Amendment to Tender-Offer Statement — Issuer Tender Offer — Schedule 13E-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13E4/A Amendment No. 1 to Schedule 13E-4/A 4 16K
2: EX-99.(A)(10) Press Release Dated July 26, 1999 2 9K
3: EX-99.(A)(11) Press Release Dated July 30, 1999 2 8K
4: EX-99.(A)(12) Press Release Dated August 5, 1999 1 7K
5: EX-99.(G)(4) Selected Text of Mgm Grand's 10-Q for 6/30/1999 16 87K
EX-99.(G)(4) — Selected Text of Mgm Grand’s 10-Q for 6/30/1999
Exhibit Table of Contents
EXHIBIT (g)(4)
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
[Enlarge/Download Table]
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ---------------------------
1999 1998 1999 1998
------------- ---------- ----------- ----------
REVENUES:
Casino $182,606 $ 96,427 $320,659 $192,149
Rooms 67,426 43,344 122,265 84,093
Food and beverage 40,032 23,560 74,479 48,543
Entertainment, retail and other 54,668 27,413 95,090 51,360
Income from unconsolidated affiliate - 9,468 6,084 19,677
------------- ---------- ----------- ----------
344,732 200,212 618,577 395,822
Less: promotional allowances 25,672 14,847 48,150 30,610
------------- ---------- ----------- ----------
319,060 185,365 570,427 365,212
------------- ---------- ----------- ----------
EXPENSES:
Casino 82,947 54,641 155,582 109,241
Rooms 21,227 12,428 35,945 23,801
Food and beverage 25,277 14,987 46,267 30,520
Entertainment, retail and other 29,385 18,657 54,656 36,774
Provision for doubtful accounts and discounts 12,888 9,586 24,283 17,773
General and administrative 49,436 26,186 83,056 50,710
Depreciation and amortization 29,069 18,840 49,961 35,744
------------- ---------- ----------- ----------
250,229 155,325 449,750 304,563
------------- ---------- ----------- ----------
OPERATING PROFIT BEFORE PREOPENING AND CORPORATE
EXPENSE 68,831 30,040 120,677 60,649
Preopening and other 14,107 - 22,917 -
Corporate expense 4,533 2,937 9,627 5,388
------------- ---------- ----------- ----------
OPERATING INCOME 50,191 27,103 88,133 55,261
------------- ---------- ----------- ----------
OTHER INCOME (EXPENSE):
Interest income 370 5,413 697 9,210
Interest expense, net of amounts capitalized (11,965) (6,272) (20,151) (10,044)
Interest expense from unconsolidated affiliate - (2,185) (1,058) (4,356)
Other, net (332) (544) (533) (1,147)
------------- ---------- ----------- ----------
(11,927) (3,588) (21,045) (6,337)
------------- ---------- ----------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES,
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 38,264 23,515 67,088 48,924
Provision for income taxes (14,158) (9,116) (24,491) (18,263)
------------- ---------- ----------- ----------
NET INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 24,106 14,399 42,597 30,661
Extraordinary Loss on early ext. of debt, net of
$484 tax benefit - - (898) -
Cum. effect of acct. change for preopening, net
of $4,399 tax benefit - - (8,168) -
------------- ---------- ----------- ----------
NET INCOME $ 24,106 $ 14,399 $ 33,531 $ 30,661
============= ========== =========== ==========
PER SHARE OF COMMON STOCK:
Basic:
Net income per share before extraordinary item
and cumulative effect of accounting change $ 0.39 $ 0.25 $ 0.73 $ 0.53
Extraordinary item, net - - (0.02) -
Cumulative effect of accounting change, net - - (0.14) -
------------- ---------- ----------- ----------
Net income per share $ 0.39 $ 0.25 $ 0.57 $ 0.53
============= ========== =========== ==========
Weighted Average Shares Outstanding (000's) 62,067 58,001 58,740 57,995
============= ========== =========== ==========
Diluted:
Net income per share before extraordinary item
and cumulative effect of accounting change $ 0.38 $ 0.25 $ 0.71 $ 0.52
Extraordinary item, net - - (0.01) -
Cumulative effect of accounting change, net - - (0.14) -
------------- ---------- ----------- ----------
Net income per share $ 0.38 $ 0.25 $ 0.56 $ 0.52
============= ========== =========== ==========
Weighted Average Shares Outstanding (000's) 63,733 58,613 60,106 58,697
============= ========== =========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-1-
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
ASSETS
[Enlarge/Download Table]
June 30, December 31,
1999 1998
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 107,520 $ 81,956
Accounts receivable, net 68,872 69,116
Prepaid expenses and other 31,523 11,829
Inventories 11,607 11,081
Deferred tax asset 32,444 34,098
------------ ------------
Total current assets 251,966 208,080
------------ ------------
PROPERTY AND EQUIPMENT, NET 2,321,165 1,327,722
OTHER ASSETS:
Investments in unconsolidated affiliates, net 11,516 134,025
Excess of purchase price over fair market value
of net assets acquired, net 37,062 37,574
Deposits and other assets, net 52,785 66,393
------------ ------------
Total other assets 101,363 237,992
------------ ------------
$ 2,674,494 $ 1,773,794
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 41,216 $ 23,931
Construction payable 41,889 17,403
Income taxes payable 3,757 2,457
Current obligation, capital leases 5,710 5,086
Current obligation, long term debt 10,874 10,077
Accrued interest on long term debt 14,734 14,630
Other accrued liabilities 136,487 115,781
------------ ------------
Total current liabilities 254,667 189,365
------------ ------------
DEFERRED REVENUES 4,936 5,219
DEFERRED INCOME TAXES 106,170 77,165
LONG TERM OBLIGATION, CAPITAL LEASES 14,734 2,867
LONG TERM DEBT 1,034,111 534,797
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 75,000,000 shares
authorized, 68,237,795 and 58,033,094
shares issued and outstanding) 682 580
