UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
_________
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-11324
GNS FINANCE CORP.
THE MIRAGE CASINO-HOTEL
(EXACT NAME OF EACH REGISTRANT AS SPECIFIED IN ITS CHARTER)
_________
88-0235356
NEVADA 88-0224157
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBERS)
3400 LAS VEGAS BOULEVARD SOUTH
LAS VEGAS, NEVADA 89109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE: (702) 791-7111
_________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
___________________________________ _______________________
9 1/4% Series B Senior Subordinated
Notes Due March 15, 2003 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports) and (2) have been subject
to such filing requirements for the past 90 days: YES X NO
_____ _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be con-
tained, to the best of the Registrants' knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K: X
_____
GNS FINANCE CORP.'s Common Stock, no par value, outstanding at March 29,
1996 was 200 shares, none of which was held by non-affiliates.
THE MIRAGE CASINO-HOTEL's Common Stock, no par value, outstanding
at March 29, 1996 was 100 shares, none of which was held by non-affiliates.
The Registrants meet the conditions set forth in General Instructions
J(1)(a) and (b) of Form 10-K and, accordingly, are filing this Form 10-K
with the reduced disclosure format provided in General Instruction J(2).
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PART I
ITEM 1. BUSINESS
GENERAL
GNS FINANCE CORP. ("Finance") was incorporated in Nevada in
March 1988 as a wholly owned subsidiary of Mirage Resorts,
Incorporated ("MRI"), a Nevada corporation whose common stock is
traded on the New York Stock Exchange under the symbol "MIR."
THE MIRAGE CASINO-HOTEL ("MCH") was incorporated in Nevada in
September 1986 as a wholly owned subsidiary of MRI. MCH owns and
operates The Mirage, a hotel-casino and destination resort which
opened in 1989. The Mirage shares with the Treasure Island
hotel-casino, as discussed below, approximately 120 acres near
the center of the Las Vegas Strip. Finance functions solely
as a financing corporation to raise funds for the benefit of MCH
and has no other operations. Treasure Island Corp. ("TI"), a
wholly owned subsidiary of MCH, was incorporated in Nevada in
December 1991. On October 26, 1993, TI opened Treasure Island at
The Mirage ("Treasure Island"), a hotel-casino resort located
adjacent to The Mirage. Treasure Island Finance Corp. ("TI
Finance") is a wholly owned subsidiary of Finance and was also
incorporated in Nevada in December 1991. TI Finance functions
solely as a financing corporation to raise funds for the benefit
of TI and has no other operations.
THE MIRAGE
The Mirage is a luxurious, tropically themed destination
resort containing approximately 3.1 million square feet in a 29-
story Y-shaped hotel tower and an expansive low-rise complex.
The Mirage features a 95,500-square foot casino, 3,044 hotel
rooms (including 265 suites and 14 villa and lanai suites),
approximately 82,000 square feet of meeting, convention and
banquet space, a parking garage with space for approximately
2,200 vehicles, a valet parking garage with space for
approximately 1,830 vehicles shared with Treasure Island, surface
parking for approximately 1,650 vehicles, a 1,500-seat showroom
showcasing the world-famous illusionists Siegfried & Roy, five
gourmet restaurants, a California-style pizza restaurant, a
coffee shop, a buffet, four bars (two featuring live entertain-
ment), two snack bars, an ice cream parlor, a health spa and
beauty salon, a swimming pool and cabana area, a white
tiger display and extensive retail facilities. During 1995,
all of the standard guest rooms and 61 of the suites were
extensively refurbished and enhanced. 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 simulated volcano and waterfall. Each evening,
the volcano erupts at regular intervals, spectacularly
illuminating 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
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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.
As of March 1, 1996, The Mirage's casino offered 119 table
games (including blackjack, craps, roulette, baccarat, mini-
baccarat, let it ride, pai gow, pai gow poker, Caribbean stud
poker and big six), keno, poker, a race and sports book and
approximately 2,255 slot machines or similar coin-operated
devices.
The Mirage operates 24 hours a day, every day of the year.
Management does not consider its business to be particularly
seasonal.
TREASURE ISLAND
Treasure Island is a pirate-themed hotel-casino resort located
on the same site as The Mirage. Treasure Island features a
78,400-square foot casino, 2,900 hotel rooms (including
212 suites), two gourmet restaurants, an Italian specialties
grill, a coffee shop, a buffet, three snack bars, an ice
cream parlor, five bars (two featuring live entertainment), a
1,500-seat showroom featuring "Mystere" (a production developed
by the creators of the world-renowned Cirque du Soleil)
and an 18,000-square foot amusement arcade. Treasure Island
also offers extensive retail facilities, approximately 18,000
square feet of meeting and banquet space, two wedding
chapels, a swimming pool with a 230-foot water slide, a parking
garage with space for approximately 2,400 vehicles and the valet
parking garage shared with The Mirage. The front of Treasure
Island, facing the Las Vegas Strip, is an elaborate pirate
village in which full-scale replicas of a pirate ship and a
British frigate periodically engage in a pyrotechnic and
special effects sea battle, culminating with the sinking of the
frigate.
As of March 1, 1996, Treasure Island's casino offered 82 table
games (including blackjack, craps, roulette, baccarat, mini-
baccarat, let it ride, pai gow, pai gow poker, Caribbean stud
poker and big six), keno, poker, a race and sports book and
approximately 2,160 slot machines or similar coin-operated
devices.
Treasure Island operates 24 hours a day, every day of the
year. Management does not consider its business to be
particularly seasonal.
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SHADOW CREEK
MCH's wholly owned subsidiary, MH, INC. ("MH"), owns
approximately 305 acres of real property located approximately 10
miles north of The Mirage and Treasure Island. MCH has developed
an exclusive world-class golf course and related facilities known
as "Shadow Creek" on approximately 240 acres of such property.
In connection with their marketing activities, MCH and TI make
the course and related facilities available for use, by
invitation only, by high-level-wagerer patrons.
COMPETITION
The Mirage and Treasure Island compete with a number of other
hotel-casinos in Las Vegas. Currently, there are approximately
27 major hotel-casinos located on or near the Las Vegas Strip,
nine major hotel-casinos located in the downtown area and
several major facilities located elsewhere in the Las Vegas
area. As of March 1, 1996, there were approximately
86,500 hotel and motel rooms in Las Vegas. Las Vegas room
capacity is expected to increase significantly during the next
three years upon the completion and opening of several new
hotel-casinos and expansion projects.
Management believes that The Mirage primarily competes with
other large hotel-casinos located on or near the Strip that
offer amenities and marketing programs appealing to the upper-
middle and higher-income strata of the gaming populace.
The Mirage competes on the basis of the elegance and excitement
offered by the facility, the desirability of its location,
the quality and relative value of its hotel rooms and
restaurants, its entertainment, customer service, its balanced
marketing strategy and special marketing and promotional
programs.
Management believes that Treasure Island primarily competes
with the other large hotel-casinos located on or near the Strip
that offer amenities and marketing programs that appeal to the
middle- to upper-middle-income strata of the gaming populace.
Treasure Island competes on the basis of the excitement offered
by the facility, the desirability of its location (including its
proximity to The Mirage), the quality of its hotel rooms, the
variety, quality and attractive pricing of its food and
beverage outlets, its unique entertainment offerings, customer
service and its marketing and promotional programs.
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The Mirage and Treasure Island also compete for gaming
customers with hotel-casino operations located in other areas of
Nevada, Atlantic City and other parts of the world, and for
vacationers with non-gaming tourist destinations such as Hawaii
and Florida. The Mirage and Treasure Island compete to a lesser
extent with state-sponsored lotteries, off-track wagering,
card parlors, riverboat and Indian gaming ventures and other
forms of legalized gaming in the United States, as well as with
gaming on cruise ships. In recent years, certain states
have legalized, and several other states are currently
considering legalizing, casino gaming. Management does not
believe that such legalization of casino gaming in those juris-
dictions will have a material adverse impact on MCH's and TI's
operations. However, management believes that the legalization
of large-scale land-based casino gaming in or near certain major
metropolitan areas, particularly in California, could have a
material adverse effect on the Las Vegas market.
REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in
Nevada are subject to extensive state and local regulation.
MCH's and TI's gaming operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission, the Nevada
State Gaming Control Board and the Clark County Liquor and Gaming
Licensing Board. To the best knowledge of management, MCH and TI
are presently in material compliance with all applicable state
and local gaming laws, regulations and supervisory procedures.
For a more detailed description of such matters, reference is
made to the section entitled "Regulation and Licensing" in Item 1
of Part I of MRI's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, a copy of which section is filed as
Exhibit 99 to this Form 10-K and is hereby incorporated by
reference.
MANAGEMENT'S ANALYSIS OF OPERATIONS (1995 COMPARED TO 1994)
RESULTS OF OPERATIONS
Net revenues during 1995 increased $79.7 million, or 8%,
reflecting substantial growth in both casino and non-casino
revenues. The Mirage and Treasure Island achieved a 19%
increase in table games revenues attributable almost equally
to a higher win percentage and a strong increase in the level of
activity, particularly baccarat play. The table games win
percentage for the year was 21.1%, compared to 19.4% in 1994.
Slot revenues increased 1% over 1994. However, other
casino revenues declined due primarily to a lower sports book
win percentage.
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Non-casino revenues net of promotional allowances increased
by $20.6 million, or 5%. A major contributor to this was a 22%
increase in entertainment revenues. This growth partially
reflects a 16% increase in the number of performances by
Siegfried & Roy, whose performance schedule was curtailed
during 1994 due to knee surgery required by one of the
principal performers. Furthermore, the "Mystere" production
achieved higher occupancy and a higher average ticket price
for the year. Both Siegfried & Roy and "Mystere" played to
average occupancy of nearly 100% during 1995. The increase in
ticket prices and showroom occupancy resulted in an improvement
in gross margins and profitability.
