Tender-Offer Statement — Issuer Tender Offer — Schedule 13E-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13E4 Tender-Offer Statement -- Issuer Tender Offer 5 25K
2: EX-99.(A)(1) Form of Offer to Purchase 34 158K
3: EX-99.(A)(2) Form of Letter of Transmittal 12 54K
4: EX-99.(A)(3) Form of Notice of Guaranteed Delivery 2 16K
5: EX-99.(A)(4) Form of Letter to Brokers, Dealers 2 13K
6: EX-99.(A)(5) Form of Letter to Clients 2 13K
7: EX-99.(A)(6) Press Release Dated 6/23/98 2 12K
8: EX-99.(A)(7) Form of Summary Advertisement 4± 17K
9: EX-99.(A)(8) Substitute W-9 Tax Guidelines 4± 16K
10: EX-99.(G)(1) Exhibit 13 to Company's Annual Report on Form 37 182K
10-K
11: EX-99.(G)(2) Certain Pages of the Company's Form 10-Q 9 47K
12: EX-99.(G)(3) Consent of Independent Accountants 1 6K
EX-99.(G)(2) — Certain Pages of the Company’s Form 10-Q
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EXHIBIT (g)(2)
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
[Download Table]
Three Months Ended
March 31,
---------------------
1998 1997
------- --------
REVENUES:
Casino $ 95,722 $107,096
Room 40,749 43,336
Food and beverage 24,983 21,569
Entertainment, retail and other 23,947 25,874
Income from unconsolidated affiliate 10,209 14,722
-------- --------
195,610 212,597
Less promotional allowances 15,763 15,099
-------- --------
179,847 197,498
-------- --------
EXPENSES:
Casino 54,600 53,157
Room 11,373 11,116
Food and beverage 15,533 12,239
Entertainment, retail and other 18,117 18,642
Provision for doubtful accounts and discounts 8,187 8,413
General and administrative 24,524 25,435
Depreciation and amortization 16,904 15,458
-------- --------
149,238 144,460
-------- --------
OPERATING PROFIT BEFORE CORPORATE EXPENSE 30,609 53,038
CORPORATE EXPENSE 2,451 1,489
-------- --------
OPERATING INCOME 28,158 51,549
-------- --------
OTHER INCOME (EXPENSE):
Interest Income 3,797 199
Interest expense, net of amounts capitalized (3,772) (974)
Interest expense from unconsolidated affiliate (2,171) (2,465)
Other, net (603) (232)
-------- --------
(2,749) (3,472)
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 25,409 48,077
Provision for income taxes (9,147) (17,927)
-------- --------
NET INCOME $ 16,262 $ 30,150
======== ========
PER SHARE OF COMMON STOCK:
Basic:
Net income per share $ 0.28 $ 0.52
======== ========
Weighted Average Shares Outstanding (000's) 57,990 57,836
======== ========
Diluted:
Net income per share $ 0.28 0.51
======== ========
Weighted Average Shares Outstanding (000's) 58,775 58,772
======== ========
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)
[Download Table]
ASSETS
March 31, December 31,
1998 1997
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 437,333 $ 34,606
Accounts receivable, net 47,747 78,977
Prepaid expenses and other 11,645 10,452
Inventories 13,882 16,462
Deferred tax asset 28,986 30,294
---------- ----------
Total current assets 539,593 170,791
---------- ----------
PROPERTY AND EQUIPMENT, NET 1,122,017 1,032,708
OTHER ASSETS:
Investments in unconsolidated affiliates 115,951 108,121
Excess of purchase price over fair market value
of net assets acquired, net 38,342 38,598
Deposits and other assets, net 56,356 48,156
---------- ----------
Total other assets 210,649 194,875
---------- ----------
$1,872,259 $1,398,374
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 18,323 $ 20,484
Construction payable 28,786 33,376
Current obligation, capital leases 5,935 6,088
Current obligation, long term debt 11,606 10,589
Accrued interest on long term debt 5,441 -
Other accrued liabilities 70,604 110,953
---------- ----------
Total current liabilities 140,695 181,490
---------- ----------
DEFERRED REVENUES 5,721 4,743
DEFERRED INCOME TAXES 60,099 58,831
LONG TERM OBLIGATION, CAPITAL LEASES 3,937 4,447
LONG TERM DEBT 544,559 47,241
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 75,000,000 shares
authorized, 58,000,280 and 57,984,873 shares
issued and outstanding) 580 580
Capital in excess of par value 966,953 966,487
Retained earnings 140,501 124,239
Other comprehensive income 9,214 10,316
---------- ----------
Total stockholders' equity 1,117,248 1,101,622