Capital in excess of par value 1,233,695 968,199
Treasury stock, at cost (6,000,000 shares) (210,589) (210,589)
Retained earnings 226,718 193,187
Other comprehensive income 9,370 13,004
------------- ------------
Total stockholders' equity 1,259,876 964,381
------------- ------------
$ 2,674,494 $ 1,773,794
============= ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-2-
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
[Enlarge/Download Table]
Six Months Ended
June 30,
---------------------------
1999 1998
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 33,531 $ 30,661
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 50,351 35,819
Amortization of debt offering costs 979 868
Provision for doubtful accounts and discounts 24,283 17,773
Loss on early extinguishment of debt 1,382 -
Cumulative change in accounting principle 12,567 -
Earnings in excess of distributions-unconsolidated affiliate (5,026) (11,201)
Deferred income taxes 9,954 7,133
Change in assets and liabilities:
Accounts receivable 537 2,106
Inventories 493 1,256
Prepaid expenses and other (8,257) 39
Income taxes payable (5,506) -
Accounts payable, accrued liabilities and other (10,894) (13,214)
Currency translation adjustment (211) 266
----------- -----------
Net cash from operating activities 104,183 71,506
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (235,446) (208,247)
Acquisition of Primadonna Resorts, Inc., net (13,346) -
Disposition of property and equipment, net 6,193 446
Change in construction payable 24,486 (10,900)
Change in deposits and other assets, net 10,174 (14,493)
----------- -----------
Net cash from investing activities (207,939) (233,194)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to banks and others (5,312) (5,210)
Issuance of long term debt - 500,000
Borrowings under bank line of credit 597,000 31,000
Extinguishment of debts (374,500) -
Repayments of bank lines of credit (110,000) (31,000)
Issuance of common stock 22,132 497
------------- ----------
Net cash from financing activities 129,320 495,287
------------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 25,564 333,599
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 81,956 34,606
------------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 107,520 $ 368,205
============= ===========
-3-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation
MGM Grand, Inc. (the "Company") is a Delaware corporation,
incorporated on January 29, 1986. As of June 30, 1999, approximately 61.1%
of the outstanding shares of the Company's common stock were owned by Kirk
Kerkorian and Tracinda Corporation ("Tracinda"), a Nevada corporation
wholly owned by Kirk Kerkorian.
Through its wholly-owned subsidiary, MGM Grand Hotel, Inc., the
Company owns and operates the MGM Grand Hotel/Casino ("MGM Grand Las
Vegas"), a hotel/casino and entertainment complex in Las Vegas, Nevada.
On March 1, 1999, the Company completed its merger (the "Merger") with
Primadonna Resorts, Inc. ("Primadonna"), and as part of the Merger acquired
Primadonna's 50% ownership interest in New York-New York Hotel and Casino
LLC ("NYNY, LLC") which owns and operates the New York-New York Hotel and
Casino ("NYNY") in Las Vegas, Nevada (see Note 7). Beginning March 1,
1999, Primadonna and NYNY, LLC are wholly-owned subsidiaries of the
Company. The Merger gave the Company ownership of three hotel/casinos
located in Primm, Nevada at the California/Nevada border, which includes
Whiskey Pete's, Buffalo Bill's and the Primm Valley Resort (the "Primm
Properties"), as well as two championship golf courses located 1 mile from
the Primm Properties.
Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the
Company owns and operates the MGM Grand Hotel/Casino in Darwin, Australia
("MGM Grand Australia").
Through its wholly-owned subsidiary, MGM Grand South Africa, Inc., the
Company manages three casinos throughout various provinces of the Republic
of South Africa. The casino in Nelspruit began operations on October 15,
1997, the casino in Witbank began operations on March 10, 1998 and the
casino in Johannesburg began operations on September 28, 1998. The Company
receives development and management fees from its partner, Tsogo Sun Gaming
& Entertainment, which is responsible for providing all project costs.
Through its wholly-owned subsidiary, MGM Grand Detroit, Inc. the
Company and its local partners in Detroit, Michigan, formed MGM Grand
Detroit, LLC to develop a hotel/casino and entertainment complex ("MGM
Grand Detroit"), at an approximate cost of $800 million. On November 20,
1997, the Company was chosen as a finalist for a development agreement to
construct, own and operate one of Detroit's three new casinos. On April 9,
1998, the Detroit City Council approved MGM Grand Detroit's development
agreement with the City of Detroit. Construction of the project is subject
to the receipt of various governmental approvals. The plans for the
permanent facility call for an 800-room hotel, a 100,000 square-foot
casino, signature restaurants and retail outlets, a showroom and other
entertainment venues. On July 22, 1998, the Michigan Gaming Control Board
adopted a resolution which allows the issuance of casino licenses to
conduct gaming operations in temporary facilities. On July 28, 1999, the
Michigan Gaming Control Board issued a casino license to MGM Grand Detroit,
LLC to conduct gaming operations in it's interim facility, which opened on
July 29, 1999. Through June 30, 1999, approximately $159.1 million was
expended, with $131.2 million capitalized and $27.9 million expensed, by
the Company for the permanent and temporary facilities.
