Filed On 3/31/98 · SEC Files 1-06697 (10-K), 1-06697 · Accession Number 42246-98-4
This Filing was Corrected by the SEC on 4/9/98.
As Of Filer Filing On/For/As Docs:Pgs
3/31/98 Mirage Resorts Inc 10-K405® 12/31/97 17:340
Annual Report -- [X] Reg. S-K Item 405 · Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K Annual Report 72 342K
2: EX-4.E Instrument Defining the Rights of Security Holders 55 264K
3: EX-4.F Instrument Defining the Rights of Security Holders 36 161K
4: EX-10.CCC Material Contract 2 14K
5: EX-10.JJJ Material Contract 95± 397K
6: EX-10.KKK Material Contract 14 60K
7: EX-10.LLL Material Contract 25 71K
8: EX-10.MMM Material Contract 1 11K
9: EX-10.NNN Material Contract 14 39K
10: EX-10.OOO Material Contract 4 15K
11: EX-10.PPP Material Contract 4 21K
12: EX-10.QQQ Material Contract 4 19K
13: EX-10.RRR Material Contract 10 49K
14: EX-23 Consent of Experts or Counsel 1 7K
15: EX-27.A Financial Data Schedule 1 11K
16: EX-27.B Financial Data Schedule 1 13K
17: EX-27.C Financial Data Schedule 1 13K
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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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-6697
MIRAGE RESORTS, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
NEVADA 88-0058016
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3400 LAS VEGAS BOULEVARD SOUTH
LAS VEGAS, NEVADA 89109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S 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
---------------------------------------- -----------------------
COMMON STOCK ($.004 PAR VALUE PER SHARE) NEW YORK STOCK EXCHANGE
PACIFIC EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days: 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 contained, to the best of the Registrant's
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
-----
The aggregate market value of the Registrant's Common Stock
held by non-affiliates (all persons other than executive officers
or directors) of the Registrant on March 27, 1998 (based on the
closing sale price per share on the New York Stock Exchange
Composite Tape on that date) was $3,943,420,236.
The Registrant's Common Stock outstanding at March 27, 1998
was 179,489,247 shares.
Portions of the Registrant's definitive Proxy Statement for
its May 21, 1998 Annual Meeting of Stockholders (which has not
been filed as of the date of this filing) are incorporated by
reference into Part III.
=================================================================
PART I
ITEM 1. BUSINESS
GENERAL
Mirage Resorts, Incorporated (the "Company" or the
"Registrant") was incorporated in Nevada in 1949 as the successor
to a partnership that began business in 1946. The Company,
through wholly owned subsidiaries, owns and operates (i)
The Mirage, a hotel-casino and destination resort on the Las
Vegas Strip, (ii) Treasure Island at The Mirage ("Treasure
Island"), a hotel-casino resort adjacent to The Mirage, (iii)
the Golden Nugget, a hotel-casino in downtown Las Vegas, and
(iv) the Golden Nugget-Laughlin, a hotel-casino in Laughlin,
Nevada. The Company, through a wholly owned subsidiary,
also owns a 50% interest in a joint venture that owns and
operates the Monte Carlo Resort & Casino, which opened June 21,
1996 on the Las Vegas Strip.
The Company, through wholly owned subsidiaries, is also
currently constructing Bellagio, an elegant hotel-casino and
destination resort on the Las Vegas Strip, and Beau Rivage,
a luxurious hotel-casino and beachfront resort in Biloxi,
Mississippi. Bellagio is believed to be the most expensive
resort hotel ever built. When it opens, Beau Rivage will be
the largest hotel-casino in the United States outside of
Nevada.
OPERATING PROPERTIES
The Mirage opened in 1989 and is located on approximately
100 acres shared with Treasure Island near the center of the
Las Vegas Strip. The Mirage is a luxurious, tropically
themed destination resort. 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, sending
blasts of steam and water 40 feet into the air, with flames
which spectacularly illuminate the front of the resort.
Inside the front entrance is an atrium with a tropical
garden and additional water features capped by a 100-foot-
high glass dome. The atrium has an advanced environmental
control system and creative lighting and other special
effects designed to replicate the sights, sounds and
fragrances of the South Seas. Located at the rear of the
hotel, adjacent to the swimming pool area, is a dolphin
habitat with eight Atlantic bottlenose dolphins, and The
Secret Garden of Siegfried & Roy, a $14 million attraction
that allows guests to view the beautiful exotic animals of
Siegfried & Roy, the world-famous illusionists who perform
at The Mirage.
Treasure Island opened in 1993 adjacent to The Mirage.
Treasure Island is a pirate-themed hotel-casino resort. 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 regularly engage in a
pyrotechnic and special effects sea battle, culminating with
the sinking of the frigate. The showroom at Treasure Island
features Mystere, a unique choreographic mix of special
effects, comedy and feats of human prowess produced and
performed by the world-famous Cirque du Soleil.
