGM Grand or any of its
Subsidiaries conducts or proposes to conduct gaming requires that a person who
is a holder or the beneficial owner of notes be licensed, qualified or found
suitable under applicable gaming laws, such holder or beneficial owner, as the
case may be, shall apply for a license, qualification or a finding of
suitability within the required time period. If such Person fails to apply or
become licensed or qualified or is found unsuitable, MGM Grand shall have the
right, at its option:
. to require such Person to dispose of its notes or beneficial interest
therein within 30 days of receipt of notice of MGM Grand's election or
such earlier date as may be requested or prescribed by such gaming
authority; or
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. to redeem such notes, which redemption may be less than 30 days
following the notice of redemption if so requested or prescribed by the
applicable gaming authority, at a redemption price equal to:
(1) the lesser of:
(a) the Person's cost, plus accrued and unpaid interest, if any, to
the earlier of the redemption date or the date of the finding of
unsuitability or failure to comply; and
(b) 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the earlier of the redemption date or the date of
the finding of unsuitability or failure to comply; or
(2) such other amount as may be required by applicable law or order of
the applicable gaming authority.
MGM Grand shall notify the trustee in writing of any such redemption as
soon as practicable. MGM Grand shall not be responsible for any costs or
expenses any holder of MGM Grand notes may incur in connection with its
application for a license, qualification or a finding of suitability.
Subordination
The payment of principal, interest and premium, if any, on and all other
Obligations owing in respect of the notes and the Subsidiary Guarantees will
be subordinated in right of payment, as set forth in the indenture and the
Subsidiary Guarantees, to the prior payment in full in cash of all Senior
Indebtedness of MGM Grand and the Subsidiary Guarantors.
The holders of Senior Indebtedness will be entitled to receive payment in
full in cash of all Obligations due in respect of Senior Indebtedness
(including interest accruing after the commencement of any bankruptcy,
insolvency or similar proceeding at the rate specified in the applicable
Senior Indebtedness, whether or not such interest is an allowed claim in any
such proceeding) before the holders of notes will be entitled to receive any
payment of any kind or character with respect to the notes (except that
holders of notes may receive payments made from the trust described under
"Description of Debt Securities--Defeasance of Debt Securities or Certain
Covenants in Certain Circumstances" in the accompanying prospectus), in the
event of any distribution to creditors of MGM Grand or any Subsidiary
Guarantor:
. in a total or partial liquidation or dissolution of MGM Grand or any
Subsidiary Guarantor;
. in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to MGM Grand or any Subsidiary Guarantor or its
respective property;
. in an assignment for the benefit of creditors; or
. in any marshalling of assets and liabilities of MGM Grand or any
Subsidiary Guarantor.
MGM Grand and each Subsidiary Guarantor also may not make any payment in
respect of the notes (except from the trust described under "Description of
Debt Securities--Defeasance of Debt Securities or Certain Covenants in Certain
Circumstances" in the accompanying prospectus) if:
. a payment default on Designated Senior Indebtedness occurs and is
continuing; or
. any other default occurs and is continuing on Designated Senior
Indebtedness that permits holders of the Designated Senior Indebtedness
to accelerate its maturity and the trustee receives a notice of such
default (a "Payment Blockage Notice") from the Representative of any
Designated Senior Indebtedness.
Payments on the notes may and shall be resumed:
. in the case of a payment default, upon the date on which such default is
cured or waived; and
. in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived (so long as no other nonpayment
default exists) or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any
Designated Senior Indebtedness has been accelerated.
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No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 180 days.
MGM Grand must promptly notify holders of Designated Senior Indebtedness or
their Representative if payment of the notes is accelerated because of an
Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of MGM Grand or any Subsidiary
Guarantor, holders of these notes may recover less ratably than creditors of
MGM Grand and the Subsidiary Guarantors who are holders of Senior
Indebtedness. The indenture does not limit the ability of the Company or any
Subsidiary Guarantor to incur Senior Indebtedness or any other Indebtedness or
the ability of any Excluded Subsidiary to incur any Indebtedness. See "Risk
Factors."
Additional Covenants of MGM Grand
Limitation on Liens
Other than as provided below under "--Exempted Liens and Sale and Lease-
Back Transactions," neither MGM Grand nor any of the Subsidiary Guarantors may
issue, assume or guarantee any Indebtedness secured by a Lien upon any
Principal Property or on any evidences of Indebtedness or shares of capital
stock of, or other ownership interests in, any Subsidiaries (regardless of
whether the Principal Property, Indebtedness, capital stock or ownership
interests were acquired before or after the date of the indenture) without
effectively providing that the notes shall be secured equally and ratably with
(or prior to) such Indebtedness so long as such Indebtedness shall be so
secured, except that this restriction will not apply to:
(a) Liens existing on the date of original issuance of the notes;
(b) Liens affecting property of a corporation or other entity existing
at the time it becomes a Subsidiary Guarantor or at the time it is merged
into or consolidated with MGM Grand or a Subsidiary Guarantor (provided
that such Liens are not incurred in connection with, or in contemplation
of, such entity becoming a Subsidiary Guarantor or such merger or
consolidation and do not extend to or cover property of MGM Grand or any
Subsidiary Guarantor other then property of the entity so acquired or which
becomes a Subsidiary Guarantor);
(c) Liens (including purchase money Liens) on property existing at the
time of acquisition thereof or to secure Indebtedness Incurred prior to, at
the time of, or within 24 months after the acquisition for the purpose of
financing all or part of the purchase price thereof (provided that such
Liens do not extend to or cover any property of MGM Grand or any Subsidiary
Guarantor other than the property so acquired);
(d) Liens on any property to secure all or part of the cost of
improvements or construction thereon or Indebtedness Incurred to provide
funds for such purpose in a principal amount not exceeding the cost of such
improvements or construction;
(e) Liens which secure Indebtedness of a Subsidiary of MGM Grand to MGM
Grand or to a Subsidiary Guarantor or which secure Indebtedness of MGM
Grand to a Subsidiary Guarantor;
(f) Liens on the stock, partnership or other equity interest of MGM
Grand or Subsidiary Guarantor in any Joint Venture or any Subsidiary which
owns an equity interest in such Joint Venture to secure Indebtedness,
provided the amount of such Indebtedness is contributed and/or advanced
solely to such Joint Venture;
(g) Liens securing Senior Indebtedness;
(h) certain Liens to government entities, including pollution control or
industrial revenue bond financing;
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(i) Liens required by any contract or statute in order to permit MGM
Grand or a Subsidiary of MGM Grand to perform any contract or subcontract
made by it with or at the request of a governmental entity;
(j) mechanic's, materialman's, carrier's or other like Liens, arising in
the ordinary course of business;
(k) certain Liens for taxes or assessments and similar charges;
(l) zoning restrictions, easements, licenses, covenants, reservations,
restrictions on the use of real property and certain other minor
irregularities of title; and
(m) any extension, renewal, replacement or refinancing of any
Indebtedness secured by a Lien permitted by any of the foregoing clauses
(a) through (g).
Notwithstanding the foregoing, at and after the time of the Mirage merger,
the foregoing covenant shall not apply to the extent it constitutes an
agreement not to encumber the equity securities of Mirage corporate
Subsidiaries licensed in Nevada, unless and until it is approved by the Nevada
Board and the Nevada Commission. Similar approvals were obtained from the
Mississippi Gaming Commission on May 18, 2000 with respect to these agreements
not to encumber the equity securities of the corporate Subsidiaries of Mirage
licensed in Mississippi. In addition, the foregoing covenant shall not apply
to equity securities of future Subsidiaries of MGM Grand to the extent such
covenant constitutes an agreement not to encumber the equity securities of
such Subsidiary and requires a regulatory approval, unless and until such
approval is obtained. See "Regulation and Licensing--Nevada Gaming
Regulation," "--Mississippi Government Regulation" and "Description of Notes--
Gaming Approvals."
Limitation on Sale and Lease-Back Transactions
Other than as provided below under "--Exempted Liens and Sale and Lease-
Back Transactions," neither MGM Grand nor any Subsidiary Guarantor will enter
into any Sale and Lease-Back Transaction unless either:
(i) MGM Grand or such Subsidiary Guarantor would be entitled, pursuant
to the provisions described in clauses (a) through (m) under "--Limitation
on Liens" above, to create, assume or suffer to exist a Lien on the
property to be leased without equally and ratably securing the notes; or
(ii) an amount equal to the greater of the net cash proceeds of such
sale or the fair market value of such property (in the good faith opinion
of MGM Grand's board of directors) is applied within 120 days to the
retirement or other discharge of its Funded Debt.
Exempted Liens and Sale and Lease-Back Transactions
Notwithstanding the restrictions set forth in "--Limitation on Liens" and
"--Limitation on Sale and Lease-Back Transactions" above, MGM Grand or any
Subsidiary Guarantor may create, assume or suffer to exist Liens or enter into
Sale and Lease-Back Transactions not otherwise permitted as described above,
provided that at the time of such event, and after giving effect thereto, the
sum of outstanding Indebtedness secured by such Liens (not including Liens
permitted under "--Limitation on Liens" above) plus all Attributable Debt in
respect of such Sale and Lease-Back Transactions entered into (not including
Sale and Lease-Back Transactions permitted under "--Limitation on Sale and
Lease-Back Transactions" above), measured, in each case, at the time any such
Lien is incurred or any such Sale and Lease-Back Transaction is entered into,
by MGM Grand and the Subsidiary Guarantors does not exceed 15% of Consolidated
Net Tangible Assets.
Limitation on Senior Subordinated Indebtedness
MGM Grand will not Incur any Indebtedness that is subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness is pari passu
with, or subordinated in right of payment to, the notes. No Subsidiary
Guarantor will Incur any Indebtedness that is subordinate in right of payment
to any Senior Indebtedness unless such Indebtedness is pari passu with, or
subordinated in right of payment to, any Subsidiary Guarantee executed by the
Subsidiary Guarantor.
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Subsidiary Guarantees
In addition to the Subsidiary Guarantors named in the indenture on the
closing date, the indenture will provide that any existing or future
Subsidiary of MGM Grand (other than an Excluded Subsidiary) shall become a
Subsidiary Guarantor, on a senior subordinated basis (pursuant to
subordination provisions substantially similar to those described above under
the subheading "Subordination" above) of MGM Grand's payment Obligations under
the notes and the indenture, if such Subsidiary Incurs any Indebtedness or if
and for so long as such Subsidiary provides a guarantee in respect of Senior
Indebtedness of MGM Grand.
Repurchase at the Option of Holders Upon a Change of Control
Upon the occurrence of a Change of Control, each holder of notes shall have
the right to require MGM Grand to repurchase all or any part of such holder's
notes pursuant to the offer described below (the "Change of Control Offer") at
a purchase price (the "Change of Control Purchase Price") equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
purchase date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
Within 30 days following any Change of Control, MGM Grand or, at MGM
Grand's request, the Trustee will mail to each holder of notes a notice
stating:
. that a Change of Control has occurred and a Change of Control Offer is
being made pursuant to the covenant entitled "Repurchase at the Option
of Holders Upon a Change of Control" and that all notes timely tendered
will be accepted for payment;
. the Change of Control Purchase Price and the purchase date, which shall
be, subject to any contrary requirements of applicable law, a business
day no earlier than 30 days nor later than 60 days from the date such
notice is mailed;
. the circumstances and relevant facts regarding the Change of Control;
and
. the procedures that holders of notes must follow in order to tender
their notes (or portions thereof) for payment, and the procedures that
holders of notes must follow in order to withdraw an election to tender
notes (or portions thereof) for payment.
MGM Grand will comply, to the extent applicable, with the requirements of
Section 14(e) of the Securities Exchange Act of 1934 and any other securities
laws or regulations in connection with the repurchase of notes pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the covenant described
hereunder, MGM Grand will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
covenant described hereunder by virtue of such compliance.
The Change of Control repurchase feature is a result of negotiations
between MGM Grand and representatives of the underwriters. Management has no
present intention to engage in a transaction involving a Change of Control,
although it is possible that MGM Grand would decide to do so in the future.
The definition of Change of Control includes a phrase relating to the sale,
transfer, assignment, lease, conveyance or other disposition of "all or
substantially all" the assets of MGM Grand. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise established definition of the phrase under applicable law.
Accordingly, if MGM Grand disposes of less than all its assets by any of the
means described above, the ability of a holder of notes to require MGM Grand
to repurchase its notes may be uncertain. In such a case, holders of the notes
may not be able to resolve this uncertainty without resorting to legal action.
The Credit Facilities provide that the occurrence of certain of the events
that would constitute a Change of Control could lead to termination of
commitments and require the early repayment of loans under the Credit
Facilities. Other future debt of MGM Grand may contain prohibitions of certain
events which would constitute a
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Change of Control or require such debt to be repurchased upon a Change of
Control. Moreover, the exercise by holders of notes of their right to require
MGM Grand to repurchase such notes could cause a default under existing or
future debt of MGM Grand, even if the Change of Control itself does not, due
to the financial effect of such repurchase on MGM Grand. If repurchase upon a
Change of Control would constitute a default on Designated Senior
Indebtedness, a Payment Blockage Notice could result, preventing such
repurchase. Finally, MGM Grand's ability to pay cash to holders of notes upon
a repurchase may be limited by its then existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to
make any required repurchases. MGM Grand's failure to make a required Change
of Control Offer or to purchase notes in connection with a Change of Control
Offer would result in a default under the indenture. Such a default would, in
turn, constitute a default under other existing debt of MGM Grand, and may
constitute a default under future debt as well. MGM Grand's obligation to make
an offer to repurchase the notes as a result of a Change of Control may be
waived or modified at any time prior to the occurrence of such Change of
Control with the written consent of the holders of a majority in principal
amount of the notes. See "Supplemental Modification and Waiver Provisions."
MGM Grand will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control Offer made by MGM
Grand and purchases all of the notes validly tendered and not withdrawn under
such Change of Control Offer.
Supplemental Events of Default
Reference is made to the section entitled "Description of Debt Securities"
in the accompanying Prospectus for a description of events of default
applicable to the notes under the indenture. In addition to such events of
default, the following events shall each constitute an event of default
applicable to the notes under the indenture:
(i) the acceleration of the maturity of any Indebtedness of MGM Grand or
any Subsidiary Guarantor (other than Non-recourse Indebtedness), at any one
time, in an amount in excess of the greater of (a) $25 million and (b) 5%
of Consolidated Net Tangible Assets, if such acceleration is not annulled
within 30 days after written notice as provided in the indenture;
(ii) entry of final judgments against MGM Grand or any Subsidiary
Guarantor which remain undischarged for a period of 60 days, provided that
the aggregate of all such judgments exceeds $25 million and judgments
exceeding $25 million remain undischarged for 60 days after notice; and
(iii) the failure (a) to make timely any offer to purchase the notes or
(b) on the applicable purchase date, to purchase the notes required to be
purchased, in each case, as required under "Additional Covenants of MGM
Grand--Repurchase at the Option of Holders Upon a Change of Control."
Supplemental Modification or Waiver Provisions
Reference is made to the section entitled "Description of Debt Securities--
Modification and Waiver" in the accompanying prospectus for a description of
provisions pertaining to modifications or waivers of the indenture, provided
with respect to these notes and the indenture, references in such section to
MGM Grand shall also be deemed to include the Subsidiary Guarantors. In
addition to the other modifications or waivers specified therein that require
the consent of each affected holder of the notes, a release of any Subsidiary
Guarantor (except in accordance with the provisions of the indenture) requires
the consent of each affected holder of notes. In addition, no such
modification or waiver may, without the consent of the holder of each note, at
any time after a Change of Control has occurred, change the time at which the
Change of Control Offer related thereto must be made or change the time or
price at which the notes must be repurchased pursuant to such Change of
Control Offer.
Gaming Approvals
Restrictions on the transfer of the equity securities of the corporate
Subsidiaries licensed in Nevada of MGM Grand, and at and after the Mirage
merger, of Mirage, and agreements not to encumber such equity securities, in
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each case in respect of the notes, require the prior approval of the Nevada
Commission in order to be effective. On August 19, 1999, the Nevada Commission
granted MGM Grand prior approval to make public offerings for a period of 23
months, subject to certain conditions ("Shelf Approval"). This offering is
being made pursuant to the Shelf Approval. However, while such Shelf Approval
includes prior approvals of restrictions on the transfer of the equity
securities of MGM Grand's Nevada-licensed corporate Subsidiaries and
agreements not to encumber such equity securities, in each case in respect of
the notes, it does not include approvals in respect of the equity securities
of Nevada-licensed Mirage corporate Subsidiaries.
Consequently, applications have been filed with the Nevada Board and the
Nevada Commission seeking their approval for the Nevada-licensed corporate
Subsidiaries of Mirage to allow restrictions on the transfer of the equity
securities of, and agreements not to encumber the equity securities of,
Mirage's Nevada-licensed corporate Subsidiaries, in each case in respect of
the notes, to be effective at and after the time of the Mirage merger. Such
restrictions on the transfer of equity securities and agreements not to
encumber equity securities will not be effective in respect of the Nevada-
licensed corporate Subsidiaries of Mirage at and after the Mirage merger
unless and until they are approved by the Nevada Board and the Nevada
Commission. There can be no assurance that such approvals will be granted on a
timely basis or at all. Similar approvals were obtained from the Mississippi
Gaming Commission on May 18, 2000 with respect to these restrictions and
agreements not to encumber the equity securities of corporate Subsidiaries of
Mirage licensed in Mississippi, whether securities are issued in a private
placement or a public offering. For more information, see "Regulation and
Licensing--Nevada Gaming Regulation" and "--Mississippi Government
Regulation."
Compliance with Gaming Laws
Each holder of a note, by accepting any note, agrees to be bound by the
requirements imposed on holders of debt securities of MGM Grand by the gaming
authority of any jurisdiction of which MGM Grand or any of its Subsidiaries
conducts or proposes to conduct gaming activities. For a description of the
regulatory requirements applicable to MGM Grand, see "Regulation and
Licensing" herein.
Reports
So long as any notes are outstanding, MGM Grand will file with the trustee
under the indenture the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 or Section 15(d) of the
Exchange Act with respect to securities listed and registered on a national
securities exchange as such rules and regulations may require.
Book-Entry; Delivery and Form
The notes sold within the United States will initially be issued in the
form of one or more global notes. The global notes will be deposited with, or
on behalf of, The Depository Trust Company ("DTC") and registered in the name
of DTC or its nominee, who will be the global notes holder. Except as set
forth below, the global notes may be transferred, in whole and not in part,
only to DTC or another nominee of DTC. Investors may hold their beneficial
interests in the global notes directly through DTC if they are participating
organizations or "participants" in such system or indirectly through
organizations that are participants in such system.
Depository Procedures
DTC has advised MGM Grand that DTC is a limited-purpose trust company that
was created to hold securities for its participants and to facilitate the
clearance and settlement of transactions in such securities between
participants through electronic book-entry changes in accounts of its
participants. The participants include securities brokers and dealers, banks
and trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies, which we refer to as "indirect
participants," that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants
may beneficially own securities held by or on behalf of DTC only through the
participants or the indirect participants.
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MGM Grand expects that pursuant to procedures established by DTC:
(i) upon deposit of the global notes, DTC will credit the accounts of
participants designated by Underwriters with portions of the principal
amount of the global notes; and
(ii) ownership of the notes evidenced by the global notes will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the interests of the
participants), the participants and the indirect participants.
Prospective purchasers are advised that the laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer notes evidenced by the
global notes will be limited to such extent.
So long as the global notes holder is the registered owner of any notes,
the global notes holder will be considered the sole holder under the indenture
of any notes evidenced by the global notes. Beneficial owners of notes
evidenced by the global notes will not be considered the owners or holders
thereof under the indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the trustee thereunder.
Neither MGM Grand nor the applicable trustee will have any responsibility or
liability for any aspect of the records of DTC or for maintaining, supervising
or reviewing any records of DTC relating to the notes.