Combined net room revenues increased 5% for the year. This was
particularly notable as the number of available room nights
declined 8%, due to construction of the room enhancement program
at The Mirage. The program entailed significant upgrading of
all 2,765 standard guest rooms and 61 of the 279 suites. Combined
net revenues per available room night increased 10% over 1994.
Combined occupancy of standard guest rooms remained steady,
at approximately 99%. The increase in average room rate helped
achieve an increase in the gross margin on room revenues.
General and administrative expense in 1994 includes
abandonment charges totaling $11.9 million, principally
reflecting an $11.0 million charge associated with the room
enhancement program. During 1995, various smaller projects
resulted in similar charges of $3.5 million. Combined
depreciation expense declined 9%, principally due to certain
equipment at The Mirage having five-year depreciable lives
becoming fully depreciated near the end of 1994.
OTHER INCOME AND EXPENSES
Interest cost related to notes payable to non-affiliates
declined by $19.7 million, or 41%, primarily reflecting debt
levels that on average were approximately 38% lower than they
were in 1994.
In April 1995, the $518.9 million outstanding principal
balance of notes payable to MRI was repaid using the proceeds
from the sale to MRI of 100 shares of Finance's common stock. As
a result, interest expense for 1995 related to such notes
decreased by $21.5 million, or 60%.
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FEDERAL INCOME TAXES
MRI and its subsidiaries file federal income tax returns on a
consolidated basis. MRI has tax allocation agreements (which are
not binding on the Internal Revenue Service) with each of its key
subsidiaries, including MCH, TI, Finance and TI Finance, which
require each of them to reimburse MRI for the amount of tax they
would pay on a stand-alone basis. This includes reimbursement
for any additional taxes and interest thereon resulting from
Internal Revenue Service audit adjustments. Under the Internal
Revenue Code, MRI's consolidated subsidiaries are jointly and
severally liable for all income tax liabilities.
As a result of the tax allocation agreements, the tax
provision is not calculated on the combined income or loss of
MCH, TI, Finance and TI Finance. Instead, it reflects the sum of
their respective tax provisions and benefits. This resulted in a
combined provision in 1995 and 1994 at a rate above the federal
income tax statutory rate.
EXTRAORDINARY ITEM
During 1994 and 1995, some of Finance 's and TI Finance's debt
was retired prior to its scheduled maturity. Although these
retirements were financially advantageous, the call premiums and
the write-off of the related unamortized debt issuance costs
resulted in extraordinary charges.
ITEM 2. PROPERTIES
The Mirage and Treasure Island share approximately 120 acres
owned by MCH near the center of the Las Vegas Strip. At
March 1, 1996, both The Mirage and Treasure Island were subject
to an encumbrance of approximately $106.6 million, representing
the accreted value of Finance's zero coupon first mortgage notes.
MCH, through MH, also owns approximately 305 acres of land in
North Las Vegas, including approximately 240 acres occupied by
Shadow Creek.
ITEM 3. LEGAL PROCEEDINGS
On August 23, 1995, an amended complaint in a purported class
action lawsuit was filed in the United States District Court for
the District of New Jersey, Camden Division, against 80
defendants, including TI and other hotel-casino operators. The
complaint alleges that the defendants have engaged in a course of
conduct involving conspiracy among casinos in the United States
to refuse to deal to blackjack players who are capable of winning
money at the casinos' blackjack tables in violation of various
statutory provisions, including the Sherman Act, the Fair Credit
Reporting Act and state antitrust and consumer fraud laws. The
complaint also asserts pendant causes of action under the tort
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and contract laws of states where it is alleged that refusal to
deal to such players is illegal. The complaint seeks unspecified
compensatory damages as well as punitive damages, including
treble damages for alleged violations of the Sherman Act. TI and
other defendants have moved to dismiss the complaint for failure
to state a claim. No hearing has been set on this motion.
Management believes that the claims against TI are without merit
and intends to defend the case vigorously.
MCH (including its subsidiaries) is also a defendant in
various other lawsuits, most of which relate to routine matters
incidental to its business. Management does not believe that the
outcome of such pending litigation, in the aggregate, will have a
material adverse effect on MCH.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted in accordance with General Instruction J(2) of Form
10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no public trading market for the Common Stock of MCH
or Finance.
ITEM 6. SELECTED FINANCIAL DATA
Omitted in accordance with General Instruction J(2) of Form
10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Omitted in accordance with General Instruction J(2) of Form
10-K. See "Management's Analysis of Operations (1995 Compared to
1994)" in Item 1 of Part I of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Combined Financial Statements and Notes to Combined
Financial Statements of THE MIRAGE CASINO-HOTEL and Subsidiaries
and GNS FINANCE CORP. and Subsidiary, referred to in Item
14(a)(1) of this Form 10-K, are included at pages 9 to 22.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted in accordance with General Instruction J(2) of Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
Omitted in accordance with General Instruction J(2) of Form
10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Omitted in accordance with General Instruction J(2) of Form
10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted in accordance with General Instruction J(2) of Form
10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1). FINANCIAL STATEMENTS.
Included in Part II of this Report:
Reports of Independent Public Accountants
Combined Balance Sheets - December 31, 1995 and 1994
Years ended December 31, 1995, 1994 and 1993
Combined Statements of Operations and Retained
Earnings (Accumulated Deficit)
Combined Statements of Cash Flows
Notes to Combined Financial Statements
(a)(2). FINANCIAL STATEMENT SCHEDULES.
Included in Part IV of this Report:
For the years ended December 31, 1995, 1994 and 1993
Schedule II - Valuation and Qualifying Accounts
Schedules other than that listed above are omitted because
they are not required or are not applicable, or the required
information is shown in the financial statements or notes to the
financial statements.
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(a)(3). EXHIBITS.
3(i)(a) Articles of Incorporation of Finance.
Incorporated by reference to Exhibit 3(a) to
the Registration Statement filed by MCH and
Finance on Form S-1 under the Securities Act
of 1933 (No. 33-22369) (the "Form S-1").
3(i)(b) Amendment to Articles of Incorporation of
Finance, filed May 27, 1988. Incorporated by
reference to Exhibit 3(b) to the Annual Report
on Form 10-K of MCH and Finance for the fiscal
year ended December 31, 1988 (the "1988
Form 10-K").
3(i)(c) Articles of Incorporation of MCH, filed
September 30, 1986, and amendments, filed
April 28, 1987, May 18, 1987, August 25, 1987
and February 23, 1988. Incorporated by
reference to Exhibit 3(c) to the Form S-1.
3(i)(d) Amendment to Articles of Incorporation of MCH,
filed April 25, 1989. Incorporated by
reference to Exhibit 3(e) to Post-Effective
Amendment No. 1 to the Registration Statement
filed by MCH and Finance on Form S-1 under the
Securities Act of 1933 (No. 33-23701) (the
"Second Form S-1").
3(i)(e) Amendment to Articles of Incorporation of MCH,
filed May 31, 1989. Incorporated by
reference to Exhibit 3(f) to Post-Effective
Amendment No. 2 to the Second Form S-1.
3(ii)(a) Bylaws of Finance. Incorporated by reference
to Exhibit 3(c) to the 1988 Form 10-K.
3(ii)(b) Bylaws of MCH. Incorporated by reference to
Exhibit 3(d) to the Form S-1.
4(a) Indenture, dated as of March 15, 1988, with
respect to Finance's Zero Coupon First
Mortgage Notes Due March 15, 1998, together
with exhibits (the "Zero Coupon Notes
Indenture"). Incorporated by reference to
Exhibit 4(c) to the Form S-1.
4(b) First Supplemental Indenture, dated as of
August 1, 1988, to the Zero Coupon Notes
Indenture. Incorporated by reference to
Exhibit 4(f) to Amendment No. 1 to the
Form S-1.
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4(c) Second Supplemental Indenture, dated as of
January 15, 1990, to the Zero Coupon
Notes Indenture. Incorporated by reference
to Exhibit 4(l) to the Annual Report on
Form 10-K of Finance for the fiscal year ended
December 31, 1989.
4(d) Third Supplemental Indenture, dated as of
October 15, 1990, to the Zero Coupon
Notes Indenture. Incorporated by reference
to Exhibit 4(r) to Amendment No. 1 to the
Annual Report on Form 10-K of Finance for the
fiscal year ended December 31, 1990.
4(e) Fourth Supplemental Indenture, dated as of
June 15, 1992, to the Zero Coupon Notes
Indenture. Incorporated by reference to
Exhibit 19.4 to the Quarterly Report on Form
10-Q of MRI for the fiscal quarter ended June
30, 1992.
4(f) Indenture, dated as of March 31, 1993, with
respect to Finance's 9 1/4% Senior
Subordinated Notes Due March 15, 2003,
together with exhibits. Incorporated by
reference to Exhibit 4 to the Current Report
on Form 8-K of MRI dated March 31, 1993.
10(a) Deed of Trust, Assignment of Rents and
Security Agreement, dated as of March 23,
1988, from MCH in favor of First Interstate
Bank of Nevada, N.A. ("FIBN"), as trustee.
Incorporated by reference to Exhibit 10(xx)
to the Annual Report on Form 10-K of MRI for
the fiscal year ended December 31, 1987.
10(b) Tax Allocation Agreement, dated as of March 9,
1988, between Finance and MRI. Incorporated by
reference to Exhibit 10(g) to the Form S-1.
10(c) Tax Allocation Agreement, dated as of
January 1, 1988, between MCH and MRI.
Incorporated by reference to Exhibit 10(h) to
the Form S-1.
10(d) Management Agreement, dated as of January 1,
1988, between MCH and MRI. Incorporated by
reference to Exhibit 10(i) to the Form S-1.