Through its wholly-owned subsidiary, MGM Grand Atlantic City, Inc.,
the Company intends to construct, own and operate a destination resort
hotel/casino, entertainment and retail facility in Atlantic City, New
Jersey, at an approximate cost of $700 million, on approximately 35 acres
of land on the Atlantic City Boardwalk. Construction of the project is
subject to the receipt of various governmental approvals. On July 24, 1996,
the Company was found suitable for licensing
-4-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 1. Organization and Basis of Presentation (continued)
by the New Jersey Casino Control Commission. Through June 30, 1999,
approximately $54.8 million was expended, with $54 million capitalized and
$.8 million expensed by the Company for the project.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
1998 Annual Report included on Form 10-K.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
financial position as of June 30, 1999, and the results of operations for
the three month and six month periods ended June 30, 1999 and 1998. The
results of operations for such periods are not necessarily indicative of
the results to be expected for the full year.
Certain reclassifications have been made to prior period financial
statements to conform with the 1999 presentation, which have no effect on
previously reported net income.
Note 2. Statements of Cash Flows - Supplemental Disclosures
For the six months ended June 30, 1999 and 1998, cash payments made
for interest, net of amounts capitalized were $21.5 million and $3.1
million, respectively.
Cash payments made for state and federal taxes for the six months
ended June 30, 1999 and 1998 were $16.1 million and $7.1 million,
respectively.
As a result of the Merger (see Note 7), the Company issued stock to
Primadonna shareholders in the amount of approximately $244.7 million and
assumed long-term debt totaling $389 million.
Note 3. Long Term Debt and Notes Payable
Long term debt consisted of the following (in thousands):
[Enlarge/Download Table]
June 30, December 31,
1999 1998
------------------ ------------------
Australian Hotel/Casino Loan, due December 1, 2000 (US$) $ 42,985 $ 44,874
Senior Reducing Revolving Credit Facility 355,000 -
MGM Grand Detroit, LLC Credit Facility 147,000 -
6.95% Senior Collateralized Notes, due February 1, 2005 300,000 300,000
6.875% Senior Collateralized Notes, due February 6, 2008 200,000 200,000
------------------ -----------------
1,044,985 544,874
Less: Current Maturities (10,874) (10,077)
------------------ -----------------
$ 1,034,111 $ 534,797
================== =================
-5-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 3. Long Term Debt and Notes Payable (continued)
Total interest incurred for the first six months of 1999 and 1998 was
$30.5 million and $18.2 million, respectively, of which $10.4 million and
$8.2 million was capitalized in the 1999 and 1998 periods, respectively.
During the first six months of 1999 and 1998, the Company recognized
interest expense from its unconsolidated affiliate of $1.1 million and $4.4
million, respectively.
On July 1, 1996, the Company secured a $500 million Senior Reducing
Revolving Credit Facility with BA Securities (the "Facility"), an affiliate
of Bank of America NT&SA. In August 1996, the Facility was increased to
$600 million. In July 1997, the Facility was amended, extended and
increased to $1.25 billion (the "New Facility"), with provisions to allow
an increase of the New Facility to $1.5 billion as well as to allow
additional pari passu debt financing up to $500 million. The New Facility
contains various restrictive covenants on the Company which include the
maintenance of certain financial ratios and limitations on additional debt,
dividends, capital expenditures and disposition of assets. The New
Facility also restricts certain acquisitions and similar transactions.
Interest on the New Facility is based on the bank reference rate or
Eurodollar rate. The New Facility matures in December 2002, with the
opportunity to extend the maturity for successive one year periods. On May
4, 1999, two letters of credit totaling $49.9 million were issued under the
facility to support municipal financing used in connection with the
proposed Detroit permanent casino. During the six months ended June 30,
1999, $450 million was drawn down on the New Facility of which $355 million
remained outstanding. The Company used $216.6 million and $157.9 million
from the New Facility to pay off the Primadonna and NYNY bank facilities,
respectively, and terminated these borrowing arrangements.
The Company filed a Shelf Registration Statement with the Securities
and Exchange Commission which became effective on August 4, 1997. The Shelf
Registration Statement allows the Company to issue up to $600 million of
debt and equity securities. On February 2 and February 6, 1998, the Company
completed public offerings totaling $500 million of Senior Collateralized
Notes in tranches of 7 and 10 years. The 7-year tranche of $300 million
carries a coupon of 6.95%, while the 10-year tranche of $200 million
carries a coupon of 6.875%. Both tranches are initially secured equally and
ratably with the New Facility, and the security may be removed equally with
the New Facility at the Company's option upon the occurrence of certain
events, including the maintenance of investment grade ratings. These Senior
Collateralized Notes are pari passu with the New Facility and contain
various restrictive covenants as does the New Facility. The Senior
Collateralized Notes and the New Facility are collateralized by
substantially all of the assets of the Company except for assets of certain
unrestricted subsidiaries.