Payments in respect of the principal of, premium, if any, and interest on
any notes registered in the name of the global notes holder on the applicable
record date will be payable by the applicable trustee to or at the direction
of the global notes holder in its capacity as the registered holder under the
indenture. Under the terms of the indenture, MGM Grand and the applicable
trustee may treat the persons in whose names notes, including the global
notes, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither MGM Grand nor the applicable trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of notes. MGM Grand believes, however, that it is currently
the policy of DTC to immediately credit the accounts of the relevant
participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of DTC. Payments by the participants and the indirect participants to
the beneficial owners of notes will be governed by standing instructions and
customary practice and will be the responsibility of the participants or the
indirect participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in a
global note may, upon request to the trustee, exchange such beneficial
interest for notes in the form of certificated securities. Upon any such
issuance, the trustee is required to register such certificated securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if:
(i) MGM Grand notifies the trustee in writing that DTC is no longer
willing or able to act as a depositary and MGM Grand is unable to locate a
qualified successor within 90 days; or
(ii) MGM Grand, at its option, notifies the trustee in writing that it
elects to cause the issuance of notes in the form of certificated
securities under the indenture, then, upon surrender by the global notes
holder of its global notes, notes in such form will be issued to each
person that the global notes holder and DTC identify as being the
beneficial owner of the related notes.
Neither MGM Grand nor the trustee will be liable for any delay by the
global notes holder or DTC in identifying the beneficial owners of notes and
MGM Grand and the trustee may conclusively rely on, and will be protected in
relying on, instructions from the global notes holder or DTC for all purposes.
Same-Day Settlement and Payment
The indenture will require that payments in respect of the notes
represented by the global notes (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts
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specified by the global notes holder. With respect to certificated securities,
MGM Grand will make all payments of principal, premium, if any, and interest
by wire transfer of immediately available funds to the accounts specified by
the holders thereof or, if no such account is specified, by mailing a check to
each such holder's registered address.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar for the notes.
MGM Grand may change the paying agent or registrar without prior notice to the
holders of the notes, and MGM Grand or any of its Subsidiaries may act as
paying agent or registrar.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and MGM Grand may
require a holder to pay any taxes and fees required by law or permitted by the
indenture. MGM Grand is not required to transfer or exchange any note selected
for redemption. Also, MGM Grand is not required to transfer or exchange any
note for a period of 15 days before a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
Concerning the Trustee
If the trustee becomes a creditor of MGM Grand, the indenture limits its
right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
The holders of a majority in aggregate principal amount of the then
outstanding notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the trustee,
subject to certain exceptions. The indenture provides that in case an Event of
Default shall occur and be continuing, the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the trustee will be
under no obligation to exercise any of its rights or powers under the
indenture at the request of any holder of notes, unless such holder shall have
offered to the trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") as used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
agreement or otherwise.
"Attributable Debt" with respect to any Sale and Lease-Back Transaction
that is subject to the restrictions described under "--Additional Covenants of
MGM Grand--Limitation on Sale and Lease-Back Transactions" means the present
value of the minimum rental payments called for during the terms of the lease
(including any
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period for which such lease has been extended), determined in accordance with
generally accepted accounting principles, discounted at a rate that, at the
inception of the lease, the lessee would have incurred to borrow over a
similar term the funds necessary to purchase the leased assets.
"Change of Control" means the occurrence of any of the following events:
(a) if any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 or any successor
provisions to either of the foregoing), other than any Permitted Holders,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person will be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power of the
Voting Stock of MGM Grand (for purposes of this clause (a), such person or
group shall be deemed to beneficially own any Voting Stock of a corporation
held by any other corporation (the "parent corporation") so long as such
person or group beneficially owns, directly or indirectly, in the aggregate
a majority of the total voting power of the Voting Stock of such parent
corporation); or
(b) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the assets
of MGM Grand and its Subsidiaries, considered as a whole, to another person
(other than a disposition of such assets as an entirety or virtually as an
entirety to one or more Wholly Owned Subsidiary Guarantors) shall have
occurred, or MGM Grand merges, consolidates or amalgamates with or into any
other Person or any other Person merges, consolidates or amalgamates with
or into MGM Grand, in any event pursuant to a transaction in which the
outstanding Voting Stock of MGM Grand is reclassified into or exchanged for
cash, securities or other property, other than any such transaction where:
(1) the outstanding Voting Stock of MGM Grand is reclassified into
or exchanged for other Voting Stock of MGM Grand or for Voting Stock of
the surviving corporation, and
(2) the holders of the Voting Stock of MGM Grand immediately prior
to such transaction own, directly or indirectly, not less than a
majority of the Voting Stock of MGM Grand or the surviving corporation
immediately after such transaction; or
(c) the first day on which a majority of the members of the Board of
Directors of MGM Grand are not Continuing Directors.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of MGM Grand and its Subsidiaries
(less applicable depreciation, amortization and other valuation reserves)
after deducting therefrom (a) all current liabilities of MGM Grand and its
Subsidiaries (excluding (i) the current portion of long-term Indebtedness,
(ii) intercompany liabilities and (iii) any liabilities which are by their
terms renewable or extendible at the option of the obligor thereon to a time
more than 12 months from the time as of which the amount thereof is being
computed) and (b) all goodwill, trade names, trademarks, patents, unamortized
debt discount and any other like intangibles, all as set forth on the
consolidated balance sheet of MGM Grand for the most recently completed fiscal
quarter for which financial statements are available and computed in
accordance with generally accepted accounting principles.
"Continuing Director" means, as of any date of determination, any member of
the Board of Directors of MGM Grand who (i) was a member of that Board of
Directors on the date of the indenture, (ii) had been a member of that Board
of Directors for the two years immediately preceding such date of
determination or (iii) was nominated for election or elected to that Board of
Directors with the affirmative vote of the greater of (x) a majority of
Continuing Directors who were members of that Board at the time of such
nomination or election or (y) at least three Continuing Directors.
"Credit Facilities" means, collectively: (i) the Second Amended and
Restated Loan Agreement, dated as of April 10, 2000, among MGM Grand, as
Borrower, MGM Grand Atlantic City, Inc. and MGM Grand Detroit, LLC, as Co-
Borrowers, the Banks, Syndication Agent, Documentation Agents and Co-
Documentation Agents
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therein named, and Bank of America, N.A., as Administrative Agent (and their
successors and assigns from time to time party thereto), including any,
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, in each case as amended, modified, renewed,
extended, refunded, replaced or refinanced from time to time; (ii) the 364-Day
Loan Agreement, dated as of April 10, 2000, among MGM Grand, as Borrower, MGM
Grand Atlantic City, Inc. and MGM Grand Detroit, LLC, as Co-Borrowers, the
Banks, Syndication Agent, Documentation Agents and Co-Documentation Agents
therein named, and Bank of America, N.A., as Administrative Agent (and their
successors and assigns from time to time party thereto), including any,
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, in each case as amended, modified, renewed,
extended, refunded, replaced or refinanced from time to time; and (iii) the
Term Loan Agreement, dated as of April 7, 2000, among MGM Grand, as Borrower,
MGM Grand Atlantic City, Inc. and MGM Grand Detroit, LLC, as Co-Borrowers, the
Banks, Syndication Agent, Documentation Agents and Co-Documentation Agents
therein named, and Bank of America, N.A., as Administrative Agent (and their
successors and assigns from time to time party thereto), including any,
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, in each case as amended, modified, renewed,
extended, refunded, replaced or refinanced from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Designated Senior Indebtedness" means (i) Indebtedness under the Credit
Facilities, (ii) Indebtedness under the Senior Notes and (iii) any other
Senior Indebtedness the principal amount of which is $100.0 million or more
and that has been designated by MGM Grand as "Designated Senior Indebtedness"
in the documentation with respect thereto.
"Excluded Subsidiary" means The MGM Grand Bally's Monorail, LLC, MGM Grand
Detroit, LLC, MGM Grand Detroit II, LLC, MGM Grand Diamond, Inc. and MGM
Grand's non-U.S. Subsidiaries whose only tangible assets are located in
foreign nations and their U.S. holding companies, provided such holding
companies have no other assets or operations and provided that except for MGM
Grand Detroit, LLC to the extent it guarantees any amount of proceeds of
borrowings under the Credit Facilities made available to MGM Grand Detroit,
LLC, if any Excluded Subsidiary becomes subject to the covenants in the Credit
Facilities applicable to the Subsidiary Guarantors or grants any Liens to
secure the Credit Facilities, such Excluded Subsidiary will thereafter not be
an Excluded Subsidiary.
"Funded Debt" means all Indebtedness of MGM Grand or any Subsidiary
Guarantor which (i) matures by its terms on, or is renewable at the option of
any obligor thereon to, a date more than one year after the date of original
issuance of such Indebtedness and (ii) ranks at least pari passu with the
notes or the applicable Subsidiary Guarantee.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness;
provided that the accrual of interest shall not be considered an Incurrence of
Indebtedness.
"Indebtedness" of any Person means (i) any indebtedness of such Person,
contingent or otherwise, in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to
a portion thereof), or evidenced by notes, bonds, debentures or similar
instruments or letters of credit, or representing the balance deferred and
unpaid of the purchase price of any property, including any such indebtedness
Incurred in connection with the acquisition by such Person or any of its
Subsidiaries of any other business or entity, if and to the extent such
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with generally accepted accounting principles,
including for such purpose Obligations under capitalized leases, and (ii) any
guarantee, endorsement (other than for collection or deposit in the ordinary
course of business), discount with recourse, or any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire or to supply or
advance funds with respect to, or to become liable with respect to (directly
or indirectly) any indebtedness, obligation, liability or dividend of any
Person, but shall not include
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indebtedness or amounts owed for compensation to employees, or for goods or
materials purchased, or services utilized, in the ordinary course of business
of such Person. For purposes of this definition of Indebtedness, a
"capitalized lease" shall be deemed to mean a lease of real or personal
property which, in accordance with generally accepted accounting principles,
is required to be capitalized.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Joint Venture" means any partnership, corporation or other entity, in
which up to and including 50% of the partnership interests, outstanding voting
stock or other equity interests is owned, directly or indirectly, by MGM Grand
and/or one or more of its Subsidiaries.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit,
arrangement, encumbrance, security interest, lien (statutory or otherwise), or
preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
any conditional sale or other title retention agreement having substantially
the same economic effect as any of the foregoing).
"Make-Whole Premium" means, with respect to any note at any redemption
date, the excess, if any, of (i) the present value of the sum of the principal
amount and premium, if any, that would be payable on such note on its maturity
date and all remaining interest payments (not including any portion of such
payments of interest accrued as of the redemption date) to and including such
maturity date, discounted on a semi-annual bond equivalent basis from such
maturity date to the redemption date at a per annum interest rate equal to the
sum of the Treasury Yield (determined on the business day immediately
preceding the date of such redemption), plus 50 basis points, over (ii) the
principal amount of the note being redeemed.
"Mirage Notes" means (i) Mirage Resorts, Incorporated's 6 5/8% notes due
2005 in the original aggregate principal amount of $200 million, (ii) Mirage
Resorts, Incorporated's 7 1/4% notes due 2006 in the original aggregate
principal amount of $250 million, (iii) Mirage Resorts, Incorporated's 6 3/4%
notes due 2007 in the original principal amount of $200 million, (iv) Mirage
Resorts, Incorporated's 6 3/4% notes due 2008 in the original principal amount
of $200 million and (v) Mirage Resorts, Incorporated's 7 1/4% debentures due
2017 in the original principal amount of $100 million.
"Non-recourse Indebtedness" means Indebtedness the terms of which provide
that the lender's claim for repayment of such Indebtedness is limited solely
to a claim against the property which secures such Indebtedness.
"Obligations" means any principal, interest, premium, if any, penalties,
fees, indemnifications, reimbursements, expenses, damages or other liabilities
or amounts payable under the documentation governing or otherwise in respect
of any Indebtedness.
"Permitted Holders" means (i) an employee stock ownership plan or other
employee benefit plan covering employees of MGM Grand and its Subsidiaries and
(ii) Tracinda Corporation, its Affiliates and, with respect to any natural
Person that is an Affiliate, any Related Persons or such Person.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
unincorporated organization or government or any agency or political
subdivision thereof or any other entity.
"Principal Property" means any real estate or other physical facility or
depreciable asset or securities the net book value of which on the date of
determination exceeds the greater of $25 million or 2% of Consolidated Net
Tangible Assets.
"Related Persons" means, with respect to any natural Person, (i) such
Person's spouse, former spouses, parents and descendants (whether by blood or
adoption, and including stepchildren) and the spouses of any such
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natural Persons, (ii) the estate of such natural Person and (iii) any
corporation, partnership, trust or other Person controlled by, and in which at
least 50% of the interests therein are owned by, one or more of any of such
natural Person, such spouse, former spouses, parents and descendants (whether
by blood or adoption, and including stepchildren) and the spouses of any such
natural Persons.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior
Indebtedness shall at all times be the holders of a majority in outstanding
principal amount of such Designated Senior Indebtedness in respect of any
Designated Senior Indebtedness.
"Sale and Lease-Back Transaction" means any arrangement with a person
(other than MGM Grand or any of its Subsidiaries), or to which any such person
is a party, providing for the leasing to MGM Grand or any of its Subsidiaries
for a period of more than three years of any Principal Property which has been
or is to be sold or transferred by MGM Grand or any of its Subsidiaries to
such person or to any other person (other than MGM Grand of any of its
Subsidiaries), to which funds have been or are to be advanced by such person
on the security of the leased property.
"Senior Indebtedness" means the following Obligations of MGM Grand or any
Subsidiary Guarantor, as the case may be, whether outstanding on the date of
the offering or thereafter Incurred, unless such Obligation is Indebtedness
that is expressly made equal or subordinate in right of payment to the notes
or the Subsidiary Guarantees, by its terms or the terms of any issuing
agreement or instrument:
(i) all Indebtedness and all other Obligations of MGM Grand or any
Subsidiary Guarantor, as the case may be, under (or in respect of) the
Credit Facilities and all Interest Rate Agreements and Currency Agreements
with respect thereto;
(ii) all Indebtedness and all other obligations of MGM Grand or any
Subsidiary Guarantor, as the case may be, under (or in respect of) the
Senior Notes;
(iii) all interest accruing subsequent to events of bankruptcy of MGM
Grand or any Subsidiary Guarantor at the rate provided for in the document
governing any Senior Indebtedness, whether or not such interest is an
allowed claim enforceable against the debtor in a bankruptcy case under
bankruptcy law; and
(iv) all other Indebtedness and all other Obligations of MGM Grand or
any Subsidiary Guarantor, unless it is expressly stated in the governing
terms or in the assumption thereof that such Indebtedness is not "Senior
Indebtedness."
Notwithstanding the foregoing, the term "Senior Indebtedness" shall not
include:
. any Indebtedness of MGM Grand to any of its Subsidiaries, or to a joint
venture in which MGM Grand or any of its Subsidiaries has an interest;
. any Indebtedness of any Subsidiary of MGM Grand to MGM Grand or any
other Subsidiary of MGM Grand, or to a joint venture in which MGM Grand
or any of its Subsidiaries has an interest;
. any Indebtedness that was Non-recourse Indebtedness when Incurred by
either MGM Grand or any Subsidiary Guarantor;
. any Indebtedness of MGM Grand or any Subsidiary Guarantor, as the case
may be, to the extent not permitted by the "Limitation on Senior
Subordinated Indebtedness" covenant described above;
. any Indebtedness to any employee of either MGM Grand or any of its
Subsidiaries;
. any liability for taxes owed or owing by either MGM Grand or any of its
Subsidiaries; or
. any trade payables.
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"Senior Notes" means (i) MGM Grand's 6.95% senior collateralized notes due
2005 in the original aggregate principal amount of $300 million, (ii) MGM
Grand's 6.875% senior collateralized notes due 2008 in the original aggregate
principal amount of $200 million and (iii) the Mirage notes.
"Subsidiary" of any specified person means any corporation, partnership or
limited liability companies of which at least a majority of the outstanding
stock having by the terms thereof ordinary voting power for the election of
directors of such corporation (irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned by such person, or by one or more other
Subsidiaries, or by such person and one or more other Subsidiaries.
"Treasury Securities" mean any investment in obligations issued or
guaranteed by the United States government or any agency thereof.
"Treasury Yield" means the yield to maturity at the time of computation of
Treasury Securities with a constant maturity (as compiled by and published in
the most recent Federal Reserve Statistical Release H.15 (519) which has
become publicly available at least two business days prior to the date fixed
for redemption (or, if such Statistical Release is no longer published, any
publicly available source of similar data)) most nearly equal to the then
remaining average life of the notes, provided that if the average life of the
notes is not equal to the constant maturity of a Treasury Security for which a
weekly average yield is given, the Treasury Yield shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of Treasury Securities for which such yields are given,
except that if the average life of the notes is less than one year, the weekly
average yield on actually traded Treasury Securities adjusted to a constant
maturity of one year shall be used.
"Voting Stock" of any Person means all classes of capital stock or other
interests (including partnership interests) of such Person then outstanding
and normally entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary Guarantor" means, at any time, a Subsidiary
Guarantor all the Voting Stock of which (except directors' qualifying shares)
is at such time owned, directly or indirectly, by MGM Grand and its other
Wholly Owned Subsidiary Guarantors.
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UNDERWRITING
We intend to offer the notes through a number of underwriters. Subject to
the terms and conditions set forth in the purchase agreement, dated May 22,
2000, the underwriters named below have severally agreed to purchase, and we
have agreed to sell to them, severally, the respective principal amount of the
notes set forth opposite their respective names below. Banc of America
Securities LLC and Deutsche Bank Securities Inc. are acting as joint book
running managers for the note offering.
<TABLE>
<CAPTION>
Principal amount
Name of the notes
---- ----------------
<S> <C>
Banc of America Securities LLC............................. $300,000,000
Deutsche Bank Securities Inc. ............................. 200,000,000
Morgan Stanley & Co. Incorporated.......................... 30,000,000
Banc One Capital Markets, Inc. ............................ 20,000,000
Bear, Stearns & Co. Inc. .................................. 20,000,000
CIBC World Markets Corp. .................................. 20,000,000
Commerzbank Capital Markets Corp. ......................... 20,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................... 20,000,000
Salomon Smith Barney Inc. ................................. 20,000,000
Scotia Capital Markets (USA) Inc. ......................... 20,000,000
SG Cowen Securities Corporation............................ 20,000,000
Wasserstein Perella Securities, Inc. ...................... 20,000,000
------------
Total.................................................... $710,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the notes is subject to, among
other things, the approval of certain legal matters by their counsel and
certain other conditions. Under the terms of the underwriting agreement, the
underwriters are committed to take and pay for all of the notes, if any are
taken.
At our request, the underwriters have reserved up to $60.0 million in
aggregate principal amount of the notes for sale, in accordance with the rules
and regulations of the National Association of Securities Dealers, Inc., to
certain of our and Mirage's directors and senior management at the public
offering price. These persons must commit to purchase no later than the close
of business on the second business day following the date of this prospectus
supplement and, to the extent required under the NASD's Rules of Conduct, will
agree not to sell, transfer, assign, pledge or hypothecate the notes they
purchase from the underwriters for a period of three months following the date
they purchase such notes. The aggregate principal amount of the notes
available for sale to the general public will be reduced to the extent that
such persons purchase such reserved notes. Any reserved notes not so purchased
will be offered by the underwriters to the general public at the public
offering price on the same basis as the other notes offered hereby.
The underwriters have advised us that they propose to offer the notes from
time to time for sale in one or more negotiated transactions, or otherwise, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The underwriters may effect
such transactions by selling the notes to or through dealers, and such dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the underwriters and/or the purchasers of the notes for whom
they may act as agent. The underwriters and any dealers that participate with
the underwriters in the distribution of the notes may be deemed to be
underwriters, and any discounts or commissions received by them and any profit
on the resale of the notes by them may be deemed to be underwriting discounts
or commissions, under the Securities Act of 1933, as amended.
The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on a national securities
exchange, but have been advised by the underwriters that they intend
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to make a market in the notes. The underwriters are not obligated, however, to
do so and may discontinue their market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
notes.
We have agreed that for a period of 180 days from the date hereof, we will
not, without the prior written consent of Banc of America Securities LLC and
Deutsche Bank Securities Inc., directly or indirectly, issue, sell, offer to
sell, grant any option for the sale of, or otherwise dispose of, any
securities similar to the notes, or any securities convertible into or
exchangeable or exercisable for the notes or any such similar securities,
except for the notes sold to the underwriters pursuant to the underwriting
agreement.