10(e) Amendment Agreement, dated as of October 4,
1990, between MCH, as trustor, and FIBN,
as beneficiary. Incorporated by reference
to Exhibit 4.12 to the Current Report on Form
8-K of MRI dated October 4, 1990.
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10(f) Management Agreement, dated as of January 1,
1992, between MRI and TI. Incorporated by
reference to Exhibit 10(oo) to Amendment No.
2 to the Registration Statement filed by TI
Finance, TI and MCH on Form S-1 under the
Securities Act of 1933 (No. 33-45415) (the
"TI Form S-1").
10(g) Easement, dated December 28, 1990, from MH
in favor of Stephen A. Wynn. Incorporated
by reference to Exhibit 10(ll) to Amendment
No. 1 to the Registration Statement filed by
MCH and Finance on Form S-1 under the
Securities Act of 1933 (No. 33-38496).
10(h) Second Amendment to Deed of Trust, dated as of
February 21, 1992, between MCH, as trustor,
and FIBN, as beneficiary. Incorporated by
reference to Exhibit 10(z) to the Annual
Report on Form 10-K of Finance for the fiscal
year ended December 31, 1991 (the "1991
Form 10-K").
10(i) Leasehold Deed of Trust, Assignment of Rents
and Security Agreement, dated as of March 25,
1992, from TI in favor of FIBN, as trustee.
Incorporated by reference to Exhibit 10(cc) to
the 1991 Form 10-K.
10(j) Ground Lease, dated as of March 1, 1992,
between MCH and TI. Incorporated by reference
to Exhibit 10(nn) to Amendment No. 2 to the TI
Form S-1.
10(k) Tax Allocation Agreement, dated as of
January 1, 1992, between MRI and TI Finance.
Incorporated by reference to Exhibit 10(qq)
to Amendment No. 2 to the TI Form S-1.
10(l) Tax Allocation Agreement, dated as of
January 1, 1992, between MRI and TI.
Incorporated by reference to Exhibit 10(pp) to
Amendment No. 2 to the TI Form S-1.
10(m) Amendment Agreement, dated as of November
24, 1992, between MCH, as trustor, and FIBN,
as beneficiary. Incorporated by reference to
Exhibit 10(ddd) to the Annual Report on Form
10-K of MRI for the fiscal year ended December
31, 1992 (the "MRI 1992 Form 10-K").
10(n) First Amendment to Ground Lease, dated as of
March 1, 1993, between MCH and TI.
Incorporated by reference to Exhibit 10(ggg)
to the MRI 1992 Form 10-K.
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10(o) Second Amendment to Ground Lease, dated as
of October 26, 1993, between MCH and TI.
Incorporated by reference to Exhibit 10(bbb)
to the Annual Report on Form 10-K of MRI for
the fiscal year ended December 31, 1993.
10(p) Land Sales Contract, dated March 26, 1993,
between MH and Stephen A. Wynn, together
with exhibits. Incorporated by reference to
Exhibit 10(yy) to the Registration Statement
filed by Finance and MCH on Form S-4 under the
Securities Act of 1933 (No. 33-62514).
10(q) Reducing Revolving Loan Agreement, dated as
of May 25, 1994, among MRI, MCH, TI, MR
Realty, MH, each bank party thereto, Bank of
America National Trust and Savings
Association, Bankers Trust Company, The
Long-Term Credit Bank of Japan, Ltd., Los
Angeles Agency and Societe Generale, as
Co-Agents, and Bank of America National
Trust and Savings Association, as
Administrative Co-Agent (without schedules
or exhibits) (the "MRI Loan Agreement").
Incorporated by reference to Exhibit 99 to
the Current Report on Form 8-K of MRI dated
May 25, 1994.
10(r) Amendment No. 1 to the MRI Loan Agreement,
dated as of April 6, 1995 (without schedules
or exhibits). Incorporated by reference to
Exhibit 10(b) to the Quarterly Report on Form
10-Q of MRI for the fiscal quarter ended March
31, 1995.
10(s) Amendment No. 2 to the MRI Loan Agreement,
dated as of August 30, 1995 (without
exhibits). Incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form
10-Q of MRI for the fiscal quarter ended
September 30, 1995 (the "MRI Form 10-Q").
10(t) Amendment No. 3 to the MRI Loan Agreement,
dated as of August 30, 1995 (without
exhibits). Incorporated by reference to
Exhibit 10.2 to the MRI Form 10-Q.
10(u) Amendment No. 4 to the MRI Loan Agreement,
dated as of September 5, 1995 (without
exhibits). Incorporated by reference to
Exhibit 10.3 to the MRI Form 10-Q.
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10(v) Amendment No. 5 to the MRI Loan Agreement,
dated as of October 16, 1995 (without
exhibits). Incorporated by reference to
Exhibit 10(ccc) to the Annual Report on Form
10-K of MRI for the fiscal year ended December
31, 1995 (the "MRI 1995 Form 10-K").
10(w) Issuing and Paying Agency Agreement, dated
November 13, 1995, between MRI, MCH, TI,
Bellagio, GNLV, CORP. and MH, as issuers,
and BankAmerica National Trust Company, as
issuing and paying agent (without exhibit).
Incorporated by reference to Exhibit 4.1 to
the Current Report on Form 8-K of MRI dated
November 20, 1995 (the "MRI Form 8-K").
10(x) Form of Commercial Paper Note of MRI, MCH, TI,
Bellagio, GNLV, CORP. and MH. Incorporated by
reference to Exhibit 4.2 to the MRI Form 8-K.
10(y) Amendment No. 6 to the MRI Loan Agreement,
dated as of November 30, 1995 (without
exhibits). Incorporated by reference to
Exhibit 10(ggg) to the MRI 1995 Form 10-K.
27 Financial Data Schedule.
99 Section entitled "Regulation and Licensing"
in Item 1 of Part I of the MRI 1995 Form 10-K.
(b). REPORTS ON FORM 8-K.
The Registrants filed no reports on Form 8-K during the
three-month period ended December 31, 1995.
-13-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Directors and Stockholder of
THE MIRAGE CASINO-HOTEL and Subsidiaries
and GNS FINANCE CORP. and Subsidiary
We have audited the accompanying combined balance sheets of
THE MIRAGE CASINO-HOTEL and subsidiaries and GNS FINANCE CORP.
and subsidiary (collectively, the "Company") as of December 31,
1995 and 1994, and the related combined statements of operations
and retained earnings (accumulated deficit) and cash flows for
the years ended December 31, 1995 and 1994. These combined
financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these combined financial statements
and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of THE MIRAGE CASINO-HOTEL and subsidiaries and GNS
FINANCE CORP. and subsidiary as of December 31, 1995 and 1994,
and the combined results of their operations and their cash flows
for the years ended December 31, 1995 and 1994 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The financial
statement schedule for the years ended December 31, 1995 and 1994
listed in Item 14(a)(2) is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 9, 1996
-14-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholder of
THE MIRAGE CASINO-HOTEL and Subsidiaries
and GNS FINANCE CORP. and Subsidiary
Las Vegas, Nevada
We have audited the combined statements of operations and
retained earnings (accumulated deficit) and cash flows of THE
MIRAGE CASINO-HOTEL and subsidiaries and GNS FINANCE CORP. and
subsidiary (collectively, the "Company") for the year ended
December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the combined
results of operations and cash flows of THE MIRAGE CASINO-HOTEL
and subsidiaries and GNS FINANCE CORP. and subsidiary for the
year ended December 31, 1993 in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The financial
statement schedule listed in Item 14(a)(2) is the responsibility
of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. The information
included in the schedule for the year ended December 31, 1993 has
been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, when
considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND
Los Angeles, California
February 11, 1994,
except as to Note 2 which is dated
September 1, 1994
-15-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31
__________________________
1995 1994
__________ __________
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................................ $ 36,516 $ 28,511
Receivables, net of allowance for doubtful accounts
of $44,862 and $34,990................................................. 73,070 56,788
Inventories.............................................................. 22,163 22,661
Deferred income taxes.................................................... 26,709 18,530
Prepaid expenses and other............................................... 8,356 7,848
__________ __________
Total current assets............................................. 166,814 134,338
Property and equipment, net................................................ 1,021,985 1,015,649
Other assets, net.......................................................... 9,401 11,452
__________ __________
$1,198,200 $1,161,439
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable......................................................... $ 72,186 $ 64,593
Accrued payroll.......................................................... 29,231 21,909
Other accrued expenses................................................... 31,890 29,436
Amounts payable to Mirage Resorts, Incorporated
and affiliates......................................................... 87,365 82,788
Current maturities of notes payable to non-affiliates.................... 41,882 -
__________ __________
Total current liabilities........................................ 262,554 198,726
Notes payable to Mirage Resorts, Incorporated.............................. - 518,943
Notes payable to non-affiliates, net of current maturities................. 204,700 339,926
Other liabilities, including deferred income taxes of
$69,215 and $52,379...................................................... 70,321 52,733
__________ __________
Total liabilities................................................ 537,575 1,110,328
__________ __________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, no par value: THE MIRAGE CASINO-HOTEL -
authorized 1,000 shares, issued and outstanding
100 shares; GNS FINANCE CORP. - authorized 2,500
shares, issued and outstanding 200 and 100 shares...................... 518,945 2
Additional paid-in capital............................................... 107,142 107,142
Retained earnings (accumulated deficit).................................. 34,538 (56,033)
__________ __________
Total stockholder's equity....................................... 660,625 51,111
__________ __________
$1,198,200 $1,161,439
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
-16-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
COMBINED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (ACCUMULATED DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
_____________________________________
1995 1994 1993
__________ __________ ________
<S> <C> <C> <C>
(IN THOUSANDS)
REVENUES
Casino........................................................... $ 613,509 $ 554,411 $414,000
Rooms............................................................ 224,042 213,193 137,941
Food and beverage................................................ 166,936 163,691 115,974
Entertainment.................................................... 84,719 69,580 56,733
Retail........................................................... 56,780 60,516 41,464
Other............................................................ 38,805 37,930 19,228
__________ __________ ________
1,184,791 1,099,321 785,340
Less - promotional allowances.................................... (97,768) (92,010) (76,736)
__________ __________ ________
1,087,023 1,007,311 708,604
__________ __________ ________
COSTS AND EXPENSES
Casino........................................................... 303,108 275,145 212,330
Rooms............................................................ 63,009 61,793 36,358
Food and beverage................................................ 105,657 106,441 70,894
Entertainment.................................................... 69,894 61,127 45,324