The Golden Nugget, together with its parking facilities,
occupies approximately two and one-half square blocks and is
located approximately five miles north of The Mirage and
Treasure Island in the center of downtown Las Vegas. The
Golden Nugget has received the Mobil Travel Guide's Four
Star Award and the AAA Four Diamond Award for 14 and 21
consecutive years, respectively. It is the largest hotel-
casino and the generally acknowledged leader in the downtown
Las Vegas market and has benefited from the "Fremont Street
Experience," a $70 million entertainment attraction developed
by a coalition of several major downtown Las Vegas hotel-casinos
(including the Golden Nugget) in conjunction with the City of
Las Vegas. This attraction opened in December 1995 and converted
Fremont Street into a four-block-long pedestrian mall, topped
with a 90-foot by 1,400-foot special effects canopy. Within
the canopy are 2.1 million computer-controlled, four-color lights
and a 540,000-watt sound system. The Fremont Street Experience
also includes retail facilities and a 1,432-space parking garage.
The Golden Nugget-Laughlin is located approximately 90
miles south of Las Vegas in Laughlin, Nevada. The hotel-
casino is located on approximately 13 acres with 600 feet of
Colorado River frontage near the center of Laughlin's
tourist district. The Golden Nugget-Laughlin features a
32,000-square foot casino offering 18 table games and
approximately 1,175 slots, 300 hotel rooms (including four
suites), three restaurants, three bars, an entertainment
lounge, a deli, an ice cream parlor and two gift and retail
shops. Other facilities at the Golden Nugget-Laughlin
include a swimming pool, a parking garage with space for
approximately 1,585 vehicles and approximately four and one-
half acres of surface parking for recreational vehicles.
The Company also owns and operates a 78-room motel in
Bullhead City, Arizona, across the Colorado River from Laughlin.
The Company, through a wholly owned subsidiary, is a 50%
partner with Circus Circus Enterprises, Inc. ("Circus") in
Victoria Partners, a joint venture that owns and operates
Monte Carlo. The resort is situated on approximately 46
acres near the center of the Las Vegas Strip. Monte Carlo
has a palatial style reminiscent of the Belle Epoque, the
French Victorian architecture of the late 19th century.
Monte Carlo has amenities such as a microbrewery featuring
live entertainment, a health spa, a beauty salon, a 1,200-
2
seat theater featuring the world-renowned magician Lance
Burton, a large pool area and lighted tennis courts. Monte
Carlo will be connected to Bellagio by a monorail.
CURRENT CONSTRUCTION PROJECTS
BELLAGIO
The Company is currently constructing Bellagio on an
approximately 120-acre site at the corner of the Las Vegas
Strip and Flamingo Road. Bellagio is the Company's most
ambitious destination resort to date. This elegant European-
style resort will overlook a picturesque lake inspired by
Lake Como in Northern Italy. Throughout each day the lake's
1,200 fountains will come alive in a choreographed
performance of water, music and lights which will be highly
visible along the Las Vegas Strip. The resort will also
feature a wide variety of casual and gourmet restaurants in
both indoor and outdoor settings (including a branch of
Manhattan's world-famous Le Cirque), upscale retail
boutiques, including those leased to Armani, Chanel, Fred
Leighton, Gucci, Hermes, Prada and Tiffany & Co., and
extensive meeting, convention and banquet space. Cirque du
Soleil is producing an all-new and unique production to be
performed in a specially designed showroom. Bellagio will
be lushly landscaped with classical gardens (both indoors
and outdoors) and European fountains and pools. The resort
is currently expected to cost approximately $1.6 billion
(including land, capitalized interest and preopening costs)
and is scheduled to open in October 1998. Additionally, as
of March 1, 1998, the Company had acquired a collection of
fine art at a cost of approximately $162 million for display
and resale at Bellagio and was renting additional fine art
for display. The Bellagio art collection rivals in quality
the collections of many of the world's leading art galleries
and museums and is expected to be a major draw for the
resort.
BEAU RIVAGE
The Company is constructing Beau Rivage, a luxurious
beachfront resort in Biloxi, Mississippi, on a 23-acre site
where Interstate 110 meets the Gulf Coast. The Gulf Coast is
one of the largest gaming markets in the United States and
Beau Rivage will be the largest hotel-casino in Mississippi,
with 1,780 guest rooms and an approximately 80,000-square foot
casino. Guests arriving at the resort will be greeted by
lush gardens and stately oaks. Beau Rivage will feature
13 restaurants, upscale retail outlets, a full-service spa and
salon, a state-of-the-art convention center, an elegant atrium
lobby, a beautifully landscaped pool area and a 1,550-seat show-
room that will be home to a new production by Cirque du Soleil.