The underwriting agreement provides that we will indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the underwriters
may be required to make in respect thereof.
In order to facilitate the offering of the notes, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the prices
of the notes. Specifically, the underwriters may overallot in connection with
the offering, creating a short position in the notes for their own account. In
addition, to cover overallotments or to stabilize the price of the notes, the
underwriters may bid for, and purchase, the notes in the open market. Finally,
the underwriters may reclaim selling concessions allowed to an underwriter or
a dealer for distributing the notes in the offering, if they repurchase
previously distributed notes in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price for the notes above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.
Certain of the underwriters and their respective affiliates have, from time
to time, performed various investment or commercial banking and financial
advisory services for us and our affiliates in the ordinary course of business
for which they have received customary fees. Any of the underwriters or their
respective affiliates may in the future engage in investment or commercial
banking or other transactions of a financial nature with us or our affiliates,
including the provision of advisory services and the making of loans to us or
our affiliates, for which they would receive customary fees or other payments.
As described under "Use of Proceeds," we intend to use the net proceeds from
the offering of the notes to repay a portion of the outstanding borrowings
under Mirage's existing senior credit facility. The lenders under Mirage's
existing senior credit facility include affiliates of the following
underwriters: Banc of America Securities LLC, Deutsche Bank Securities Inc.,
CIBC World Markets Corp., Commerzbank Capital Markets Corp., Scotia Capital
Markets (USA) Inc. and SG Cowen Securities Corporation. It is expected that
these lenders will in the aggregate receive more than 10% of the net proceeds
from the offering of the notes in the form of repayment of borrowings
outstanding under Mirage's existing senior credit facility. Accordingly, the
offering of the notes is being made pursuant to Rule 2710(c)(8) of the Conduct
Rules of the National Association of Securities Dealers, Inc. Wasserstein
Perella Securities, Inc. will act as "qualified independent underwriter," as
defined pursuant to Rule 2720(b)(15) of the Conduct Rules, and will assume the
responsibilities in connection therewith.
LEGAL MATTERS
The validity of the notes offered hereby will be passed upon for us by,
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, Los Angeles,
California. Terry N. Christensen, a partner of Christensen, Miller, Fink,
Jacobs, Glaser, Weil & Shapiro, LLP, is a member of our board of directors,
and he and other attorneys in that firm beneficially owned an aggregate of
11,500 shares of our common stock. Certain matters in connection with this
offering will be passed upon for the underwriters by Gibson, Dunn & Crutcher
LLP, Los Angeles, California.
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EXPERTS
The audited consolidated financial statements and schedule of MGM Grand,
Inc. incorporated by reference in this prospectus supplement and the
accompanying prospectus, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are incorporated herein by reference in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports. Reference
is made to said report which includes an explanatory paragraph with respect to
the change in accounting for start-up activities in 1999 as discussed in Note
2 to the MGM Grand, Inc. consolidated financial statements.
The audited consolidated financial statements and schedule of Mirage
Resorts, Incorporated, incorporated by reference in this prospectus supplement
and the accompanying prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and is incorporated herein by reference in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report. Reference is made to said report which includes an explanatory
paragraph with respect to the change in accounting for start-up activities in
1999 as discussed in Note 2 to the Mirage Resorts, Incorporated consolidated
financial statements.
FORWARD-LOOKING STATEMENTS
This prospectus supplement includes "forward-looking statements" that are
subject to risks and uncertainties. In portions of this prospectus supplement,
the words "anticipates," "believes," "estimates," "seeks," "expects," "plans,"
"intends" and similar expressions, as they relate to us or our management, are
intended to identify forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, and
have based these expectations on our beliefs as well as assumptions we have
made, such expectations may prove to be incorrect. Important factors that
could cause actual results to differ materially from such expectations are
disclosed in this prospectus supplement, including, without limitation, those
set forth under "Risk Factors," beginning on page S-13, as well as the
following factors:
. completion of the Mirage merger;
. 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;
. competition and changes in customer demand;
. ability to achieve certain cost savings, asset sales and revenue
enhancements;
. challenges imposed by the Mirage merger and integration of Mirage's
hotel/casino properties into our operations;
. changes or uncertainties in federal or state tax laws or the
administration of such laws;
. changes or uncertainties in gaming laws or regulations, including
legalization of gaming in certain jurisdictions; and
. any requirement to apply for licenses and approvals under applicable
laws, including gaming laws, on our part or on the part of our
suppliers.
All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety
by our cautionary statements. The forward-looking statements included or
incorporated herein are made only as of the date of this prospectus
supplement, or as of the date of the documents incorporated by reference. We
do not intend, and undertake no obligation, to update these forward-looking
statements.
S-78
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Each of MGM Grand and Mirage files annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy, at prescribed rates, any document MGM Grand
or Mirage files at the Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 (1-800-732-0330) for further information on the public
reference rooms. The Commission also maintains a website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission (http://www.sec.gov).
You also may read and copy reports and other information filed by MGM Grand or
Mirage at the office of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005. You may also read reports, proxy statements and
other information relating to MGM Grand or Mirage at the offices of the
Pacific Exchange at 310 Pine Street, San Francisco, California 94104.
We have filed a registration statement and related exhibits with the
Commission under the Securities Act of 1933. The registration statement
contains additional information about us and our debt securities and common
stock. You may inspect the registration statement and its exhibits without
charge at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and obtain copies, at prescribed rates, from the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Commission allows us to "incorporate by reference" information filed
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus supplement, and information filed later
by MGM Grand or Mirage with the Commission will automatically update and
supersede this information.
We incorporate by reference the documents listed below and any future
filings made with the Commission under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:
. Our Annual Report on Form 10-K for the year ended December 31, 1999;
. Our Form 10-K/A filed with the Commission on May 5, 2000;
. Our Quarterly Report on Form 10-Q for the period ended March 31, 2000;
. Our Current Reports on Form 8-K dated February 23, 2000, February 28,
2000, March 6, 2000 April 11, 2000, May 17, 2000, May 18, 2000 and May
19, 2000;
. Mirage Resorts, Incorporated Annual Report on Form 10-K for the year
ended December 31, 1999;
. Mirage Resorts, Incorporated Proxy Statement filed with the Commission
on February 23, 2000;
. Mirage Resorts, Incorporated Registration Statement on Form 8-A12B filed
with the Commission on March 10, 2000;
. Mirage Resorts, Incorporated Preliminary Proxy Statement filed with the
Commission of March 24, 2000;
. Mirage Reports, Incorporated Amended Registration Statement on Form 8-
A12B/A filed with the Commission on April 7, 2000;
. Mirage Resorts, Incorporated Amended Preliminary Proxy Statement filed
with the Commission on April 25, 2000;
. Mirage Resorts, Incorporated Quarterly Report on Form 10-Q for the
period ended March 31, 2000;
. Mirage Resorts, Incorporated Definitive Proxy Statement filed with the
Commission on May 5, 2000; and
. Mirage Resorts, Incorporated Soliciting Material filed with the
Commission on May 16, 2000.
S-79
<PAGE>
All documents and reports filed by MGM Grand or Mirage pursuant to Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 after the
date of this prospectus supplement and on or prior to the termination of the
offering of the offered securities made by this prospectus supplement are
deemed to be incorporated by reference in this prospectus supplement from the
date of filing of such documents or reports, except as to any portion of any
future annual or quarterly reports or proxy statements which is not deemed to
be filed under those sections. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this prospectus
supplement will be deemed to be modified or superceded for purposes of this
prospectus supplement to the extent that any statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference in this prospectus supplement modifies or supercedes
such statement. Any statement so modified or superceded will not be deemed,
except as so modified or superceded, to constitute a part of this prospectus
supplement.
Any person receiving a copy of this prospectus supplement may obtain,
without charge, upon written or oral request, a copy of any of the documents
incorporated by reference except for the exhibits to such documents (other
than the exhibits expressly incorporated in such documents by reference).
Requests should be directed to: Scott Langsner, Secretary, MGM Grand, Inc.,
3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109; telephone number:
(702) 891-3333. A copy will be provided by first class mail or other equally
prompt means within one business day after receipt of your request.
S-80
<PAGE>
APPENDIX I
MIRAGE RESORTS, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is reproduced from the Mirage Resorts, Incorporated Quarterly
Report in Form 10-Q for the period ended March 31, 2000.
Comparison of Operating Results for the Three-Month Periods Ended March 31,
2000 and 1999
Total revenues of $737.9 million for the first quarter of 2000 set a new
quarterly record for the Company, directly following the previous record of
$706.6 million set in the fourth quarter of 1999. Compared with total revenues
of $648.1 million in the 1999 first quarter, the recent quarter represents an
increase of $89.8 million (14%). Operating income of $120.1 million also set a
new quarterly record, again surpassing the previous record set in the 1999
fourth quarter of $103.0 million. Operating income during the first quarter of
1999 totaled $75.1 million. The 1999 amount was reduced by $31.5 million of
preopening costs related to Beau Rivage and our development activities in
Atlantic City, New Jersey. Excluding these costs, the year-ago first quarter
represents the Company's previous record for operating income.
The record results achieved during the 2000 first quarter include a full
quarter of operation for our Beau Rivage resort in Biloxi, Mississippi, which
opened on March 16, 1999. The new resort achieved total revenues during the
quarter of $87.5 million and operating income of $8.1 million. Casino revenues
totaled $49.8 million and non-casino revenues were $37.7 million. Beau
Rivage's operating margin (operating income as a percentage of net revenues)
for the quarter increased to 10.5%. By comparison, its operating margin
(before preopening costs) during nine and one-half months of operation in 1999
was 6.5%.
During its initial 16 days of operation in the 1999 first quarter, Beau
Rivage generated total revenues of $14.2 million. Casino revenues totaled $9.0
million and total non-casino revenues were $5.2 million. Like many new
resorts, Beau Rivage's operating results were hampered during its initial
start-up period by overstaffing and other inefficiencies. As a result, Beau
Rivage reported an operating loss of $1.8 million before preopening costs
during the 1999 first quarter.
The record quarterly operating results were achieved despite a lower than
historical average table games win percentage and increased competition in the
Las Vegas market. The overall table games win percentage was 19.0% during the
2000 first quarter, versus our historical long-term average of approximately
20%. The win percentage in the 1999 quarter averaged 20.2%. Our room rates and
occupancy levels remained strong during the recent quarter, in the face of the
new Las Vegas competition. Excluding Beau Rivage, our Company-wide average
daily standard room rate increased to approximately $113, compared with $109
in the 1999 first quarter. On this same-store basis, occupancy of available
standard guestrooms was 98.0%, versus 98.6%. Including Beau Rivage, our
Company-wide standard guestroom occupancy was approximately 98% during the
first quarter of both years at an average daily rate of $107 in 2000 and $108
in 1999.
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<PAGE>
Summary Operating Results of Wholly-Owned Properties
<TABLE>
<CAPTION>
Three months
ended March 31
-----------------
2000 1999(a)
-------- --------
(In thousands)
<S> <C> <C>
Gross revenues
Bellagio................................................ $277,955 $282,005
The Mirage.............................................. 191,692 176,508
Treasure Island......................................... 104,874 96,764
Beau Rivage............................................. 87,490 14,172
Golden Nugget-Las Vegas................................. 53,045 54,078
Golden Nugget-Laughlin.................................. 15,319 15,678
-------- --------
$730,375 $639,205
======== ========
Net revenues
Bellagio................................................ $249,171 $256,130
The Mirage.............................................. 172,562 161,140
Treasure Island......................................... 95,516 88,398
Beau Rivage............................................. 77,849 12,506
Golden Nugget-Las Vegas................................. 47,341 48,709
Golden Nugget-Laughlin.................................. 13,475 13,830
-------- --------
$655,914 $580,713
======== ========
Operating income (loss)
Bellagio................................................ $ 41,276 $ 42,387
The Mirage.............................................. 45,003 39,270
Treasure Island......................................... 20,827 19,524
Beau Rivage(b).......................................... 8,145 (1,840)
Golden Nugget-Las Vegas................................. 7,038 8,013
Golden Nugget-Laughlin.................................. 1,742 1,630
-------- --------
$124,031 $108,984
======== ========
</TABLE>
- --------
(a) Beau Rivage opened on March 16, 1999.
(b) Before preopening costs of $28.7 million in 1999.
Same-Property Operating Results
Bellagio
Bellagio experienced only a 3% decline in operating income during the
quarter, despite a significantly lower table games win percentage. The table
games win percentage was 17.7%, substantially below the 21.7% experienced in
the 1999 period. The lower table games win percentage principally accounted
for a $21.4 million (16%) decline in Bellagio's casino revenues.
Bellagio's total non-casino revenues were up sharply over the prior-year
period, substantially offsetting the decline in casino revenues. Total non-
casino revenues grew to $162.5 million, representing an increase of
$17.4 million (12%) over the first quarter of 1999. The revenue growth was
experienced across the board. Food and beverage and room revenues during the
quarter were particularly strong, posting year-over-year increases of 16% and
9%, respectively. The average daily rate for Bellagio's standard guestrooms
rose to $171 during the 2000 first quarter, versus $156 in the prior-year
period. Occupancy held steady at approximately 99% during the first quarter of
both years. Bellagio's operating margin was essentially equal with the 1999
first quarter.
I-2
<PAGE>
The Mirage
The Mirage reported its best quarterly results since the third quarter of
1997. Total revenues increased $15.2 million (9%) and operating income grew by
$5.7 million (15%).
Casino revenues totaled $99.1 million, representing a $10.7 million (12%)
increase over the prior-year period. This increase principally reflects a 22%
increase in table games revenue resulting from a significantly higher table
games win percentage and a 9% increase in drop. The table games win percentage
for the quarter was 24.1%, compared with 21.5% in the prior-year period.
The Mirage achieved total non-casino revenues during the quarter of $92.6
million, representing an increase of $4.5 million (5%) over the year-ago
period. Similar to Bellagio, revenue contribution increased in every
non-casino category. Food and beverage revenue increased by $2.0 million (7%)
and room revenue grew by $1.6 million (5%). Lower cost of sales percentages
and other cost containment efforts led to an improvement in The Mirage's
operating margin versus the 1999 first quarter.
Treasure Island
Treasure Island reported its highest quarterly operating results in three
years. Its total revenues grew by $8.1 million (8%) and its operating income
climbed $1.3 million (7%). Casino revenues increased by $3.3 million (9%) and
non-casino revenues grew by $4.8 million (8%). Slot play was up substantially
over the prior-year quarter, leading to a $2.8 million (14%) increase in
related revenue. Table games revenue rose by 2%, despite a slight decline in
the win percentage.
Total room revenue at Treasure Island grew by $1.9 million (8%) over the
first quarter of 1999. Occupancy of available standard guestrooms averaged
98.9% during the recently completed quarter, versus 98.1% in the year-ago
period. The resort immediately benefited from the room refurbishment program
completed near the end of the 1999 third quarter. The program substantially
upgraded the quality of the furnishings of its guestrooms and assisted the
property in receiving the Four Diamond rating from AAA. The refurbishment
program began in February 1999 and resulted in approximately 8% fewer
available room nights at the hotel during the 1999 first quarter compared with
the current-year period. An increase in both occupancy and the average ticket
price for the popular Mystere show principally accounted for a $1.9 million
(17%) increase in entertainment revenue. Higher depreciation expense
associated with the completed room refurbishment project accounted for a small
decline in Treasure Island's operating margin compared with the prior-year
first quarter.
Golden Nugget Properties
The additional competition from several major new resorts built on the Las
Vegas Strip in recent years has especially impacted the hotel-casinos located
in downtown Las Vegas and in Laughlin. The hotel-casinos in Laughlin have
experienced additional competitive pressure from hotel-casinos built on nearby
Indian reservations. Nevertheless, comparisons at the Company's Golden Nugget
properties in downtown Las Vegas and in Laughlin remained fairly stable. At
the Golden Nugget-Las Vegas, both table games and slot play increased over the
prior-year first quarter. A decline in the table games win percentage,
however, principally accounted for a 2% decline in casino revenues. Total room
revenue grew by 3%, representing an increase in average daily room rates.
Standard guestroom occupancy was 97.0%, versus 98.9% in the 1999 first
quarter. Small declines in the facility's other the non-gaming revenue sources
resulted in a 2% decrease in its total non-casino revenues.
Comparisons at the Golden Nugget in Laughlin were essentially flat with
those of the year-ago quarter. Lower table games and slot play principally
accounted for a 2% decline in its total revenues. Similar to the Golden Nugget
in Las Vegas, an increase in average room rates led to a small improvement in
associated revenue. Standard guestroom occupancy was 97.1% during the 2000
first quarter, compared with 97.6% in the prior-year period. Reduced
promotional costs and depreciation expense led to an improvement in the
property's operating margin and a small improvement in its operating income.
I-3
<PAGE>
Other Factors Affecting Earnings
Monte Carlo
Our 50% share of the earnings of Monte Carlo contributed $7.6 million to
our pre-tax income during the 2000 first quarter, versus $8.9 million in the
prior-year period. Total revenues at the resort declined by $1.3 million (2%)
from the prior-year quarter. Room revenue grew by $1.3 million (5%),
reflecting a 7% increase in the average daily room rate. Guestroom occupancy
was 93.1%, versus 95.5% in the 1999 first quarter. Entertainment revenue also
showed improvement, increasing by $1.1 million (35%) over the prior-year
period. These increases, however, were more than offset by a $3.1 million
(10%) decrease in casino revenues mostly due to a decline in table games play
and the win percentage.
Preopening and related promotional costs
Our earnings during the first quarter of both 2000 and 1999 were reduced by
charges for preopening and related promotional costs. During the 2000 quarter,
preopening costs associated with our development activities in Atlantic City
reduced earnings by $2.5 million ($1.6 million, $0.01 per share, after tax).
During the 1999 first quarter, there were two separate components to the
charge for preopening costs. First, we adopted a new method of accounting for
preopening costs that requires such costs to be expensed as incurred. We
previously capitalized preopening costs and amortized them to expense
following opening of the related resort. All previously capitalized preopening
costs remaining at the time of adoption were required to be written off. As a
result, we expensed all previously capitalized preopening costs associated
with Beau Rivage and our development activities in Atlantic City, resulting in
an after-tax cumulative effect charge of $30.6 million ($0.16 per share).
Second, we incurred and expensed additional preopening costs associated with
these projects during the 1999 first quarter, reducing earnings by an
additional $31.5 million ($20.6 million, $0.11 per share, after tax).
Corporate expense
Corporate expense totaled $9.0 million in the 2000 first quarter,
representing a $2.2 million (20%) decline from $11.3 million in the prior-year
period. This decline reflects reduced expenditures for payroll, professional
fees and contributions, combined with a net gain of $1.0 million from the sale
of corporate aircraft.
Interest and other non-operating items
With Bellagio and Beau Rivage now complete, we have been using a
significant amount of our operating cash flow to reduce outstanding debt. At
March 31, 2000, total outstanding debt was $2.07 billion, versus $2.21 billion
and $2.38 billion at year-end 1999 and 1998, respectively. With these two
resorts now complete, we are also capitalizing a smaller portion of our
interest cost. The combined effect of these two factors resulted in a $3.0
million (11%) increase in our net interest expense when compared with the 1999
first quarter.
Our earnings during the recent quarter were also reduced by $3.9 million
($3.6 million, $0.02 per share, after tax) for costs incurred in connection
with our pending merger with MGM Grand.
Capital Resources, Capital Spending and Liquidity
Net cash provided by operating activities (as shown in our Condensed
Consolidated Statements of Cash Flows) totaled $159.5 million for the first
three months of 2000, versus $101.6 million in the same 1999 period. This
increase generally coincides with the record earnings we achieved during the
2000 first quarter. Our operating cash flow in the recent quarter also
includes $25.0 million we received in early January in connection with our
previous evaluation of the possible acquisition of the gaming operations of a
major competitor. The evaluation occurred in April 1999, and as part of the
negotiations it was agreed that we would receive the $25 million fee as
compensation for our efforts should the operations be sold to another bidder.