Retail........................................................... 36,230 38,254 27,486
Other............................................................ 22,461 23,296 13,347
Provision for losses on receivables.............................. 22,895 20,185 19,837
General and administrative....................................... 118,602 118,684 76,927
Mirage Resorts, Incorporated management fee...................... 60,163 55,247 39,373
Depreciation..................................................... 68,541 75,509 55,265
Corporate development............................................ 2,700 1,899 3,461
Preopening and related promotional expense....................... - - 29,793
__________ __________ ________
873,260 837,580 630,395
__________ __________ ________
OPERATING INCOME................................................... 213,763 169,731 78,209
__________ __________ ________
OTHER INCOME AND (EXPENSES)
Interest cost
Notes payable to non-affiliates................................ (28,181) (47,913) (63,380)
Notes payable to Mirage Resorts, Incorporated.................. (14,235) (35,729) (13,366)
Interest capitalized............................................. 284 - 18,239
Other............................................................ 438 409 2,748
__________ __________ ________
(41,694) (83,233) (55,759)
__________ __________ ________
INCOME BEFORE FEDERAL INCOME TAXES AND EXTRAORDINARY ITEM.......... 172,069 86,498 22,450
Provision for federal income taxes............................... (71,059) (45,326) (23,025)
__________ __________ ________
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM............................ 101,010 41,172 (575)
Extraordinary item - loss on early retirements of debt,
net of applicable federal income tax benefit in 1994............ (10,439) (14,975) (13,876)
__________ __________ ________
NET INCOME (LOSS).................................................. $ 90,571 $ 26,197 $(14,451)
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance, beginning of year....................................... (56,033) (82,230) (67,779)
__________ __________ ________
Balance, end of year............................................. $ 34,538 $ (56,033) $(82,230)
========== ========== ========
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
-17-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
___________________________________
1995 1994 1993
_________ _________ _________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................................................ $ 90,571 $ 26,197 $ (14,451)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Provision for losses on receivables...................................... 22,895 20,185 19,837
Depreciation of property and equipment................................... 68,541 75,509 55,537
Amortization of debt discount and issuance costs......................... 11,234 12,451 12,941
Loss (gain) on disposal and abandonment of
property and equipment................................................. 3,155 11,953 (283)
Loss on early retirements of debt........................................ 10,439 16,024 13,876
Deferred income taxes.................................................... 8,657 3,902 (3,973)
Changes in assets and liabilities
Increase in receivables and other operating assets..................... (39,112) (19,606) (30,647)
Increase (decrease) in trade accounts payable and
accrued expenses..................................................... 17,763 (9,099) 34,023
Other.................................................................... (2,065) (560) 345
_________ _________ _________
Net cash provided by operating activities....................... 192,078 136,956 87,205
_________ _________ _________
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures......................................................... (79,494) (35,322) (336,232)
Decrease in non-current cash equivalents restricted for construction......... - - 144,251
Decrease in deposit with affiliate for construction projects................. - - 12,945
Decrease in construction accounts payable.................................... (394) (2,171) (17,274)
Other........................................................................ 1,462 2,488 1,042
_________ _________ _________
Net cash used for investing activities.......................... (78,426) (35,005) (195,268)
_________ _________ _________
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in management fee obligations to
Mirage Resorts, Incorporated............................................... (112,205) 55,247 39,373
Advances from (to) Mirage Resorts, Incorporated and affiliates............... (5,793) 44,077 36,256
Increase (decrease) in income taxes currently payable to
Mirage Resorts, Incorporated............................................... (41,272) 4,869 26,998
Notes payable to Mirage Resorts, Incorporated
Borrowings................................................................. - - 75,000
Repayments (excluding notes related to management
fees and income taxes)................................................... (353,022) - (10,000)
Early retirements of long-term debt.......................................... (134,180) (193,990) (143,194)
Proceeds from issuance of long-term debt..................................... - - 97,500
Net increase (decrease) in bank credit facility and
commercial paper borrowings................................................ 21,882 3,000 (28,000)
Other principal payments on debt............................................. - (27,074) (52)
Issuance of common stock to Mirage Resorts, Incorporated..................... 518,943 - -
Other........................................................................ - (245) (964)
_________ _________ _________
Net cash provided by (used for) financing activities............ (105,647) (114,116) 92,917
_________ _________ _________
CASH AND CASH EQUIVALENTS
Increase (decrease) for the year............................................. 8,005 (12,165) (15,146)
Balance, beginning of year................................................... 28,511 40,676 55,822
_________ _________ _________
Balance, end of year......................................................... $ 36,516 $ 28,511 $ 40,676
========= ========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid (including $16,309, $36,289 and $13,021 to
Mirage Resorts, Incorporated), net of amounts capitalized.................. $ 36,114 $ 76,160 $ 47,171
Income taxes paid to Mirage Resorts, Incorporated (including
amounts represented by a note payable)..................................... 103,674 35,506 -
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
-18-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND BACKGROUND INFORMATION. The combined
financial statements include the consolidated accounts of
THE MIRAGE CASINO-HOTEL ("MCH") and its wholly owned
subsidiaries, Treasure Island Corp. ("TI") and MH, INC. ("MH"),
combined with the consolidated accounts of GNS FINANCE CORP.
("Finance") and its wholly owned subsidiary, Treasure Island
Finance Corp. ("TI Finance") (collectively, the "Company"). All
significant intercompany balances and transactions have been
eliminated in consolidation or combination, as appropriate.
MCH and Finance are wholly owned Nevada subsidiaries of Mirage
Resorts, Incorporated ("MRI"). MCH owns and operates The Mirage,
a hotel-casino and destination resort located near the center of
the Las Vegas Strip. TI owns and operates Treasure Island, a
pirate-themed hotel-casino resort located adjacent to The Mirage,
which opened on October 26, 1993. MH owns and operates an
exclusive world-class golf course and related facilities known as
Shadow Creek, located approximately 10 miles from The Mirage and
Treasure Island. Finance and TI Finance function solely as
financing corporations to raise funds for the benefit of MCH and
TI, respectively.
MRI, through other wholly owned Nevada subsidiaries, also owns
and operates the Golden Nugget, a hotel-casino in downtown Las
Vegas, and the Golden Nugget-Laughlin, a hotel-casino in
Laughlin, Nevada. MRI, through another wholly owned subsidiary,
is also constructing Bellagio, a major new 3,000-guest room
luxury hotel, casino and resort facility, on 120 acres near the
center of the Las Vegas Strip. Additionally, MRI, through
another wholly owned subsidiary, is a 50% partner in a joint
venture that is constructing Monte Carlo, a 3,024-guest room,
mid-priced resort on 46 acres located adjacent to the Bellagio
site. The combined financial statements include various
transactions between the Company and MRI and its wholly
owned subsidiaries (see Note 3).
The combined financial statements have been prepared in
conformity with generally accepted accounting principles. Those
principles require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
-19-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASINO REVENUES AND PROMOTIONAL ALLOWANCES. The Company
recognizes as casino revenues the net win from gaming activities,
which is the difference between gaming wins and losses. Revenues
include the estimated retail value of rooms, food and beverage
and other goods and services provided to customers on a
complimentary basis as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
_______________________________
1995 1994 1993
_______ _______ _______
(IN THOUSANDS)
<S> <C> <C> <C>
Rooms............................ $43,535 $41,357 $36,985
Food and beverage................ 49,332 46,802 35,608
Other............................ 4,901 3,851 4,143
_______ _______ _______
$97,768 $92,010 $76,736
======= ======= =======
</TABLE>
Such amounts are then deducted as promotional allowances. The
estimated costs of providing these promotional allowances of
$63,226,000 in 1995, $60,575,000 in 1994 and $47,929,000 in 1993
have been classified primarily as casino costs and expenses.
CASH AND CASH EQUIVALENTS. The Company classifies as cash
equivalents all highly liquid debt instruments with a maturity of
three months or less when purchased. Cash equivalents are
carried at cost which approximates fair value.
CONCENTRATIONS OF CREDIT RISK. Financial instruments which
potentially subject the Company to concentrations of credit risk
consist principally of short-term investments and receivables.
The Company's short-term investments typically consist of U.S.
Government-backed repurchase agreements with maturities of 30
days or less. Such investments are made with financial
institutions having a high credit quality and the Company limits
the amount of its credit exposure to any one financial
institution. Due to the short-term nature of the instruments,
the Company does not take possession of the securities, which are
instead held in a custodial account.
-20-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company extends credit to a limited number of casino
patrons, but only following background checks and investigations
of creditworthiness. At December 31, 1995, a substantial portion
of the receivables was due from foreign customers. The
collectibility of these receivables could be affected by future
business or economic trends or other significant events in the
countries in which such customers reside. At December 31, 1995,
no individual customer accounted for more than five percent of
the Company's total receivables.
The Company maintains an allowance for doubtful accounts to
reduce its receivables to their carrying amount, which
approximates fair value. Management believes that as of December
31, 1995, no significant concentrations of credit risk existed
for which an allowance had not already been determined and
recorded.
