<PAGE>
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
-------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
----------------------- ------------------------
Commission File Number: 0-16760
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MGM MIRAGE
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 88-0215232
----------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 693-7120
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
MGM Grand, Inc. 3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 11, 2000
------------------------------- ------------------------------------
Common Stock, $.01 par value 158,885,798 shares
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
FORM 10-Q
I N D E X
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
for the Three Months and Six Months
Ended June 30, 2000 and June 30,1999.................... 1-2
Consolidated Balance Sheets
at June 30, 2000 and December 31, 1999.................. 3
Consolidated Statements of
Cash Flows for the Six Months Ended
June 30, 2000 and June 30, 1999......................... 4
Condensed Notes to Consolidated Financial
Statements ............................................. 5-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........ 11-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................... 17
Item 2. Changes in Securities and Use of Proceeds............... 17
Item 6. Exhibits and Reports on Form 8-K........................ 17-19
Signatures.............................................. 20
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------ --------------------------------------
2000 1999 2000 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Casino $379,230 $182,606 $ 683,865 $320,659
Rooms 114,921 67,426 182,254 122,265
Food and beverage 89,030 40,032 140,156 74,479
Entertainment, retail and other 91,686 54,668 144,717 95,090
Income from unconsolidated affiliates 2,740 - 2,740 6,084
------------- ------------- -------------- -------------
677,607 344,732 1,153,732 618,577
Less: promotional allowances 50,436 25,672 83,689 48,150
------------- ------------- -------------- -------------
627,171 319,060 1,070,043 570,427
------------- ------------- -------------- -------------
EXPENSES:
Casino 176,565 82,947 319,923 155,582
Rooms 33,257 21,227 52,753 35,945
Food and beverage 56,644 25,277 84,190 46,267
Entertainment, retail and other 55,333 29,385 83,800 54,656
Provision for doubtful accounts and discounts 18,936 12,888 33,862 24,283
General and administrative 87,568 49,436 152,031 83,056
Preopening expenses and other 1,190 14,107 2,199 22,917
Restructuring costs 18,040 - 23,519 -
Write-Downs and impairments 102,225 - 102,225 -
Depreciation and amortization 58,519 29,069 98,390 49,961
------------- ------------- -------------- -------------
608,277 264,336 952,892 472,667
------------- ------------- -------------- -------------
OPERATING PROFIT BEFORE CORPORATE EXPENSE 18,894 54,724 117,151 97,760
Corporate expense 7,690 4,533 13,507 9,627
------------- ------------- -------------- -------------
OPERATING INCOME 11,204 50,191 103,644 88,133
------------- ------------- -------------- -------------
OTHER INCOME (EXPENSE):
Interest income 6,962 370 7,725 697
Interest expense, net of amounts capitalized (47,371) (11,965) (69,460) (20,151)
Interest expense from unconsolidated affiliates (273) - (273) (1,058)
Other, net (350) (332) (512) (533)
------------- ------------- -------------- -------------
(41,032) (11,927) (62,520) (21,045)
------------- ------------- -------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES, EXTRA-
ORDINARY ITEM AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (29,828) 38,264 41,124 67,088
Benefit (Provision) for income taxes 11,567 (14,158) (15,080) (24,491)
------------- ------------- -------------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (18,261) 24,106 26,044 42,597
Extraordinary loss on early extinguishment
of debt, net of $462 tax benefit in 2000
and $484 tax benefit in 1999 (733) - (733) (898)
Cumulative effect of change in accounting
principle for preopening, net of $4,399
tax benefit - - - (8,168)
------------- ------------- -------------- -------------
NET INCOME (LOSS) $(18,994) $ 24,106 $ 25,311 $ 33,531
============= ============= ============== =============
NET INCOME (LOSS) $(18,994) $ 24,106 $ 25,311 $ 33,531
Currency translation adjustment 982 (2,183) 4,794 (3,634)
------------- ------------- -------------- -------------
COMPREHENSIVE INCOME (LOSS) $(18,012) $ 21,923 $ 30,105 $ 29,897
============= ============= ============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-1-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
PER SHARE OF COMMON STOCK
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- -----------------------------------
2000 1999 2000 1999
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
PER SHARE OF COMMON STOCK:
Basic:
Income (loss) per share before extraordinary item and
cumulative effect of change in accounting principle $ (0.13) $ 0.19 $ 0.20 $ 0.37
Extraordinary item, net - - (0.01) (0.01)
Cumulative effect of change in accounting principle, net - - - (0.07)
---------------- ---------------- ---------------- -----------------
Net income (loss) per share $ (0.13) $ 0.19 $ 0.19 $ 0.29
================ ================ ================ =================
Weighted Average Shares Outstanding (000's) (1) 150,184 124,134 131,399 117,480
================ ================ ================ =================
Diluted:
Income (loss) per share before extraordinary item and
cumulative effect of change in accounting principle $ (0.13) $ 0.19 $ 0.20 $ 0.36
Extraordinary item, net - - (0.01) (0.01)
Cumulative effect of change in accounting principle, net - - - (0.07)
---------------- ---------------- ---------------- -----------------
Net income (loss) per share $ (0.13) $ 0.19 $ 0.19 $ 0.28
================ ================ ================ =================
Weighted Average Shares Outstanding (000's) (1) (2) 150,184 127,466 133,748 120,212
================ ================ ================ =================
</TABLE>
Note:
(1) All references to share and per share data herein have been adjusted
retroactively to give effect to the 2-for-1 stock split effective on
February 10, 2000.
(2) The impact of stock options is excluded from the calculation of diluted
loss per share for the 2000 three-month period because inclusion would be
antidilutive.