3
Beau Rivage is currently expected to be completed in the first
quarter of 1999 at an estimated total cost (including land,
capitalized interest and preopening costs) of approximately $600
million. The Company has also expended an additional $6 million
to acquire several other parcels of land in the Biloxi area
for future development, including approximately 508 acres for
the potential development of a world-class 18-hole golf course.
In addition, the Company is planning the construction of a
deluxe marina at Beau Rivage for sportfishing, Gulf excursions
and other water sports, as well as dockage for private yachts of
up to 125 feet.
As with any major construction project, the Bellagio and
Beau Rivage projects involve many risks, including weather
interference, shortages of materials and labor, work stoppages,
labor disputes, unforeseen engineering, environmental or
geological problems and unanticipated cost increases, any of
which could give rise to delays or cost overruns. Con-
struction, equipment or staffing problems or difficulties
in obtaining any of the requisite licenses, permits, allocations
or authorizations from regulatory authorities could increase
the cost or delay the construction or opening of the facilities
or otherwise affect their design and features. It is possible
that the existing budget and construction plans for either
project may be changed for competitive or other reasons.
Accordingly, there can be no assurance that either project will
be completed within the time periods or budgets which are
currently contemplated.
4
The following table sets forth certain data, as of March 1,
1998, regarding the Company's major resorts and certain estimates
regarding the Company's two projects under construction.
· Enlarge/Download Table
Bellagio (a) Beau Rivage (b) The Mirage Treasure Island Golden Nugget Monte Carlo (c)
------------ --------------- --------------- --------------- ------------- ---------------
Project cost................... $1.6 billion $600 million $862 million(d) $485 million(d) (e) $355 million(d)
Opening date................... Oct. 1998 1st Qtr. 1999 Nov. 1989 Oct. 1993 Aug. 1946 June 1996
Total building square footage.. 4,289,000 2,222,000 3,117,000 2,377,000 1,465,000 2,520,000
Casino
Square footage (including
corridors).................. 151,000 80,000 107,200 83,800 38,000 90,000
Number of gaming tables...... 139 90 122 86 56 95
Number of slots.............. 2,637 2,025 2,220 1,952 1,327 2,156
Hotel
Number of guest rooms (in-
cluding suites and villas).. 3,005 1,780 3,044 2,891 1,907 3,002
Square footage of interior
meeting space.............. 99,400 30,000 73,000 16,000 21,000 22,000
Restaurants
Number of outlets............ 16 13 12 10 6 8
Number of seats.............. 2,878 1,564 2,300 1,744 1,006 2,200
Retail
Square footage............... 76,700 25,500 35,000 16,000 4,350 11,300
Showroom
Number of seats.............. 1,800 1,550 1,503 1,525 350 1,200
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(a) The estimated Bellagio project cost does not include the cost
of fine art purchased for display and resale at Bellagio.
(b) The estimated Beau Rivage project cost does not include the cost of
land acquired for future development.
(c) Monte Carlo is 50%-owned by the Company.
(d) Includes capital improvements subsequent to opening, but is not
adjusted for inflation or depreciation.
(e) Not meaningful for comparative purposes.
PENDING ACQUISITION OF BOARDWALK HOTEL-CASINO
On December 22, 1997, the Company entered into agreements
(the "Boardwalk Agreements") to acquire Boardwalk Casino,
Inc. ("BCI") and certain related assets at a total cost
(including assumed and acquired debt) of approximately $112
million. BCI owns and operates the Boardwalk, a hotel-
casino situated on approximately eight acres on the Las
Vegas Strip between Monte Carlo and Bellagio. The Boardwalk
includes 653 hotel rooms and 33,000 square feet of casino
space offering 661 slot machines, 20 table games and a full-
service race and sports book. Other amenities at the
Boardwalk include a coffee shop, a buffet, a snack bar, an
entertainment lounge, two bars, a gift shop, two outdoor
swimming pools and 1,125 garage and surface parking spaces.
The hotel is currently operated under a Holiday Inn-
Registered Trademark- franchise license agreement. Upon consum-
5
mation of the transactions contemplated by the Boardwalk Agree-
ments and combined with adjacent parcels of land previously
acquired by the Company, the Company will own approximately
12 acres with 817 feet of frontage on the Las Vegas Strip at
a total cost of approximately $140 million.
Consummation of the BCI acquisition is subject to
a number of conditions, including approval by the
stockholders of BCI and the receipt of requisite approvals
from gaming regulatory authorities. Pursuant to the
Boardwalk Agreements, the Company holds proxies covering
approximately 53% of BCI's outstanding shares and has agreed
to vote such shares in favor of the acquisition. If such
approvals are obtained, the acquisition is expected to close
in the second quarter of 1998, whereupon BCI would become a
wholly owned subsidiary of the Company. The Company's
acquisition of BCI, together with adjacent land owned by the
Company (including a portion of the Bellagio site not
required for Bellagio) and land the Company has agreed to
acquire in an exchange with Monte Carlo, would afford the
Company a 42-acre site for potential future development on
the Las Vegas Strip, between and contiguous to Bellagio and
Monte Carlo.