INVENTORIES. Inventories are stated at the lower of cost or
market value. Cost is determined by the first-in, first-out and
specific identification methods.
PROPERTY AND EQUIPMENT. Property and equipment are stated at
cost. Depreciation is provided over the estimated useful lives
of the assets using the straight-line method for financial
reporting purposes and accelerated methods for income tax
purposes.
The costs of significant improvements are capitalized.
Costs of normal repairs are charged to expense as incurred.
The cost and accumulated depreciation of property and
equipment retired or otherwise disposed of are eliminated
from the respective accounts and any resulting gain or loss is
included in income.
CAPITALIZED INTEREST. The Company capitalizes interest costs
associated with major construction projects. When no debt is
incurred specifically for a project, interest is capitalized on
amounts expended on the project at the weighted average cost of
the Company's outstanding borrowings. The amount of interest
capitalized in any accounting period cannot exceed the Company's
total interest cost in such period. Capitalization of interest
ceases when the project is substantially complete.
DEBT DISCOUNT AND ISSUANCE COSTS. Debt discount and issuance
costs are capitalized and amortized to expense based on the terms
of the related debt agreements using the effective interest
method or a method which approximates the effective interest
method.
-21-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PREOPENING EXPENSE. Preopening expense, representing
primarily direct personnel and other operating costs incurred
prior to the opening of a new hotel-casino, are capitalized as
incurred and amortized to expense on a straight-line basis over
the 60-day period following opening of the related facility. As
a result, the capitalized preopening costs associated with the
development of Treasure Island were fully charged to expense
during 1993 following the October 26 commencement of operations.
RECLASSIFICATIONS. Certain amounts in the 1994 and 1993
combined financial statements have been reclassified to conform
with the 1995 presentation. These reclassifications had no
effect on the Company's results of operations.
NOTE 2 - MERGER
Effective September 1, 1994, New City Development, Inc.
("New City"), a wholly owned subsidiary of MRI, was merged into
and became a division of TI. The merger has been accounted for
in a manner similar to the pooling of interest method and,
accordingly, the combined financial statements have been restated
to reflect the merger. The Combined Statements of Operations and
Retained Earnings (Accumulated Deficit) for 1994 and 1993 have
been restated to include New City's net losses of $919,000 and
$2,237,000, respectively. Previously reported revenue amounts
were not affected by the merger.
NOTE 3 - TRANSACTIONS WITH MRI AND AFFILIATES
Pursuant to separate management agreements with MRI, MCH and
TI is each charged a management fee equal to 5% of revenues
(before deduction of promotional allowances) primarily for
executive assistance and administrative support. The services
provided include financial and business planning, insurance
policy evaluation and procurement and legal and accounting
services.
The Company also reimburses MRI and its subsidiaries for the
cost of various services not covered by the management
agreements. The Company was charged $13,592,000 in 1995,
$13,578,000 in 1994 and $16,313,000 in 1993 for its use of MRI's
corporate aircraft and computer software and for marketing and
advertising services provided by certain MRI subsidiaries.
Another MRI subsidiary provides architectural, construction
management and interior design and furnishings procurement
services to the Company.
The Company charges MRI for the retail value of complimentary
items used by MRI executives and business associates. MH charges
-22-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - TRANSACTIONS WITH MRI AND AFFILIATES (CONTINUED)
MRI's subsidiary that owns and operates the Golden Nugget for its
use of Shadow Creek. During 1995, 1994 and 1993, charges to such
subsidiary totaled $526,000, $470,000 and $699,000, respectively.
In November and December 1993, MCH repaid $108,000,000 of the
amount borrowed under a previous bank credit facility, of which
$75,000,000 was provided by the proceeds from demand notes issued
to MRI in November 1993. In December 1993, MCH and TI issued
long-term notes to MRI aggregating $473,706,000. These notes
bore interest at the six-month London Interbank Offered Rate
("LIBOR") plus 3%. The principal amount of the long-term notes
represented unpaid management fees and income taxes as well as
certain intercompany advances and the total outstanding principal
balance of a demand note issued in November 1992 and the November
1993 notes, which were canceled. Amounts that became due under
the management agreements and the tax allocation agreements (see
Note 6) were added to the principal balance of the respective
long-term notes. On April 11, 1995, the $518,943,000
outstanding principal balance of the long-term notes was repaid
by the Company using the proceeds from the sale to MRI of 100
shares of Finance's common stock.
During 1994, MRI and its subsidiary that owns and operates the
Golden Nugget provided non-interest-bearing advances aggregating
approximately $48 million to TI. TI used such funds to retire a
portion of the outstanding principal amount of TI Finance's
9 7/8% first mortgage notes and to repay a portion of the
borrowings outstanding under the revolving bank credit facility
(see Note 5).
Amounts payable to Mirage Resorts, Incorporated and affiliates
(exclusive of amounts owed under the long-term notes at December
31, 1994) consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
__________________
1995 1994
_______ _______
(IN THOUSANDS)
<S> <C> <C>
Management fees......................... $15,591 $13,637
Advances................................ 54,983 60,776
Income taxes............................ 16,791 6,301
Interest................................ - 2,074
_______ _______
$87,365 $82,788
======= =======
</TABLE>
-23-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
__________________________
1995 1994
__________ __________
(IN THOUSANDS)
<S> <C> <C>
Land......................................................... $ 102,857 $ 102,875
Land improvements............................................ 110,163 109,347
Buildings.................................................... 669,391 654,339
Furniture, fixtures and equipment............................ 408,006 382,242
Construction in progress..................................... 20,897 4,692
__________ __________
1,311,314 1,253,495
Less accumulated depreciation................................ (289,329) (237,846)
__________ __________
$1,021,985 $1,015,649
========== ==========
</TABLE>
NOTE 5 - NOTES PAYABLE TO NON-AFFILIATES
Notes payable to non-affiliates consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
__________________________
1995 1994
__________ __________
(IN THOUSANDS)
<S> <C> <C>
Zero coupon first mortgage notes (effective
interest rate of 11%), due March 1998...................... $ 104,700 $ 93,935
9 7/8% first mortgage notes, redeemed in April 1995.......... - 125,991
9 1/4% senior subordinated notes, due March 2003............. 100,000 100,000
Bank credit facility at a floating interest rate
(6.448% at December 31, 1995).............................. 25,000 20,000
Commercial paper at a weighted average effective
interest rate of 6.34%..................................... 16,882 -
__________ __________
246,582 339,926
Less current maturities...................................... (41,882) -
__________ __________
$ 204,700 $ 339,926
========== ==========
</TABLE>
-24-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - NOTES PAYABLE TO NON-AFFILIATES (CONTINUED)
The zero coupon first mortgage notes were issued by Finance in
March 1988. The notes are collateralized by first liens on The
Mirage and Treasure Island and are guaranteed by MCH. The net
proceeds from the offering were used to fund a portion of the
cost of the development and construction of The Mirage. The
notes are shown in the above table at their accreted value rather
than their face amount, as the holders of the notes are not
entitled to the face amount upon default or other accelerated
maturity, but only to the accreted value. The unamortized debt
discount was $28,300,000 and $39,065,000 at December 31, 1995
and 1994, respectively.
The 9 1/4% senior subordinated notes were issued by Finance in
March 1993. As required by the indenture governing the notes,
the net proceeds from the offering were used to retire senior
indebtedness related to The Mirage and Treasure Island. The
notes are guaranteed by MCH and are redeemable at the option of
Finance, in whole or in part, on or after March 15, 1998 at
prices set forth in the indenture.
On April 6, 1995, MRI's $525 million revolving bank credit
facility maturing in May 1999 was amended to increase the total
availability to $1 billion (as so amended, the "Facility").
Borrowings under the Facility bear interest at a specified
premium over, at the borrower's option, the prime rate or the
one-, two-, three- or six-month LIBOR. The premium is based on
MRI's Annualized Funded Debt Ratio (as defined) and the rating of
the zero coupon first mortgage notes. The premium is currently
zero for prime rate borrowings and 75 basis points for LIBOR
borrowings. Alternatively, bids may be requested from the
participating banks, which in the past has resulted in borrowings
at less than these premiums. MRI incurred all costs associated
with amending the Facility and pays commitment fees on the unused
portion of the Facility. MRI also pays a fee on the portion of
the Facility supporting outstanding commercial paper borrowings
discussed below.
-25-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - NOTES PAYABLE TO NON-AFFILIATES (CONTINUED)
MRI and most of its significant subsidiaries, including MCH,
MH and TI, are directly liable for or have guaranteed the
repayment of borrowings under the Facility. Borrowings under the
Facility are currently uncollateralized. If MRI's Leverage Ratio
(as defined) were to exceed 2.75 to 1.0, or if the rating of the
zero coupon first mortgage notes were to decline to below
investment grade, the banks would be granted a first lien on the
Golden Nugget hotel-casino, Bellagio, Shadow Creek and certain
other assets, including The Mirage and Treasure Island if the
zero coupon first mortgage notes are then no longer outstanding.
MRI has agreed, with certain limited exceptions, not to dispose
of or further encumber such properties and assets without the
approval of its bank group.
The credit agreement governing the Facility contains covenants
requiring MRI and most of its subsidiaries, including MCH, MH and
TI, to maintain a specified tangible net worth and certain
financial ratios. The credit agreement also contains covenants
that limit to various permitted amounts the ability of MRI and
most of its subsidiaries, including MCH, MH and TI, to, among
other things, incur additional debt, commit funds to capital
expenditures or new business ventures, make investments, merge or
sell assets.
MRI has established a commercial paper program that provides
for the issuance, on a revolving basis, of up to $350 million
outstanding principal amount of uncollateralized short-term
notes. Credit availability is required to be maintained under
the Facility equal to the outstanding principal amount of
commercial paper borrowings.