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 211,388 $ 121,522
Accounts receivable, net 175,679 83,101
Prepaid expenses and other 46,043 32,598
Inventories 86,852 15,240
Income tax receivable 94,589 -
Deferred tax asset 63,832 17,452
------------------ ------------------
Total current assets 678,383 269,913
------------------ ------------------
PROPERTY AND EQUIPMENT, NET 9,237,733 2,390,524
OTHER ASSETS:
Investments in unconsolidated affiliates 408,286 12,485
Excess of purchase price over fair value
of net assets acquired, net 64,523 36,550
Deposits and other assets, net 345,343 44,627
------------------ ------------------
Total other assets 818,152 93,662
------------------ ------------------
$10,734,268 $2,754,099
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 60,079 $ 38,018
Construction payable 13,880 7,896
Income taxes payable - 3,296
Dividend payable - 11,388
Current obligation, capital leases 6,212 5,145
Current obligation, long term debt 978,449 7,852
Accrued interest on long term debt 47,100 18,915
Other accrued liabilities 484,817 197,580
------------------ ------------------
Total current liabilities 1,590,537 290,090
------------------ ------------------
DEFERRED REVENUES 3,833 4,241
DEFERRED INCOME TAXES 1,591,718 108,713
LONG TERM OBLIGATION, CAPITAL LEASES 9,335 12,864
LONG TERM DEBT, NET 5,284,703 1,304,345
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 300,000,000 shares authorized,
158,620,696 and 113,879,848 shares outstanding) 1,626 1,384
Capital in excess of par value 2,029,386 1,261,625
Treasury stock, at cost (4,059,000 and 24,565,200 shares) (83,683) (505,824)
Retained earnings 292,523 267,165
Other comprehensive income 14,290 9,496
------------------ ------------------
Total stockholders' equity 2,254,142 1,033,846
------------------ ------------------
$10,734,268 $2,754,099
================== ==================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,311 $ 33,531
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 99,510 50,351
Amortization of debt offering costs 5,661 979
Provision for doubtful accounts and discounts 33,862 24,283
Loss on early extinguishment of debt 1,195 1,382
Cumulative effect of accounting change - 12,567
Restructuring costs 23,519 -
Write-Downs and impairments 102,225 -
Income from unconsolidated affiliates (2,467) (5,026)
Distributions from unconsolidated affiliates 4,000 -
Deferred income taxes (3,913) 9,954
Change in assets and liabilities, net of effect of business acquisitions:
Accounts receivable 11,844 537
Inventories 5,574 493
Prepaid expenses and other 5,421 (8,257)
Income taxes receivable and payable (11,570) (5,506)
Accounts payable, accrued liabilities and other (16,956) (10,894)
Currency translation adjustment 1,716 (211)
---------------- ----------------
Net cash from operating activities 284,932 104,183
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (125,068) (235,446)
Acquisition of Primadonna Resorts, Inc., net of cash acquired - (13,346)
Acquisition of Mirage Resorts, Incorporated, net of cash acquired (5,315,466) -
Proceeds from disposition of property and equipment 50,112 6,193
Change in construction payable (4,927) 24,486
Change in deposits and other assets, net (106,184) 10,174
---------------- ----------------
Net cash from (used in) investing activities (5,501,533) (207,939)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long term debt, net 701,322 -
Borrowings under bank facilities 4,338,000 597,000
Extinguishment of long term debt - (374,500)
Repayments of bank facilities and other (911,661) (115,312)
Sale of treasury stock 422,141 -
Cash dividend paid (11,338) -
Issuance of common stock 768,003 22,132
---------------- ----------------
Net cash from financing activities 5,306,467 129,320
---------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 89,866 25,564
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 121,522 81,956
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 211,388 $ 107,520
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Organization and Basis of Presentation
MGM MIRAGE (the "Company"), formerly known as MGM Grand, Inc., is a
Delaware corporation, incorporated on January 29, 1986. As of June 30,
2000, approximately 59.9% of the outstanding shares of the Company's common
stock were owned by Kirk Kerkorian and Tracinda Corporation ("Tracinda"), a
Nevada corporation wholly owned by Kirk Kerkorian.
Through its wholly-owned subsidiary, MGM Grand Hotel, Inc., the
Company owns and operates the MGM Grand Hotel and Casino ("MGM Grand Las
Vegas"), a hotel, casino and entertainment complex located on the Las Vegas
Strip in Las Vegas, Nevada.
On May 31, 2000, the Company completed the acquisition (the "Mirage
Acquisition") of Mirage Resorts, Incorporated ("Mirage") (see Note 2).
Mirage owns and operates the following hotel, casino and entertainment
resorts: Bellagio, a European-style luxury resort; The Mirage, a
tropically-themed destination resort; Treasure Island at The Mirage, a
pirate-themed hotel and casino resort; and the Holiday Inn(R) Casino
Boardwalk, all of which are located on the Las Vegas Strip. Mirage also
owns a 50% interest in the joint venture that owns and operates the Monte
Carlo Resort & Casino, a palatial-style hotel and casino also located on
the Las Vegas Strip. Mirage also owns and operates the Golden Nugget, a
hotel and casino in downtown Las Vegas, the Golden Nugget-Laughlin, located
in Laughlin, Nevada, and Beau Rivage, a beachfront resort located in
Biloxi, Mississippi. Mirage is developing The Borgata, a hotel and casino
resort in the Marina District of Atlantic City, New Jersey in a 50-50 joint
venture with Boyd Gaming Corporation. Including The Borgata site, Mirage
owns approximately 120 acres in the Marina District of Atlantic City
available for future development. The aforementioned properties are
collectively referred to herein as the "Mirage Properties."
Prior to March 1, 1999, the Company and Primadonna Resorts, Inc.
("Primadonna") each owned 50% of New York-New York Hotel and Casino, LLC
("NYNY LLC"). On March 1, 1999, the Company completed its acquisition (the
"Primadonna Acquisition") of Primadonna, and as part of the Primadonna
Acquisition, acquired Primadonna's 50% ownership interest in NYNY LLC,
which owns and operates the New York-New York Hotel and Casino ("NYNY") on
the Las Vegas Strip (see Note 2). Consequently, as of March 1, 1999,
Primadonna and NYNY LLC became wholly-owned subsidiaries of the Company.
The Primadonna Acquisition also gave the Company ownership of three resorts
located in Primm, Nevada at the California/Nevada stateline: Whiskey
Pete's, Buffalo Bill's and the Primm Valley Resort (the "Primm
Properties"), as well as two championship golf courses located one mile
from the Primm Properties.
The Company, through its wholly-owned subsidiary, MGM Grand Detroit,
Inc., and its local partners in Detroit, Michigan formed MGM Grand Detroit,
LLC, to develop a hotel, casino and entertainment complex ("MGM Grand
Detroit"). The plans for MGM Grand Detroit call for an 800-room hotel, a
100,000 square-foot casino, signature restaurants and retail outlets, a
showroom and other entertainment venues. On July 28, 1999, the Michigan
Gaming Control Board issued a casino license to MGM Grand Detroit, LLC to
conduct gaming operations in its interim facility ("MGM Grand Detroit
Casino"), which commenced operations on July 29, 1999. The MGM Grand
Detroit Casino is located directly off of the Lodge Freeway in downtown
Detroit.
Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd.,
the Company owns and operates the MGM Grand Hotel and Casino in Darwin,
Australia ("MGM Grand Australia"), which is located on 18 acres of
beachfront property on the north central coast of Australia.
Through its wholly-owned subsidiary, MGM Grand South Africa, Inc.,
the Company manages one permanent and two temporary casinos in two
provinces of the Republic of South Africa. The Company managed a temporary
facility in Nelspruit from October 15, 1997 to November 17, 1999, at which
time a permanent casino began operations; the temporary casino in Witbank
began operations on March 10, 1998 and the temporary casino in Johannesburg
began operations on September 28, 1998. The Company receives management
fees from its partner, Tsogo Sun Gaming & Entertainment, which is
responsible for providing all project costs.