FUTURE EXPANSION
ATLANTIC CITY
The Company and the City of Atlantic City, New Jersey have
entered into an agreement (as amended, the "Redevelopment
Agreement") pursuant to which, on January 8, 1998, the City
conveyed a total of approximately 180 acres (125 acres of
which are developable) in the Marina area of the City (the
"Marina Site") to the Company in exchange for the Company
agreeing to develop a hotel-casino (tentatively named "Le
Jardin") on the Marina Site and undertaking certain other
obligations, including remediation of environmental
contamination on the Marina Site. Under the terms of the
Redevelopment Agreement, construction of the planned resort
is subject to the satisfaction of certain conditions. One
such condition is the construction of certain major road
improvements designed to improve access to the Marina area.
The Company has entered into an agreement (the "Road
Development Agreement") with the New Jersey Department of
Transportation (the "State") and the South Jersey
Transportation Authority ("SJTA") with respect to the
construction and joint funding of the road improvements.
Pursuant to the Road Development Agreement, the Company
agreed to fund $110 million of the estimated $330 million
cost of the road improvement project, with the balance to be
funded by the State ($95 million) and SJTA ($125 million).
The Company's and SJTA's portion of the funding has been
deposited in escrow accounts and is restricted for the road
improvement project. Of the Company's $110 million funding
obligation, $55 million will be satisfied by the Company
6
purchasing special revenue bonds which are repayable,
together with interest, solely from certain future tax
revenues generated by the Company's planned hotel-casino on
the Marina Site. The road improvement project is being
undertaken pursuant to a fixed-price design/build contract.
The contractor commenced the design phase of the project in
October 1997 and expects to complete the project in 2001.
Numerous governmental permits required for the Company's
hotel-casino and the road improvement project have not yet
been received. Additionally, an existing Atlantic City
hotel-casino operator and others have filed various lawsuits
which challenge the validity of the Redevelopment Agreement
and seek to prevent construction of the road improvements,
thereby delaying or preventing the Company from developing
its hotel-casino on the Marina Site. The hotel-casino
project is in the early design stage and a project budget
has not yet been developed. As a result of the foregoing
factors, there can be no assurance that the Company will
construct a hotel-casino in Atlantic City or as to the
timing or cost of construction.
In 1996, the Company entered into agreements with Circus
and Boyd Gaming Corporation ("Boyd") pursuant to which the
Company agreed, subject to a number of conditions, to sell a
portion of the Marina Site to Circus as a casino site and to
form a joint venture with Boyd to develop a third hotel-
casino on the Marina Site (in addition to the Company's
wholly owned hotel-casino and the Circus hotel-casino). In
January 1998, the Company notified Circus and Boyd that
their respective agreements with the Company relating to the
Marina Site had terminated. For information concerning
pending litigation with Circus and Boyd arising from such
terminations, see "Legal Proceedings" in Item 3 on page 24 of
this Form 10-K.
OTHER
The Company regularly evaluates potential expansion and
acquisition opportunities in both the domestic and
international markets. Such opportunities may include the
ownership, management and operation of gaming and other
entertainment facilities in states other than Nevada or
outside of the United States, either alone or with joint
venture partners. Development and operation of any gaming
facility in a new jurisdiction are subject to numerous
contingencies, several of which are outside of the Company's
control and may include the enactment of appropriate gaming
legislation, the issuance of requisite permits, licenses and
approvals, the availability of appropriate financing and the
satisfaction of other conditions. There can be no assurance
that the Company will elect or be able to consummate any
such acquisition or expansion opportunity.
7
MARKETING
All of the Company's hotel-casinos operate 24 hours each
day, every day of the year. Management does not consider
the Company's business, taken as a whole, to be particularly
seasonal.
The level of gaming activity at its casinos is the single
largest factor in determining the Company's revenues and
operating income. The Company also receives significant
revenues from lodging, food and beverage, entertainment and
retail operations.
The principal segments of the Nevada gaming market are
tour and travel, leisure travel, high-level wagerers and
conventions (including small meetings and corporate
incentive programs). The Company believes that The Mirage's
hotel occupancy and gaming revenues can be maximized through
a balanced marketing approach aimed at the high end of each
market segment. The marketing strategy for Bellagio and
Beau Rivage will be similar to that for The Mirage. The
Company's marketing strategy for Treasure Island and the
Golden Nugget is aimed at attracting middle- to upper-middle-
income wagerers, largely from the leisure travel and, to a
lesser extent, the tour and travel segments. The Company
believes that the success of its hotel-casinos is also
affected by the level of walk-in customers and, accordingly,
has designed its facilities to maximize their attraction to
guests of other hotels.