The Australian bank facility originally provided a total availability
of approximately $69.5 million (AUD $105 million), which has been reduced
by principal payments totaling $26.9 million (AUD $40.1 million) made in
accordance with the terms of the bank facility, including $5.3 million (AUD
$8.2 million) during the six months ended June 30, 1999. As of June 30,
1999, $43 million (AUD $64.9 million) remained outstanding. The bank
facility includes funding for general corporate purposes. Interest on the
bank facility is based on the Australian Bank Bill rate. The indebtedness,
which matures in December 2002, has been wholly guaranteed by the Company.
MGM Grand Australia has an $13.2 million (AUD $20 million) uncommitted
standby line of credit, with a funding period of 91 days for working
capital purposes. No amount was outstanding during the six months ended
June 30, 1999.
-6-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 3. Long Term Debt and Notes Payable (continued)
On March 31, 1999, MGM Grand Detroit, LLC secured a $230 million
credit facility (the "Detroit Facility") with a consortium of banks, the
majority of which are based in the greater Detroit metropolitan area. The
Detroit Facility will be used to finance the development and construction
of the temporary and permanent casino complexes and for general working
capital. The Detroit Facility may be increased to $250 million at the
Company's discretion. The Detroit Facility is secured by substantially all
of the assets of the temporary facility and is guaranteed by the Company.
During the six months ended June 30, 1999, $147 million was drawn down and
remained outstanding on the Detroit Facility. As of June 30, 1999, the
Company was in compliance with all covenant provisions associated with the
aforementioned obligations.
Note 4. Common Stock
On June 23, 1998, the Company announced a $35.00 per share cash tender
offer for up to 6 million shares of the Company's common stock as part of a
12 million share repurchase program. The offer commenced on July 2, 1998
and expired on July 31, 1998. A total of 10.8 million shares of the
Company's common stock were tendered and, accordingly, the shares were
prorated with 6 million shares being purchased. The total acquisition cost
of the tendered shares was approximately $210.6 million.
On March 1, 1999, the Company issued 9.5 million shares of the
Company's common stock valued at approximately $244.7 million in connection
with the Merger (see Note 7).
On June 10, 1999, the Company announced a $50.00 per share cash tender
offer for up to 6 million shares of the Company's common stock. The offer
commenced on June 17, 1999 and expired on July 23, 1999. Based upon the
final results, 15.1 million shares of the Company's common stock were
tendered, and accordingly, the tendered shares were prorated. The total
acquisition cost of the tendered shares was approximately $300.6 million.
This tender offer completes the acquisition of the remaining 6 million
shares offered in the 12 million share repurchase program announced on June
23, 1998.
Note 5. Comprehensive Income
Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
Reporting Comprehensive Income, requires that the Company disclose
comprehensive income and its components. The objective of SFAS 130 is to
report a measure of all changes in equity of a company that result from
transactions and other economic events of the period other than
transactions with stockholders. Comprehensive income is the total of net
income and all other non-stockholder changes in equity ("Other
Comprehensive Income").
The Company has recorded currency translation adjustments as Other
Comprehensive Income in the accompanying consolidated financial statements.
Comprehensive income is calculated as follows (in thousands):
[Download Table]
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
Net income $24,106 $14,399 $33,531 $30,661
Currency translation adjustment (2,183) 4,065 (3,634) 2,963
------- ------- ------- -------
Comprehensive income $21,923 $18,464 $29,897 $33,624
======= ======= ======= =======
-7-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 6. Earnings per Share
The Company calculates earnings per share ("EPS") in accordance with
the Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
Earnings Per Share. SFAS 128 presents two EPS calculations: (i) basic
earnings per common share which is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
periods presented, and (ii) diluted earnings per common share which is
determined on the assumptions that options issued to employees are
exercised and repurchased at the average price for the periods presented
(in thousands except per share amounts):
[Download Table]
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net Income $ 24,106 $ 14,399 $ 33,531 $ 30,661
========== ========== ========== ==========
Weighted Average Basic Shares 62,067 58,001 58,740 57,995
========== ========== ========== ==========
Basic Earnings per Share $ 0.39 $ 0.25 $ 0.57 $ 0.53
========== ========== ========== ==========
Weighted Average Diluted Shares 63,733 58,613 60,106 58,697
========== ========== ========== ==========
Diluted Earnings per Share $ 0.38 $ 0.25 $ 0.56 $ 0.52
========== ========== ========== ==========
Weighted average diluted shares include the following: options to
purchase 1,666,000 and 612,000 shares issued to employees for the three
month periods ended June 30, 1999 and 1998, respectively, and 1,366,000 and
702,000 for the six month periods ended June 30, 1999 and 1998,
respectively.
Note 7. Primadonna Acquisition
On March 1, 1999, the Company completed the Merger with Primadonna
Resorts, Inc. for 9.5 million shares of the Company's common stock valued
at approximately $244.7 million plus the assumption of debt totaling $389
million. Primadonna shareholders received .33 shares of the Company's
common stock for every Primadonna share held. The transaction was accounted
for as a purchase and, accordingly, the purchase price was preliminarily
allocated to the underlying assets acquired and liabilities assumed based
upon their estimated fair values at the date of the Merger. The operating
results for Primadonna are included in the Condensed Consolidated
Statements of Operations from the date of acquisition.