As permitted by the rules and regulations of the Securities and
Exchange Commission, certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
consolidated
-5-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Organization and Basis of Presentation (continued)
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Form 10-
K/A for the year ended December 31, 1999.
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
Company's financial position as of June 30, 2000, and the results of its
operations for the three month and six month periods ended June 30, 2000
and 1999. The results of operations for such periods are not necessarily
indicative of the results to be expected for the full year.
Certain reclassifications have been made to the 1999 financial
statements to conform to the 2000 presentation, which have no effect on
previously reported net income.
Note 2. Acquisitions
On May 31, 2000, the Company completed the Mirage Acquisition
whereby Mirage shareholders received $21 per share in cash. The
acquisition had a total equity value of approximately $4.4 billion. In
addition, the Company assumed approximately $2.0 billion of Mirage's
outstanding debt, of which approximately $1.0 billion was refinanced and
$950 million remains outstanding. The transaction was accounted for as a
purchase and, accordingly, the purchase price was preliminarily allocated
to the underlying assets acquired and liabilities assumed based upon their
estimated fair values at the date of the acquisition. The operating
results for Mirage are included in the Consolidated Statements of
Operations from the date of acquisition.
On March 1, 1999, the Company completed the Primadonna Acquisition
for 19 million shares of the Company's common stock valued at approximately
$243.6 million plus the assumption of debt totaling $315.2 million.
Primadonna shareholders received .66 share of the Company's common stock
for every Primadonna share held. The transaction was accounted for as a
purchase and, accordingly, the purchase price was allocated to the
underlying assets acquired and liabilities assumed based upon their
estimated fair values at the date of the Primadonna Acquisition. The
operating results for Primadonna are included in the Consolidated
Statements of Operations from the date of acquisition.
-6-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2. Acquisitions (continued)
The following unaudited pro forma consolidated financial information
for the Company has been prepared assuming both the Primadonna Acquisition
and Mirage Acquisition had occurred on the first day of the following
respective periods (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net Revenues $ 2,158,828 $ 1,811,439
============ ============
Operating Income $ 277,638 $ 236,655
============ ============
Income before Extraordinary Item and
Cumulative Effect of Change in Accounting Principle $ 50,111 $ 33,026
============ ============
Basic Earnings per Share before Extraordinary Item
and Cumulative Effect of Change in Accounting Principle $ 0.32 $ 0.19
============ ============
Weighted Average Basic Shares Outstanding (000's) 158,888 169,800
============ ============
Diluted Earnings per Share before Extraordinary Item
and Cumulative Effect of Change in Accounting Principle $ 0.31 $ 0.19
============ ============
Weighted Average Diluted Shares Outstanding (000's) 161,237 173,078
============ ============
</TABLE>
This unaudited pro forma consolidated financial information is not
necessarily indicative of what the Company's actual results would have been
had the acquisitions been completed as of the beginning of these periods,
or of future results.
-7-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3. Long Term Debt
Long term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
$1.25 Billion Revolving Credit Facility $ - $ 612,000
$2.0 Billion Revolving Credit Facility 1,795,000 -
$1.3 Billion Term Loan 1,300,000 -
$1.0 Billion Revolving Credit Facility 1,000,000 -
$300 Million 6.95% Senior Notes, due 2005, net of discount 296,148 295,728
$200 Million 6.875% Senior Notes, due 2008, net of discount 197,775 197,628
$200 Million 6.625% Senior Notes, due 2005, net of discount 179,603 -
$250 Million 7.25% Senior Notes, due 2006, net of discount 223,734 -
$200 Million 6.75% Senior Notes, due 2007, net of discount 171,639 -
$200 Million 6.75% Senior Notes, due 2008, net of discount 170,050 -
$100 Million 7.25% Senior Debentures, due 2017, net of discount 79,201 -
$710 Million 9.75% Senior Subordinated Notes, due 2007, net of
discount 701,322 -
Other Notes 1,559 -
MGM Grand Detroit, LLC Credit Facility, due 2003 116,000 169,000
Australian Bank Facility, due December 1, 2004 (US$) 31,121 37,841
----------- -----------
6,263,152 1,312,197
Less: Current Obligation (978,449) (7,852)
----------- -----------
$ 5,284,703 $ 1,304,345
=========== ===========
</TABLE>
Total interest incurred for the three month periods ended June 30,
2000 and 1999 was $61.2 million and $17.4 million, respectively, of which
$13.8 million and $5.4 million, respectively, was capitalized. Total
interest incurred for the six month periods ended June 30, 2000 and 1999
was $85.3 million and $30.5 million, respectively, of which $15.8 million
and $10.3 million, respectively, was capitalized.
On April 11, 2000, the Company entered into three senior credit
agreements providing for bank financing totaling $4.3 billion from
syndicates of banks each led by Bank of America, N.A. (collectively the
"New Senior Facilities"). The New Senior Facilities consist of (1) an
amended, extended and increased $1.25 billion Facility to a $2.0 billion
senior revolving credit facility which matures on May 31, 2005 (the "$2.0
billion Revolving Credit Facility"); (2) a $1.0 billion senior revolving
credit facility which matures on April 6, 2001 (the "$1.0 billion Revolving
Credit Facility"); and (3) a $1.3 billion senior term loan which matures on
April 6, 2001 (the "$1.3 billion Term Loan"). On May 31, 2000, the Company
borrowed $4.21 billion on the New Senior Facilities to fund the Mirage
Acquisition, refinance certain indebtedness of Mirage and the Company, to
pay fees and expenses in connection with the Mirage Acquisition and for
general corporate purposes. The Company intends to refinance the $1.3
billion Term Loan prior to its maturity through the issuance of debt or
equity securities under the previously filed $2.75 billion Shelf
Registration Statement or through other financing alternatives. The Company
currently has financing commitments in place that could be used to
refinance a portion of the $1.3 billion Term Loan. The remaining amount of
the $1.3 billion Term Loan has been classified as a current obligation.
Also, two stand-by letters of credit totaling $49.9 million remained issued
and outstanding as of June 30, 2000 under the $2.0 billion Revolving Credit
Facility to support municipal financing used in connection with the
proposed MGM Grand Detroit permanent casino.
These New Senior Facilities contain certain covenants, including the
requirement to maintain certain financial ratios, among others.
On March 24, 2000, the Company filed with the Securities and Exchange
Commission a $2.75 billion Shelf Registration Statement. The Shelf
Registration Statement allows the Company to issue up to a total of $2.75
billion of debt and equity securities. The Shelf Registration Statement
became effective on May 5, 2000. On May 31, 2000, the Company completed the
public offering of $710 million of Senior Subordinated
-8-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3. Long Term Debt (continued)
Notes, which carry a coupon of 9.75% and are due on June 1, 2007. These
Senior Subordinated Notes contain certain basic covenants consistent with
this type of indenture. Proceeds from this offering were used to repay a
portion of the then outstanding borrowings under Mirage's senior credit
facility. Any future public offering of securities will only be made by
means of a prospectus supplement.