The Golden Nugget-Laughlin appeals primarily to patrons
from the middle-income strata of the gaming populace. Many
of the Golden Nugget-Laughlin's customers are retired
individuals who are attracted by lodging, food and beverage
and entertainment prices that are lower than those offered
by the major Las Vegas hotel-casinos. The predominant
portion of the Golden Nugget-Laughlin's casino revenues is
derived from slot machine play.
The Company, through wholly owned subsidiaries, owns
approximately 850 acres of real property located
approximately 10 miles north of The Mirage and Treasure
Island and five miles north of the Golden Nugget. The
Company owns and operates an exclusive world-class golf
course and related facilities known as "Shadow Creek" on
approximately 240 acres of such property. The Company is
currently offering a luxury suite package at its Las Vegas
hotel-casinos which includes golf privileges at Shadow
Creek. In connection with its marketing activities, the
Company also makes the course and related facilities
available for use, by invitation only, by high-level-wagerer
patrons. The Company has contemplated the development of a
second golf course adjacent to Shadow Creek, but has
indefinitely postponed plans for its construction.
8
CREDIT
Credit play represents a significant portion of the table
games volume at The Mirage. The Company's other facilities
do not emphasize credit play to the same extent as The
Mirage, although credit is made available.
The Company maintains strict controls over the issuance of
credit and aggressively pursues collection of its customer
receivables. These collection efforts parallel those
procedures commonly followed by most large corporations,
including the mailing of statements and delinquency notices,
personal and other contacts, the use of outside collection
agencies and civil litigation. Nevada gaming debts
evidenced by credit instruments are enforceable under the
laws of Nevada. All other states are required to enforce a
judgment on a gaming debt entered in Nevada pursuant to the
Full Faith and Credit Clause of the United States
Constitution. Gaming debts are not legally enforceable in
some foreign countries, but the United States assets of
foreign debtors may be reached to satisfy judgments entered
in the United States. A significant portion of the
Company's accounts receivable is owed by high-level-wagerer
customers from the Far East. The collectibility of customer
receivables is affected by a number of factors, including
changes in currency exchange rates and economic conditions
in the customers' home countries.
SUPERVISION OF GAMING ACTIVITIES
In connection with the supervision of gaming activities at
its casinos, the Company maintains stringent controls on the
recording of all receipts and disbursements. These audit and
cash controls include: locked cash boxes; personnel
independent of casino operations to perform the daily cash
and coin counts; floor observation of the gaming area;
observation of gaming and certain other areas through the
use of closed-circuit television; computer tabulation of
receipts and disbursements for each of the slot machines and
table games; and timely analysis of discrepancies or
deviations from normal performance.
COMPETITION
The Mirage, Treasure Island and the Golden Nugget 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, 11 major hotel-
casinos located in the downtown area and several major
facilities located elsewhere in the Las Vegas area. As of
March 1, 1998, there were approximately 102,100 hotel and
motel rooms in Las Vegas, compared to approximately 97,300
at December 31, 1996. In addition to Bellagio, there are
currently three major new hotel-casinos under construction
in Las Vegas. All three are scheduled to open in 1999 and
will add a total of approximately 9,700 rooms to the market.
9
Another hotel-casino with plans for 2,600 guest rooms and a
projected opening date in 2000 recently obtained significant
financing. Other major hotel-casinos have been proposed,
some of which are likely to be built. Expansion projects at
an existing major Las Vegas Strip hotel-casino are also
under construction and several other expansion projects have
been proposed. Management is unable to determine the extent
to which the increased competition will affect the Company's
future operating results.
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 of its hotel rooms and
restaurants, its entertainment and special attractions,
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.
Management believes that the Golden Nugget primarily
competes with the large hotel-casinos located on or near the
Strip, particularly those offering amenities and marketing
programs that appeal primarily to the middle- and upper-
middle-income strata of the gaming populace. The Golden
Nugget competes for gaming customers primarily on the basis
of the elegance, intimacy and excitement offered by the
facility, the quality and relative value of its hotel rooms
and restaurants, customer service and its marketing and
promotional programs. The Fremont Street Experience
attraction was developed in order for the downtown Las Vegas
hotel-casinos to compete more effectively with the hotel-
casinos located on the Las Vegas Strip. Management believes
that the competitive pressures of additional guest rooms on
the Strip particularly impacted the downtown market in 1997
and will continue to do so during 1998.
10
The Golden Nugget-Laughlin competes with eight nearby
hotel-casinos in Laughlin, as well as with hotel-casinos in
Las Vegas, Jean and Primm, Nevada and casinos on Indian
reservations in Laughlin's regional market, particularly
Southern California and Arizona. In recent years, the
Laughlin market has been adversely affected by increased
competition from the expansion of casino gaming in Las Vegas
and on Indian reservations in Arizona and elsewhere in the
regional market.