Borrowings under the Facility and commercial paper at
December 31, 1995 have been classified as current liabilities
because management does not intend to replace such borrowings
as they come due.
The indenture governing the 9 1/4% senior subordinated notes
generally limits dividend payments by the Company and repurchases
of its capital stock to the proceeds received from the sale of
MCH or Finance equity securities plus 50% of cumulative net
income (or minus 100% of cumulative net loss) recognized by the
Company since October 1, 1989. The indenture governing the zero
coupon first mortgage notes has similar provisions, but the
restrictions apply only to MCH and its subsidiaries. Finance's
net income (loss) and proceeds from the sale of its equity
securities are excluded from the calculation of permitted
payments. This indenture does not restrict Finance and TI
Finance from paying dividends on or repurchasing their capital
stock.
-26-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - NOTES PAYABLE TO NON-AFFILIATES (CONTINUED)
During the three years ended December 31, 1995, the Company
retired, prior to scheduled maturities, certain of the publicly
held debt securities issued by Finance and TI Finance. The debt
securities and respective principal amounts retired, and the
resulting aggregate extraordinary losses, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
_______________________________
1995 1994 1993
________ ________ ________
(IN THOUSANDS)
<S> <C> <C> <C>
13 3/4% first mortgage notes............. $ - $ - $100,000
Zero coupon first mortgage notes(a)...... - 10,320 -
9 7/8% first mortgage notes.............. 125,991 174,009 -
12% second mortgage notes................ - - 33,350
________ ________ ________
$125,991 $184,329 $133,350
======== ======== ========
Extraordinary loss....................... $ 10,439 $ 13,028 $ 13,876
======== ======== ========
</TABLE>
_______________
(a) Represents the accreted value of the notes on the date
of retirement. The face amount of the notes retired was
$15.0 million.
In addition, during 1994 MCH incurred an extraordinary loss of
$1,947,000, net of applicable federal income tax benefit of
$1,049,000, in connection with the write-off of the unamortized
deferred financing costs associated with a previous bank credit
facility.
Maturities of the Company's notes payable to non-affiliates
during the five years subsequent to December 31, 1995 are $41.9
million in 1996 and $133.0 million in 1998.
The estimated fair value of the Company's notes payable to
non-affiliates at December 31, 1995 was approximately $266
million, versus their book value of approximately $247 million.
At December 31, 1994, the estimated fair value of the Company's
notes payable to non-affiliates was approximately $350 million,
versus their book value of approximately $340 million. The
estimated fair value amounts were based on quoted market prices
on or about December 31, 1995 and 1994 for the Company's debt
securities that are traded. For the debt securities that are not
traded, fair value was estimated based on the quoted market
prices for similar issues or on the current rates offered to the
Company for debt having the same remaining maturities.
-27-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - FEDERAL INCOME TAXES
MRI and its subsidiaries file federal income tax returns on a
consolidated basis. MRI has tax allocation agreements with each
of its key subsidiaries (including MCH, TI, Finance and TI
Finance) which require each of them to reimburse MRI for the
amount of tax they would pay on a stand-alone basis. This
includes reimbursement for any additional taxes and interest
thereon resulting from Internal Revenue Service audit
adjustments.
Accordingly, the tax provision is not calculated on the
combined income or loss of MCH, TI, Finance and TI Finance.
Instead, it reflects the sum of their respective tax provisions
and benefits. MCH had income in all three years and accrued
taxes at a rate approximating the federal income tax statutory
rate. TI had income in 1995 and 1994 and also accrued taxes at a
rate approximating the statutory rate. In 1993, TI incurred a
loss and recorded an income tax benefit approximating the
statutory rate. Finance and TI Finance incurred losses in all
three years and did not recognize a tax benefit from such losses.
Tax benefits of net operating loss carryforwards are not
recognized for financial reporting purposes until it is more
likely than not that such benefits will be realized. The
realization of any tax benefit by Finance or TI Finance from
their net operating loss carryforwards is unlikely, as they have
no operations and are unlikely to have future taxable income.
The sum of these individual tax provisions and benefits
resulted in a combined provision in 1995, 1994 and 1993 at a rate
above the statutory rate.
The combined provision for federal income taxes for financial
reporting purposes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
___________________________
1995 1994 1993
_______ _______ _______
(IN THOUSANDS)
<S> <C> <C> <C>
Income from continuing operations.............. $71,059 $45,326 $23,025
Tax benefit from extraordinary loss on early
retirement of debt........................... - (1,049) -
_______ _______ _______
$71,059 $44,277 $23,025
======= ======= =======
</TABLE>
-28-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - FEDERAL INCOME TAXES (CONTINUED)
The combined provision for federal income taxes attributable
to income from continuing operations consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
_______________________________
1995 1994 1993
_______ _______ _______
(IN THOUSANDS)
<S> <C> <C> <C>
Current.......................................... $62,402 $41,424 $26,998
Deferred......................................... 8,657 3,902 (3,973)
_______ _______ _______
$71,059 $45,326 $23,025
======= ======= =======
</TABLE>
The combined provision for federal income taxes attributable
to income from continuing operations differs from the amount
computed at the federal income tax statutory rate as a result of
the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
_______________________________
1995 1994 1993
_______ _______ _______
(IN THOUSANDS)
<S> <C> <C> <C>
Amount at statutory rate......................... $60,224 $30,274 $ 7,858
Unutilized net operating loss carryforwards...... 8,370 15,605 14,295
Change in statutory rate......................... - - 1,006
Other............................................ 2,465 (553) (134)
_______ _______ _______
$71,059 $45,326 $23,025
======= ======= =======
</TABLE>
The Company increased its 1993 combined federal income tax
provision and deferred tax liability as a result of legislation
enacted in August 1993 which increased the federal income tax
statutory rate from 34% to 35% effective January 1, 1993.
-29-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - FEDERAL INCOME TAXES (CONTINUED)
The components of the deferred tax liability consisted of the
following:
<TABLE>
<CAPTION>
AT DECEMBER 31
_____________________
1995 1994
_________ _________
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX LIABILITIES
Temporary differences related to property and equipment.... $ 80,764 $ 76,592
Other temporary differences................................ 6,222 2,878
_________ ________
Gross deferred tax liabilities......................... 86,986 79,470
_________ ________
DEFERRED TAX ASSETS
Alternative minimum tax credit(a).......................... 15,811 6,386
Provision for losses on receivables........................ 15,702 12,246
Preopening expense, net of amortization.................... 4,243 5,786
Other temporary differences................................ 8,266 11,377
Loss carryforwards......................................... 156,738 154,083
Valuation allowance........................................ (156,280) (144,257)
_________ _________
Net deferred tax assets................................ 44,480 45,621
_________ _________
$ 42,506 $ 33,849
========= =========
</TABLE>
_______________
(a) The excess of the alternative minimum tax over the regular
federal income tax is a tax credit which can be carried
forward indefinitely to reduce future federal income
tax liabilities.
-30-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - FEDERAL INCOME TAXES (CONTINUED)
At December 31, 1995, Finance and TI Finance had combined net
operating loss carryforwards totaling approximately $443.6
million which expire at various dates through 2010. At December
31, 1995, MCH had capital loss carryforwards of approximately
$2.9 million which expire in 1996 and 1997. A valuation
allowance has been established to eliminate the tax benefits
associated with these carryforwards because management believes
the Company will not obtain any tax benefits from these deferred
tax assets. At December 31, 1995, TI had a net operating loss
carryforward of approximately $1.3 million. Management
anticipates that the Company will realize tax benefits from this
carryforward.
NOTE 7 - EMPLOYEE BENEFIT PLANS
Employees of the Company who are members of various unions are
covered by union-sponsored, collectively bargained, multi-
employer health and welfare and defined benefit pension plans.
The Company recorded an expense of $22,607,000 in 1995,
$20,564,000 in 1994 and $16,944,000 in 1993 under such plans.
Sufficient information is not available from the plans' sponsors
to permit the Company to determine its share of unfunded vested
benefits, if any.
The Company's non-union employees are covered by MRI's
retirement savings plan under Section 401(k) of the Internal
Revenue Code. The plan allows employees to defer up to the
lesser of the Internal Revenue Code-prescribed maximum amount
($9,240 for 1995) or 15% of their income on a pre-tax basis
through contributions to the plan. The Company matches 50% of
eligible employees' contributions up to a maximum of 4% of their
individual earnings (provided that, for such purpose, earnings
may not exceed $150,000 per year). The Company recorded charges
for matching contributions of $2,678,000 in 1995, $1,988,000 in
1994 and $1,798,000 in 1993.
Certain key executives of the Company are also included in
MRI's executive deferred compensation plan. Under the terms of
the plan, each executive will be entitled to a retirement benefit
payable in 120 equal monthly installments commencing in the month
following the vesting date. Vesting is based upon age and years
of service. The amount of the annual benefit payable to each
executive will be equal to his annual salary on the date he
entered the plan increased by 8% per year from the later of the
effective date or the date the executive has completed 10 years
-31-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - EMPLOYEE BENEFIT PLANS (CONTINUED)
of full-time service to the vesting date, or to the date payment
commences if the executive remains employed on a full-time basis
and elects to defer payment. Benefits payable under the plan
represent unfunded and unsecured liabilities of MRI, and the
present value of such benefits is being charged ratably to
expense over the respective vesting period of each executive. In
addition, a separate deferred compensation agreement exists
between MCH and an executive not included in the plan. The
Company recorded deferred compensation expense totaling $725,000
in 1995, $1,152,000 in 1994 and $1,049,000 in 1993.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
LEASES. The Company leases various equipment under operating
lease arrangements. Future minimum lease commitments in effect
at December 31, 1995 aggregate approximately $2.7 million,
payable during 1996 through 1999. Aggregate rent expense was
$1,324,000 in 1995, $1,598,000 in 1994 and $1,555,000 in 1993.