On May 31, 2000, the $300 million 6.95% Senior Notes due 2005 and the
$200 million 6.875% Senior Notes due 2008 each received investment grade
ratings from both Moody's and Standard & Poor's. Consistent with these
ratings and upon the occurrence of certain events, the collateral was
released. The Senior Notes are pari passu with the New Senior Facilities
and contain various restrictive covenants, similar to the New Senior
Facilities.
In connection with the May 31, 2000 Mirage Acquisition, all of the
Mirage outstanding notes and debentures remained outstanding obligations.
The notes and debentures consist of the following: (1) $200 million 6.625%
notes due February 2005; (2) $250 million 7.25% notes due October 2006; (3)
$200 million 6.75% notes due August 2007; (4) $200 million 6.75% notes due
February 2008; and (5) $100 million 7.25% debentures due August 2017
(collectively, the "Mirage Notes").
The Company and each of its material subsidiaries, including Mirage,
unconditionally guarantee the New Senior Facilities, the Senior Notes, the
Mirage Notes and the Senior Subordinated Notes.
As of June 30, 2000, the Company was in compliance with all covenant
provisions associated with the aforementioned obligations.
Note 4. Stockholders' Equity
On March 1, 1999, the Company issued 19 million shares of its common
stock valued at approximately $243.6 million in connection with the
Primadonna Acquisition (see Note 2).
On July 23, 1999, the Company completed a $25.00 per share cash tender
offer for 12 million shares of its common stock. The total acquisition
cost of the 12 million shares was approximately $282 million.
On August 5, 1999, the Company announced a twelve-month stock
repurchase program for up to 10 million shares of its common stock. The
purchases were made from time to time in the open market or through
privately negotiated transactions as market conditions warranted. Through
June 30, 2000, the Company had purchased in the open market and in
privately negotiated transactions 3.1 million shares for an approximate
cost of $65.8 million. As a result of the Mirage Acquisition, the Company
suspended the program.
On December 13, 1999, the Board of Directors approved a 2-for-1
split of the Company's common stock and declared an initial quarterly cash
dividend of $0.10 per share, after giving effect to the stock split. The
additional shares were distributed on February 25, 2000 to stockholders of
record on February 10, 2000. The cash dividend totaling $11.3 million was
paid on March 1, 2000 to stockholders of record on February 10, 2000. All
references to share and per share data herein have been adjusted
retroactively to give effect to the stock split. Concurrently, the Board of
Directors increased the number of authorized shares of the Company's common
stock from 75 million shares to 300 million shares. As a result of the
Mirage Acquisition, the Company announced on April 19, 2000, that the
previously declared quarterly dividend policy was discontinued.
On April 18, 2000, the Company completed a private placement of 46.5
million shares of its common stock for a total purchase price of $1.23
billion. On May 18, 2000, as required by the private placement agreement,
the Company filed a shelf registration statement to register the resale of
these shares. Tracinda purchased 23 million shares in the private
placement.
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5. Statements of Cash Flows - Supplemental Disclosures
For the six months ended June 30, 2000 and 1999, cash payments made
for interest, net of amounts capitalized, were $76.9 million and $21.5
million, respectively.
Cash payments made for state and federal income taxes for the six
months ended June 30, 2000 and 1999 were $28.3 million and $16.1 million,
respectively.
As a result of the Primadonna Acquisition (see Note 2), the Company
issued stock to Primadonna shareholders valued at approximately $243.6
million and assumed long term debt totaling $315.2 million.
Note 6. Company Restructuring Plan
During the three months ended March 31, 2000, management initiated
and completed a restructuring plan designed to consolidate certain general
and administrative functions at NYNY and MGM Grand Las Vegas. This
restructuring resulted in a charge against earnings in the first quarter of
2000 totaling $5.5 million ($3.6 million, net of income tax). Approximately
70 people were affected by the reductions, primarily at the Company's
operating properties (excluding the Mirage Properties).
In connection with the Mirage Acquisition, management initiated a
comprehensive restructuring plan designed to reduce costs and improve
efficiencies of the combined operations of the Company. This restructuring
resulted in a charge against earnings in the second quarter of 2000
totaling $18.0 million ($11.7 million, net of income tax). The charge
included the accrual of costs associated with contract terminations and
staffing reductions of approximately $5.7 million, the buyout of various
leases of approximately $11.1 million and other related restructuring costs
of $1.2 million. Approximately 125 people were affected by the reductions,
primarily at the Company's operating properties (excluding the Mirage
Properties) relating to duplicative functions within marketing,
entertainment, retail, information systems and human resources. A
substantial majority of the accrued costs remained unpaid as of June 30,
2000.
Note 7. Asset Write-Downs and Impairments
During June 2000, the Company recognized a charge against earnings
totaling $102.2 million ($66.4 million, net of income tax) to record asset
impairments and project write-offs. The charge included approximately $49.5
million of costs associated with projects previously under development
which management has determined not to pursue, approximately $19.0 million
of costs associated with the divesting of certain non-strategic assets and
$33.7 million of costs associated with reevaluation of certain assets, all
as a result of the Mirage Acquisition.
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Quarter versus Quarter
Net revenues for the second quarter of 2000 were $627.2 million,
representing an increase of $308.1 million (96.6%) when compared with
$319.1 million during the same period last year. The increase in net
revenues was due principally to the July 1999 opening of the MGM Grand
Detroit Casino and the May 31, 2000 acquisition of the Mirage Properties.
The MGM Grand Detroit Casino generated $101 million of net revenues during
the quarter, while the Mirage Properties generated $193.5 million during
the one month since their acquisition. Net revenues also benefited from
strong casino and hotel volumes throughout the Company.
Consolidated casino revenues for the second quarter of 2000 were
$379.2 million, representing an increase of $196.6 million (107.7%) when
compared with $182.6 million during the same period in the prior year.
MGM Grand Las Vegas casino revenues were $110.9 million, representing an
increase of $5.3 million (5.0%) when compared with $105.6 million during
the same period in the prior year. The increase in casino revenues at MGM
Grand Las Vegas was a result of increased table games and baccarat volume
and win percentages, somewhat offset by decreased slots volume and win
percentage. MGM Grand Detroit Casino contributed $97.5 million to casino
revenues during the quarter as a result of the opening of the property on
July 29, 1999. The Mirage Properties contributed $92.4 million to casino
revenues during the second quarter of 2000 as a result of the Mirage
Acquisition on May 31, 2000.