---------- ----------
$1,872,259 $1,398,374
========== ==========
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]
Three Months Ended
March 31,
----------------------
1998 1997
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 16,262 $ 30,150
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 16,942 15,493
Amortization of debt offering costs 377 431
Provision for doubtful accounts and discounts 8,187 8,413
Earnings in excess of distributions-unconsolidated affiliate (8,038) (12,257)
Change in assets and liabilities:
Accounts receivable 23,043 25,116
Inventories 2,339 (342)
Prepaid expenses and other (1,193) 1,135
Income taxes payable and deferred income taxes 2,575 (8,493)
Accounts payable, accrued liabilities and other (36,754) (50,069)
Currency translation adjustment (71) 48
--------- --------
Net cash from operating activities 23,669 9,625
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (104,092) (23,760)
Disposition of property and equipment, net 402 113
Investments in unconsolidated affiliates - (7,160)
Change in construction payables (4,590) (45)
Change in deposits and other assets, net (10,434) (8,503)
--------- --------
Net cash from investing activities (118,714) (39,355)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to banks and others (2,694) (3,192)
Issuance of long term debt 500,000 -
Borrowings under bank line of credit 31,000 15,000
Repayments of bank line of credit (31,000) -
Issuance of common stock 466 1,883
--------- --------
Net cash from financing activities 497,772 13,691
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 402,727 (16,039)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 34,606 61,412
--------- --------
CASH AND CASH EQUIVALENTS AS END OF PERIOD $ 437,333 $ 45,373
========= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-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 March 31, 1998, approximately 62.5%
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 MGM Grand Hotel/Casino ("MGM Grand Las Vegas"),
a hotel/casino and entertainment complex in Las Vegas, Nevada.
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").
The Company and Primadonna Resorts, Inc. ("Primadonna") each owns 50%
of New York-New York Hotel and Casino, LLC ("NYNY LLC"), which completed
development of the $460 million themed destination resort called New York-
New York Hotel and Casino ("NYNY") in Las Vegas, Nevada in December 1996.
NYNY commenced operations on January 3, 1997, and is located on
approximately 20 acres at the northwest corner of Tropicana Avenue and Las
Vegas Boulevard, across from MGM Grand Las Vegas.
Through its wholly-owned subsidiary, MGM Grand South Africa, Inc., the
Company manages two casinos in the Mpumalanga Province of the Republic of
South Africa. The casino in Nelspruit began operations on October 15,
1997, while the casino in Witbank began operations on March 10, 1998. The
Company receives development and management fees from its partner, Tsogo
Sun Gaming & Entertainment, who 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 ("MGM Grand Detroit") to develop a hotel/casino and
entertainment complex at a minimum approximate cost of $700 million. On
November 20, 1997, MGM Grand Detroit 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. Construction of the project
is subject to the receipt of various governmental approvals. The plans for
MGM Grand Detroit call for an 800-room hotel, a 100,000-square-foot casino,
signature restaurants and retail outlets, a showroom and other
entertainment venues.
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 a minimum 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 by the New Jersey Casino
Control Commission.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the 1997
Annual Report included on Form 10-K.
-4-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
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 March 31, 1998, and the results of operations for
the three month periods ended March 31, 1998 and 1997. The results of
operations for such periods are not necessarily indicative of the results
to be expected for the full year.