-8-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following unaudited pro forma consolidated financial information for
the Company has been prepared assuming that the Merger had occurred on the
first day of the following respective periods (in thousands, except per
share amounts):
[Enlarge/Download Table]
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net Revenues $319,060 $292,302 $637,525 $572,349
========== ========== ========== ==========
Operating Profit before Preopening and
Corporate Expense $ 68,831 $ 46,919 $130,533 $ 92,350
========== ========== ========== ==========
Operating Income $ 50,191 $ 41,886 $ 97,990 $ 83,682
========== ========== ========== ==========
Net Income before Extaordinary Item and
Cum. Effect of Accounting Change $ 24,106 $ 19,605 $ 46,520 $ 40,832
========== ========== ========== ==========
Basic Earnings per Share before Extraordinary
Item and Cum. Effect of Accounting Change $ 0.39 $ 0.29 $ 0.75 $ 0.60
========== ========== ========== ==========
Weighted Average Basic Shares Outstanding (000's) 62,067 67,544 61,650 67,532
========== ========== ========== ==========
Diluted Earnings per Share before Extraordinary
Item and Cum. Effect of Accounting Change $ 0.38 $ 0.29 $ 0.74 $ 0.60
========== ========== ========== ==========
Weighted Average Diluted Shares Outstanding (000's) 63,733 68,175 63,289 68,251
========== ========== ========== ==========
These unaudited pro forma results are presented for comparative purposes
only. The pro forma results are not necessarily indicative of what the
Company's actual results would have been had the acquisition been completed
as of the beginning of these periods, or of future results.
Note 8. Start Up Activities
Effective January 1, 1999, the Company adopted Statement of Position
98-5 ("SOP 98-5"), "Reporting on the Costs of Start-up Activities." SOP 98-
5 requires that all companies expense costs of start-up activities as those
costs are incurred. The term "start-up" includes pre-opening, pre-operating
and organization activities. As a result of the adoption of SOP 98-5, the
Company recognized $16 million and $.2 million in preopening expense
related to the Detroit and Atlantic City projects, respectively, as well as
$4 million related to the Mansion at the MGM Grand Las Vegas for the six
months ended June 30, 1999. Additionally, the Company recognized the
cumulative effect of the accounting change (net of tax) of $7.7 million and
$.5 million, related to the adoption of SOP 98-5 for the Detroit and
Atlantic City projects, respectively.
-9-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Quarter versus Quarter
Net revenues for the second quarter of 1999 were $319.1 million,
representing an increase of $133.7 million (72.1%) when compared with
$185.4 million during the same period last year. The increase in net
revenues was due to growth in every revenue segment at existing properties
as well as the addition of NYNY and the Primm Properties effective with the
March 1st merger with Primadonna Resorts, Inc. (see Note 7).
Consolidated casino revenues for the second quarter of 1999 were
$182.6 million, representing an increase of $86.2 million (89.4%) when
compared with $96.4 million during the same period in the prior year. MGM
Grand Las Vegas casino revenues were $105.6 million, representing an
increase of $15.8 million (17.6%) when compared with $89.8 million during
the same period in the prior year. The increase in casino revenues at MGM
Grand Las Vegas was a result of increased table games volume (excluding
baccarat), a more normalized table games and baccarat win percentage, and
increased slots volume. MGM Grand Australia reported casino revenues of
$7.1 million, representing an increase of $.5 million (7.6%) when compared
with $6.6 million during the same period in the prior year. This increase
was largely due to an increase in slots volume. In addition, NYNY and the
Primm Properties contributed $28.3 million and $41.5 million, respectively,
to casino revenues during the quarter as a result of the merger on March 1,
1999.
Consolidated room revenues were $67.4 million for the second quarter
of 1999 compared with $43.3 million in the prior year's second quarter,
representing an increase of $24.1 million (55.7%). MGM Grand Las Vegas
room revenues were $45.2 million, representing an increase of $2.3 million
(5.4%) when compared with $42.9 million in the same period of the prior
year. The increase was due to a higher average room rate for the 1999
second quarter of $100 compared with $97, as well as an increase in
occupancy to 100% in the second quarter of 1999 when compared with 98% in
the prior year. MGM Grand Australia room revenues of $.5 million were flat
when compared with the second quarter of 1998. NYNY and the Primm
Properties reported room revenues of $15.8 million and $5.9 million,
respectively, for the second quarter of 1999.
Consolidated food and beverage revenues were $40 million in the second
quarter of 1999, representing an increase of $16.4 million (69.5%) when
compared with $23.6 million in the second quarter of the prior year. MGM
Grand Las Vegas reported food and beverage revenues of $28.6 million during
the second quarter of 1999, representing an increase of $6.4 million
(28.8%) when compared with $22.2 million in the second quarter of 1998.