The Company's facilities 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 Company's hotel-casinos compete to
a lesser extent with state-sponsored lotteries, off-track
wagering, card parlors, riverboat and Indian gaming
facilities 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 have considered legalizing, casino gaming.
Management does not believe that such legalization of casino
gaming in those jurisdictions would have a material adverse
impact on the Company'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.
EMPLOYEES AND LABOR RELATIONS
As of March 1, 1998, the Company and its subsidiaries had
approximately 14,750 full-time and 2,335 part-time
employees. The Company and unions representing
approximately 7,000 of its Las Vegas employees recently
approved, and the employees ratified, the terms of new
collective bargaining contracts that will expire in May
2002. Management considers its employee relations to be
excellent.
REGULATION AND LICENSING
NEVADA
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 Nevada 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."
11
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) pro-
viding 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 con-
duct 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. THE MIRAGE
CASINO-HOTEL ("MCH") is registered as an intermediary company and
has been found suitable to own the stock of Treasure Island Corp.
("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, CORP. ("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, CORP. ("GNL") has
been licensed to conduct nonrestricted gaming operations at the
Golden Nugget-Laughlin. Bellagio has been registered as an
intermediary company and has been found suitable to own the stock
of MRGS Corp. ("MRGS"), which has been licensed as a 50% general
partner of Victoria Partners. The Registrant is registered by the
Nevada Commission as a publicly traded corporation (a
"Registered Corporation") and has been found suitable to own the
stock of MCH, GNLV, Bellagio and GNL, each of which, together
with TI Corp., MRGS and GNMC, is a corporate licensee (individ-
ually, a "Gaming Subsidiary" and collectively, the "Gaming
Subsidiaries") under the Nevada Act. Victoria Partners has been
licensed to conduct nonrestricted gaming operations at Monte
Carlo and certain subsidiaries of Circus have been registered or
licensed for their ownership of Victoria Partners. The
acquisition of BCI is subject to the prior approval of the Nevada
Gaming Authorities. Upon receipt of such approval, BCI will
become a Gaming Subsidiary.
12
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 distri-
buted 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
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.
13
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, the
Golden Nugget-Laughlin and Monte Carlo 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.
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
14
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 voting
securities 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
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.
15
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. On May
22, 1997, the Nevada Commission granted the Registrant prior
approval to make public offerings for a period of two years,
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 and must be renewed biannually. The
Shelf Approval also applies to any affiliated company wholly
owned by the Registrant (an "Affiliate") which is a publicly
traded corporation or would 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.
16
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.
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 con-
ducted. Depending upon the particular fee or tax involved, these
fees and taxes are payable monthly, quarterly or annually and
are based upon: (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 serving of food or refreshments or the
selling of merchandise. Nevada licensees that hold a manu-
facturer's or distributor's license, such as GNMC, also pay
certain fees to the State of Nevada.
17
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, the Golden Nugget-Laughlin and Monte Carlo, 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.
MISSISSIPPI
The ownership and operation of casino gaming facilities in
Mississippi are subject to the Mississippi Gaming Control Act and
the regulations promulgated thereunder (collectively, the
"Mississippi Act"). The Registrant's Mississippi gaming
operations will be subject to the licensing and regulatory
control of the Mississippi Gaming Commission (the "Mississippi
Commission").
The laws, regulations and supervisory procedures of the
Mississippi Commission are based upon declarations of public
policy which are concerned with, among other things: (i) keeping
gaming free of criminal and corruptive elements and (ii)
maintaining public confidence and trust in gaming by means of
strict regulation of all persons, locations, practices,
associations and activity related to the operation of licensed
gaming establishments and the manufacture or distribution of
gambling devices and equipment. Change in such laws, regulations
and procedures could have an adverse effect on the Registrant's
Mississippi gaming operations.
18
Beau Rivage Resorts, Inc. ("Beau Rivage Resorts"), the
Registrant's indirect subsidiary that will own and operate Beau
Rivage, is required to be licensed by the Mississippi Commission.
The gaming license requires the periodic payment of fees and
taxes and is not transferable. GNLV is registered as an
intermediary company and has been found suitable to own the stock
of Beau Rivage Resorts. The Registrant is registered by the
Mississippi Commission as a publicly traded corporation (a
"Registered Corporation") and has been found suitable to own the
stock of GNLV under the Mississippi Act.
As a Registered Corporation, the Registrant is required
periodically to submit detailed financial and operating reports
to the Mississippi Commission and furnish any other information
which the Mississippi Commission may require. No person may
become a stockholder of, or receive any percentage of profits
from, Beau Rivage Resorts without first obtaining approval from
the Mississippi Commission. The Registrant, GNLV and Beau Rivage
Resorts have obtained from the Mississippi Commission the various
registrations, findings of suitability and licenses required in
order to engage in gaming activities in Mississippi; however,
Beau Rivage is under construction, and the final approvals to
open the casino must be obtained from the Mississippi Commission
as well as other state and local governmental entities. Although
the Registrant expects to obtain such approvals in due course,
failure to receive such approvals would have a material adverse
effect on the Registrant's Mississippi gaming operations.