The operations were sold to another bidder in late December 1999, and we
recorded the receivable for the fee and the associated income net of related
costs in the 1999 fourth quarter.
I-4
<PAGE>
Our capital spending has declined significantly as a result of the
completion of Bellagio and Beau Rivage. After giving effect to the change in
associated deposit and payable amounts, capital expenditures and preopening
and related promotional costs required net cash of $63.8 million in the 2000
first quarter, versus $191.3 million in the prior-year period. Expenditures
during the current-year quarter principally relate to construction projects at
The Mirage. These projects include the new 1,260-seat Danny Gans Theatre and
extensive new meeting, convention and exhibit space, including a new 90,000-
square foot exhibit hall. The popular singer/impersonator Danny Gans began
performing in the new theatre in early April. The new meeting and convention
space is scheduled to be completed in June of this year and the exhibit hall
is expected to open in May 2001. The total cost of these projects is
anticipated to be approximately $100 million. At March 31, 2000, we had
incurred approximately $51 million of this amount. Capital expenditures during
the 1999 first quarter principally relate to the completion of Beau Rivage and
amounts associated with the room refurbishment project at Treasure Island.
Except for the above-noted projects at The Mirage and our development
activities in Atlantic City, New Jersey, the merger agreement with MGM Grand
generally limits our capital expenditures to $3.0 million for any individual
project or $80.0 million for all projects combined. The merger agreement does
not limit our expenditures for normal maintenance and repairs.
With respect to our development activities in Atlantic City, environmental
remediation work is ongoing on our 120-acre Marina site and design of the
internal roads and other master plan elements is underway. Construction is
also continuing on the previously funded joint venture road improvement
project with the State of New Jersey to improve access to the Marina area.
Because of the pending merger with MGM Grand, we cannot be certain of the
ultimate design, timing, cost or construction of our wholly owned hotel-casino
resort planned for the Marina site. Our plans for a new hotel-casino resort on
the site of our existing Boardwalk hotel-casino and adjacent land on the Las
Vegas Strip, as well as our contemplated hotel expansion project at Bellagio,
are also subject to MGM Grand's analysis and approval following the merger.
The pending merger with MGM Grand is not expected to affect plans for our
existing 50-50 joint venture with Boyd Gaming Corporation, which call for the
development of a hotel-casino resort to be known as "The Borgata" on a 25-acre
portion of our Marina site. We are in discussions with Boyd concerning
increasing the size of The Borgata from 1,200 rooms to 2,000 rooms. It is
currently estimated that the larger project size would increase the budgeted
cost from approximately $750 million to slightly in excess of $1.0 billion.
Each partner's cash equity contribution would also increase by $57 million,
thereby requiring total cash contributions of $117 million from us and $207
million from Boyd. At March 31, 2000, we had made cash contributions of
approximately $7 million. We would also contribute the 25-acre site to the
joint venture. The joint venture will attempt to obtain acceptable financing
for the remaining cost of the project that is non-recourse to either partner.
If the necessary permits and financing are obtained, construction of The
Borgata could begin by the end of this year.
During the 2000 first quarter, we received proceeds from the sale of
property and equipment of approximately $46 million. Most of this amount was
received from the sale of corporate aircraft mentioned previously.
The significant decline in our capital spending requirements has allowed us
to use the majority of our free cash flow in recent months to reduce
outstanding debt. During the first three months of 2000, we utilized
$141.7 million to repay borrowings under our bank credit facility and
commercial paper program. All outstanding bank credit facility and commercial
paper borrowings are required to be repaid upon completion of the merger with
MGM Grand. At April 30, 2000, no borrowings were outstanding under our
commercial paper program and we had $1.09 billion outstanding under our bank
credit facility. None of our remaining debt securities are required to be
repaid upon completion of the merger. The merger agreement limits our
aggregate outstanding indebtedness, net of cash and cash equivalents, to $2.15
billion. At March 31, 2000, the total outstanding principal amount of our
debt, net of cash and cash equivalents, was approximately $1.93 billion.
I-5
<PAGE>
Forward-Looking Statements
This Form 10-Q contains some forward-looking statements. Forward-looking
statements give our current expectations or forecasts of future events. You
can identify these statements by the fact that they do not relate strictly to
historical or current facts. They contain words such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe," "may," "could,"
"might" and other words or phrases of similar meaning in connection with any
discussion of future operating or financial performance. These forward-looking
statements involve important risks and uncertainties that could significantly
affect our anticipated future results and, therefore, our actual results may
differ materially from those described in any forward-looking statement. These
risks and uncertainties include those relating to competition, development and
construction activities, leverage and debt service (including sensitivity to
fluctuations in interest rates), domestic or international economic
conditions, pending or future legal proceedings, the effects of changes in
federal or state tax laws or the administration of such laws and changes in
gaming laws or regulations (including the legalization of gaming in certain
jurisdictions). Additional information concerning potential factors that we
think could cause our actual results to differ materially from expected and
historical results is included under the caption "Factors that May Affect Our
Future Results" in Item 1 of the 1999 Annual Report. This statement is
provided as permitted by the Private Securities Litigation Reform Act of 1995.
The following is reproduced from the Mirage Resorts, Incorporated Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
Our Operating Results
Company-Wide
Our two new resorts had a major impact on our operating results during
1999. Bellagio opened on October 15, 1998 and Beau Rivage opened on March 16,
1999.
Reflecting the contribution from these two new resorts, total revenues grew
by $1.00 billion, or 61%, over 1998. Casino revenues increased by $421.7
million, or 51%, and non-casino revenues were up by $578.5 million, or 70%.
Table games revenue increased by $223.9 million, or 53%, and slot revenue rose
by $183.4 million, or 50%. Company-wide table games win percentage was 19.8%,
compared with 19.4% in 1998. Company-wide occupancy of our available standard
guestrooms was 96% in 1999 at an average daily rate of approximately $105.
This compares with 98% and $93 in 1998. The decline in occupancy reflects the
effect of a substantial increase in room inventory on the Las Vegas Strip
during 1999 and the lower occupancy experienced at Beau Rivage. The increase
in the average daily room rate principally reflects Bellagio's room rates,
which are generally higher than those of our other resorts.
Bellagio
Bellagio generated total revenues of $1.10 billion and an operating profit
of $168.6 million during its first full year of operation in 1999. Bellagio's
depreciation expense for 1999 was $91.6 million. Casino revenues totaled
$507.3 million and non-casino revenues were $589.4 million. Table games
revenue for the year was $354.0 million and slot revenue accounted for $131.4
million. Bellagio's table games win percentage in 1999 averaged 22.6%.
Standard guestroom occupancy was 98% at an average daily rate of approximately
$153.
During its first 77 days of operation in 1998, Bellagio achieved total
revenues of $244.1 million and an operating profit of $34.1 million before
preopening expense. Its depreciation expense for the period was $18.9 million.
Casino revenues were $127.8 million and non-casino revenues totaled $116.3
million. Table games contributed $87.4 million and slots added another $35.3
million. The table games win percentage for this abbreviated period was 21.5%.
Standard guestroom occupancy was 96% at an average daily rate of approximately
$147.
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<PAGE>
Beau Rivage
During nine and one-half months of operation in 1999, Beau Rivage generated
total revenues of $278.1 million and an operating profit of $16.2 million
before preopening expense. Its depreciation charge for the period was $28.9
million. Casino revenues totaled $146.9 million and non-casino revenues were
$131.2 million. Casino revenues principally include slot revenue of $97.9
million and table games revenue of $47.9 million. Beau Rivage's table games
win percentage for the period was 17.0%. Standard guestroom occupancy was 85%
at an average daily rate of approximately $90. Beau Rivage's operating results
in 1999 include approximately $12.0 million of pre-tax income from the
settlement of a business interruption insurance claim associated with a major
hurricane that struck the Biloxi area in September 1998.
We designed Beau Rivage as a luxurious facility in anticipation of the Gulf
Coast developing into a major destination resort market. Efforts to establish
Beau Rivage as the long-term leader in the Gulf Coast market resulted in
additional payroll, promotional, advertising and other costs that have
constrained the resort's operating income contribution since opening.
Additionally, high staffing levels and other inefficiencies associated with
the opening periods of new resorts have hindered Beau Rivage's initial
operating results.
The March 16, 1999 opening of Beau Rivage spurred significant growth in
gaming revenues in the Gulf Coast market. For the nine months ended December
31, 1999, gross gaming revenues grew by 31.3% over the same period in 1998.
Excluding Beau Rivage's contribution, gross gaming revenues for the period
were up 8.4%. We believe that Beau Rivage's earnings will improve as we
intensify our efforts toward gaining a larger share of the growing Gulf Coast
market and becoming more efficient in our operations. However, until we are
successful in these efforts, Beau Rivage will continue to have a negative
impact on our operating margins.
Same-Store (Excluding Bellagio and Beau Rivage)
Our same-store revenues totaled $1.27 billion in 1999, versus $1.41 billion
in 1998 and $1.52 billion in 1997. On a same-store basis, our wholly owned
resorts generated an operating profit of $182.9 million in 1999,
$228.1 million in 1998 and $325.6 million in 1997. Same-store depreciation
expense was $84.7 million in 1999, versus $86.4 million in 1998 and $88.0
million in 1997. Same-store casino revenues were $589.4 million, compared with
$694.2 million in 1998 and $784.5 million in 1997. The decline in both 1999
and 1998 principally reflects lower table games revenue. Same-store table
games revenue was down by 27% in 1999 and 22% in 1998. We attribute these
declines to increased competitive pressures in the Las Vegas market, including
from Bellagio, and economic difficulties experienced by certain Asian
countries affecting our international business. A lower win percentage was
also a factor. Our same-store table games win percentage was 17.3% in 1999,
versus 18.9% in 1998 and 21.5% in 1997. Historically, our table games win
percentage has averaged approximately 20%. Following a 2% increase in 1998,
same-store slot revenue was down by 3% in 1999.
Our non-casino revenues have also been impacted by the increased
competition in Las Vegas. Same-store non-casino revenues totaled $685.7
million in 1999, $711.4 million in 1998 and $731.9 million in 1997. In
addition to the opening of Bellagio in October 1998, three major new competing
resorts opened on the Las Vegas Strip during 1999, adding approximately 9,700
guestrooms to the market. Despite this additional capacity, our occupancy
levels have remained strong. Same-store occupancy of available standard
guestrooms averaged 97% in 1999, versus 98% in both 1998 and 1997. The
additional inventory, however, has put pressure on room rates. Guestroom
refurbishment programs at both Treasure Island and the Golden Nugget in
Laughlin also impacted our operating results during 1999. Both projects were
completed by the end of the third quarter and significantly upgraded the
furnishings of the guestrooms. Principally due to these two projects, we
experienced approximately 2% fewer available same-store room nights during
1999 versus 1998. As a result of these factors, same-store room revenues were
down by approximately 3% in both 1999 and 1998. During 1997, we completed the
refurbishment of 1,382 guestrooms at our Golden Nugget facility in downtown
Las Vegas, principally accounting for a 1% reduction in our company-wide
available room nights for that year.
We continue to develop and implement strategies to enhance our competitive
position in Las Vegas. Some of these strategies include introducing new
entertainment attractions and restaurants, refurbishing our
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guestrooms, constructing additional meeting and convention facilities and
introducing new advertising and marketing programs. We believe that some of
our greatest strengths for dealing with new competition are the superior
design, condition and locations of our resorts and the friendliness and
professionalism of our employees.
Same-store operating costs and expenses at our hotel-casinos declined by
$75.9 million, or 7%, in 1999 and $15.6 million, or 1%, in 1998. These
declines generally follow the decline in same-store revenues. The decline in
1998 was partially offset by the costs of additional staffing efforts
necessary to prepare for the opening of Bellagio and Beau Rivage. The opening
of these two new resorts increased our staffing levels from 17,000 to almost
30,000 employees. Many of these new positions were filled through promotion or
transfer of employees from our other resorts. In order to ensure a smooth
transition, we hired replacement employees prior to the departure of
transferring employees. These additional staffing efforts resulted in
considerably higher payroll and training costs in 1998.
Other Factors Affecting Our Earnings
Corporate expense was relatively flat in 1999, after increasing
significantly in 1998. The increase in 1998 reflects expenses related to the
potential legalization of gaming in new jurisdictions, the growth in the size
of our Company and expanded activities in pursuit of entertainment attractions
for our resorts. Additionally, corporate expense in 1998 and 1997 was reduced
by gains from the sale of corporate aircraft.
On January 1, 1999, we adopted a new accounting standard that requires
preopening and other start-up costs to be expensed as incurred rather than
capitalized and charged to expense subsequent to opening the related facility.
As a result, we recorded an after-tax cumulative effect charge in 1999 of
$30.6 million ($0.16 per share basic and $0.15 per share diluted) for the
write-off of all previously capitalized preopening costs associated with Beau
Rivage and our development activities in Atlantic City, New Jersey. During
1999, we also incurred and expensed additional preopening and related
promotional costs related to these projects of $42.1 million. After tax, these
additional preopening costs reduced our 1999 earnings by $27.6 million, or
$0.14 per share basic and diluted. We expensed all $88.3 million of Bellagio's
previously capitalized preopening costs in the 1998 fourth quarter. After tax,
the write-off reduced our 1998 earnings by $57.5 million, or $0.32 per share
basic and $0.30 per share diluted.
Reflecting our investment in Bellagio and Beau Rivage, our debt levels and
associated interest cost have risen significantly. Our long-term debt
increased from $468.1 million at December 31, 1996 to $2.21 billion at
December 31, 1999. With Bellagio and Beau Rivage now complete, we are
capitalizing a smaller portion of our interest cost, resulting in a much
higher charge for interest expense. Net interest expense in 1999 totaled
$117.5 million, compared with $32.7 million in 1998 and $7.7 million in 1997.
In April 1999, we evaluated the possible acquisition of the gaming
operations of a major competitor. As part of the negotiations, it was agreed
that we would receive a fee as compensation for our efforts should the
operations be sold to another bidder. In late December 1999, a competing
bidder completed the acquisition of the operations and we recorded income of
$24.5 million after deducting the related costs. After tax, this transaction
increased our 1999 earnings by $15.9 million, or $0.08 per share basic and
diluted.
We recorded other non-operating income in 1999 of $6.1 million, compared
with $15.8 million in 1998 and $6.7 million in 1997. The 1998 amount includes
earnings on debt securities we acquired late in 1997 in connection with the
purchase of the Boardwalk hotel-casino. We recorded interest income on the
securities until the purchase was completed on June 30, 1998. The 1998 amount
also reflects additional earnings on an escrow account established late in
1997 to fund our portion of the cost of road improvements in the Marina area
of Atlantic City. Earnings on the account were lower in 1999 as the funds were
being used for construction of the road improvements.
We incurred debt-related extraordinary charges in both 1998 and 1997. The
$3.5 million ($0.02 per share basic and diluted) after-tax charge in 1998 is
associated with the redemption of all $100 million principal amount
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of our 9 1/4% notes. The notes were scheduled to mature in March 2003 and were
redeemed at 104.11% of the principal amount. It was economically advantageous
for us to repay the notes with less expensive funds borrowed under our bank
credit facility and commercial paper program, even after considering the
prepayment penalty that accounted for most of the extraordinary charge. In
1997, we incurred an after-tax extraordinary charge of $2.2 million ($0.01 per
share basic and diluted) in connection with amending our bank credit facility
to, among other things, increase its size and extend its maturity. We incurred
no extraordinary charges in 1999.
Our effective income tax rate approximated the 35% statutory rate in both
1999 and 1997. Our effective income tax rate in 1998 was approximately 37%,
mainly due to the non-deductibility of certain expenses related to the
potential legalization of gaming in new jurisdictions.
Our Capital Resources, Capital Spending and Liquidity
Net cash provided by operating activities (as shown in our Consolidated
Statements of Cash Flows) totaled $429.2 million in 1999, versus $279.9
million in 1998 and $294.0 million in 1997. The increase in our operating cash
flow in 1999 principally represents the contribution from Bellagio and Beau
Rivage and additional cash distributions from Monte Carlo of $13.1 million.
The decline in 1998 generally reflects the decline in our operating income,
offset in part by cash distributions from Monte Carlo of $20.9 million. We
received no cash distributions from Monte Carlo prior to 1998, as the joint
venture was using its free cash flow to reduce outstanding debt.
The majority of our operating cash flow during the past three years was
effectively used for the completion of Bellagio and Beau Rivage. After giving
effect to the change in associated deposit and payable amounts, capital
expenditures and preopening and related promotional costs required net cash of
$558.8 million in 1999, $1.29 billion in 1998 and $1.17 billion in 1997.
Capital expenditures in 1999 also include expenditures associated with the
room refurbishment programs at Treasure Island and the Golden Nugget-Laughlin.
We completed the purchase of the Boardwalk on June 30, 1998. The purchase
required total cash outlays of approximately $112.0 million. We spent
approximately $51.9 million of this amount in 1997, primarily to acquire
certain of Boardwalk's previously issued debt securities. We also incurred
$118.8 million in 1998 and $27.6 million in 1997 to acquire additional
adjacent land on the Strip. This land, combined with the Boardwalk site and
other land we purchased in 1993, provides us with approximately 55 acres for
future development with over 1,200 feet of frontage on the Las Vegas Strip
between Bellagio and Monte Carlo. We are in the very early design phase for a
new hotel-casino resort which we expect to ultimately develop on the site. The
design, timing and cost of any new resort are still highly uncertain and will
depend on several factors. Among these factors is the market's absorption of
the new resorts on the Las Vegas Strip and competition from gaming outside of
Nevada. Because we acquired the Boardwalk and adjacent land for development of
a new resort, interest cost is being capitalized on the funds used for such
purchases. In the interim, Boardwalk is being accounted for as an incidental
operation. Under this method, Boardwalk's operations are excluded from our
consolidated operating results, and its net income, as well as rental income
from the adjacent land, is recorded as a reduction in the carrying value of
the land.
We are currently converting existing meeting space at The Mirage into the
new 1,260-seat Danny Gans Theatre. This popular singer/impersonator will begin
performing in the new theatre in April 2000. We are also currently adding
extensive meeting, convention and exhibit space at The Mirage, including a new
90,000-square foot exhibit hall. The meeting and convention space is scheduled
to be completed in June of this year, and the exhibit hall is expected to open
in May 2001. The total cost of these projects is anticipated to be
approximately $100 million. At December 31, 1999, we had incurred
approximately $23 million of this amount. We are also considering the
construction of a 1,500-seat theatre at The Mirage for the presentation of a
new Broadway-style musical. The design, budget and construction schedule for
the new theatre have not yet been finalized.
In Atlantic City, we are progressing with the design and budgeting of our
proposed resort development in the Marina area. Current plans for our 120-acre
site call for construction of our own wholly owned hotel-casino
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resort and a second 50%-owned resort in partnership with Boyd. We are
currently designing and will develop the master plan improvements for the
entire Marina site. We previously filed an application for the major
environmental permit necessary to construct a portion of these improvements,
which is currently pending. As part of our agreement with the City of Atlantic
City to acquire the land, we are required to remediate environmental
contamination at the Marina site, which was a municipal landfill until 1975. A
substantial portion of the remediation work had been completed at February 1,
2000. Also as part of our agreement with the City, we have completed
demolition of the City-owned facilities previously located on the site and are
in the process of relocating on-site public utilities. Construction is also
continuing on the previously funded joint venture road improvement project
with the State of New Jersey to improve access to the Marina area. The road
improvement project is scheduled for completion in May 2001.
The design, budget and construction schedule for our wholly owned hotel-
casino on the Marina site have not yet been finalized. We intend to apply for
the major environmental permit that is required to develop our resort in the
second quarter of this year. Our joint venture agreement with Boyd calls for
the development of a new hotel-casino resort with approximately 1,200
guestrooms on a 25-acre portion of the Marina site. Boyd will oversee the
design and construction of the joint venture hotel-casino to be known as "The
Borgata" and operate the resort upon completion. Under the agreement, subject
to the receipt of acceptable financing as described below, we will contribute
the 25 acres of land (valued at $90 million) and $60 million in cash, of which
approximately $5 million had been contributed at February 1, 2000. Boyd will
contribute a minimum of $150 million in cash plus any amounts necessary to
fund project costs in excess of $750 million. The joint venture will attempt
to obtain acceptable financing of approximately $450 million for the remaining
cost of the project that is non-recourse to both our Company and Boyd. We have
recently had discussions with Boyd regarding a possible increase in the size
of The Borgata and each partner's required capital contribution. The joint
venture has an application currently pending for the required major
environmental permit. If the necessary permits and financing are obtained,
construction of The Borgata could begin by late summer of this year.