Recently issued Statement of Position - In April 1998, the American
Institute of Certified Public Accountants issued SOP 98-5, "Reporting on
the Costs of Start-up Activities." The new standard 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. Previously, the company had capitalized these items until the
property opened at which time these cumulative costs would be expensed. As
of March 31, 1998, the Company capitalized "start-up" costs of $.6 million
related to Atlantic City. The Company will adopt SOP 98-5 in the first
quarter of fiscal year 1999.
Certain reclassifications have been made to prior period financial
statements to conform with the 1998 presentation, which have no effect on
previously reported net income.
NOTE 2. STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1998 and 1997, cash payments made
for interest were $1.6 million and $2.0 million, respectively.
No cash payments were made for state and federal taxes for the three
months ended March 31, 1998. Cash payments made for state and federal
taxes for the three months ended March 31, 1997 were $25 million.
NOTE 3. LONG TERM DEBT AND NOTES PAYABLE
Long term debt consisted of the following (in thousands):
[Download Table]
March 31, December 31,
1998 1997
--------- ------------
Australian Hotel/Casino Loan, due December 1, 2000 $ 56,165 $ 57,830
6.95% Senior Collateralized Notes, due February 1, 2005 300,000 -
6.875% Senior Collateralized Notes, due February 6, 2008 200,000 -
Bank Credit Facility - -
-------- ------------
556,165 57,830
Less: Current Maturities (11,606) (10,589)
-------- ------------
$544,559 $ 47,241
======== ============
Total interest incurred for the first three months of 1998 and 1997
was $7.5 million and $2.5 million, respectively, of which $3.7 million and
$1.5 million were capitalized in the 1998 and 1997 periods, respectively.
During the first three months of 1998 and 1997, the Company recognized
interest expense from its unconsolidated affiliate of $2.2 million and $2.5
million, respectively.
-5-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. LONG TERM DEBT AND NOTES PAYABLE (CONTINUED)
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. As a result of
the New Facility, the Company recognized an extraordinary loss of
approximately $4.2 million, net of tax benefits, of unamortized debt costs
from the Facility during the third quarter of 1997. 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. During
the three months ended March 31, 1998, $31 million was drawn down and
repaid against the New Facility, and no amounts remained outstanding as of
March 31, 1998.
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.
The Australian bank facility originally provided a total availability
of approximately $69.6 million (AUD $105 million), which has been reduced
by principal payments totaling $14.5 million (AUD $20.3 million) made in
accordance with the terms of the bank facility, including $2.7 million (AUD
$4.1 million) during the three months ended March 31, 1998. As of March
31, 1998, $56.2 million (AUD $84.7 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 2000, has been wholly guaranteed by the Company.
MGM Grand Australia has a $13.3 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 three months ended
March 31, 1998 and December 31, 1997.
Upon commencement of operations of NYNY on January 3, 1997 (see Note
1), the $285 million non-revolving construction line of credit converted to
a five-year reducing revolver. The Company and Primadonna (the "Partners")
have executed a joint and several unlimited Keep-Well Agreement, which
provides that in the event of insufficient cash flow from NYNY to comply
with financial covenants, the Partners will make cash infusions which are
sufficient to bring NYNY LLC into compliance with the financial covenants.
During the first three months of 1998, $17.6
-6-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. LONG TERM DEBT AND NOTES PAYABLE (CONTINUED)
million in voluntary principal repayments were made by NYNY LLC. As of
March 31, 1998 and December 31, 1997, a total of $227.5 million and $245.1
million was outstanding, respectively. On January 21, 1997, NYNY LLC
completed an additional $20 million equipment financing with a financial
institution. As of March 31, 1998 and December 31, 1997, $16.7 million and
$17.5 million were outstanding related to the equipment financing,
respectively.
NOTE 4. ISSUANCE OF COMMON STOCK
On May 7, 1996, the Company made a commitment to grant 15 shares of
Company Common Stock to each of its employees in exchange for continued
active employment through the one year anniversary date of the commitment.