This increase resulted from the banquet revenue generated by the Conference
Center, increased revenue from the Studio 54 night club and revenue from
the buffet which was closed for remodeling during the second quarter of
1998. MGM Grand Australia reported food and beverage revenues of $1.5
million, representing an increase of $.1 million (7.1%) when compared with
$1.4 million in the second quarter of 1998, due to increased food covers in
the current year. NYNY and the Primm Properties reported food and beverage
revenues of $3.1 million and $6.9 million, respectively, for the second
quarter of 1999.
Consolidated entertainment, retail and other revenues increased $27.3
million (99.6%) from $27.4 million in the 1998 period to $54.7 million in
the 1999 period. MGM Grand Las Vegas entertainment, retail and other
revenue increased $4.2 million (15.7%) from $26.8 million in the second
quarter of 1998 to $31 million in 1999. This was the result of increased
entertainment, tenant rental, wedding chapel and spa revenues in 1999.
Also, the Company had increased management and development fees from MGM
Grand South Africa of $2.7 million in
-10-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Quarter versus Quarter (continued)
the 1999 period compared with $.6 million in the prior year, due to the
opening of the Johannesburg temporary casino in September, 1998. NYNY and
the Primm Properties reported entertainment, retail, and other revenues of
$10.2 million and $10.8 million, respectively, for the second quarter of
1999.
Income from unconsolidated affiliate was $9.5 million for the second
quarter of 1998, representing the Company's 50% share of NYNY's operating
income. As a result of the merger with Primadonna Resorts, Inc. on March
1, 1999, NYNY became a 100% owned subsidiary of the Company and as such its
results of operations have been consolidated with those of the Company
since that time.
Consolidated operating expenses (before Pre-Opening and Corporate
expenses) were $250.2 million in the second quarter of 1999, representing
an increase of $94.9 million (61.1%) when compared with $155.3 million for
the same period last year. MGM Grand Las Vegas expenses increased $12
million (8.1%) due to increased casino expenses due to gaming taxes on the
increased revenues, an increased provision for doubtful accounts and higher
food and beverage expenses due to the increased revenues. MGM Grand
Australia operating expenses increased from $6.5 million in the 1998 period
to $7 million in the 1999 period as a result of the higher revenues. NYNY
and the Primm Properties added operating expenses of $35 million and $47.3
million, respectively, during the second quarter of 1999.
Preopening and other expense for the 1999 period of $14.1 million
represent costs principally associated with the Detroit interim casino.
Corporate expense for 1999 was $4.5 million compared with $2.9 million
in 1998, representing an increase of $1.6 million (55.2%). The 1999
quarter included expense of stock options issued to non-employees of the
Company.
Interest income of $.4 million for the three months ended June 30,
1999 decreased by $5 million from $5.4 million in the second quarter of
1998. The decrease was attributable to lower invested cash balances versus
the prior year.
Interest expense in the second quarter of 1999 was $12 million (net of
amounts capitalized) compared with $6.3 million in the second quarter of
1998, reflecting increased outstanding loan balances relating to
construction of the Detroit interim casino, as well as debt assumed in the
merger with Primadonna on March 1, 1999. Also, the Company recognized
interest expense from unconsolidated affiliate of $2.2 million during the
1998 period.
Six Months versus Six Months
Net revenues for the six months ended June 30, 1999 were $570.4
million, representing an increase of $205.2 million (56.2%) when compared
with $365.2 million during the same period last year. The increase in net
revenues was due to growth in every revenue segment at existing properties
as well as the addition of NYNY and the Primm Properties effective with the
March 1st merger with Primadonna Resorts, Inc. (see Note 7).
-11-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Six Months versus Six Months (continued)
Consolidated casino revenues for the six months ended June 30, 1999
were $320.7 million, representing an increase of $128.6 million (66.9%)
when compared with $192.1 million during the same period in the prior year.
MGM Grand Las Vegas casino revenues were $212.9 million, representing an
increase of $33.5 million (18.7%) when compared with $179.4 million during
the same period in the prior year. The increase in casino revenues at MGM
Grand Las Vegas was a result of increased table games volume (excluding
baccarat), a more normalized table games and baccarat win percentage, and
increased slots volume. MGM Grand Australia reported casino revenues of
$13.8 million, representing an increase of $1.1 million (8.7%) when
compared with $12.7 million during the same period in the prior year. The
increase in casino revenue was largely due to an increase in slots volume.
In addition, NYNY and the Primm Properties contributed $38.6 million and
$55.4 million, respectively, to casino revenues since the merger on March
1, 1999.
Consolidated room revenues for the period were $122.3 million compared
with $84.1 million for the same period in 1998, representing an increase of
$38.2 million (45.4%). MGM Grand Las Vegas room revenues were $92 million,
representing an increase of $8.8 million (10.6%) when compared with $83.2
million in the same period of the prior year. The increase was due to a
higher average room rate for the 1999 period of $104 compared with $99, as
well as an increase in occupancy to 98.3% in the 1999 period compared with
94.2% in the same period of the prior year. MGM Grand Australia room
revenues of $.8 million were flat when compared with the first six months
of 1998. NYNY and the Primm Properties reported room revenues of $21.7
million and $7.8 million, respectively, since the merger on March 1, 1999.