Consolidated room revenues were $114.9 million for the second quarter
of 2000 compared with $67.4 million in the prior year's second quarter,
representing an increase of $47.5 million (70.5%). This increase was
primarily a result of the addition of the Mirage Properties, which
contributed $45.6 million to room revenues during the second quarter of
2000.
Consolidated food and beverage revenues were $89.0 million in the
second quarter of 2000, representing an increase of $49.0 million (122.5%)
when compared with $40.0 million in the second quarter of the prior year.
MGM Grand Las Vegas reported food and beverage revenues of $32 million
during the second quarter of 2000, representing an increase of $3.4 million
(11.9%) when compared with $28.6 million in the second quarter of 1999.
This increase primarily resulted from higher Conference Center revenue,
Studio 54 night club revenue and beverage revenue. MGM Grand Detroit
Casino contributed $6.2 million to food and beverage revenues during the
quarter and the Mirage Properties contributed $39.3 million.
Consolidated entertainment, retail and other revenues increased $37.0
million (67.6%) from $54.7 million in the 1999 period to $91.7 million in
the 2000 period. MGM Grand Las Vegas entertainment, retail and other
revenues increased $2.6 million (8.4%) from $31.0 million in the second
quarter of 1999 to $33.6 million in the second quarter of 2000. The
increase was the result of higher retail revenue associated with the Lion
Cub Encounter, in addition to higher spa and telephone revenues in the
current quarter. The increase was also attributable to the addition of the
Mansion and Wedding Chapel, both of which opened in June 1999. The Mirage
Properties contributed $33.8 million to entertainment, retail and other
revenues since the Mirage Acquisition on May 31, 2000.
The current quarter income from unconsolidated affiliates, of $2.7
million represents the Company's 50% share of Monte Carlo's operating
income since the Mirage Acquisition.
Consolidated operating expenses (before Restructuring costs, Write-
Downs and impairments and Corporate expense) were $488.0 million in the
second quarter of 2000, representing an increase of $223.7 million (84.6%)
when compared with $264.3 million for the same period last year. MGM Grand
Las Vegas expenses increased $5.9 million (3.6%) from $163.4 million in the
1999 period to $169.3 million in the 2000 period. The increase is
primarily due to increased casino expenses for gaming taxes, payroll,
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Quarter versus Quarter (continued)
marketing expenses and provision for doubtful accounts pertaining to the
increased casino revenues. The increase also reflects higher entertainment,
retail and other expenses related to the Lion Habitat and Mansion. As a
result of the opening of the property on July 29, 1999, MGM Grand Detroit
Casino added $66.4 million in operating expenses during the second quarter
of 2000. The Mirage Properties contributed $163.4 million to operating
expenses during the second quarter of 2000 as a result of the Mirage
Acquisition on May 31, 2000. These increases were partially offset by a
$12.9 million decrease in preopening and other resulting from the opening
of MGM Grand Detroit Casino.
During June 2000, management, in connection with the Mirage
Acquisition, initiated a comprehensive restructuring plan designed to
reduce costs and improve efficiencies of the combined operations of the
Company. This restructuring resulted in a charge against earnings in the
second quarter of 2000 totaling $18.0 million ($11.7 million, net of income
tax or 8 cents per share), primarily related to the accrual of costs
related to contract terminations and staffing reductions and the buyout of
various leases (see Note 6). Approximately 125 people were affected by the
reductions, primarily at the Company's operating properties (excluding the
Mirage Properties) relating to duplicative functions within marketing,
entertainment, retail, information systems and human resources. Management
estimates the annualized cost savings resulting from the restructuring to
be approximately $10.9 million.
During June 2000, management recognized a charge against earnings in
the current quarter of $102.2 million ($66.4 million, net of income tax or
44 cents per share), primarily related to certain projects previously under
development which management has determined not to pursue, the divesting of
certain non-strategic assets and reevaluation of certain assets all as a
result of the Mirage Acquisition (see Note 7).
Corporate expense for the 2000 second quarter was $7.7 million
compared with $4.5 million in 1999, representing an increase of $3.2
million. The increase in corporate expense was primarily due to the Mirage
Acquisition, as well as higher payroll expenses and aircraft costs during
the second quarter of 2000 compared with the prior year.
Interest income of $7.0 million for the three months ended June 30,
2000, increased by $6.6 million from $.4 million in the second quarter of
1999. The increase was primarily attributable to temporarily higher
invested cash balances in the current quarter related to the timing of the
equity offering funds received and the closing of the Mirage Acquisition.
Additionally, the increase was attributable to the Mirage Properties which
contributed $1.3 million to interest income during the second quarter of
2000.
Interest expense in the second quarter of 2000 was $47.4 million (net
of amounts capitalized) compared with $12.0 million in the second quarter
of 1999. The increase reflects increased outstanding loan balances relating
to construction of the MGM Grand Detroit Casino, debt assumed in the
Primadonna Acquisition on March 1, 1999 and new debt issued and assumed in
the Mirage Acquisition on May 31, 2000.
The extraordinary loss of $.7 million in 2000, net of income tax
benefit, reflects the write-off of unamortized debt costs resulting from
the termination of the $1.25 billion Revolving Credit Facility.
Six Months versus Six Months
Net revenues for the six months ended June 30, 2000 were $1,070
million, representing an increase of $499.6 million (87.6%) when compared
with $570.4 million during the same period in the prior year. The increase
in net revenues was a result of the addition of the Mirage Properties,
which contributed $193.5 million since the May 31, 2000 acquisition (see
Note 2), additional contribution from NYNY and the Primm Properties, which
increased $76.8 million due to the March 1, 1999 Primadonna Acquisition
(see Note 2) and, the contribution of $202.3 million from the MGM Grand
Detroit Casino which opened on July 29, 1999. Net revenues also benefited
from strong casino and hotel volumes throughout the Company.
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Six Months versus Six Months (continued)
Consolidated casino revenues for the six months ended June 30, 2000 were
$683.9 million, representing an increase of $363.2 million (113.3%) when
compared with $320.7 million during the same period in the prior year. MGM Grand
Las Vegas casino revenues were $238.8 million, representing an increase of $25.9
million (12.2%) when compared with $212.9 million during the same period in the
prior year. The increase in casino revenues at MGM Grand Las Vegas was primarily
a result of increased baccarat volume and hold percentages. During the 2000
period, casino revenues at NYNY and the Primm Properties increased $19.2 million
and $28.6 million, respectively, when compared with the same period in the prior
year. The increase at both properties was primarily due to the current year
receiving a full six month contribution from the Primadonna Acquisition on March
1, 1999. MGM Grand Detroit Casino contributed $195.5 million to casino revenues
since the opening of the property on July 29, 1999. The Mirage Properties
contributed $92.4 million to casino revenues since the Mirage Acquisition on May
31, 2000.