As a result of the stock grant commitment, deferred compensation was
charged to stockholders' equity and amortized monthly to compensation
expense over the one year commitment period. On May 7, 1997, 99,045 shares
were issued to employees as a result of the commitment. Over the life of
the commitment, approximately $4 million was amortized to expense, of which
$.9 million of such expense was recognized during the three months ended
March 31, 1997.
On May 24, 1995, and as amended, the Company entered into an agreement
with Don King Productions, Inc. ("DKP"), to present six of Mike Tyson's
fights. Pursuant to the agreement, the Company made a non-interest bearing
working capital advance of $15 million to DKP, sold to DKP 618,557 treasury
shares of the Company's Common Stock (the "Shares") for $15 million in
exchange for a non-interest bearing promissory note which was repaid, and
provided a guaranteed future share price of $48.50. The original agreement
was amended by a Trust Agreement dated October 23, 1996, in which the
Shares were placed in the name of, and held by, an independent trustee,
pending disposition at the direction of the Company. The Company and DKP
determined to terminate the agreement, and on September 25, 1997, after
solicitation of competitive bids, the Shares held by the Trustee were sold
to Tracinda at the price of $44.50 per share for an aggregate consideration
of $27.5 million, the Company was repaid the $15 million working capital
advance and the remaining consideration in the amount of $12.5 million was
paid to DKP. As a result of this transaction, the Company reversed
approximately $5.9 million of previously expensed stock price guarantee
amortization during 1997.
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 financial statements.
Comprehensive income is calculated as follows (in thousands):
-7-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. COMPREHENSIVE INCOME (CONTINUED)
[Download Table]
For Three Months Ended March 31,
1998 1997
------- -------
Net income $16,262 $30,150
Currency translation adjustment (1,102) 1,133
------- -------
Comprehensive income $15,160 $31,283
======= =======
NOTE 6. EARNINGS PER SHARE
The Company calculates earnings per share ("EPS") in accordance with
the Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"). 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
March 31,
------------------------
1998 1997
------- -------
Net Income $16,262 $30,150
======= =======
Weighted Average Basic Shares 57,990 57,836
======= =======
Basic Earnings per Share $ 0.28 $ 0.52
======= =======
Weighted Average Diluted Shares 58,775 58,772
======= =======
Diluted Earnings per Share $ 0.28 $ 0.51
======= =======
Weighted average diluted shares include the following: options to purchase
785,000 and 858,000 shares issued to employees for the three month periods
ended March 31, 1998 and 1997, respectively, and 78,000 employee grant
shares (see Note 4) for the period ended March 31, 1997.
NOTE 7. INVESTMENT IN UNCONSOLIDATED AFFILIATE
On December 28, 1994, the Company and Primadonna formed a joint
venture to construct, own and operate the New York-New York Hotel and
Casino (see Note 1). The hotel/casino opened to the public on January 3,
1997. The Company holds a 50% interest in the joint venture. The Company
has contributed land on which the property is located and cash totaling
$70.7 million. The joint venture secured bank financing of $285 million and
term loan financing of $20 million (see Note 3), and the joint venture
Partners' executed a Keep-Well Agreement in conjunction with the financing.
-8-
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MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. INVESTMENT IN UNCONSOLIDATED AFFILIATE (CONTINUED)
Summary condensed financial information for New York-New York Hotel and
Casino, LLC is as follows (In thousands):
[Download Table]
Three Months Ended March 31,
1998 1997
-------- --------
Net Revenues $ 54,035 $ 67,868
======== ========
Operating Income $ 20,406 $ 29,261
======== ========
Interest Expense, net $ 4,342 $ 4,930
======== ========
Net Income $ 16,064 $ 24,331
======== ========
As of As of
March 31, 1998 December 31, 1997
-------------- -----------------
Total Assets $467,444 $470,252
======== ========
Long-term Debt $241,813 $246,403
======== ========
Members' Equity $199,414 $183,350
======== ========
-9-
Dates Referenced Herein and Documents Incorporated by Reference
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