ENTERTAINMENT SERVICES. The Company has entered into two
agreements for major productions appearing in the showrooms at
The Mirage and Treasure Island. These agreements expire in
1998 and 1999, respectively. Under the terms of the agreements,
the Company is required to pay the producers of the shows
a total of approximately $28 million per year and a
percentage of show revenues in excess of a specified amount or a
percentage of show profits. The producers are responsible for
paying the talent and most other costs of presenting the shows.
Future minimum payments remaining under the agreements at
December 31, 1995 total approximately $94 million. However,
such payments are contingent upon the actual performance of
shows and under certain conditions, including failure of the
respective show to achieve specified financial results, the
Company may terminate the agreements without material financial
obligation. The Company made payments pursuant to the agreements
and a previous agreement totaling approximately $46.7 million in
1995, $46.8 million in 1994 and $31.6 million in 1993. The
agreements can be extended at the Company's option until 2001
for the production at The Mirage and until 2004 for the
production at Treasure Island.
LITIGATION. The Company is a party to various legal
proceedings, most of which relate to routine matters incidental
to its business. Management does not believe that the outcome of
such proceedings will have a material adverse effect on the
Company's financial position or results of operations.
-32-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
________ ________ ________ ________ __________
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995
Gross revenues........................................ $313,814 $263,216 $300,900 $306,861 $1,184,791
Promotional allowances................................ (24,223) (21,938) (24,955) (26,652) (97,768)
Net revenues.......................................... 289,591 241,278 275,945 280,209 1,087,023
Operating income...................................... 64,664 36,422 57,711 54,966 213,763
Other expenses, net................................... (20,833) (8,618) (6,370) (5,873) (41,694)
Income before extraordinary item...................... 25,648 16,146 32,110 27,106 101,010
Extraordinary loss on early retirements of debt....... (10,439) - - - (10,439)
Net income............................................ 15,209 16,146 32,110 27,106 90,571
1994
Gross revenues........................................ $262,352 $268,619 $296,941 $271,409 $1,099,321
Promotional allowances................................ (24,431) (21,688) (23,095) (22,796) (92,010)
Net revenues.......................................... 237,921 246,931 273,846 248,613 1,007,311
Operating income...................................... 30,298 41,460 59,656 38,317 169,731
Other expenses, net................................... (21,429) (20,912) (21,108) (19,784) (83,233)
Income before extraordinary item...................... 917 8,868 20,923 10,464 41,172
Extraordinary loss on early retirements of debt....... - (5,973) (4,265) (4,737) (14,975)
Net income............................................ 917 2,895 16,658 5,727 26,197
</TABLE>
In the fourth quarter of 1994, the Company recorded an $11.0
million abandonment charge in connection with a guest room
enhancement program at The Mirage that was completed in August
1995.
-33-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GNS FINANCE CORP.
By: STEPHEN A. WYNN
__________________________
Stephen A. Wynn, President
Dated: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
_________ _____ ____
<S> <C> <C>
STEPHEN A. WYNN Chairman of the Board and President March 29, 1996
______________________
Stephen A. Wynn (Principal Executive Officer)
DANIEL R. LEE Treasurer and Director (Principal March 29, 1996
______________________
Daniel R. Lee Financial and Accounting Officer)
BRUCE A. LEVIN Director March 29, 1996
______________________
Bruce A. Levin
</TABLE>
-34-
<PAGE> SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE MIRAGE CASINO-HOTEL
By: ROBERT H. BALDWIN
____________________________
Robert H. Baldwin, President
Dated: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
_________ _____ ____
<S> <C> <C>
STEPHEN A. WYNN Chairman of the Board March 29, 1996
______________________
Stephen A. Wynn
ROBERT H. BALDWIN President and Chief Executive Officer March 29, 1996
______________________
Robert H. Baldwin (Principal Executive Officer)
DOUGLAS G. POOL Senior Vice President, Treasurer March 29, 1996
______________________
Douglas G. Pool and Chief Financial Officer (Principal
Financial and Accounting Officer)
ELAINE P. WYNN Director March 29, 1996
______________________
Elaine P. Wynn
GEORGE J. MASON Director March 29, 1996
______________________
George J. Mason
MELVIN B. WOLZINGER Director March 29, 1996
______________________
Melvin B. Wolzinger
RONALD M. POPEIL Director March 29, 1996
______________________
Ronald M. Popeil
DANIEL B. WAYSON Director March 29, 1996
______________________
Daniel B. Wayson
RICHARD D. BRONSON Director March 29, 1996
______________________
Richard D. Bronson
</TABLE>
-35-
<PAGE>
SCHEDULE II
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
ADDITIONS
___________________________
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER DEDUCTIONS AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (A) OF YEAR
___________ ___________ __________ _________ __________ _______
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Receivables
Allowance for doubtful accounts
Year Ended December 31, 1995........ $ 34,990 $22,895 $ 1,150 (b) $14,173 $ 44,862
Year Ended December 31, 1994........ $ 23,224 $20,185 $ 833 (b) $ 9,252 $ 34,990
Year Ended December 31, 1993........ $ 28,497 $19,837 $ 884 (b) $25,994 $ 23,224
Federal income taxes
Valuation allowance
Year Ended December 31, 1995........ $144,257 $ - $12,023 (c) $ - $156,280
Year Ended December 31, 1994........ $124,185 $ (93) $20,165 (c) $ - $144,257
Year Ended December 31, 1993........ $102,152 $ (123) $22,156 (c) $ - $124,185
</TABLE>
_______________
(a) Accounts charged off.
(b) Recoveries of accounts previously charged off.
(c) A valuation allowance has been established to eliminate the
tax benefits associated with certain loss carryforwards be-
cause management believes the combined companies will not
obtain any tax benefits from these deferred tax assets.
S-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS' COMBINED BALANCE SHEET AS OF DECEMBER 31, 1995 AND THE RELATED
COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS FOR THE YEAR ENDED
DECEMBER 31, 1995 AND NOTES TO COMBINED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
NOTES TO FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 36,516
<SECURITIES> 0
<RECEIVABLES> 117,932
<ALLOWANCES> 44,862
<INVENTORY> 22,163
<CURRENT-ASSETS> 166,814
<PP&E> 1,311,314
<DEPRECIATION> 289,329
<TOTAL-ASSETS> 1,198,200
<CURRENT-LIABILITIES> 262,554
<BONDS> 204,700
<COMMON> 518,945
0
0
<OTHER-SE> 141,680
<TOTAL-LIABILITY-AND-EQUITY> 1,198,200
<SALES> 174,384
<TOTAL-REVENUES> 1,087,023
<CGS> 141,887
<TOTAL-COSTS> 600,359
<OTHER-EXPENSES> 68,541
<LOSS-PROVISION> 22,895
<INTEREST-EXPENSE> 42,132
<INCOME-PRETAX> 172,069
<INCOME-TAX> 71,059
<INCOME-CONTINUING> 101,010
<DISCONTINUED> 0
<EXTRAORDINARY> (10,439)
<CHANGES> 0
<NET-INCOME> 90,571
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in
Nevada are subject to (i) the Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively, the "Nevada
Act") and (ii) various local ordinances and regulations. The
Registrant's gaming operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission (the "Nevada
Commission"), the Nevada State Gaming Control Board (the "Nevada
Board"), the City of Las Vegas and the Clark County Liquor and
Gaming Licensing Board (the "Clark County Board"). The Nevada
Commission, the Nevada Board, the City of Las Vegas and the Clark
County Board are collectively referred to as the "Nevada Gaming
Authorities." To the best knowledge of management, the Registrant
and its subsidiaries are presently in material compliance with
all applicable laws, regulations and supervisory procedures
described herein.
The laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of public
policy which are concerned with, among other things: (i) the
prevention of unsavory or unsuitable persons from having a direct
or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible
accounting practices and procedures; (iii) 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; (iv) the
prevention of cheating and fraudulent practices; and (v)
providing a source of state and local revenues through taxation
and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Registrant's
gaming operations.
The Registrant's direct and indirect subsidiaries that
conduct gaming operations 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. MCH
is registered as an intermediary company and has been found
suitable to own the stock of TI Corp. MCH has also been licensed
to conduct nonrestricted gaming operations at The Mirage. TI
Corp. has been licensed to conduct nonrestricted gaming
operations at Treasure Island. GNLV has been registered as an
intermediary company and has been found suitable to own the stock
of Golden Nugget Manufacturing Corp. ("GNMC"), its inactive
subsidiary which is licensed as a manufacturer and distributor of
gaming devices. GNLV has also been licensed to conduct
nonrestricted gaming operations at the Golden Nugget. GNL has
been licensed to conduct nonrestricted gaming operations at the
Golden Nugget-Laughlin. The Registrant is registered by the
Nevada Commission as a publicly traded corporation (a "Registered
EXHIBIT 99
<PAGE>
Corporation") and has been found suitable to own the stock of
MCH, GNLV and GNL, each of which, together with TI Corp. and
GNMC, is a corporate licensee (individually, a "Gaming
Subsidiary" and collectively, the "Gaming Subsidiaries") under
the Nevada Act. Victoria Partners, the joint venture which will
own and operate Monte Carlo, and certain subsidiaries of the
Registrant and Circus Circus Enterprises, Inc. which are involved
in the ownership of Victoria Partners, are required to be
licensed by the Nevada Gaming Authorities and have filed
applications for such licenses.
As a Registered Corporation, the Registrant is required
periodically to submit detailed financial and operating reports
to the Nevada Commission and furnish any other information which
the Nevada Commission may require. No person may become a
stockholder of, or receive any percentage of profits from, the
Gaming Subsidiaries without first obtaining licenses and
approvals from the Nevada Gaming Authorities. The Registrant and
the Gaming Subsidiaries have obtained from the Nevada Gaming
Authorities the various registrations, findings of suitability,
approvals, permits and licenses required in order to engage in
gaming activities in Nevada.