Consolidated room revenues for the period were $182.3 million compared
with $122.3 million for the same period in 1999, representing an increase of
$60.0 million (49.1%). The higher room revenues include a $9.5 million and a
$4.4 million increase at NYNY and the Primm Properties, respectively, in the
2000 period when compared with the 1999 period. These increases were a result of
the current year receiving a full six month contribution from the Primadonna
Acquisition on March 1, 1999. The Mirage Properties contributed $45.6 million to
room revenues since the Mirage Acquisition on May 31, 2000.
Consolidated food and beverage revenues for the period were $140.2
million, representing an increase of $65.7 million (88.2%) compared with $74.5
million in the same period of the prior year. MGM Grand Las Vegas food and
beverage revenues were $65.7 million, representing an increase of $7.2 million
(12.3%) compared with $58.5 million in the same period of the prior year. The
increase was primarily due to increased Conference Center revenue, Studio 54
night club revenue, and beverage revenue. NYNY and the Primm Properties
contributed food and beverage revenues of $6.8 million and $13.9 million,
respectively, in the current year compared with $4.4 million and $9.3 million,
respectively, during the same period in the prior year. The increase at both
properties was primarily due to the current year receiving a full six month
contribution from the Primadonna Acquisition on March 1, 1999. MGM Grand Detroit
Casino contributed $12 million to food and beverage revenues during the current
year and the Mirage Properties contributed $39.3 million.
Consolidated entertainment, retail and other revenues for the 2000 period
were $144.7 million, representing an increase of $49.6 million (52.2%) compared
with $95.1 million in the same period of the prior year. The increase in
entertainment, retail and other revenues was attributable in part to increased
revenues at both NYNY and the Primm Properties primarily due to the current year
receiving a full six month contribution from the Primadonna Acquisition. During
the 2000 period, entertainment, retail and other revenues at NYNY and the Primm
Properties increased $6.8 million and $7.2 million, respectively, when compared
with the 1999 period. The Mirage Properties contributed $33.8 million to
entertainment, retail and other revenues during the current year period.
Income from unconsolidated affiliates was $2.7 million for the six months
ended June 30, 2000 compared with $6.1 million in 1999. The current year amount
represents the Company's 50% share of Monte Carlo Resort & Casino's operating
income for the month of June 2000, resulting from the Mirage Acquisition. The
prior year's income from unconsolidated affiliates represents the Company's 50%
share of NYNY's operating income for the two-month period prior to the
Primadonna Acquisition.
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Six Months versus Six Months (continued)
Consolidated operating expenses (before Restructuring costs, Write-Downs
and impairments and Corporate expense) for the period totaled $827.1 million,
representing an increase of $354.4 million (75%) compared with $472.7 million in
the same period of the prior year. MGM Grand Las Vegas operating expenses were
$345.8 million, representing an increase of $20.6 million (6.3%) compared with
$325.2 million in the same period of the prior year. The increase was primarily
due to increased expenses related to the increased casino volume during the
current year. NYNY and the Primm Properties contributed operating expenses of
$71.8 million and $91.6 million, respectively, in the current year compared with
$46.9 million and $63.5 million, respectively, during the same period in the
prior year. The increase at both properties was primarily due to the current
year receiving a full six month contribution from the Primadonna Acquisition on
March 1, 1999. MGM Grand Detroit Casino contributed $140.6 million to operating
expenses during the current year as a result of the opening of the property on
July 29, 1999. The Mirage Properties contributed $163.4 million to operating
expenses during the current year. These increases were partially offset by a
$20.7 million decrease in preopening and other resulting from the opening of the
MGM Grand Detroit Casino.
During the 2000 period, management implemented comprehensive restructuring
plans designed to reduce costs and improve efficiencies within the Company. The
implementation of such plans resulted in a charge against earnings in the
current year totaling $23.5 million ($15.3 million, net of tax or 11 cents per
share) primarily related to consolidation of certain general and administrative
functions at NYNY and MGM Grand Las Vegas, various contract terminations and
staffing reductions, the buyout of various leases and other related items (see
Note 6). Approximately 195 people were affected by the reductions, primarily at
the Company's operating properties (excluding the Mirage Properties) relating to
duplicative functions within marketing, entertainment, retail, information
systems and human resources. Management estimates the annualized cost savings
resulting from these restructurings to be approximately $15.8 million.
During June 2000, the Company recognized a charge against earnings in the
period of $102.2 million ($66.4 million, net of tax or 50 cents per share),
primarily related to certain projects previously under development which
management has determined not to pursue, the divesting of certain non-strategic
assets and the re-evaluation of certain assets all as a result of the Mirage
Acquisition (see Note 7).
Corporate expense for 2000 was $13.5 million compared with $9.6 million in
1999. The increase in corporate expense was primarily due to the Mirage
Acquisition, and higher payroll expenses, aircraft expenses and professional
fees in the current year.
Interest income of $7.7 million for the period ended June 30, 2000,
increased by $7.0 million from $.7 million in the same period of 1999. The
increase was primarily attributable to higher temporary invested cash balances
in the current period related to the timing of the equity offering funds
received and the closing of the Mirage Acquisition. Additionally, the increase
was attributable to the Mirage Properties which contributed $1.3 million to
interest income during 2000.
Interest expense for the six months ended June 30, 2000 was $69.5 million
(net of amounts capitalized) compared with $20.2 million in the same period of
1999. The increase reflects higher outstanding loan balances relating to
construction of the MGM Grand Detroit Casino, debt assumed in the Primadonna
Acquisition on March 1, 1999 and new debt issued and assumed in the Mirage
Acquisition on May 31, 2000. Capitalized interest during the 2000 period
increased $5.5 million from $10.3 million in 1999 to $15.8 million in 2000
related to various ongoing development projects.
The extraordinary loss of $.7 million in 2000, net of income tax benefit,
reflects the write-off of unamortized debt costs from the $1.25 billion
Revolving Credit Facility. Extraordinary loss of $.9 million in 1999, net of
income tax benefit, reflects the write-off of unamortized debt costs resulting
from the termination of the NYNY LLC bank facility, which was extinguished on
March 31, 1999.
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Six Months versus Six Months (continued)
Cumulative effect of change in accounting principle of $8.2 million in
1999, net of income tax benefit, reflects the Company's adoption of Statement of
Position 98-5 ("SOP 98-5") which requires that costs associated with start-up
activities must be expensed as incurred.
Liquidity and Capital Resources
As of June 30, 2000 and December 31, 1999, the Company held cash and cash
equivalents of $211.4 million and $121.5 million, respectively. Cash provided by
operating activities for the first six months of 2000 was $284.9 million
compared with $104.2 million for the same period of 1999.
During the six months ended June 30, 2000, $118 million was drawn down and
$730 million was repaid on the former $1.25 billion revolving credit Facility.