All gaming devices that are manufactured, sold or distri-
buted for use or play in Mississippi, or for distribution outside
of Mississippi, must be manufactured by licensed manufacturers
and distributed or sold by licensed distributors. All gaming
devices manufactured for use or play in Mississippi must be
approved by the Mississippi Commission before distribution or
exposure for play. The approval process for gaming devices
includes rigorous testing by the staff of the Mississippi
Commission, 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 Mississippi Commission.
Associated equipment must be administratively approved by the
Executive Director of the Mississippi Commission before it is
distributed for use in Mississippi.
The Mississippi Commission may investigate any individual
who has a material relationship to, or material involvement with,
the Registrant, GNLV or Beau Rivage Resorts 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 Beau Rivage Resorts must file
applications with the Mississippi Commission and may be required
to be licensed or found suitable. Officers, directors and key
employees of GNLV and the Registrant who are actively and
directly involved in gaming activities of Beau Rivage Resorts may
be required to be licensed or found suitable by the Mississippi
Commission. The Mississippi Commission may deny an application
19
for licensing for any cause which it deems reasonable. A finding
of suitability is comparable to licensing, and both require
submission of detailed personal and financial information
followed by a thorough investigation. The applicant for
licensing or a finding of suitability must pay all the costs of
the investigation. Changes in approval positions must be
reported to the Mississippi Commission, and in addition to its
authority to deny an application for a finding of suitability or
licensure, the Mississippi Commission has jurisdiction to
disapprove a change in a corporate position.
If the Mississippi Commission were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the Registrant, GNLV or
Beau Rivage Resorts, the companies involved would have to sever
all relationships with such person. In addition, the Mississippi
Commission may require the Registrant, GNLV or Beau Rivage
Resorts 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 Mississippi.
In addition to the Registrant, GNLV and Beau Rivage Resorts
are required to submit detailed financial and operating reports
to the Mississippi Commission. All material loans, sales of
securities and similar financing transactions entered into by
Beau Rivage Resorts must be reported to or approved by the
Mississippi Commission.
If it were determined that the Mississippi Act was violated
by Beau Rivage Resorts, the license it holds could be limited,
conditioned, suspended or revoked, subject to compliance with
certain statutory and regulatory procedures. In addition, the
Registrant, GNLV, Beau Rivage Resorts and the persons involved
could be subject to substantial fines for each separate violation
of the Mississippi Act at the discretion of the Mississippi
Commission. Limitation, conditioning or suspension of the gaming
license of Beau Rivage Resorts could (and revocation of the
gaming license would) materially adversely affect the
Registrant's Mississippi 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 Mississippi Commission has reason to believe
that such ownership would be inconsistent with the declared
policies of the State of Mississippi. The applicant must pay all
costs of investigation incurred by the Mississippi Commission in
conducting any such investigation.
20
The Mississippi Act requires any person who acquires more
than 5% of a Registered Corporation's voting securities to report
the acquisition to the Mississippi Commission. The Mississippi
Act requires that beneficial owners of more than 10% of a
Registered Corporation's voting securities apply to the
Mississippi Commission for a finding of suitability within 30
days after the Executive Director of the Mississippi Commission
requests such filing.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Mississippi Commission or the Executive Director of the
Mississippi Commission 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 voting securities beyond such period
of time as may be prescribed by the Mississippi Commission may be
guilty of a criminal offense.
The Mississippi 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 determines that such requirement is in
the public interest.
The Registrant is required to maintain a current stock
ledger in Mississippi which may be examined by the Mississippi
Commission 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 Mississippi
Commission. 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 Mississippi Commission has the
power to require the Registrant's stock certificates to bear a
legend indicating that the securities are subject to the
Mississippi Act; however, the Mississippi Commission has in the
past routinely waived such requirement.
The Registrant may not make a public offering of its
securities without the prior approval of the Mississippi
Commission if the securities or proceeds therefrom are intended
to be used to construct, acquire or finance gaming facilities in
Mississippi or to retire or extend obligations incurred for such
purposes. On May 29, 1997, the Mississippi Commission granted
the Registrant prior approval to make public offerings for a
period of one year, subject to certain conditions (the
"Mississippi Shelf Approval"). However, the Mississippi Shelf
Approval may be rescinded for good cause without prior notice
upon the issuance of a stop order by the Executive Director of
the Mississippi Commission. The Mississippi Shelf Approval does
not constitute a finding, recommendation or approval by the
Mississippi Commission as to the accuracy or adequacy of the
prospectus or the investment merits of the securities offered.