Both our Company and the joint venture must apply for and receive numerous
other governmental permits and satisfy other conditions before construction of
either hotel-casino can begin. Additionally, a current Atlantic City hotel-
casino operator and others have filed various lawsuits challenging the
validity of our previous agreement with the City of Atlantic City to acquire
the land and seeking to stop the construction of the road improvements. We
have prevailed in all of these lawsuits that have been finally adjudicated to
date, but a number of lawsuits are still pending in various stages and others
could be filed in the future. As a result of these factors, as well as the
pending merger with MGM Grand, we cannot be certain of the ultimate
development or timing of construction of the hotel-casinos planned for the
Marina site.
In 1998, we received net proceeds of $394.7 million from the issuance of
$200 million principal amount of 6 5/8% notes due in 2005 and an equal
principal amount of 6 3/4% notes due in 2008. We also issued debt securities
in 1997 and received net proceeds of approximately $296.1 million. The debt
securities issued in 1997 consisted of $200 million principal amount of 6 3/4%
notes due in 2007 and $100 million principal amount of 7 1/4% debentures due
in 2017.
During 1998, we repaid the $133 million principal amount of our zero coupon
notes upon maturity and retired early all $100 million principal amount of our
9 1/4% notes due in 2003. These debt retirements required total cash of
approximately $237.1 million, which was provided principally by borrowings
under our bank credit facility and commercial paper program.
On May 11, 1999, we issued 16,633,663 shares of our common stock in a
public offering at $25.00 per share. The $415.6 million net proceeds from the
offering were used to reduce borrowings outstanding under our $1.75 billion
bank credit facility and commercial paper program. During 1999, we also
repurchased a total of 9,020,809 shares of our common stock in the open market
and in a privately negotiated transaction. The total cost of the repurchases
was approximately $130.3 million, or an average of $14.45 per share. In
December 1999, our Board of Directors approved a program to repurchase up to
5,000,000 additional shares of our common stock. At February 1, 2000, no
shares had been repurchased under this program. The timing and amount of
future
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share repurchases, if any, will depend on various factors, including market
conditions, available alternative investments and our financial position.
Pending the merger with MGM Grand, we are not permitted to repurchase shares
without their approval.
We believe our existing cash balances, future operating cash flow and
available borrowing capacity will provide us with sufficient resources to meet
our existing debt obligations and foreseeable capital expenditure
requirements.
Market Risk
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk
associated with our long-term debt. To date, we have not invested in
derivative- or foreign currency-based financial instruments. We attempt to
limit our exposure to interest rate risk by managing the mix of our long-term
fixed-rate borrowings and short-term borrowings under our revolving bank
credit facility and commercial paper program.
The following table provides information about our long-term debt at
December 31, 1999.
<TABLE>
<CAPTION>
Estimated
Maturity Face Carrying Fair
Date Amount Value Value
---------- -------- -------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C>
LIBOR-based bank credit facility
borrowings, at a weighted average
interest rate of approximately Various to
6.68%............................. Feb. 2000 $1,155.0 $1,155.0 $1,155.0
Commercial paper notes, at a
weighted average effective
interest rate of approximately Various to
6.59%............................. Jan. 2000 107.4 106.6 106.6
6 5/8% notes....................... Feb. 2005 200.0 199.2 183.6
7 1/4% notes....................... Oct. 2006 250.0 249.7 230.2
6 3/4% notes....................... Aug. 2007 200.0 199.3 176.6
6 3/4% notes....................... Feb. 2008 200.0 199.1 174.0
7 1/4% debentures.................. Aug. 2017 100.0 99.7 83.5
Other notes, at a weighted average
interest rate of approximately Various to
8.7%.............................. Aug. 2010 1.7 1.7 1.7
-------- -------- --------
$2,214.1 $2,210.3 $2,111.2
======== ======== ========
</TABLE>
There are no principal payments due on our debt securities prior to their
maturity.
At December 31, 1998, the face amount, carrying value and estimated fair
value of our long-term debt was approximately $2.4 billion. Our fixed-rate
debt at that date consisted of the notes and debentures listed above, and our
bank credit facility borrowings totaled $1.43 billion at a weighted average
interest rate of approximately 5.75%. No borrowings were outstanding under our
commercial paper program.
Borrowings under our $1.75 billion bank credit facility are unsecured and
bear interest, at our option, at the prime rate or at a specified premium over
the one-, two-, three- or six-month London Interbank Offered Rate, a rate that
fluctuates daily. The premium is based on the credit rating of our 7 1/4%
notes due October 2006 and our Leverage Ratio (as defined). At February 1,
2000, the premium was 0.50% per annum. Alternatively, we may request interest
rate bids from the participating banks. Outstanding borrowings under our $500
million commercial paper program count against the availability under our bank
credit facility. Borrowings under our bank credit facility and commercial
paper program are classified as long-term debt because we intend to replace
these borrowings as they come due and to have these borrowings outstanding for
longer than one year. However, the amount of our outstanding borrowings is
expected to fluctuate and may be reduced from time to time. The
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bank credit facility matures in March 2002. If the merger with MGM Grand is
consummated, the bank credit facility will terminate and all outstanding
borrowings will become due.
Year 2000 Readiness
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
computer software may recognize a date using "00" as the year 1900 rather than
the year 2000. This is generally referred to as the "Year 2000 issue." If this
situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
We completed an extensive program to ensure that our computer systems are
Year 2000 compliant and have experienced no significant problems to date
associated with the Year 2000 issue. Additionally, there are no claims pending
or, to our knowledge, threatened against us arising out of the Year 2000
issue.
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<PAGE>
PROSPECTUS
- ----------
$2,750,000,000
MGM GRAND, INC.
Debt Securities, Common Stock
and Subscription Rights
----------------
We may use this prospectus to offer and sell from time to time, separately
or together, one or more series of our debt securities, consisting of
debentures, notes, bonds or other evidences of indebtedness, shares of our
common stock and subscription rights. These securities will have an aggregate
initial public offering price not to exceed $2,750,000,000 and will be offered
and sold at prices and on terms to be determined at the time of sale. The
terms of any offering will be set forth in one or more prospectus supplements
to this prospectus.
If we offer our common stock and/or subscription rights, the prospectus
supplement will also set forth the total number of shares offered, the
offering price and the terms of the offering. Our common stock trades on the
New York Stock Exchange under the symbol "MGG." On May 4, 2000, the closing
price of our common stock was $29.125 per share. Any subscription rights we
issue will be transferable, and we anticipate that the rights will be
authorized for trading on the NYSE.
If the offering is for debt securities, the prospectus supplement will set
forth the specific title, series, total principal amount, maturity, interest
rate (or the way interest is to be calculated), time of payment of interest,
whether the debt securities are to be represented by certificates, authorized
denominations, terms for redemption, sinking fund requirements, guarantees by
our subsidiaries, covenants and the initial public offering price. The
prospectus supplement will also contain information, where applicable, about
certain U.S. federal income tax considerations relating to the offered
securities.
----------------
Neither the Securities and Exchange Commission nor any state securities
regulators or gaming regulatory authorities have approved or disapproved of
these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
----------------
None of the Nevada Gaming Commission, the Nevada State Gaming Control
Board, the New Jersey Casino Control Commission, the Michigan Gaming Control
Board, the Mississippi Gaming Commission nor any other gaming authority has
passed upon the accuracy or adequacy of this prospectus or the investment
merits of the securities offered. Any representation to the contrary is
unlawful.
----------------
The Attorney General of the State of New York has not passed upon or
endorsed the merits of this offering. Any representation to the contrary is
unlawful.
We may sell all or a portion of the offered securities directly, through
agents designated from time to time or to or through underwriters or dealers.
If any agents or underwriters are involved in the sale of the offered
securities, their names and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the prospectus supplement. See
"Plan of Distribution." We will not sell any offered securities without
delivering a prospectus supplement describing the method and terms of the
offering of the offered securities.
The date of this prospectus is May 5, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus.................................................... 2
Forward-Looking Statements............................................... 2
The Company.............................................................. 3
Use of Proceeds.......................................................... 4
Ratio of Earnings to Fixed Charges....................................... 4
Summary Historical Financial Data........................................ 5
Summary Unaudited Pro Forma Data......................................... 6
Comparative Historical and Pro Forma Selected Consolidated Financial
Data.................................................................... 7
Unaudited Proforma Financial Statements.................................. 8
Description of Our Long Term Debt........................................ 12
Description of Debt Securities........................................... 17
Description of Common Stock.............................................. 24
Plan of Distribution..................................................... 25
Legal Matters............................................................ 26
Experts.................................................................. 26
Where You Can Find More Information...................................... 26
Incorporation of Certain Information by Reference........................ 27
</TABLE>
----------------
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may from time to time over approximately the next two
years, sell any combination of the securities described in this prospectus in
one or more offerings up to a total dollar amount of $2,750,000,000. This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement also may add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information" on page 26 below.
You should rely only on the information or representations incorporated by
reference or provided in this prospectus and in the accompanying prospectus
supplement. We have not authorized anyone to provide you with different
information. You may obtain copies of the Registration Statement, or any
document which we have filed as an exhibit to the Registration Statement or to
any other SEC filing, either from the SEC or from the Secretary of the company
as described under "Where You Can Find More Information" below. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or in
the accompanying prospectus supplement is accurate as of any date other than
the dates printed on the front of each such document.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements, within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act. Forward-looking statements
typically can be identified by the use of forward-looking words, such as
"may," "will," "could," "project," "believe," "anticipate," "expect,"
"estimate," "continue," "potential," "plan," "intend," "forecast" and the
like. These statements appear in a number of places, both in this prospectus
and in the information incorporated by reference and include statements
regarding our current intentions, plans, strategies, beliefs and expectations.
Forward-looking statements do not guarantee future performance and involve
risks and uncertainties that could cause actual results to differ materially
from those anticipated. The information contained in this prospectus,
including the information incorporated by reference, identifies important
factors that could cause such differences.
2
<PAGE>
THE COMPANY
We are a leading operator of first class hotel and casino properties with
an emphasis on the total gaming and entertainment experience. We own and
operate the MGM Grand Las Vegas and the New York-New York Hotel and Casino,
two of the most prominent hotel/casinos on the Las Vegas Strip. We believe the
MGM Grand Las Vegas is one of the largest hotel/casinos in the world with
5,034 rooms, 171,500 square feet of gaming space and one of the largest arenas
in Las Vegas. We have completed an approximate $570 million master plan to
expand and transform the MGM Grand Las Vegas into "The City of Entertainment."
Our New York-New York property has 2,024 hotel rooms and 84,000 square feet of
gaming space. In Primm, Nevada, we own and operate the three hotel/casinos
that travelers first encounter on the principal route from Southern California
to Las Vegas. On July 29, 1999, we opened the MGM Grand Detroit interim casino
in Detroit, Michigan. We also own and operate the MGM Grand Hotel and Casino
in Darwin, Australia and operate three casinos in South Africa. We have also
announced plans to develop a casino resort in Atlantic City, New Jersey.
Recent Developments
On December 13, 1999, our board of directors approved a two-for-one split
of our common stock and declared a cash dividend of $.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 was paid on March 1, 2000 to stockholders of record on February 10,
2000. All references to share and per share data in this prospectus have been
adjusted retroactively to give effect to the stock split. At the same time,
our board of directors increased the number of authorized shares of our common
stock from 75 million shares to 300 million shares. We do not intend to pay
any additional cash dividends for the forseeable future.
On March 6, 2000, we announced the signing of a definitive merger agreement
with Mirage Resorts, Incorporated, under which we 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, Mirage
has outstanding debt of approximately $2.0 billion. The transaction 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 transaction will be
accounted for as a purchase and is anticipated to close in 2000. As a result
of the merger, Mirage will become our wholly owned subsidiary.
Mirage is a leading owner, developer and operator of casino-based resorts.
It owns and operates Bellagio, Mirage and Treasure Island on the Las Vegas
Strip; Golden Nugget in downtown Las Vegas; Golden Nugget-Laughlin in
Laughlin, Nevada; and Beau Rivage in Biloxi, Mississippi. Mirage also owns a
50% interest in a joint venture which owns and operates the Monte Carlo Resort
& Casino on the Las Vegas Strip. Mirage also intends to expand into the
Atlantic City, New Jersey market, where it owns land. For more information
about us and Mirage, see "Where You Can Find More Information" on page 26
below.
On April 11, 2000, we announced the execution of agreements with a group of
banks to provide $4.3 billion in credit facilities. The credit facilities
consist of a $2.0 billion five-year revolving facility, a $1.0 billion 364-day
revolving facility and a $1.3 billion one-year term loan. We expect to draw on
these facilities in connection with the pending acquisition of Mirage. This
completes the commercial bank financing for the acquisition.
On April 18, 2000, we completed a private placement of 46.5 million shares
of our common stock for a total purchase price of $1.23 billion. Tracinda
Corporation, our largest stockholder, purchased 23 million shares in the
private placement. As a result of the private placement, the percentage
ownership of our outstanding shares by Tracinda and its sole stockholder
decreased from approximately 64% to 60%.
On April 19, 2000, we announced our results from operations for the three
months ended March 31, 2000. Net revenues for the 2000 first quarter were
$442.9 million up from the prior year's quarter of $251.4 million. Operating
income increased 144% to $92.4 million in the three months ended March 31,
2000 from $37.9 million in the prior year's quarter. Net income before
extraordinary item and cumulative effect of change in accounting principle was
$44.3 million in the 2000 first quarter when compared with $18.5 million the
prior year's period. Earnings per diluted share before extraordinary item and
cumulative effect of change in accounting principle was $0.38 in 2000 compared
with $0.16 in the 1999 quarter. Net income for the three months ended March
31, 2000 was $44.3 million compared with $9.4 million in the 1999 period.
Earnings per diluted share was $0.38 in 2000 compared with $0.08 in the prior
year's quarter.
As a result of the pending merger with Mirage, we announced on April 19,
2000, that our previously declared quarterly dividend policy was discontinued.
Also, management has determined to suspend our previously announced share
repurchase program. We intend to focus on utilizing all available free cash
flow to pay down debt under our existing and future debt obligations as well
as finance our ongoing operations.
3
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in the prospectus supplement which accompanies
this prospectus, our net proceeds from the sale of the offered securities will
be used to provide a portion of the cash needed to complete the Mirage merger
and for general corporate purposes, which may include financing the
development and construction of new facilities, additions to working capital,
reductions of our indebtedness, financing of capital expenditures, potential
acquisitions and the repurchase of our common stock. Funds not immediately
required for such purposes may be invested in short-term investment grade
securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1995 1996 1997 1998 1999(2)
---- ---- ----- ---- -------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(1).............. 1.65 2.78 10.11 2.94 2.73
</TABLE>
- --------
(1) For purposes of computing the foregoing ratios: (a) earnings consist of
income from continuing operations before income taxes and fixed charges,
adjusted to exclude capitalized interest, and (b) fixed charges consist
of interest, whether expensed or capitalized, amortization of debt
discount and issuance costs, our proportionate share of the interest cost
of 50%-owned joint ventures (such as the limited liability company which
owns New York-New York, of which we have owned 100% since March 1, 1999)
and the estimated interest component of rental expense.
(2) The pro forma ratio of earnings to fixed charges for 1999, giving effect
to our acquisition of Mirage, is 1.08. These pro forma results do not
reflect any cost savings of duplicative departments and redundant
infrastructure, the benefit of operational efficiencies or revenue
enhancement opportunities which we expect to achieve after the merger. We
expect to realize annual pre-tax cost savings of approximately $95
million (post-tax of approximately $61.8 million) related to duplicative
departments and redundant infrastructure and operating efficiencies upon
full integration of Mirage. These estimated benefits are based on
projections and assumptions, not actual experience. As a result, our
ability to realize these benefits could be adversely impacted by
difficulties integrating Mirage into MGM Grand, the inability to achieve
certain economies of scale or other risks associated with achieving these
projected cost savings. We cannot assure you that these cost savings will
be achieved.
4
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
MGM Grand and Mirage are providing the following financial information to
assist you in your analysis of the financial aspects of the merger. This
information is only a summary and you should read it in conjunction with the
historical financial statements and related notes contained in the annual
reports and other information that MGM Grand and Mirage have filed with the
Securities and Exchange Commission.
SUMMARY HISTORICAL FINANCIAL DATA OF MGM GRAND
(in thousands, except for per share data)
<TABLE>
<CAPTION>
At or for the year ended December 31,
------------------------------------------------------
1995 (A) 1996 (B) 1997 (C) 1998 1999 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues............ $ 718,781 $ 800,189 $ 827,597 $ 773,863 $1,391,650
Operating income........ 103,823 129,294 190,970 131,574 209,868
Net income before
extraordinary items and
cumulative effect of
change in accounting
principle.............. 46,565 74,517 115,256 68,948 95,124
Cash dividends per
common share........... -- -- -- -- --
Diluted earnings per
share before
extraordinary items and
cumulative effect of
change in accounting
principle.............. $ 0.48 $ 0.68 $ 0.98 $ 0.61 $ 0.80
Weighted average common
and common equivalent
shares outstanding..... 97,088 108,514 117,670 112,684 120,086
Total assets............ $1,275,883 $1,275,121 $1,389,816 $1,768,958 $2,760,743
Long-term debt
(including current
portion)............... 551,099 83,391 57,830 544,874 1,318,841
Stockholders' equity.... 584,548 973,382 1,101,622 964,381 1,033,846
SUMMARY HISTORICAL FINANCIAL DATA OF MIRAGE
(in thousands, except for per share data)
<CAPTION>
At or for the year ended December 31,
------------------------------------------------------
1995 1996 1997 1998 (E) 1999 (F)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues............ $1,330,744 $1,367,544 $1,418,551 $1,523,729 $2,431,837
Operating income........ 284,087 312,670 326,041 152,105 305,027
Net income before
extraordinary items and
cumulative effect of
change in accounting
principle.............. 169,948 206,045 209,803 85,225 140,968
Cash dividends per
common share........... -- -- -- -- --
Diluted earnings per
share before
extraordinary items and
cumulative effect of
change in accounting
principle.............. $ 0.88 $ 1.05 $ 1.09 $ 0.45 $ 0.70
Weighted average common
and common equivalent
shares outstanding..... 192,331 196,683 192,536 190,964 200,240
Total assets............ $1,791,713 $2,143,490 $3,347,350 $4,530,202 $4,804,306
Long-term debt
(including current
portion)............... 249,063 468,593 1,397,655 2,378,911 2,210,279
Stockholders' equity.... 1,209,343 1,290,883 1,512,484 1,601,837 2,023,902
</TABLE>
- --------
(A) Includes a $5,942,000 pre-tax write-down for restructuring costs.
(B) Includes a $49,401,000 pre-tax write-down for the master plan asset
disposition and a $7,868,000 pre-tax charge for New York-New York hotel
preopening costs.
(C) Includes a $28,566,000 pre-tax write-down for the master plan asset
disposition.
(D) Includes a $71,495,000 pre-tax charge for MGM Grand Detroit, the Mansion
at the MGM Grand Las Vegas, and MGM Grand Atlantic City hotel preopening
costs as well as certain tender related costs.
(E) Includes a $88,313,000 pre-tax charge for Bellagio hotel preopening costs.
(F) Includes a $42,130,000 pre-tax charge for Beau Rivage hotel preopening
costs.
5
<PAGE>
SUMMARY UNAUDITED PRO FORMA DATA
The Mirage merger will be accounted for as a "purchase," which means that
the purchase price will be allocated to assets acquired and liabilities
assumed based on their estimated fair values at the time the companies are
combined. We are providing the following financial information to assist you
in your analysis of the financial aspects of the Mirage merger. We derived
this information from audited financial statements for 1999 for both MGM Grand
and Mirage. The information is only a summary of the unaudited pro forma
financial information presented on pages 8 to 11 and you should read it in
conjunction with our historical financial statements (and related notes)
contained in the annual reports and other information that we have filed with
the Securities and Exchange Commission.