During the six months ended June 30, 2000, $4.21 billion was drawn down and $115
million was repaid on the $4.3 billion Facility and $4.1 billion remained
outstanding at the end of the period. During the six months ended June 30, 2000,
$10 million was drawn down and $63 million was repaid on the Detroit Facility
and $116 million remained outstanding at the end of the period.
Capital expenditures for the six months ended June 30, 2000 were $125.1
million of which approximately $99.6 million related to general property
improvements at the Company's resorts, including the ongoing room refurbishment
program at MGM Grand Las Vegas, the development of a new golf course and land
acquired by the MGM Grand Detroit Casino. Also, the Company incurred
approximately $25.5 million related to pre-construction activities and land
acquisitions associated with ongoing development projects, including capitalized
interest. Capital expenditures relating to general property improvements are
estimated to be approximately $149 million for the remainder of 2000. Also,
management estimates that the Company may incur approximately $227 million
related to ongoing pre-construction activities, land acquisitions and
capitalized interest for the balance of 2000.
On August 5, 1999, the Company announced a twelve-month stock repurchase
program for up to 10 million shares of its common stock. The purchases were made
from time to time in the open market or through privately negotiated
transactions as market conditions warranted. Through June 30, 2000, the Company
purchased 3.1 million shares for an approximate cost of $65.8 million. As a
result of the Mirage Acquisition, the Company suspended the program.
On December 13, 1999, the Board of Directors approved a 2-for-1 stock
split of the Company's common stock and declared an initial quarterly cash
dividend of $0.10 per share, after giving effect to the stock split. The
additional shares were distributed on February 25, 2000 to stockholders of
record on February 10, 2000. The cash dividend totaling $11.3 million was paid
on March 1, 2000 to stockholders of record on February 10, 2000. All references
to share and per share data herein have been adjusted retroactively to give
effect to the stock split. Concurrently, the Board of Directors increased the
number of authorized shares of the Company's common stock from 75 million shares
to 300 million shares. As a result of the Mirage Acquisition, the Company
announced on April 19, 2000 that the previously declared quarterly dividend
policy was discontinued.
On March 24, 2000, the Company filed with the Securities and Exchange
Commission a $2.75 billion Shelf Registration Statement. The Shelf Registration
Statement allows the Company to issue up to $2.75 billion of debt and equity
securities. The Shelf Registration Statement became effective on May 5,
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Liquidity and Capital Resources (continued)
2000. After giving effect to the issuance of the $710 million Senior
Subordinated Notes (see Note 3), the Shelf Registration Statement has
approximately $2.0 billion in remaining capacity for the issuance of future debt
or equity securities. Any future public offering of securities will only be made
by means of a prospectus supplement.
The Company intends to refinance the $1.3 billion Term Loan prior to its
maturity through the issuance of debt or equity securities under the shelf
registration statement or through other financing alternatives. The Company
currently has financing commitments in place that could be used to refinance a
portion of the $1.3 billion Term Loan. As of August 11, 2000, $329 million was
available under such commitments.
On May 31, 2000, the Company completed the Mirage Acquisition whereby
Mirage shareholders received $21 per share in cash. The acquisition had a total
equity value of approximately $4.4 billion. In addition, the Company assumed
$950 million of Mirage's outstanding debt and refinanced approximately $1.0
billion of borrowings outstanding under Mirage's senior credit facility. Funds
needed to complete the acquisition were approximately $6.2 billion. These funds
included payments made to Mirage shareholders and holders of Mirage stock
options, refinancing of Mirage's senior credit facility and certain indebtedness
of MGM Grand, payment of fees and expenses in connection with the Mirage
Acquisition and funds for general corporate purposes. The funds for the Mirage
Acquisition were provided largely by borrowings under the Company's $4.3 billion
New Senior Facilities (see Note 3). In addition, the Company completed the
private placement of 46.5 million shares of its common stock for a total
purchase price of approximately $1.23 billion (see Note 4), utilized proceeds
from the issuance of $710 million in Senior Subordinated Notes (see Note 3) and
used cash on hand to fund the remaining balance. The Company's interest expense
has increased substantially as a result of the Mirage Acquisition.
The Company intends to focus on utilizing all available free cash flow to
pay down debt under existing and future debt obligations, as well as to finance
its ongoing operations. Management expects to finance operations, capital
expenditures and existing debt obligations through cash flow from operations,
cash on hand, bank lines of credit and public offerings under the $2.75 billion
Shelf Registration Statement.
Safe Harbor Provision
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
report contains statements that are forward-looking, such as statements relating
to plans for future expansion and other business development activities, as well
as other capital spending, financing sources, the effects of regulation
(including gaming and tax regulations) and competition. Such forward-looking
information involves important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made by or on
behalf of the Company. These risks and uncertainties include, but are not
limited to, those relating to competition, development and construction
activities, dependence on existing management, leverage and debt service
(including sensitivity to fluctuations in interest rates), pending or future
legal proceedings, domestic or international economic conditions (including
sensitivity to fluctuations in foreign currencies), changes in federal or state
tax laws or the administration of such laws, changes in gaming laws or
regulations (including the legalization of gaming in certain jurisdictions) and
application for licenses and approvals under applicable laws and regulations
(including gaming laws and regulations).
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Part II. OTHER INFORMATION
Items 3, 4 and 5 of Part II are not applicable.
Item 1. Legal Proceedings
On September 28, 1999, a former stockholder of the Company's subsidiary
which owns and operates the Holiday Inn(R) Boardwalk hotel-casino filed a first
amended complaint in a putative class action lawsuit in District Court for Clark
County, Nevada against Mirage and certain former directors and principal
stockholders of the subsidiary. The complaint alleged that Mirage induced the
other defendants to breach their fiduciary duties to Boardwalk's minority
stockholders by devising and implementing a scheme by which Mirage acquired
Boardwalk at significantly less than the true value of its shares. The complaint
sought an unspecified amount of compensatory damages from Mirage and punitive
damages from the other defendants, whom the Company is required to defend and
indemnify. In June 2000, the court granted the Company's motion to dismiss the
complaint for failure to state a claim upon which relief may be granted. In July
2000, the plaintiff filed a notice of appeal from the order of dismissal.
Part II, Item 1 of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000 contains a description of 11 putative class action
complaints filed in District Court for Clark County, Nevada against Mirage and
its former directors relating to the Mirage Acquisition. In July 2000, the court
consolidated the original 10 cases. The Company's motion to dismiss the
complaints for failure to state a claim upon which relief may be granted, and
the plaintiff's motion in the unconsolidated case to impose a constructive trust
on the Company's artwork, are scheduled to be heard by the court on August 28,
2000.
Item 2. Changes in Securities and Use of Proceeds
(c) On April 18, 2000, the Company sold 46.5 million shares of its common
stock in a private placement for a total purchase price of $1.23 billion.