All gaming devices that are manufactured, sold or
distributed for use or play in Nevada, or for distribution
outside of Nevada, must be manufactured by licensed manufacturers
and distributed or sold by licensed distributors. All gaming
devices manufactured for use or play in Nevada must be approved
by the Nevada Commission before distribution or exposure for
play. The approval process for gaming devices includes rigorous
testing by the Nevada Board, a field trial and a determination as
to whether the gaming device meets strict technical standards
that are set forth in the regulations of the Nevada Commission.
Associated equipment must be administratively approved by the
Chairman of the Nevada Board before it is distributed for use in
Nevada.
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement with,
the Registrant or the Gaming Subsidiaries in order to determine
whether such individual is suitable or should be licensed as a
business associate of a gaming licensee. Officers, directors and
certain key employees of the Gaming Subsidiaries must file
applications with the Nevada Gaming Authorities and may be
required to be licensed or found suitable by the Nevada Gaming
Authorities. Officers, directors and key employees of the
Registrant who are actively and directly involved in gaming
activities of the Gaming Subsidiaries may be required to be
licensed or found suitable by the Nevada Gaming Authorities. The
Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of
suitability is comparable to licensing, and both require
submission of detailed personal and financial information
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followed by a thorough investigation. The applicant for licensing
or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to
the Nevada Gaming Authorities, and in addition to their authority
to deny an application for a finding of suitability or licensure,
the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the Registrant or the
Gaming Subsidiaries, the companies involved would have to sever
all relationships with such person. In addition, the Nevada
Commission may require the Registrant or the Gaming Subsidiaries
to terminate the employment of any person who refuses to file
appropriate applications. Determinations of suitability or of
questions pertaining to licensing are not subject to judicial
review in Nevada.
The Registrant and the Gaming Subsidiaries are required to
submit detailed financial and operating reports to the Nevada
Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions entered into by the
Gaming Subsidiaries must be reported to or approved by the Nevada
Commission.
If it were determined that the Nevada Act was violated by a
Gaming Subsidiary, the licenses it holds could be limited,
conditioned, suspended or revoked, subject to compliance with
certain statutory and regulatory procedures. In addition, the
Registrant, the Gaming Subsidiaries and the persons involved
could be subject to substantial fines for each separate violation
of the Nevada Act at the discretion of the Nevada Commission.
Further, a supervisor could be appointed by the Nevada Commission
to operate The Mirage, Treasure Island, the Golden Nugget and the
Golden Nugget-Laughlin and, under certain circumstances, earnings
generated during the supervisor's appointment (except for the
reasonable rental value of the casino) could be forfeited to the
State of Nevada. Limitation, conditioning or suspension of the
gaming license of a Gaming Subsidiary or the appointment of a
supervisor could (and revocation of any gaming license would)
materially adversely affect the Registrant's gaming operations.
Any beneficial holder of the Registrant's voting securities,
regardless of the number of shares owned, may be required to file
an application, be investigated and have his suitability as a
beneficial holder of the Registrant's voting securities
determined if the Nevada Commission has reason to believe that
such ownership would be inconsistent with the declared policies
of the State of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
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The Nevada Act requires any person who acquires more than 5%
of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires
that beneficial owners of more than 10% of a Registered
Corporation's voting securities apply to the Nevada Commission
for a finding of suitability within 30 days after the Chairman of
the Nevada Board mails a written notice requiring such filing.
Under certain circumstances, an "institutional investor," as
defined in the Nevada Act, which acquires more than 10%, but not
more than 15%, of a Registered Corporation's voting securities
may apply to the Nevada Commission for a waiver of such finding
of suitability requirement if such institutional investor holds
the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting
securities for investment purposes unless the voting securities
were acquired and are held in the ordinary course of business as
an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members
of the board of directors of the Registered Corporation, any
change in the corporate charter, bylaws, management, policies or
operations of the Registered Corporation or any of its gaming
affiliates or any other action which the Nevada Commission finds
to be inconsistent with holding the Registered Corporation's
voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities
for investment purposes only include: (i) voting on all matters
voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities
analysts for informational purposes and not to cause a change in
its management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be
consistent with such investment intent. The City of Las Vegas
and the Clark County Board have the authority to approve all
persons owning or controlling the stock of any corporation
controlling a gaming licensee. If the beneficial holder of
voting securities who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and
financial information, including a list of beneficial owners. The
applicant is required to pay all costs of investigation.
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 Nevada Commission or the Chairman of the Nevada Board
may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the
beneficial owner. Any stockholder found unsuitable who holds,
directly or indirectly, any beneficial ownership of the common
stock beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. The
Registrant is subject to disciplinary action if, after it
receives notice that a person is unsuitable to be a stockholder
or to have any other relationship with the Registrant or the
Gaming Subsidiaries, the Registrant: (i) pays such person any
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dividend or interest upon voting securities of the Registrant;
(ii) allows such person to exercise, directly or indirectly, any
voting right conferred through securities held by that person;
(iii) pays remuneration in any form to such person for services
rendered or otherwise; or (iv) fails to pursue all lawful efforts
to require such person to relinquish his voting securities
including, if necessary, the immediate purchase of the voting
securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the
holder of any debt security of a Registered Corporation to file
applications, be investigated and be found suitable to own the
debt security if it has reason to believe that such ownership
would be inconsistent with the declared policies of the State of
Nevada. If the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant to the Nevada Act,
the Registered Corporation can be sanctioned, including the loss
of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend,
interest or any distribution whatsoever; (ii) recognizes any
voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any
form; or (iv) makes any payment to the unsuitable person by way
of principal, redemption, conversion, exchange, liquidation or
similar transaction.
The Registrant is required to maintain a current stock
ledger in Nevada which may be examined by the Nevada Gaming
Authorities at any time. If any securities are held in trust by
an agent or nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. The Registrant
is also required to render maximum assistance in determining the
identity of the beneficial owner. The Nevada Commission has the
power to require the Registrant's stock certificates to bear a
legend indicating that the securities are subject to the Nevada
Act. To date, the Nevada Commission has not imposed such a
requirement on the Registrant.
The Registrant may not make a public offering of its
securities without the prior approval of the Nevada Commission if
the securities or 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. In May
1995, the Nevada Commission granted the Registrant prior approval
to make public offerings for a period of one year, subject to
certain conditions (the "Shelf Approval"). 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. The Shelf Approval also applies to any
affiliated company wholly owned by the Registrant (an
"Affiliate") which is a publicly traded corporation or would
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thereby become a publicly traded corporation pursuant to a public
offering. The Shelf Approval also includes approval for the
Gaming Subsidiaries to guarantee any security issued by, or to
hypothecate their assets to secure the payment or performance of
any obligations issued by, the Registrant or an Affiliate in a
public offering under 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 or the investment merits of the
securities offered. Any representation to the contrary is
unlawful. The Registrant has filed an application for renewal of
the Shelf Approval, which it anticipates will be considered by
the Nevada Board and the Nevada Commission in May 1996.
Changes in control of the Registrant through merger,
consolidation, stock or asset acquisitions, management or
consulting agreements or any act or conduct by a person whereby
he obtains control may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada
Commission with respect to a variety of stringent standards prior
to assuming control of such Registered Corporation. The Nevada
Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or
involvement with the entity proposing to acquire control to be
investigated and licensed as part of the approval process
relating to the transaction.
The Nevada Legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defensive tactics affecting Nevada
corporate gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has
established a regulatory scheme to ameliorate the potentially
adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming licensees and their
affiliates; (ii) preserve the beneficial aspects of conducting
business in the corporate form; and (iii) promote a neutral
environment for the orderly governance of corporate affairs.
Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional
repurchases of voting securities above the current market price
thereof and before a corporate acquisition opposed by management
can be consummated. The Nevada Act also requires prior approval
of a plan of recapitalization proposed by the Registered
Corporation's board of directors in response to a tender offer
made directly to the Registered Corporation's stockholders for
the purpose of acquiring control of the Registered Corporation.
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License fees and taxes, computed in various ways depending
on the type of gaming or activity involved, are payable to the
State of Nevada and to Clark County and the City of Las Vegas, in
which the Gaming Subsidiaries' respective operations are
conducted. Depending upon the particular fee or tax involved,
these fees and taxes are payable either monthly, quarterly or
annually and are based upon either: (i) a percentage of the gross
revenues received; (ii) the number of gaming devices operated; or
(iii) the number of table games operated. A casino entertainment
tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food, refreshments or
merchandise. Nevada licensees that hold a manufacturer's or
distributor's license, such as GNMC, also pay certain fees to the
State of Nevada.
Any person who is licensed, required to be licensed,
registered, required to be registered or is under common control
with such persons (collectively, "Licensees"), and who proposes
to become involved in a gaming venture outside of Nevada, is
required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Board of its
participation in such foreign gaming. The revolving fund is
subject to increase or decrease at the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act.
Licensees are also subject to disciplinary action by the Nevada
Commission if they knowingly violate any laws of the foreign
jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming
operations, engage in activities that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees or employ
a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal
unsuitability.
The sale of alcoholic beverages at The Mirage, Treasure
Island and the Golden Nugget-Laughlin, and the sale of alcoholic
beverages at the Golden Nugget, are subject to licensing, control
and regulation by the Clark County Board and the City of Las
Vegas, respectively. All licenses are revocable and are not
transferable. The agencies involved have full power to limit,
condition, suspend or revoke any such license, and any such
disciplinary action could (and revocation would) have a material
adverse effect on the operations of the Gaming Subsidiaries.
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