While this pro forma financial information has been prepared based upon
currently available information using assumptions which we believe are
appropriate, you should be aware that this pro forma information may not be
indicative of what actual results will be in the future or would have been for
the periods presented. You should read the notes to the unaudited pro forma
financial information beginning on page 10 for further discussion of the
assumptions we made to prepare this information.
PRO FORMA INCOME DATA:
<TABLE>
<CAPTION>
For the year ended
December 31, 1999
---------------------
(In thousands, except
per share amounts)
<S> <C>
Net revenues............................................. $ 3,823,487
Operating income......................................... 500,009
Net income before extraordinary items and cumulative
effect of change in accounting principle................ 91,487
Diluted earnings per share before extraordinary items and
cumulative effect of change in accounting principle..... 0.55(1)
Cash dividends per common share.......................... --
Weighted average common and common equivalent shares
outstanding............................................. 166,586
PRO FORMA BALANCE SHEET DATA:
<CAPTION>
At December 31, 1999
---------------------
(In thousands)
<S> <C>
Total assets............................................. $10,991,815
Long-term debt (including current portion)............... 6,698,281
Stockholders' equity..................................... 2,230,096
</TABLE>
- --------
(1) Pro forma results do not reflect any cost savings of duplicative
departments and redundant infrastructure, the benefit of operational
efficiencies or revenue enhancement opportunities which we expect to
achieve after the merger. We expect to realize annual pre-tax cost
savings of approximately $95 million (post-tax of approximately $61.8
million or $0.37 per diluted share) related to duplicative departments
and redundant infrastructure and operating efficiencies upon full
integration of Mirage. These estimated benefits are based on projections
and assumptions, not actual experience. As a result, our ability to
realize these benefits could be adversely impacted by difficulties
integrating Mirage into MGM Grand, the inability to achieve certain
economies of scale or other risks associated with achieving these
projected cost savings. We cannot assure you that these cost savings will
be achieved.
6
<PAGE>
COMPARATIVE HISTORICAL AND PRO FORMA SELECTED
CONSOLIDATED FINANCIAL DATA
We have summarized below the per share information of MGM Grand and Mirage
on a historical and pro forma combined basis. Mirage stockholders will receive
$21 from MGM Grand in exchange for each share of Mirage common stock. The
information set forth below is only a summary, and you should read it in
conjunction with the historical financial statements and related notes
contained in the annual reports and other information that MGM Grand and
Mirage have filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
MGM Grand Mirage MGM Grand
Historical Historical Pro Forma
---------- ---------- ---------
<S> <C> <C> <C>
Income per diluted share before extraordinary
items and cumulative effect of change in
accounting principle (1):
Year ended December 31, 1999............... $0.80 $0.70 $0.55(4)
Book value per share (2):
At December 31, 1999....................... 9.08 10.65 13.91
Cash dividends per share (3)................. -- -- --
</TABLE>
- --------
(1) The table above combines MGM Grand's results of operations for the fiscal
year ended December 31, 1999 with Mirage's results of operations for the
same period. The pro forma combined income per diluted share is based on
the combined weighted average number of common shares and common share
equivalents. Common share equivalents consist of common stock issuable
upon the exercise of outstanding options and warrants.
(2) Historical book value per share for both MGM Grand and Mirage was computed
by dividing total stockholders' equity at December 31, 1999 by the number
of common shares outstanding, excluding shares held in treasury, as of
those dates, respectively. MGM Grand pro forma book value per share was
computed by dividing pro forma stockholders' equity (See "Unaudited Pro
Forma Balance Sheet" on page 9) by the pro forma number of shares of MGM
Grand's common stock outstanding as of December 31, 1999 (without
including outstanding options). The pro forma number of shares of MGM
Grand's common stock outstanding was calculated as the sum of MGM Grand's
common stock outstanding and includes the April 2000 private equity
placement of $1.23 billion.
(3) Neither MGM Grand nor Mirage paid cash dividends during the periods
presented. MGM Grand paid a cash dividend of $0.10 per share on March 1,
2000 to shareholders of record on February 10, 2000.
(4) Pro forma results do not reflect any cost savings of duplicative
departments and redundant infrastructure, the benefit of operational
efficiencies or revenue enhancement opportunities which we expect to
achieve after the merger. We expect to realize annual pre-tax cost
savings of approximately $95 million (post-tax of approximately $61.8
million or $0.37 per diluted share) related to duplicative departments
and redundant infrastructure and operating efficiencies upon full
integration of Mirage. These estimated benefits are based on projections
and assumptions, not actual experience. As a result, our ability to
realize these benefits could be adversely impacted by difficulties
integrating Mirage into MGM Grand, the inability to achieve certain
economies of scale or other risks associated with achieving these
projected cost savings. We cannot assure you that these cost savings will
be achieved.
7
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
MGM GRAND, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
MGM Grand
MGM Grand Mirage Pro Forma as
Historical Historical Adjustments Adjusted
(Note 1) (Note 1) (Note 2) for Merger
---------- ---------- ----------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Casino.................. $ 873,781 $1,243,625 $ -- $2,117,406
Rooms................... 251,207 522,566 -- 773,773
Food and beverage....... 161,301 456,811 -- 618,112
Entertainment, retail
and other.............. 211,837 426,850 -- 638,687
Income from
unconsolidated
affiliate.............. 6,084 29,164 -- 35,248
---------- ---------- --------- ----------
1,504,210 2,679,016 -- 4,183,226
Less: Promotional
allowances............. 112,560 247,179 -- 359,739
---------- ---------- --------- ----------
1,391,650 2,431,837 -- 3,823,487
---------- ---------- --------- ----------
Expenses:
Casino.................. 417,491 690,179 -- 1,107,670
Rooms................... 75,064 164,610 -- 239,674
Food and beverage....... 100,871 314,689 -- 415,560
Entertainment, retail
and other.............. 119,324 300,052 -- 419,376
Provision for doubtful
accounts and
discounts.............. 47,157 31,911 -- 79,068
General and
administrative......... 209,938 328,390 -- (a) 538,328
Depreciation and
amortization........... 125,985 205,163 14,886 (b) 346,034
Preopening and other.... 71,495 42,130 -- 113,625
---------- ---------- --------- ----------
1,167,325 2,077,124 14,886 3,259,335
---------- ---------- --------- ----------
Operating Profit Before
Corporate Expense...... 224,325 354,713 (14,886) 564,152
Corporate expense....... 14,457 49,686 -- (a) 64,143
---------- ---------- --------- ----------
Operating income........ 209,868 305,027 (14,886) 500,009
---------- ---------- --------- ----------
Nonoperating Income
(Expense):
Interest income......... 2,142 6,126 -- 8,268
Interest expense, net of
amounts capitalized.... (59,853) (117,525) (199,567)(c) (376,945)
Interest expense from
unconsolidated
affiliate.............. (1,058) -- -- (1,058)
Other, net.............. (946) 24,462 -- 23,516
---------- ---------- --------- ----------
(59,715) (86,937) (199,567) (346,219)
---------- ---------- --------- ----------
Income Before Income
Taxes, Extraordinary
Item and Cumulative
Effect of Change in
Accounting Principle.... 150,153 218,090 (214,453) 153,790
Provision for income
taxes.................. (55,029) (77,122) 69,848 (d) (62,303)
---------- ---------- --------- ----------
Net Income Before
Extraordinary Item and
Cumulative Effect of
Change in Accounting
Principle............... $ 95,124 $ 140,968 $(144,605) $ 91,487
========== ========== ========= ==========
Per Share of Common
Stock:
Net Income per Basic
Share Before
Extraordinary Item and
Cumulative Effect of
Change in Accounting
Principle.............. $ 0.82 $ 0.56 (a)
========== ==========
Net Income per Diluted
Share Before
Extrtaordinary Item and
Cumulative Effect of
Change in Accounting
Principle.............. $ 0.80 $ 0.55 (a)
========== ==========
Basic Shares
Outstanding............ 116,580 46,500 (e) 163,080
========== ========= ==========
Diluted Shares
Outstanding............ 120,086 46,500 (e) 166,586
========== ========= ==========
</TABLE>
8
<PAGE>
MGM GRAND, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
MGM Grand Mirage Pro Forma MGM Grand
Historical Historical Adjustments as Adjusted
(Note 1) (Note 1) (Note 3) for Merger
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents............. $ 121,522 $ 139,488 $ -- $ 261,010
Accounts receivable,
net..................... 83,101 181,357 -- 264,458
Prepaid expenses and
other................... 32,598 35,948 -- 68,546
Inventories.............. 15,240 94,351 -- 109,591
Deferred tax asset....... 17,452 24,558 -- 42,010
---------- ---------- ----------- -----------
Total current assets... 269,913 475,702 -- 745,615
---------- ---------- ----------- -----------
PROPERTY AND EQUIPMENT,
NET...................... 2,390,524 4,095,217 2,628,543 (f) 9,114,284
OTHER ASSETS:
Investments in
unconsolidated
affiliates.............. 12,485 118,221 228,750 (g) 359,456
Excess of purchase price
over fair market value
of net assets acquired,
net..................... 36,550 6,912 515,451 (h) 558,913
Deposits and other
assets, net............. 51,271 108,254 54,022 (i) 213,547
---------- ---------- ----------- -----------
Total other assets..... 100,306 233,387 798,223 1,131,916
---------- ---------- ----------- -----------
$2,760,743 $4,804,306 $ 3,426,766 $10,991,815
========== ========== =========== ===========
LIABILITIES AND
STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable......... $ 38,018 $ 39,369 $ -- $ 77,387
Construction payable..... 7,896 12,063 -- 19,959
Income taxes payable..... 3,296 -- -- 3,296
Dividend payable......... 11,388 -- -- 11,388
Current obligation,
capital leases.......... 5,145 -- -- 5,145
Current obligation, long
term debt............... 7,852 246 -- 8,098
Accrued interest on long
term debt............... 18,915 32,615 -- 51,530
Other accrued
liabilities............. 197,580 240,204 175,000 (j) 612,784
---------- ---------- ----------- -----------
Total current
liabilities........... 290,090 324,497 175,000 789,587
---------- ---------- ----------- -----------
DEFERRED REVENUES......... 4,241 -- -- 4,241
DEFERRED INCOME TAXES..... 108,713 232,570 910,257 (k) 1,251,540
LONG TERM OBLIGATION,
CAPITAL LEASES........... 12,864 -- -- 12,864
LONG TERM DEBT............ 1,310,989 2,210,033 3,169,161 (l) 6,690,183
OTHER LIABILITIES......... -- 13,304 -- 13,304
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock............. 1,384 940 (475)(m) 1,849
Capital in excess of par
value................... 1,261,625 1,083,459 112,326 (m) 2,457,410
Treasury stock, at
cost.................... (505,824) (316,385) 316,385 (m) (505,824)
Retained earnings........ 267,165 1,255,888 (1,255,888)(m) 267,165
Other comprehensive
income.................. 9,496 -- -- 9,496
---------- ---------- ----------- -----------
Total stockholders'
equity................ 1,033,846 2,023,902 (827,652) 2,230,096
---------- ---------- ----------- -----------
$2,760,743 $4,804,306 $ 3,426,766 $10,991,815
========== ========== =========== ===========
</TABLE>
9
<PAGE>
MGM GRAND, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
Note 1--Historical financial information for MGM Grand and Mirage for the year
ended December 31, 1999 have been derived from the MGM Grand and Mirage
historical financial statements. Included in the historical financial
information for MGM Grand are the operating results of Primadonna and New
York-New York since their acquisition on March 1, 1999.
Note 2--The following table sets forth the determination and preliminary
allocation of the purchase price based on the $21.00 per share to be paid by
MGM Grand to Mirage shareholders.
<TABLE>
<CAPTION>
(In
Thousands)
----------
<S> <C>
Merger consideration (189.9 million shares of Mirage common
stock plus 36.5 million Mirage stock options)................ $4,394,811
Estimated fair value of Mirage debt assumed by MGM Grand...... 2,116,879
Estimated transaction costs and expenses...................... 13,000
Other adjustments, net........................................ 175,000
----------
$6,699,690
==========
The preliminary allocation of the pro forma purchase price is
as follows:
Land.......................................................... $3,513,400
Property and equipment, net................................... 3,210,360
Goodwill...................................................... 515,451
Other, net.................................................... (539,521)
----------
$6,699,690
==========
</TABLE>
The final purchase price and its allocation will be based on appraisals,
discounted cash flows, quoted market prices and estimates by management and is
expected to be completed within one year of the closing of the merger.
The following are brief descriptions of the pro forma adjustments to the
statements of income to reflect MGM Grand's acquisition of Mirage.
(a) Pro forma results do not reflect any cost savings of duplicative
departments and redundant infrastructure, the benefit of operational
efficiencies or revenue enhancement opportunities which we expect to achieve
after the merger. We expect to realize annual pre-tax cost savings of
approximately $95 million (post-tax of approximately $61.8 million or $0.37
per diluted share) related to duplicative departments and redundant
infrastructure and operating efficiencies upon full integration of Mirage.
These estimated benefits are based on projections and assumptions, not actual
experience. As a result, our ability to realize these benefits could be
adversely impacted by difficulties integrating Mirage into MGM Grand, the
inability to achieve certain economies of scale or other risks associated with
achieving these projected cost savings. We cannot assure you that these cost
savings will be achieved.
(b) Represents the amortization of goodwill and other intangible assets
to which the purchase price is allocated. The amortization of goodwill is on a
straight-line basis over 40 years and the amortization of other intangibles
(which include customer lists and trademarks) is on a straight-line basis over
five years.
(c) Represents the additional interest expense based upon anticipated
debt offerings totaling $5.1 billion minus the interest on the MGM Grand and
Mirage credit facilities (see Note l). Also includes the amortization expense
associated with $93.4 million of Mirage debt discount amortized over 6 years,
offset by additional capitalized interest on Mirage projects in development.
(d) Represents the tax effect of the pro forma adjustments at the 35%
statutory tax rate.
10
<PAGE>
(e) Represents the number of MGM Grand, Inc. shares issued based upon the
April 2000 private equity placement of $1.23 billion at $26.50 per share.
Note 3 - The following are brief descriptions of the pro forma adjustments to
the balance sheet to reflect the acquisition by MGM Grand of Mirage.
(f) Represents the net increase to Mirage's carrying value of land,
buildings, furniture, fixtures and equipment to adjust those assets to their
estimated fair market value.
(g) Represents the increase in the fair value of Mirage's investment in
unconsolidated affiliate based upon the fair value of the assets and
liabilities of the unconsolidated affiliate.
(h) Represents the estimated goodwill created by the transaction after
allocating the purchase price to the fair value of Mirage's assets and
liabilities.
(i) Represents debt offering costs and the net increase in the fair value
of intangible assets such as customer lists and trademarks.
(j) Represents an accrual for the estimated costs of the transaction.
(k) Records the deferred tax effect of the pro forma balance sheet
adjustments, primarily related to land, buildings, furniture, fixtures and
equipment.
(l) Represents the anticipated proceeds from various debt offerings of
approximately $5.1 billion of which $3.2 billion is for the purchase of the
Mirage shares, $1.8 billion is for the repayment of the MGM Grand and Mirage
bank facilities, and $100 million is for financing costs. This amount is
offset by the debt discount of $93.4 million on the Mirage bonds.
(m) Represents the issuance of 46.5 million shares of MGM Grand common
stock for $26.50 per share as well as the elimination of Mirage's equity
balances.
11
<PAGE>
DESCRIPTION OF OUR LONG TERM DEBT
Our Bank Credit Facility
Since 1996, we have had available to us a credit facility from a syndicate
of banks led by Bank of America, N.A. On July 23, 1997, we amended our
syndicated bank credit facility to make it a $1.25 billion senior revolving
credit facility which may be increased to $1.5 billion under its existing
terms. The credit facility has subsequently been amended several times in less
significant ways. The following description is a summary of the material
provisions of the credit facility, but it does not restate the credit facility
agreement in its entirety. We urge you to read the credit facility agreement,
which we have filed with the Securities and Exchange Commission (see "Where
You Can Find More Information" on page 26 below).
The credit facility is available:
(1) to finance capital improvements at MGM Grand Las Vegas in accordance
with our master plan with respect to that property, up to $850 million;
(2) to fund development costs for MGM Grand Atlantic City or other casino,
resort and hotel projects, or to invest in casino, resort and hotel
companies or projects, up to $1.0 billion;
(3) to fund our proposed project in Detroit, Michigan, up to $750 million;
and
(4) for general corporate purposes, including repurchases of our own common
stock, investments in qualified investments and other capital
expenditures, up to $750 million.
Commencing on December 31, 2001, availability under the credit facility
will decline in quarterly increments of the greater of $62.5 million or 5% of
the commitment amount under the credit facility, with the balance due on
December 31, 2002. We have the right to request one-year extensions, subject
to the consent of the lenders, which would have the effect of deferring
scheduled reductions in availability.
Interest on outstanding balances and commitment fees on unutilized
availabilities under the credit facility are determined by a formula based
either on our leverage ratio (which is the ratio of our total debt to
annualized cash flow) or the credit facility rating (which is the credit
rating then applicable to the credit facility), and in the case of interest
rates, on the basis of the Eurodollar or base rate existing at the time of
determination. As our leverage ratio declines, the interest rate and
commitment fees will also decline. We also pay certain underwriting and agency
fees in connection with the credit facility.
The credit facility is unconditionally guaranteed by each of our
subsidiaries except 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 Limited Liability Company, MGM Grand Australia, Inc. and our non-U.S.
subsidiaries and their U.S. holding companies which have no other assets or
operations. Our subsidiaries which do not guarantee the credit facility are
called the "facility nonguarantors" below. The credit facility is secured by
pledges of substantially all of our assets, including the stock of MGM Grand
Hotel, Inc. and MGM Grand Atlantic City, Inc., but not our interest in any
facility nonguarantor, and the assets of our subsidiaries other than the
facility nonguarantors. 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. The credit
facility can become unsecured, at our option, if it receives investment grade
ratings as unsecured debt from both Moody's and Standard & Poor's.
The credit facility contains certain customary events of default and
agreements, including limitations on additional debt, dividends, mergers and
asset sales and capital expenditures. It also restricts acquisitions and
similar transactions. As of March 23, 2000, approximately $680 million was
outstanding under the credit facility. Also, during May 1999, two letters of
credit were issued under the credit facility totaling approximately $50
million, which support municipal financing used to acquire land for a
permanent casino in Detroit.
The credit facility has been amended and restated in its entirety in
connection with our acquisition of Mirage as a new $2 billion senior revolving
credit facility. A description of the amended credit facility appears below on
page 14.
12
<PAGE>
Our Senior Secured Notes
In addition to the credit facility, we also have outstanding two series of
senior secured notes with a total principal amount of $500 million. One of
these series of senior secured notes has a total principal amount of $300
million, pays interest semiannually at a rate of 6.95% and matures on February
1, 2005. The other series of senior secured notes has a total principal amount
of $200 million, pays interest semiannually at a rate of 6 7/8% and matures on
February 6, 2008. The material terms of the two series of senior secured notes
are otherwise identical. The following description of our senior secured notes
is a summary of the material provisions of the indentures under which the
senior secured notes were issued, which have been filed with the Securities
and Exchange Commission (see "Where You Can Find More Information" on page 26
below).
The senior secured notes are our direct obligations, guaranteed by each of
our subsidiaries other than the facility nonguarantors. The senior secured
notes and these guarantees are secured by pledges of the same assets that are
pledged to secure the credit facility. The guaranty of MGM Grand Detroit, LLC
and the pledge of its assets are limited in the same way its guaranty and
pledge are limited under the credit facility. Under agreements binding the
banks that are party to the credit facility and the holders of the senior
secured notes, the collateral securing the credit facility and the senior
secured notes, and any proceeds of such collateral, must be divided equally
and ratably among the credit facility and the senior secured notes. The senior
secured notes and the guarantees can become unsecured, at our option, if the
credit facility becomes unsecured and the unsecured facility and the senior
secured notes each receive investment grade ratings from both Moody's and
Standard & Poor's unless the release of collateral will cause either credit
rating to fall below the rating given to the senior secured notes at the time
they were issued. Each of New York-New York, The Primadonna Company, LLC,
PRMA, LLC and New PRMA Las Vegas, Inc. will guaranty our senior secured notes
(although these subsidiaries do not now guaranty such notes) immediately
following the merger. In addition, Mirage and each of its subsidiaries will
guaranty our senior secured notes immediately following the merger.