21
Any representation to the contrary is unlawful. The Registrant
intends to file an application for renewal of the Mississippi
Shelf Approval, which it anticipates will be considered by the
Mississippi Commission in May 1998.
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 Mississippi Commission. Entities seeking to acquire control
of a Registered Corporation must satisfy the Mississippi
Commission with respect to a variety of stringent standards prior
to assuming control of such Registered Corporation. The
Mississippi 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 Mississippi Legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defensive tactics affecting Mississippi
corporate gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Mississippi Commission has
established a regulatory scheme to ameliorate the potentially
adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi'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 Mississippi 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
Mississippi 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.
License fees and taxes, computed in various ways depending
on the type of gaming or activity involved, are payable to the
State of Mississippi, and to the City of Biloxi, where Beau
Rivage Resorts' operations will be conducted. Depending upon
the particular fee or tax involved, these fees and taxes are
payable monthly, quarterly or annually and are based upon:
(i) a percentage of the gross revenues received; (ii) the number
of gaming devices operated; or (iii) the number of table games
operated.
22
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 Mississippi, is
required to receive the approval of the Mississippi Commission
with respect to foreign gaming activities undertaken after
licensure. Licensees are also subject to disciplinary action by
the Mississippi 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 Mississippi gaming operations, engage in activities that are
harmful to the State of Mississippi 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
Mississippi on the ground of personal unsuitability.
The sale of alcoholic beverages at Beau Rivage will be sub-
ject to licensing, control and regulation by the Mississippi
State Tax Commission (the "Tax Commission"). All licenses are
revocable and are not transferable. The Tax Commission has 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 Beau Rivage
Resorts.
CERTAIN FORWARD-LOOKING STATEMENTS
Certain information included in this Form 10-K and other
materials filed or to be filed by the Company with the Securities
and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the
Company) contains forward-looking statements, within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements include information relating to plans for future
expansion and other business development activities as well as
other capital spending, financing sources and the effects of
regulation (including gaming and tax regulation) and competition.
Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results
in the future and, accordingly, such results may differ from
those expressed in any forward-looking statements made by or on
behalf of the Company. These risks and uncertainties include,
but are not limited to, those relating to development and
construction activities, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations
in interest rates), domestic or international economic
conditions, pending litigation, changes in federal or state tax
laws or the administration of such laws and changes in gaming
laws or regulations (including the legalization of gaming in
certain jurisdictions).
ITEM 2. PROPERTIES
The Mirage and Treasure Island share an approximately 100-
acre site owned by the Company.
23
The Golden Nugget occupies approximately seven and one-
half acres. The improvements and approximately 90% of the
underlying land are owned by the Company. The remaining
land is held under three separate ground leases that expire
(giving effect to renewal options) on dates ranging from
2025 to 2046.
The Golden Nugget-Laughlin, including approximately two
acres underlying the motel in Bullhead City, Arizona,
occupies an aggregate of approximately 15-1/2 acres. All of
the property is owned by the Company.
The Bellagio site comprises approximately 120 acres, all
of which is owned by the Company except for one acre held
under a ground lease that expires (giving effect to renewal
options) in 2073.
Monte Carlo occupies approximately 46 acres owned by
Victoria Partners. At March 1, 1998, Monte Carlo was
subject to aggregate encumbrances approximating $99.2
million.
The Company owns approximately 850 contiguous acres of
land in North Las Vegas, including 240 acres occupied by
Shadow Creek.
The Beau Rivage site comprises approximately 23 acres in
Biloxi, Mississippi owned by the Company. The Company also
owns several other parcels of land in the Biloxi area,
including approximately 508 acres for the potential
development of a world-class 18-hole golf course.
The Company owns approximately 180 acres (125 acres of
which are developable) in the Marina area of Atlantic City,
New Jersey. The Company is designing a major new hotel-
casino resort which it currently intends to construct on the
Marina Site.
The Company also owns or leases various other improved and
unimproved property in Las Vegas, Atlantic City and other
locations in the United States and certain foreign
countries. The book value of such property at March 1, 1998
was approximately $121 million.
ITEM 3. LEGAL PROCEEDINGS
On February 2, 1998, Boyd filed a complaint against the
Company in Superior Court for Atlantic County, New Jersey. The
complaint alleges that the Company's January 1998 termination of
the May 29, 1996 joint venture agreement between the Company
and Boyd relating to the development, ownership and operation of
a hotel-casino on the Marina Site was improper. The complaint
alleges, among other counts, breach of contract, breach of
fiduciary duty, breach of implied covenant of good faith and
fair dealing, fraud and concealment, and seeks, among other
relief, unspecified compensatory and punitive damages, specific
performance and imposition of a constructive trust for the
benefit of Boyd.
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