Consolidated food and beverage revenues for the period were $74.5
million, representing an increase of $26 million (53.6%) when compared with
$48.5 million for the same period of the prior year. MGM Grand Las Vegas
reported food and beverage revenues of $58.5 million during the current
period, representing an increase of $12.7 million (27.7%) when compared
with $45.8 million in the same period of 1998. This increase resulted from
the banquet revenue generated by the Conference Center, increased revenue
from the Studio 54 night club and revenue from the buffet which was closed
for remodeling during the second quarter of 1998. MGM Grand Australia
reported food and beverage revenues of $2.5 million, representing a
decrease of $.2 million (7.4%) when compared with $2.7 million during the
same period in the prior year, due to fewer food covers in the current
year. NYNY and the Primm Properties reported food and beverage revenues of
$4.4 million and $9.3 million, respectively, since the merger on March 1,
1999.
Consolidated entertainment, retail and other revenues increased $43.7
million (85%) from $51.4 million in the 1998 period to $95.1 million in the
1999 period. MGM Grand Las Vegas entertainment, retail and other revenue
increased $12 million (24%) from $50.1 million in the 1998 period to $62.1
million in 1999. This was the result of increased entertainment revenues
in 1999, which included a heavyweight boxing match, as well as increased
tennant rental, wedding chapel and spa revenues. Also, the Company had
increased management and development fees from MGM Grand South Africa of
$5.3 million in the 1999 period compared with $1.3 million in the prior
year, due to the opening of the Johannesburg temporary casino in September,
1998. NYNY and the Primm Properties reported entertainment, retail, and
other revenues of $13.6 million and $14.2 million, respectively, since the
merger on March 1, 1999.
-12-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Six Months versus Six Months (continued)
Income from unconsolidated affiliate was $6.1 million for the six
months ended June 30, 1999, compared with $19.7 million in 1998,
representing the Company's 50% share of NYNY's operating income. The
reduction is a result of the merger with Primadonna Resorts, Inc. on March
1, 1999, whereby NYNY became a 100% owned subsidiary of the Company and as
such its results of operations have been consolidated with those of the
Company since that time.
Consolidated operating expenses (before Pre-Opening and Corporate
expenses) for the 1999 period were $449.8 million, representing an increase
of $145.2 million (47.7%) when compared with $304.6 million for the same
period last year. MGM Grand Las Vegas reported increased casino expenses
and an increased provision for doubtful accounts due to increased casino
revenues. In addition, expenses increased due to costs associated with the
heavyweight boxing match held in the period and higher food and beverage
expenses due to the increased revenues. MGM Grand Australia operating
expenses increased $.5 million (3.8%) from $12.8 million in the 1998 period
to $13.3 million in the 1999 period as a result of costs associated with
the increased revenues. NYNY and the Primm Properties added operating
expenses of $46.9 million and $63.5 million, respectively, since the merger
on March 1, 1999.
Preopening and other expense for the 1999 period of $22.9 million
represent costs principally associated with the Detroit interim casino.
Corporate expense for the 1999 period was $9.6 million compared with
$5.4 million in 1998, representing an increase of $4.2 million (77.8%).
The 1999 period included expense of stock options issued to non-employees
of the Company.
Interest income of $.7 million for the period ended June 30, 1999
decreased by $8.5 million from $9.2 million in the same period of 1998.
The decrease was attributable to lower invested cash balances versus the
prior year.
Interest expense for the six months ended June 30, 1999 was $20.2
million (net of amounts capitalized) compared with $10 million (net of
amounts capitalized) in the same period of 1998, reflecting increased
outstanding loan balances relating to construction of the Detroit interim
casino, as well as debt assumed in the merger with Primadonna on March 1,
1999. Also, the Company recognized interest expense from unconsolidated
affiliate of $1.1 million during the 1999 period compared with $4.4 million
in 1998, reflecting a reduced outstanding balance on the NYNY facility, as
well as two months of activity during 1999 compared with six months in
1998.
The extraordinary loss in the 1999 period of $.9 million, net of
applicable income tax benefit, reflects the write-off of unamortized debt
costs associated with the extinguishment of the NYNY LLC credit facility
(see Note 3).
The cumulative effect of the accounting change in the 1999 period of
$8.2 million, net of income tax benefit, reflects the Company's adoption of
the recently issued SOP 98-5. Previously, the Company had capitalized
preopening costs until the development of a property was substantially
completed and ready to open, at which time the cumulative costs were
expensed (see Note 8). SOP 98-5 requires such start-up costs to be
expensed as incurred.
-13-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Liquidity and Capital Resources
As of June 30, 1999 and December 31, 1998, the Company held cash and
cash equivalents of $107.5 million and $82 million, respectively. Cash
provided by operating activities for the first six months of 1999 was
$104.2 million compared with $71.5 million for the same period of 1998.
During the six months ended June 30, 1999, $450 million was drawn down
on the New Facility, of which $355 million remained outstanding at the end
of the period. The Company used $216.6 million and $157.9 million to pay
off the Primadonna and NYNY bank facilities, respectively. Accordingly,
both the Primadonna and NYNY bank facilities have been extinguished.
During the six months ended June 30, 1999, $147 million was drawn down and
remained outstanding on the Detroit Facility. As of June 30, 1999, the
Company was in compliance with all covenant provisions associated with the
aforementioned obligations.
