UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1994
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from - to -
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Commission File Number: 0-16760
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MGM GRAND, INC.
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(Exact name of registrant as specified in its charter)
Delaware 88-0215232
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Address of principal executive offices) (Zip Code)
(702) 891-3333
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 11, 1994
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Common Stock, $.01 par value 48,010,510 shares
MGM GRAND, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the
three and nine months ended September 30, 1994 and
September 30, 1993........................................... 1
Condensed Consolidated Balance Sheets at September 30,
1994 and December 31, 1993................................... 2
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1994 and September 30, 1993.. 3
Notes to Condensed Consolidated Financial Statements......... 4-7
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations.................................... 8-11
PART II. OTHER INFORMATION............................................ 12
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1994 1993 1994 1993
--------- -------- --------- --------
REVENUES:
Casino $ 124,181 $ - $ 338,384 $ -
Rooms 39,347 - 106,098 -
Food and beverage 23,404 - 68,847 -
Entertainment, retail & other 34,448 - 95,017 -
Airline 4,096 4,731 13,312 14,388
--------- -------- --------- ---------
225,476 4,731 621,658 14,388
Less: promotional allowances 12,822 - 37,984 -
--------- -------- --------- ---------
212,654 4,731 583,674 14,388
--------- -------- --------- ---------
EXPENSES:
Casino 44,549 - 140,186 -
Rooms 11,652 - 34,968 -
Food and beverage 15,963 - 49,834 -
Entertainment, retail & other 28,384 - 81,185 -
Provision for doubtful accounts 17,254 - 34,842 -
Airline 5,510 4,692 13,642 14,627
General and administrative 30,232 898 91,957 2,584
Depreciation and amortization 11,638 1,583 34,268 4,771
Hotel pre-opening expenses - 3,562 - 3,562
--------- -------- --------- ---------
165,182 10,735 480,882 25,544
--------- -------- --------- ---------
OPERATING PROFIT (LOSS) BEFORE 47,472 (6,004) 102,792 (11,156)
CORPORATE EXPENSE
CORPORATE EXPENSE (1,649) (1,026) (4,927) (3,718)
--------- -------- --------- ---------
OPERATING INCOME (LOSS) 45,823 (7,030) 97,865 (14,874)
--------- -------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 1,490 2,746 3,627 10,221
Interest expense, net (15,515) - (46,366) (4,375)
Other, net (13) (238) 208 (291)
--------- -------- --------- ---------
(14,038) 2,508 (42,531) 5,555
--------- -------- --------- ---------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES 31,785 (4,522) 55,334 (9,319)
Provision (benefit) for income taxes - - - -
--------- -------- --------- ---------
NET INCOME (LOSS) $ 31,785 $ (4,522) $ 55,334 $ (9,319)
========= ======== ========= =========
PER SHARE OF COMMON STOCK:
Net income (loss) $ 0.65 $ (0.09) $ 1.13 $ (0.20)
========= ======== ========= =========
Weighted average shares
outstanding (000's) 48,749 47,834 49,082 47,164
========= ======== ========= =========
The accompanying notes are an integral part
of these condensed consolidated financial statements.
- 1 -
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
ASSETS
September 30, December 31,
1994 1993
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 157,367 $ 211,305
Accounts receivable, net 62,984 30,516
Prepaid expenses 11,952 11,755
Inventories 16,577 12,662
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Total current assets 248,880 266,238
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PROPERTY AND EQUIPMENT, NET 842,452 867,284
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OTHER ASSETS:
Deposits 2,111 1,330
Licensed rights and trademarks, net 1,128 1,154
Deferred organizational costs, net 1,593 1,985
Other assets, net 38,824 22,132
------------- ------------
Total other assets 43,656 26,601
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$ 1,134,988 $ 1,160,123
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,669 $ 14,181
Current obligations, capital leases 2,101 1,830
Current maturities, long term debt 737 1,573
Accrued interest on long term debt 23,694 9,472
Construction payables 9,911 96,844
Other accrued liabilities 56,560 41,696
------------ ------------
Total current liabilities 108,672 165,596
------------ ------------
DEFERRED REVENUE 8,983 10,784
DEFERRED INCOME TAXES 5,942 6,517
LONG TERM OBLIGATION, CAPITAL LEASES 13,104 14,044
LONG TERM DEBT, NET OF CURRENT MATURITIES 485,915 481,427
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value,
75,000,000 shares authorized,
50,651,016 and 50,579,537 shares issued) 507 506
Capital in excess of par value 663,186 662,365
Common stock in treasury (2,640,506
and 1,734,706 shares) (55,029) (29,490)
Retained earnings (deficit) (96,292) (151,626)
------------ ------------
Total stockholders' equity 512,372 481,755
------------- ------------
$ 1,134,988 $ 1,160,123
============ ============
The accompanying notes are an integral part
of these condensed consolidated financial statements.