The indentures contain certain events of default and agreements which are
customary with respect to investment grade debt securities, including
limitations on mergers, consolidations, and sale of substantially all assets
by us, and limitations on liens and sale and leaseback transactions by us or
our subsidiaries (other than the facility nonguarantors). The indentures also
contain limitations on certain asset sales which apply to us and certain of
our subsidiaries unless the senior secured notes become unsecured. The
indentures do not limit the amount of indebtedness we may incur.
The senior secured notes are redeemable at our option at any time at a
redemption price specified in the indenture. In addition, unless the senior
secured notes become unsecured, the asset sale limitations in the indentures
require us to either apply the proceeds of such sales in certain ways
specified in the indentures or use the proceeds to redeem senior secured
notes. The applicable gaming laws of the jurisdictions in which we operate
also include provisions which require, under certain circumstances specified
under those laws, that senior secured notes be divested by holders who are
found to be inappropriate under those laws. Except as described in this
paragraph, the senior secured notes do not include redemption or sinking fund
features.
We expect the senior secured notes will become unsecured and the collateral
securing them released when we receive investment grade ratings from both
Moody's and Standard & Poor's. Both agencies have indicated that such
investment grade ratings will be in effect on the date of the merger. However,
the indentures provide that if, following the release of the collateral
securing the senior secured notes, the notes fail to maintain investment grade
ratings from either Moody's or Standard & Poor's we must again secure the
notes with pledges of substantially all of our assets and those of the
guarantors.
MGM Grand Detroit II, LLC Interim Credit Facility
On March 31, 1999, MGM Grand Detroit II, LLC ("Detroit II"), obtained an
interim $230 million senior revolving credit facility from a syndicate of
banks led by Bank of America, N.A., which may be increased to $250 million
under its existing terms. The Detroit interim credit facility is secured by
pledges of substantially all
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assets of Detroit II. In addition, we have provided an unconditional guaranty
of the Detroit interim credit facility, but our guaranty is not secured. The
following is a summary of material provisions of the Detroit interim credit
facility, which has been filed with the Securities and Exchange Commission
(see "Where You Can Find More Information" on page 26 below), and is not
restated in its entirety herein.
The Detroit interim credit facility is available:
. to refinance funds previously invested by us in the interim casino
project in Detroit, Michigan;
. to finance the design, development and construction of the interim
casino;
. to finance up to $50 million of initial development expenses associated
with the proposed permanent hotel/casino project we are planning to
construct in Detroit, Michigan (if we choose to have the permanent
casino constructed by Detroit II); and
. to finance other capital expenditures, acquisitions and investments to
the extent permitted by the Detroit interim credit facility.
Interest on outstanding balances and commitment fees on unutilized
availabilities under the Detroit interim credit facility are determined by a
formula based on ratings given to our $1.25 billion credit facility (or, if
that credit facility has terminated, our senior unsecured debt) by Moody's and
Standard & Poor's, and in the case of interest rates, on the basis of the
Eurodollar or base rate existing at the time of determination.
Availability under the Detroit interim credit facility will decline in
quarterly increments of the greater of $19.2 million or 8 1/3% of the
commitment amount of the Detroit interim credit facility, commencing on
March 31, 2001. The Detroit interim credit facility matures on the earliest of
June 30, 2004, 45 months following the opening of the interim casino and the
date the permanent casino is opened for gaming customers.
The Detroit interim credit facility contains certain customary events of
default and agreements, including limitations with respect to additional debt,
dividends, mergers and asset sales and capital expenditures. It also restricts
acquisitions and similar transactions. As of March 23, 2000, approximately
$146 million was outstanding under the Detroit interim credit facility. We do
not expect the Detroit interim credit facility to be affected by our
acquisition of Mirage.
Our Amended Credit Facilities
We have available to us three new credit facilities, each from a syndicate
of banks led by Bank of America, N.A. The three bank credit facilities will
allow us to borrow up to $2 billion, $1 billion and $1.3 billion,
respectively. The $2 billion credit facility and the $1 billion credit
facility are both senior revolving credit facilities. This means that we will
be allowed to reborrow amounts we have borrowed and subsequently repaid under
each of these facilities. The $2 billion credit facility is an amendment and
restatement of our existing $1.25 billion bank credit facility which will
mature five years after the first day it is available to us, and the
$1 billion credit facility will mature 364 days after the first day it is
available to us. The $1.3 billion credit facility is a senior term loan, which
means that amounts borrowed and repaid by us under this credit facility cannot
be reborrowed. We will be required to repay the $1.3 billion credit facility
one year from the first day it is available to us.
The following description is a summary of the material provisions of the
three new bank credit facilities, but it does not restate the three credit
facility agreements in their entireties. We urge you to read the credit
facility agreements in the form executed, which we have filed with the
Securities and Exchange Commission.
Each credit facility is available:
. to refinance our existing debt, including our $1.25 billion syndicated
bank credit facility and the existing $1.75 billion credit facility
now available to Mirage;
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. to finance the purchase price of our acquisition of Mirage;
. to finance capital improvements at our properties and at the Mirage
properties following our acquisition of Mirage; and
. for working capital, acquisitions, investments in qualified
investments and repurchases of our own common stock.
In addition, we will have the right under the $2 billion credit facility to
obtain letters of credit not exceeding a specified aggregate amount, including
to support any commercial paper we may issue from time to time.
Interest on outstanding balances and commitment fees on unutilized
availability under each of the facilities will be determined by formulas based
on our senior unsecured debt ratings without credit enhancement (which is the
credit rating applicable to the facilities, as established by the credit
rating agencies Moody's and Standard & Poor's), and (in the case of interest
rates) on the basis of the Eurodollar or base rate existing at the time of
determination. We will also pay certain underwriting and agency fees in
connection with the facilities.
The facilities will be unconditionally guaranteed by each of our
subsidiaries except the facility nonguarantors provided, that each of New
York-New York, The Primadonna Company, LLC, PRMA, LLC and New PRMA Las Vegas,
Inc. will guaranty the bank credit facilities (although they do not guaranty
our existing $1.25 billion bank credit facility). The facilities will also be
unconditionally guaranteed by Mirage and each of its subsidiaries following
our acquisition of Mirage. The facilities and the guarantees will be
unsecured. However, the credit facility agreements restrict our ability to
encumber our assets (including the guarantors' assets) until the facilities
have been repaid and our right to borrow under them has ended.
The facilities contain events of default and agreements customary in credit
agreements of borrowers having investment grade credit ratings, including
limitations on mergers. The facilities also restrict our ability to sell any
of the Bellagio, Mirage or MGM Grand-Las Vegas hotel/casinos. In addition, the
$1.3 billion term loan credit facility will require us to use all of the
proceeds of any debt we incur or equity we issue after that credit facility
becomes available to pay down that credit facility (until it is paid in full).
The credit facilities and our senior notes will be unsecured as long as
each has an investment grade rating from both Moody's and Standard & Poor's.
Both Moody's and Standard & Poor's have indicated that such investment grade
rating will be in effect on the date of the merger.
Existing Unsecured Senior Notes of Mirage Resorts, Incorporated
Mirage has outstanding five series of senior unsecured notes. The Mirage
notes will remain outstanding as obligations of Mirage after we acquire
Mirage. Immediately following the merger, all of the Mirage subsidiaries and
all of our subsidiaries that are to guaranty our new bank credit facilities,
will also unconditionally guaranty all of the Mirage notes. The maturity
dates, annual interest rates and amounts outstanding under each series of
Mirage notes as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Series Amount Outstanding
------ -------------------------
(in thousands of dollars)
<S> <C>
6-5/8% notes, due February 2005, net of
unamortized original issue discount of $817... $199,183
7-1/4% notes, due October 2006, net of
unamortized original issue discount of $247... $249,753
6-3/4% notes, due August 2007, net of
unamortized original issue discount of $739... $199,261
6-3/4% notes, due February 2008, net of
unamortized original issue discount of $909... $199,091
7-1/4% debentures, due August 2017, net of
unamortized original issue discount of $287... $ 99,713
</TABLE>
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The following description of the Mirage notes is a summary of the material
provisions of the indentures under which the Mirage notes were issued, which
have been filed with the Securities and Exchange Commission (see "Where You
Can Find More Information" at page 26 below).
The Mirage notes are the direct obligations of Mirage. The Mirage notes are
unsecured. However, the indentures under which the Mirage notes were issued
provide (with some exceptions) that if Mirage secures any of its debt to other
persons, then the Mirage notes must also be secured by the same collateral
equally and ratably with the secured debt.
The Mirage notes are redeemable, in whole or in part, at the option of
Mirage at any time at a redemption price equal to the greater of:
. 100% of the principal amount, or
. The sum of the present values of the remaining scheduled interest and
principal payments discounted to the date of redemption on a semiannual
basis at the Adjusted Treasury Rate (as defined),
plus, in either case, accrued interest to the redemption date. Except as
described under this heading, the Mirage notes do not include redemption or
sinking fund features.
The Mirage indentures contain certain events of default and agreements
which are customary with respect to investment grade debt securities,
including limitations on mergers, consolidations, sales of all or
substantially all of the assets of Mirage and sale and leaseback transactions
by Mirage or its subsidiaries. The indentures also contain limitations on
liens which apply to Mirage and its subsidiaries. The indentures do not limit
the amount of indebtedness Mirage may incur.
The applicable gaming laws of the jurisdictions in which Mirage operates
also include provisions which require, under certain circumstances specified
under those laws, that the Mirage notes be divested by holders who are found
to be unsuitable under those laws.
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DESCRIPTION OF DEBT SECURITIES
The following provides a general description of the terms of the debt
securities which we may issue. The particular terms of any debt securities
offered by any prospectus supplement and the extent, if any, to which the
general provisions set forth below may not apply will be described in the
prospectus supplement relating to those debt securities.
We filed a form of indenture as an exhibit to the registration statement of
which this prospectus is a part. The debt securities will be issued under one
or more indentures, each dated as of a date on or before the issuance of the
debt securities to which it relates and in the form filed, subject to any
amendments or supplements as we may adopt from time to time. Each indenture
will be entered into between us, as obligor, a trustee chosen by us and
qualified to act as a trustee under the Trust Indenture Act of 1939, and any
of our subsidiaries which guarantee our obligations under the indenture. You
should read the indenture because it, and not this description, will control
your rights as a holder of debt securities. The terms of the indenture are
also governed by the Trust Indenture Act.
General
The debt securities will be our direct obligations, which will be
unsecured, rank subordinate to our credit facilities, of which $680 million
was outstanding on March 23, 2000 and may rank subordinate to, equally with or
senior to our other indebtedness, including our senior notes, of which $500
million was outstanding on March 23, 2000. Our credit facilities will provide
that unsecured subordinated debt securities may be issued under an indenture
without limit as to aggregate principal amount, in one or more series, in each
case as established from time to time in or pursuant to authority granted by a
resolution from our board of directors or as established in one or more
indentures supplemental to the indenture. All debt securities of one series do
not need to be issued at the same time. Additionally, unless otherwise
provided, a series may be reopened, without the consent of the holders of the
debt securities of such series, for issuances of additional debt securities of
such series.
Terms of the Debt Securities
You should refer to the prospectus supplement for the following terms of
each series of the debt securities in respect of which this prospectus is
being delivered:
. the designation, aggregate principal amount and authorized denominations
of the series;
. the issue price as a percentage of the principal amount at which the
series will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity or upon redemption thereof and the rate or
rates at which original issue discount will accrue;
. the date or dates on which the series will mature;
. the rate or rates per annum, if any, at which the series will bear
interest;
. the times from which any interest will accrue, be payable and the record
dates pertaining thereto;
. the place or places where the principal and interest, if any, on the
series will be payable;
. any redemption or other special terms;
. the events of default and covenants relating to the debt securities
which are in addition to, modify or delete those described herein;
. whether the debt securities will be issued in certificated or book-entry
form, and the denominations thereof;
. if applicable, the terms of any right to convert debt securities into
shares of our common stock or other securities or property;
. provisions, if any, for the defeasance or discharge of certain of our
obligations with respect to such debt securities, which provisions may
be in addition to, in substitution for, or in modification of (or any
combination of the foregoing), the provisions of the indenture;
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. the manner in which the amounts of payment of principal of, premium, if
any, or any interest on such debt securities will be determined, if such
amounts may be determined by reference to an index based on a currency
or currencies other than that in which such debt securities are
denominated or designated to be payable or by reference to a commodity,
commodity index, stock exchange index or financial index;
. a discussion of any material and/or special United States federal income
tax considerations applicable to such debt securities;
. any depositaries, trustees, interest rate calculation agents, exchange
rate calculation agents or other agents with respect to the debt
securities other than those originally appointed;
. whether such debt securities will be issued in the form of one or more
global securities and whether such global securities are to be issuable
in a temporary global form or permanent global form;
. the terms, if any, on which such debt securities will be subordinate to
other debt;
. any listing or intended listing of the debt securities on a securities
exchange;
. the provisions, if any, relating to any guarantees of the debt
securities; and
. any other terms of the debt securities, which will not be inconsistent
with the provisions of the indenture.
Our debt securities may be sold at a discount below their principal amount.
Even if our debt securities are not issued at a discount below their principal
amount, these securities may, for United States federal income tax purposes,
be deemed to have been issued with original issue discount because of certain
interest payment or other characteristics. Special United States federal
income tax considerations applicable to debt securities issued with original
issue discount will be described in more detail in any applicable prospectus
supplement. In addition, special United States federal tax considerations or
other restrictions or terms applicable to any debt securities offered
exclusively to foreigners or denominated in a currency other than United
States dollars will also be set forth in the prospectus supplement, if
applicable.
Information About the Trustee
Our indenture provides that there may be more than one trustee, each with
respect to one or more series of debt securities. Any trustee under our
indenture may resign at any time or be removed with respect to one or more
series of debt securities, and a successor trustee may be appointed to act
with respect to such series. If two or more persons are acting as trustees
with respect to different series of debt securities, each trust shall be
separate and apart from the trust administered by any other trustee. Except as
indicated in this prospectus or any prospectus supplement, any action to be
taken by the trustee may be taken only with respect to the one or more series
of debt securities for which it is trustee under the indenture.
Merger, Consolidation or Sale of Assets
Our indenture does not allow us to consolidate or merge with or into, or
sell, assign, convey, transfer or lease our properties and assets,
substantially in their entirety, as computed on a consolidated basis, to
another corporation, person or entity unless:
. either we are the surviving person, in the case of a merger or
consolidation, or the successor or transferee is a corporation organized
under the laws of the United States, or any state thereof or the
District of Columbia and the successor or transferee corporation
expressly assumes, by supplemental indenture, all of our obligations
under the debt securities and the indenture; and
. no default or event of default exists immediately after such
transaction.
Denominations
Unless we specify in the prospectus supplement, the debt securities of any
series will be issuable only as debt securities in denominations of $1,000,
and any integral multiples thereof, and will be payable only in U.S. dollars.
The indenture also provides that debt securities of a series may be issuable
in global form. See "Global Securities" below.
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Registration and Transfer
If you surrender for transfer your registered debt securities at the office
or agency we maintain for such purpose, we will deliver, in the name you have
designated as transferee, one or more new debt securities of the same series
of like aggregate principal amount in such denominations as are authorized for
debt securities of such series and of a like maturity and with like terms and
conditions. You will not incur a service charge for any transfer or exchange
of debt securities, but we may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection with the transfer
or exchange.
We will not be required to:
. register, transfer or exchange debt securities of any series during a
period beginning with the opening of business 15 days before the day of
the transmission of a notice of redemption of debt securities of such
series selected for redemption, and ending at the close of business on
the day of the transmission; or
. register, transfer or exchange any debt security so selected for
redemption in whole or in part, except the unredeemed portion of any
debt security being redeemed in part.
Events of Default
Unless we inform you otherwise in the prospectus supplement, events of
default means any of the following:
. default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of such default
for a period of 30 days;
. default in the payment of principal of or premium, if any, on any debt
security of that series when due;
. if applicable, default in the deposit of any sinking fund payment, when
and as due in respect of any debt security of that series;
. default in the performance, or breach, of any covenants or warranties in
the indenture if the default continues uncured for a period of 60 days
after written notice to us by the applicable trustee or to us and the
applicable trustee by the holders of at least 25% in principal amount of
the outstanding debt securities of that series as provided in the
indenture; and
. certain events of bankruptcy, insolvency or reorganization.
If an event of default for any series of debt securities, which are at that
time outstanding, occurs and continues, then the applicable trustee or the
holders of not less than 25% in principal amount of the outstanding debt
securities of that series may, by a notice in writing to us, and to the
applicable trustee if given by the holders, declare to be due and payable
immediately the principal, or, if the debt securities of that series are
discount securities, such portion of the principal amount as may be specified
in the terms of that series and premium, if any, of all debt securities of
that series.
At any time after a declaration of acceleration with respect to debt
securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained by the applicable trustee, the
holders of a majority in principal amount of the outstanding debt securities
of that series may, subject to our having paid or deposited with the trustee a
sum sufficient to pay overdue interest and principal which has become due
other than by acceleration and certain other conditions, rescind and annul
such acceleration if all events of default, other than the non-payment of
accelerated principal and premium, if any, with respect to debt securities of
that series, have been cured or waived as provided in the indenture. For
information as to waiver of defaults see the discussion set forth below under
"Modification and Waiver."
You should refer to our prospectus supplement with regard to any series of
debt securities that are discount securities for the particular provisions
relating to acceleration of a portion of the principal amount of such discount
securities upon the occurrence and continuation of an event of default.
The indenture provides that the trustee is not obligated to exercise any of
its rights or powers under the indenture at the request of any holder of
outstanding debt securities, unless the trustee receives indemnity
satisfactory to it against any loss, liability or expense. Subject to certain
rights of the trustee, the holders of a
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majority in principal amount of the outstanding debt securities of any series
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee with respect to the debt securities of that
series.
No holder of any debt security of any series will have any right to
institute any proceeding, judicial or otherwise with respect to the indenture
or for the appointment of a receiver or trustee, or for any remedy under the
indenture, unless such holder shall have previously given to the applicable
trustee written notice of a continuing event of default with respect to debt
securities of that series and the holders of at least 25% in principal amount
of the outstanding debt securities of that series shall have made written
request, and offered reasonable indemnity, to such trustee to institute such
proceeding as trustee, and the trustee shall not have received from the
holders of a majority in principal amount of the outstanding debt securities
of that series direction inconsistent with such request and shall have failed
to institute such proceeding within 60 days. However, the holder of any debt
security will have an absolute and unconditional right to receive payment of
the principal of, premium, if any, and any interest on such debt security on
or after the due dates expressed in such debt security and to institute suit
for the enforcement of any such payment.
We are required by the indenture, within 120 days after the end of each
fiscal year, to furnish to the trustee a statement as to compliance with the
indenture. The indenture provides that the trustee with respect to any series
of debt securities may withhold notice to the holders of debt securities of
such series of any default or event of default (except a default in payment on
any debt securities of such series) with respect to debt securities of such
series if and so long as a committee of its trust officers, in good faith,
determines that withholding such notice is in the interest of the holders of
debt securities of such series.