On May 6, 1996, MGM Grand Las Vegas announced details of a 30-month,
$250 million Master Plan designed to transform the facility into "The City
of Entertainment." The Master Plan, which on June 3, 1997 was enhanced
and increased to approximately $570 million, is nearing completion with the
debut of the "Mansion at the MGM Grand" in June, 1999, and the opening of
the Lion Habitat and the expanded parking facilities in July, 1999.
Previously, the 380,000 square foot state-of-the-art conference center
opened in April 1998, and the 50-foot tall polished bronze lion sculpture
along with the "Entertainment Casino" (previously known as the Emerald City
casino) were completed during the first quarter of 1998 which includes a
Studio 54 nightclub and the Rainforest Cafe. Additionally, the new 6.6-
acre pool and spa complex was completed and opened for operations in July
1998 and a new 3,800 space employee parking garage also opened in July
1998. Approximately $86.8 million is anticipated to be expended during
1999 related to the Master Plan, of which $70.1 million had been expended
through June 30, 1999.
Capital expenditures during the first six months of 1999 were $235.4
million, consisting primarily of $41.7 million related to MGM Grand Las
Vegas for general property improvements, $70.1 million for the Master Plan
project, $2.3 million at NYNY for general property improvements, $2.1
million at Primm Properties for general property improvements, $.1 million
at MGM Grand Australia for general property improvements, $116.7 million at
MGM Grand Detroit for construction activities and $2.4 million for MGM
Grand Atlantic City land acquisition costs and pre-construction activities.
Anticipated capital expenditures remaining for 1999 are approximately
$217.9 million, consisting of approximately $16.7 million related to the
Master Plan, approximately $98.5 million related to general property
improvements for MGM Grand Las Vegas, approximately $14.8 million related
to general property improvements for NYNY, approximately $4.7 million
related to general property improvements for the Primm Properties,
approximately $74 million related to construction activities for MGM Grand
Detroit's interim and permanent facilities, and approximately $9.2 million
related to land acquisitions and pre-construction activities for MGM Grand
Atlantic City.
On June 23, 1998, the Company announced a $35.00 per share cash tender
offer for up to 6 million shares of Company common stock as part of a 12
million share repurchase program. The offer commenced on July 2, 1998 and
expired on July 31, 1998. Based upon the final results, 10.8 million
shares of the Company's common stock were tendered, and accordingly, the
shares were prorated. The total acquisition cost of the tendered shares
was approximately $210.6 million.
-14-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Liquidity and Capital Resources (continued)
On June 10, 1999, the Company announced a $50.00 per share cash tender
offer for up to 6 million shares of the Company common stock. The offer
commenced on June 17, 1999 and expired on July 23, 1999. Based upon the
final results, 15.1 million shares of the Company's common stock were
tendered, and accordingly, the tendered shares were prorated. The total
acquisition cost of the tendered shares was approximately $300.6 million.
The Company expects to finance operations, capital expenditures,
existing debt obligations and future share repurchases through cash flow
from operations, cash on hand, and the bank lines of credit.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year,
which may result in system failures and disruptions to operations at
January 1, 2000. The Company is assessing its Year 2000 readiness through
an ongoing Year 2000 Remediation Program that addresses information
technology systems, as well as systems outside of the information
technology area. The Year 2000 Remediation Program takes into
consideration all locations where the Company has operations. The Year
2000 Remediation Program includes continuing assessment of the Company's
Year 2000 issues, contacting suppliers of certain systems to determine the
timing of applicable upgrades, and implementing applicable Year 2000
upgrades, which are currently available.
The Company has initiated formal communications with its significant
suppliers to determine the extent to which the Company is vulnerable to
third party failure to remediate their own Year 2000 issues. In
conjunction with this effort, the Company is assessing the potential impact
of such third party Year 2000 issues. There can be no guarantee that the
systems of third parties on which the Company's systems rely will be timely
converted, or that a failure to convert by another company or a conversion
that is incompatible with the Company's systems, would not have a material
adverse effect on the Company.
The Company's Year 2000 Remediation Program may require enhancements
to ensure there is no disruption to the Company's operations, however, the
financial impact of making such enhancements is not expected to be material
to the Company's financial position or results of operations. During the
six months ended June 30, 1999, the Company has incurred $.2 million in
costs to modify existing computer systems, it is anticipated that
approximately $2.4 million will be expended in 1999.
Safe Harbor Provision
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in
this report contains statements that are forward-looking, such as
statements relating to plans for future expansion and other business
development activities, as well as other capital spending, financing
sources, the effects of regulation (including gaming and tax regulations)
and competition. Such forward-looking information involves important risks
and uncertainties that could significantly affect anticipated results in
the future and, accordingly, such results may differ from those expressed
in any
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MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Safe Harbor Provision (continued)
forward-looking statements made by or on behalf of the Company. These
risks and uncertainties include, but are not limited to, those relating to
development and construction activities, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations in
interest rates), domestic or global economic conditions (including
sensitivity to fluctuations in foreign currencies), changes in federal or
state tax laws or the administration of such laws, changes in gaming laws
or regulations (including the legalization of gaming in certain
jurisdictions) and application for licenses and approvals under applicable
jurisdictional laws and regulations (including gaming laws and
regulations).
-16-
Dates Referenced Herein and Documents Incorporated by Reference
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