Tracinda, the Company's principal shareholder, purchased 23 million shares in
the private placement, and the remaining shares were sold to a limited number of
other accredited investors. The sale was exempt from registration under Section
4(2) of the Securities Act of 1933 and Rule 506 thereunder.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4 Indenture, dated as of May 31, 2000, among the Company, as issuer,
the Subsidiary Guarantors, as guarantors, and Bank One of New York,
as trustee. Incorporated by reference to Exhibit 4 to the Company's
Current Report on Form 8-K filed on July 6, 2000 (the "July Form 8-
K").
10.1 Letter Agreement dated February 21, 2000 between the Company and J.
Terrence Lanni.
10.2 Letter Agreement dated June 1, 2000 between the Company and John T.
Redmond.
10.3 Letter Agreement dated June 1, 2000 between the Company and Daniel
M. Wade.
10.4 Letter Agreement dated June 1, 2000 between the Company and James J.
Murren.
10.5 Letter Agreement dated June 1, 2000 between the Company and Gary N.
Jacobs.
10.6 Agreement for Sale of Shares dated April 14, 2000 between the
Company and the Purchasers (as defined therein).
10.7 Subsidiary Guaranty (Second Amended and Restated Loan Agreement),
dated as of May 31, 2000, by the Company and certain of its
subsidiaries, in favor of Bank of America, N.A., as Administrative
Agent for the benefit of the Banks that are party to the Loan
Agreement referred to therein. Incorporated by reference to Exhibit
10.1 to the July Form 8-K.
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K (continued)
(a) Exhibits (continued)
10.8 Schedule setting forth material details of the Subsidiary Guaranty
(364-Day Loan Agreement), by the Company and certain of its
subsidiaries, in favor of Bank of America, N.A., as Administrative
Agent for the benefit of the Banks that are party to the Loan
Agreement referred to therein. Incorporated by reference to
Exhibit 10.2 to the July Form 8-K.
10.9 Schedule setting forth material details of the Subsidiary Guaranty
(Term Loan Agreement), by the Company and certain of its
subsidiaries, in favor of Bank of America, N.A., as Administrative
Agent for the benefit of the Banks that are party to the Loan
Agreement referred to therein. Incorporated by reference to
Exhibit 10.3 to the July Form 8-K.
10.10 Guarantee, dated as of May 31, 2000, by certain subsidiaries of
the Company, in favor of The Chase Manhattan Bank, as successor in
interest to PNC Bank, National Association, as trustee for the
benefit of the holders of Notes pursuant to the Indenture referred
to therein. Incorporated by reference to Exhibit 10.4 to the July
Form 8-K.
10.11 Schedule setting forth material details of the Guarantee, dated as
of May 31, 2000, by certain subsidiaries of the Company, in favor
of U.S. Trust Company, National Association (formerly known as
U.S. Trust Company of California, N.A.), as trustee for the
benefit of the holders of Notes pursuant to the Indenture referred
to therein. Incorporated by reference to Exhibit 10.5 to the July
Form 8-K.
10.12 Guarantee (Mirage Resorts, Incorporated 7.25% Senior Notes Due
October 15, 2006), dated as of May 31, 2000, by the Company and
certain of its subsidiaries, in favor of Firstar Bank of
Minnesota, N.A., as trustee for the benefit of the holders of
Notes pursuant to the Indenture referred to therein. Incorporated
by reference to Exhibit 10.6 to the July Form 8-K.
10.13 Schedule setting forth material details of the Guarantee (Mirage
Resorts, Incorporated 6.625% Notes Due February 1, 2005 and 6.75%
Notes Due February 1, 2008), dated as of May 31, 2000, by the
Company and certain of its subsidiaries, in favor of The Chase
Manhattan Bank, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein. Incorporated
by reference to Exhibit 10.7 to the July Form 8-K.
10.14 Schedule setting forth material details of the Guarantee (Mirage
Resorts, Incorporated 6.75% Notes Due August 1, 2007 and 7.25%
Debentures Due August 1, 2017), dated as of May 31, 2000, by the
Company and certain of its subsidiaries, in favor of First
Security Bank, National Association, as trustee for the benefit of
the holders of the Notes pursuant to the Indenture referred to
therein. Incorporated by reference to Exhibit 10.8 to the July
Form 8-K.
10.15 Instrument of Joinder, dated as of May 31, 2000, by Mirage and
certain of its wholly owned subsidiaries, in favor of the
beneficiaries of the Guarantees referred to therein. Incorporated
by reference to Exhibit 10.9 to the July Form 8-K.
10.16 Second Amended and Restated Loan Agreement, dated as of April 10,
2000, among the Company, 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 Banc of America Securities LLC, as Lead Arranger and
Sole Book Manager. Incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on April 17, 2000
(the "April Form 8-K").
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<PAGE>
MGM MIRAGE AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K (continued)
(a) Exhibits (continued)
10.17 364-Day Loan Agreement, dated as of April 10, 2000, among the
Company, 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 Banc of
America Securities LLC, as Lead Arranger and Sole Book Manager.
Incorporated by reference to Exhibit 10.2 to the April Form 8-K.
10.18 Term Loan Agreement, dated as of April 7, 2000, among the Company,
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 Banc of America
Securities LLC, as Lead Arranger and Sole Book Manager.
Incorporated by reference to Exhibit 10.3 to the April Form 8-K.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company filed the following Current Reports on Form 8-K during the
quarter ended June 30, 2000:
1. Current Report on Form 8-K, dated April 13, 2000, filed by the
Company on April 17, 2000 in which events under Item 5, Other
Events and Item 7, Financial Statements and Exhibits were
reported.
2. Current Report on Form 8-K, dated May 17, 2000, filed by the
Company on May 18, 2000 in which events under Item 5, Other Events
were reported.
3. Current Report on Form 8-K, dated May 18, 2000, filed by the
Company on May 18, 2000 in which events under Item 5, Other Events
were reported.
4. Current Report on Form 8-K, dated May 19, 2000, filed by the
Company on May 19, 2000 in which events under Item 5, Other Events
and Item 7, Financial Statements and Exhibits were reported.
5. Current Report on Form 8-K, dated June 14, 2000, filed by the
Company on June 15, 2000 in which events under Item 2, Acquisition
or Disposition of Assets and Item 7, Financial Statements and
Exhibits were reported.
-19-
<PAGE>
MGM MIRAGE AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MGM MIRAGE
-----------------------------------------
(Registrant)
Date: August 11, 2000 By: /s/ J. Terrence Lanni
-------------------------------------------
J. Terrence Lanni
Chairman
(Principal Executive Officer)
Date: August 11, 2000 By: /s/ James J. Murren
--------------------------------------------
James J. Murren
President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
-20-