Modification and Waiver
We and the applicable trustee, at any time and from time to time, may
modify the indenture without prior notice to or consent of any holder of any
series of debt securities for any of the following purposes:
. to permit a successor corporation to assume our covenants and
obligations under the indenture and in such series of debt securities in
accordance with the terms of the indenture;
. to add to our covenants for the benefit of the holders of any series of
debt securities (and if the covenants are to be for the benefit of less
than all the series, we shall state that the covenants are expressly
being included solely for the benefit of the applicable series);
. to surrender any of our rights or powers conferred in the indenture;
. to add any additional events of default (and if the events of default
are to be applicable to less than all series, we shall state that the
events of default are expressly being included solely for the benefit of
the applicable series);
. to add to, change or eliminate any of the provisions of the indenture in
a manner that will become effective only when there is no outstanding
debt security which is entitled to the benefit of the provision and as
to which the modification would apply;
. to secure a series of debt securities or to provide that our obligations
under a series of debt securities or the indenture will be guaranteed
and the terms and conditions for the release or substitution of the
security or guarantee;
. to supplement any of the provisions of the indenture to the extent
needed to permit or facilitate the defeasance and discharge of a series
of debt securities in a manner that will not adversely affect the
interests of the holders of debt securities of that series or any other
series of debt securities issued under the indenture in any material
respect;
. to establish the form or terms of debt securities as permitted by the
indenture;
. to provide for the acceptance of appointment by a successor trustee
regarding one or more series of debt securities and to add to or change
any of the provisions of the indenture as is necessary to provide for
the administration of the trusts by more than one trustee;
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. to comply with the requirements of the Securities and Exchange
Commission in connection with qualification of the indenture under the
Trust Indenture Act;
. to cure any ambiguity;
. to correct or supplement any provision in the indenture which may be
defective or inconsistent with any other provision in the indenture;
. to eliminate any conflict between the terms of the indenture and the
debt securities and the Trust Indenture Act; or
. to make any other provisions with respect to matters or questions
arising under the indenture which will not be inconsistent with any
provision of the indenture as long as the new provisions do not
adversely affect in any material respect the interests of the holders of
any outstanding debt securities of any series created prior to the
modification.
We may also modify the indenture for any other purpose if we receive the
written consent of the holders of not less than a majority in principal amount
of the outstanding debt securities of each series affected by such
modification voting separately. However, we may not, without the consent of
the holder of each outstanding debt security of each series affected:
. change the stated maturity or reduce the principal amount or the rate of
interest, or extend the time for payment of interest of any debt
security or any premium payable upon the redemption of any debt
security, or change the stated maturity of, or reduce the amount of the
principal of a discount security that would be due and payable upon a
declaration of acceleration of the maturity of a discount security or
impair the right to institute suit for the enforcement of any payment on
or after the due date thereof (including, in the case of redemption, on
or after the redemption date), or alter any redemption provisions in a
manner adverse to the holders of such series of debt securities;
. reduce the percentage in principal amount of the outstanding debt
securities of a series where the consent of the holder is required for
any such amendment, supplemental indenture or waiver which is provided
for in the indenture;
. if applicable, adversely affect the right of a holder to convert any
debt security;
. modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the indenture
cannot be modified or waived without the consent of the holder of each
outstanding debt security which would be affected; or
. modify any provision described in the prospectus supplement as requiring
the consent of each affected holder of debt securities.
A modification which changes or eliminates any covenant or other provision
of the indenture with respect to one or more particular series of debt
securities, or which modifies the rights of the holders of debt securities of
a series with respect to such covenant or other provision, shall be deemed not
to affect the rights under the indenture of the holders of debt securities of
any other series.
The indenture provides that the holders of not less than a majority in
aggregate principal amount of the then outstanding debt securities of any
series, by notice to the relevant trustee, may on behalf of the holders of the
debt securities of such series waive any default and its consequences under
the indenture, except (1) a continuing default in the payment of interest on,
premium, if any, or the principal of, any such debt security held by a
nonconsenting holder or (2) a default in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the holder
of each outstanding debt security of each series affected.
Defeasance of Debt Securities or Certain Covenants in Certain Circumstances
Defeasance and Discharge. The indenture provides that we may be discharged
from any and all obligations under any debt securities other than:
. certain obligations to pay additional amounts, if any, upon the
occurrence of certain tax, assessment or governmental charge events
regarding payments on debt securities;
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. to register the transfer or exchange of debt securities;
. to replace stolen, lost or mutilated debt securities; or
. to maintain paying agencies and to hold money for payment in trust.
We may only defease and discharge all of our obligations under the debt
securities of any series if:
. we irrevocably deposit with the trustee, in trust, the amount, as
certified by an officers' certificate, of money and/or U.S. government
obligations that, through the payment of interest and principal in
respect thereof in accordance with their terms, will be sufficient to
pay and discharge each installment of principal and premium, if any and
any interest on, and any mandatory sinking fund payments in respect of,
the debt securities of such series on the dates such payments are due;
and
. we deliver to the trustee an opinion of counsel or a ruling from the
United States Internal Revenue Service, in either case to the effect
that holders of the debt securities of such series will not recognize
income, gain or loss for United States federal income tax purposes as a
result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants. Upon compliance with certain conditions,
we may omit to comply with certain restrictive covenants contained in the
indenture or in the applicable prospectus supplement or any other restrictive
covenant relating to any series of debt securities provided for in a board
resolution or supplemental indenture which by its terms may be defeased
pursuant to the terms of such series of debt securities. Any omission to
comply with our obligations or covenants shall not constitute a default or
event of default with respect to any debt securities. In that event, you would
lose the protection of these covenants, but would gain the protection of
having money and/or U.S. government obligations set aside in trust to repay
the series of debt securities. We may only defease any covenants if, among
other requirements:
. we deposit with the trustee money and/or U.S. government obligations
that, through the payment of interest and principal in respect to such
obligations, in accordance with their terms, will provide money in an
amount, as certified by an officers' certificate, sufficient to pay
principal, premium, if any, and any interest on and any mandatory
sinking fund payments in respect of the debt securities of such series
on the dates such payments are due; and
. we deliver to the trustee an opinion of counsel or a ruling from the
United States Internal Revenue Service to the effect that the holders of
the debt securities of such series will not recognize income, gain or
loss, for United States federal income tax purposes, as a result of the
covenant defeasance.
Limited Liability of Certain Persons
The indenture provides that none of our past, present or future
stockholders, incorporators, employees, officers or directors, or of any
successor corporation or any of our affiliates shall have any personal
liability in respect of our obligations under the indenture or the debt
securities by reason of his, her or its status as such stockholder,
incorporator, employee, officer or director.
Mandatory Disposition Pursuant to Gaming Laws
The indenture provides that each holder and beneficial owner, by accepting
any of the debt securities subject thereto, shall be deemed to have agreed
that if the gaming authority of any jurisdiction of which we or any of our
subsidiaries conducts or proposes to conduct gaming, requires that a person
who is a holder or the beneficial owner of the debt securities be licensed,
qualified or found suitable under applicable gaming laws, such holder or
beneficial owner, as the case may be, shall apply for a license, qualification
or a finding of suitability within the required time period. If such person
fails to apply or become licensed or qualified or is found unsuitable, we
shall have the right, at our option:
. to require such person to dispose of its debt securities or beneficial
interest therein within 30 days of receipt of notice of our election or
such earlier date as may be requested or prescribed by such gaming
authority; or
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. to redeem such debt securities (possibly within less than 30 days
following the notice of redemption if so required or prescribed by the
applicable gaming authority) at a redemption price equal to
(1) the lesser of:
(a) such person's cost; and
(b) 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the earlier of the
redemption date or the date of the finding of unsuitability or
failure to comply; or
(2) such other amount as may be required by applicable law or by order
of any applicable gaming authority.
We shall notify the trustee in writing of any such redemption as soon as
practicable. We shall not be responsible for any costs or expenses any such
holder may incur in connection with its application for a license,
qualification or a finding of suitability.
Conversion Rights
The terms and conditions, if any, upon which the debt securities are
convertible into common stock or other securities or property will be set
forth in the applicable prospectus supplement. Such terms will include the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at our option or at the option of
the holders, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such debt
securities.
Guarantee
The indenture provides that one or more of our subsidiaries may be a
guarantor and may "guarantee" the performance and punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all of our
obligations under the debt securities of any series and the indenture. The
liability of the guarantors will be independent of and not in consideration of
or contingent upon our liability or any other party obligated under the debt
securities or the indenture. A separate action or actions may be brought or
prosecuted against us or any other party obligated under the debt securities
or the indenture whether or not we or any other party obligated under the debt
securities or the indenture are joined in any such action or actions. However,
any guarantee will be limited to an amount not to exceed the maximum amount
that can be guaranteed by the guarantor without rendering the guarantee, as it
relates to such guarantor, voidable under Section 548 of the Federal
Bankruptcy Code or any applicable provision of comparable state law. This
guarantee will be a continuing guarantee and will remain in full force and
effect until payment in full of all of the guaranteed obligations.
Payment and Paying Agents
We covenant and agree, for the benefit of each series of debt securities,
that we will duly and punctually pay the principal of, premium, if any, and
any interest on the debt securities in accordance with the terms of the debt
securities and the indenture. We will maintain an office or agency where debt
securities of that series may be presented or surrendered for payment, where
debt securities of that series may be surrendered for registration of transfer
or exchange and where notices and demands to or upon us in respect of the debt
securities of that series and the indenture may be served.
Global Securities
The debt securities of any series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on
behalf of, a depositary identified in the applicable prospectus supplement
relating to such series. Global securities will be in registered form and may
be issued in either temporary or permanent form. The specific terms of the
depositary arrangement regarding a series of debt securities will be described
in the applicable prospectus supplement relating to such series.
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DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 300 million shares of common
stock. As of March 9, 2000, there were 111,832,062 shares of common stock
outstanding. Holders of the common stock are entitled to dividends when and as
declared by our board of directors. Holders have one vote per share and the
right to the net assets in liquidation after payment of any amounts due to
creditors. Holders are not liable for further calls or assessments by us.
There are no sinking fund or redemption provisions relating to the common
stock. The common stock has noncumulative voting rights, which means that the
holders of a majority of the shares voting for the election of directors can
elect 100% of the directors if they choose to do so.
Our certificate of incorporation provides that if and when we shall become,
and so long as we shall remain, a publicly traded holding company as defined
in the New Jersey Casino Control Act, all of our securities shall be held
subject to the condition that if a holder thereof is disqualified by the New
Jersey Casino Control Commission, such disqualified holder shall dispose of
his interest in the securities, including common stock within 120 days, or
such other time period required by the New Jersey Commission, following our
receipt of notice of such disqualified holder. Promptly after the notice date,
we are required to deliver a copy of such written notice to the disqualified
holder by personal delivery, mail or any other reasonable means.
Our certificate of incorporation also provides that so long as we hold,
directly or indirectly, a license or franchise from a governmental agency to
conduct our business, which license or franchise is conditioned upon some or
all of the holders of the common stock possessing prescribed qualifications,
any and all shares of the common stock shall be subject to redemption by us,
at our sole option and in our sole discretion, to the extent necessary to
prevent the loss of such license or franchise or to reinstate it. Any shares
of the common stock redeemable pursuant to such provision may be called for
redemption immediately for cash, property or rights, including our securities
or securities of another corporation, on not less than five days notice to the
disqualified holder at a redemption price equal to the average closing price
of such stock on a national securities exchange for the 45 trading days
immediately preceding the date of the redemption notice; or if the stock is
not so traded, then the average of the high and low closing bid price of the
stock as quoted by the National Association of Securities Dealers Automated
Quotation system for such 45 trading day period; or if such stock is not so
quoted, the redemption price shall be determined in good faith by the board of
directors.
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, LLC, 400 S. Hope Street, Los Angeles, California 90071.
Subscription Rights
The following description sets forth the general terms and provisions of
any subscription rights which may be issued and to which any prospectus
supplement may relate. The particular terms of the subscription rights and
extent, if any, to which such general provisions may not apply will be
described in the prospectus supplement relating to such subscription rights.
The subscription rights will be issued in connection with one or more
rights offerings. The subscription rights will be issued without charge to our
stockholders and will be transferable. The number of rights to be issued for
each outstanding share of our common stock as well as the subscription price
will be determined at the time of the rights offering, if any, and described
in the related prospectus supplement. We anticipate that the subscription
rights will be traded on the New York Stock Exchange, the exchange where our
common stock is traded.
We anticipate there will be two types of subscription privileges associated
with the subscription rights. Under the basic subscription privilege, a rights
holder would be entitled to purchase one share of common stock for each right
held. Under the oversubscription privilege, any rights holder who exercises
the basic subscription privilege for all rights held would be entitled to
subscribe for additional shares of common stock at the time the basic
subscription privilege is exercised. Shares will be available for the
oversubscription privilege to the extent that other rights holders do not
exercise their basic subscription privilege in full and will be subject to
proration if necessary. In each case, the rights holder must specify the
number of shares to be purchased and submit the subscription price to the
subscription agent.
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PLAN OF DISTRIBUTION
We may sell the offered securities as follows:
. directly to one or more purchasers;
. through agents;
. to and through one or more dealers;
. to and through one or more underwriters;
. through a distribution of subscription rights to our stockholders; or
. through a combination of any such methods of sale.
The distribution of the offered securities pursuant to any applicable
prospectus supplement may be effected from time to time in one or more
transactions either:
. at a fixed price or prices which may be changed;
. at market prices prevailing at the time of sale;
. at prices related to such prevailing market prices; or
. at negotiated prices.
Offers to purchase the offered securities may be solicited directly by us.
Offers to purchase may also be solicited by agents designated by us from time
to time. Any such agent, who may be deemed to be an "underwriter" as that term
is defined in the Securities Act, involved in the offer or sale of the offered
securities in respect of which this prospectus is delivered will be named, and
any commissions which shall be payable by us to such agent will be set forth,
in the applicable prospectus supplement.
If a dealer is utilized in the sale of the offered securities, we will sell
the securities to the dealer, as principal. The dealer, who may be deemed to
be an "underwriter" as that term is defined in the Securities Act, may then
resell the securities to the public at varying prices to be determined by such
dealer at the time of resale.
If an underwriter is, or underwriters are, utilized in the sale of the
offered securities, we will execute an underwriting agreement with such
underwriters at the time of such sale to them and the names of the
underwriters will be set forth in the applicable prospectus supplement, which
will be used by the underwriters to make resales of the offered securities. In
connection with the sale of offered securities, such underwriters may be
deemed to have received compensation from us in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
debt securities and common stock for whom they may act as agents. Underwriters
may sell offered securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agents. Any underwriting compensation paid by us to underwriters in
connection with the offering of securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set
forth in the applicable prospectus supplement.
Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with us, to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments which they may be required to make in
respect thereof. Underwriters and agents may also engage in transactions with,
or perform services for us in the ordinary course of business.
If so indicated in the applicable prospectus supplement, we will authorize
underwriters, dealers or other persons to solicit offers by certain
institutions to purchase offered securities from us pursuant to contracts
providing for payment and delivery on a future date or dates set forth in the
applicable prospectus supplement. Institutions with which such contracts may
be made may include, but are not limited to, commercial and savings
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banks, insurance companies, pension funds, investment companies, educational
and charitable institutions and others. The obligations of any purchaser under
any such contract will not be subject to any conditions except that the
purchase of offered securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject, and if
the offered securities are also being sold to underwriters, we shall have sold
to such underwriters the offered securities not sold for delayed delivery. The
underwriters, dealers and such other persons will not have any responsibility
in respect to the validity or performance of such contracts. The prospectus
supplement relating to such contracts will set forth the price to be paid for
offered securities pursuant to such contracts, the commissions payable for
solicitation of such contracts and the date or dates in the future for
delivery of offered securities pursuant to such contracts.
The anticipated date of delivery of offered securities will be set forth in
the applicable prospectus supplement relating to each offer.
LEGAL MATTERS
Certain legal matters in connection with the validity of offered securities
to which this prospectus relates will be passed upon for us by Christensen,
Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP. Terry N. Christensen, a
partner of Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, is
a member of our board of directors, and he and other attorneys in that firm
beneficially owned an aggregate of 14,618 shares of our common stock as of
March 23, 2000. Certain legal matters will be passed on for the underwriters
by Gibson, Dunn & Crutcher LLP, Los Angeles, California.
EXPERTS
The audited consolidated financial statements and schedule of MGM Grand,
Inc. incorporated by reference in this prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and are incorporated herein by reference in reliance
upon the authority of said firm as experts in accounting and auditing in
giving said reports. Reference is made to said report which includes an
explanatory paragraph with respect to the change in accounting for start-up
activities in 1999 as discussed in Note 2 to the consolidated financial
statements.
The audited consolidated financial statements and schedule of Mirage
Resorts, Incorporated, incorporated by reference in this prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their report with respect thereto, and is incorporated herein by reference
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said report. Reference is made to said report which
includes an explanatory paragraph with respect to the change in accounting for
start-up activities in 1999 as discussed in Note 2 to the consolidated
financial statements.
WHERE YOU CAN FIND MORE INFORMATION
Each of MGM Grand and Mirage files annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy, at prescribed rates, any document MGM Grand
or Mirage files at the Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 (1-800-732-0330) for further information on the public
reference rooms. The Commission also maintains a website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission (http://www.sec.gov).
You also may read and copy reports and other information filed by MGM Grand or
Mirage at the office of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005. You may also read reports, proxy statements and
other information relating to Mirage at the offices of the Pacific Exchange at
310 Pine Street, San Francisco, California 94104.
We have filed a registration statement and related exhibits with the
Commission under the Securities Act of 1933. The registration statement
contains additional information about us and our debt securities and common
stock. You may inspect the registration statement and its exhibits without
charge at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and obtain copies, at prescribed rates, from the Commission.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Commission allows us to "incorporate by reference" information filed
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information filed later by MGM Grand
or Mirage with the Commission will automatically update and supersede this
information.
We incorporate by reference the documents listed below and any future
filings made with the Commission under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:
. Our Annual Report on Form 10-K for the year ended December 31, 1999;
. Our Current Reports on Form 8-K dated February 23, 2000, February 28,
2000, March 6, 2000 and April 11, 2000;
. Mirage Resorts, Incorporated Annual Report on Form 10-K for the year
ended December 31, 1999;
. Mirage Resorts, Incorporated Proxy Statement filed with the Commission
on February 23, 2000;
. Mirage Resorts, Incorporated Registration Statement on Form 8-A12B filed
with the Commission on March 10, 2000.
. Mirage Resorts, Incorporated Preliminary Proxy Statement filed with the
Commission on March 24, 2000;
. Mirage Resorts, Incorporated Amended Registration Statement on Form 8-
A12B/A filed with the Commission on April 7, 2000;
. Mirage Resorts, Incorporated Amended Preliminary Proxy Statement filed
with the Commission on April 25, 2000; and
. Mirage Resorts, Incorporated Quarterly Report on Form 10-Q for the
period ended March 31, 2000.
All documents and reports filed by MGM Grand or Mirage pursuant to Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 after the
date of this prospectus and on or prior to the termination of the offering of
the offered securities made by this prospectus are deemed to be incorporated
by reference in this prospectus from the date of filing of such documents or
reports, except as to any portion of any future annual or quarterly reports or
proxy statements which is not deemed to be filed under those sections. Any
statement contained in a document incorporated or deemed to be incorporated by
reference in this prospectus will be deemed to be modified or superceded for
purposes of this prospectus to the extent that any statement contained herein
in any prospectus supplement or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this prospectus
modifies or supercedes such statement. Any statement so modified or superceded
will not be deemed, except as so modified or superceded, to constitute a part
of this prospectus.
Any person receiving a copy of this prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference except for the exhibits to such documents (other than the exhibits
expressly incorporated in such documents by reference). Requests should be
directed to: Scott Langsner, Secretary, MGM Grand, Inc., 3799 Las Vegas
Boulevard South, Las Vegas, Nevada 89109; telephone number: (702) 891-3333. A
copy will be provided by first class mail or other equally prompt means within
one business day after receipt of your request.
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Pictures of Entertainment Available at MGM Grand and Mirage
<PAGE>
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$710,000,000
[MGM GRAND Inc. LOGO APPEARS HERE]
9 3/4% Senior Subordinated Notes due 2007
--------------------------
PROSPECTUS SUPPLEMENT
May 22, 2000
--------------------------
Joint Book Running Managers
Banc of America Securities LLC Deutsche Banc Alex. Brown
--------------------------
Co-Lead Manager
Morgan Stanley Dean Witter
Banc One Capital Markets, Inc.
Bear, Stearns & Co. Inc.
CIBC World Markets
Commerzbank Capital Markets Corp.
Merrill Lynch & Co.
Salomon Smith Barney
Scotia Capital
SG Cowen
Wasserstein Perella Securities, Inc.
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