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MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
---------------------
1994 1993
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 55,334 $ (9,319)
Adjustments to reconcile net income
(loss) to net cash from
operating activities:
Depreciation and amortization 34,268 4,819
Amortization of debt offering costs 2,202 1,207
Aircraft overhaul amortization 508 1,467
Provision for losses on accounts receivable 34,842 -
Change in assets and liabilities:
Accounts receivable (64,279) 150
Prepaid expenses (197) 520
Inventories (3,915) (1,055)
Accounts payable, accrued liabilities
and other 28,773 1,074
Deferred income taxes (575) -
--------- ---------
Net cash from operating activities 86,961 (1,137)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (12,118) (330,730)
Dispositions of property and equipment 417 567
Change in construction payables (86,933) 22,340
Deposits and other assets (20,531) (12,556)
--------- ---------
Net cash from investing activities (119,165) (320,379)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 822 71,584
Repurchase of common stock (25,539) -
Issuance of long term debt, net 3,995 368
Payments on long term debt and capital leases (1,012) -
--------- ---------
Net cash from financing activities (21,734) 71,952
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (53,938) (249,564)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 211,305 579,963
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 157,367 $ 330,399
========= =========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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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 September 30, 1994 approximately 74.2% 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. ("MGM Grand
Hotel"), the Company owns and operates the MGM Grand Hotel, Casino and Theme
Park, a hotel/casino and entertainment complex in Las Vegas. The MGM Grand
Hotel, Casino and Theme Park commenced operations on December 18, 1993.
Through its wholly-owned subsidiary, MGM Grand Air, Inc. ("MGM Grand Air"),
the Company commenced scheduled airline service on September 8, 1994, between
Los Angeles, New York and Las Vegas, and engages in the luxury charter airline
business.
Certain information and footnote disclosures normally included in 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 financial statements and notes
thereto included in the 1993 Annual Report included in Form 10-K.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
as of September 30, 1994 and the results of operations for the three month and
nine month periods ended September 30, 1994 and September 30, 1993. The results
of operations for such periods are not necessarily indicative of the results to
be expected for the full year.
Certain reclassifications have been made to prior period financial
statements to conform with the 1994 presentation.
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MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 2. Statements of Cash Flows
For the nine months ended September 30, 1994 and September 30, 1993, cash
payments made for interest were $30,251,000 and $28,420,000, respectively,
(capitalized interest for the first nine months of 1993 was $40,201,000).
Cash payments made for state and federal taxes for the nine months ended
September 30, 1994 and September 30, 1993 were $575,000 and $203,000,
respectively.
During June 1994, the Company made a claim against a contractor's bonding
company for approximately $3,031,000 for services previously capitalized by MGM
Grand Hotel. As a result of this transaction, property and equipment was reduced
and a note receivable was recognized.
Note 3. Stock Offering
On August 17, 1993, the Company completed a common stock public offering.
Total common stock issued at completion of the offering was 1,955,000 shares at
a price of $37.75 per share, resulting in net proceeds of approximately
$70,600,000. The Company has allocated such funds for general corporate
purposes, including additions to property, plant and equipment, and the
exploration of other expansion opportunities.
Note 4. Treasury Stock
On March 9, 1994, the Company announced that it intended to acquire in open
market purchases, from time to time, as many as one million shares of its common
stock. Through September 30, 1994, the Company had acquired 905,800 shares. No
further purchases of shares have occurred through November 11, 1994.
-5-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 5. Long Term Debt
On June 16, 1993, Grand Laundry, Inc., a wholly-owned subsidiary of the
Company, obtained a $10,000,000 loan from a financial institution for a laundry
facility in North Las Vegas, Nevada. Construction of the facility was completed
in December 1993. Grand Laundry, Inc. provides the laundry and dry cleaning
services for MGM Grand Hotel.
On April 1, 1994, MGM Dist., Inc., a wholly-owned subsidiary of the
Company, obtained a $4,000,000 loan from a financial institution for the
acquisition of certain signage equipment.
Long term debt consisted of the following (in thousands):
September 30, December 31,
1994 1993
------------- ------------
11-3/4% First Mortgage Notes due May 1, 1999 $220,000 $220,000
12% First Mortgage Notes due May 1, 2002 253,000 253,000
Laundry Facility Loan 9,657 10,000
Signage Equipment Loan 3,995 -
-------- --------
486,652 483,000
Less: Current Maturities (737) (1,573)
-------- --------
$485,915 $481,427
======== ========
Total interest incurred for the first nine months of 1994 and 1993 was
$46,366,000 and $44,576,000 of which $40,201,000 was capitalized during the 1993
period. Interest was not capitalized during the 1994 period since the MGM Grand
Hotel had completed construction and had commenced operations.
-6-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 6. Income Taxes
For the period ended September 30, 1994, the Company reduced its valuation
allowance on deferred tax assets by $18,453,000 due to the utilization of its
net operating loss carryforward for income tax purposes.
Note 7. Earnings (Loss) per Share
Earnings (loss) per share has been computed based on the weighted average
number of shares of common stock and common stock equivalents, if dilutive,
outstanding during each period (48,749,371 and 47,833,690 shares for the three
month periods ended September 30, 1994 and September 30, 1993, respectively, and
49,081,905 and 47,163,701 shares for the nine month periods ended September 30,
1994 and September 30, 1993, respectively).
-7-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The Company operates in two industry segments -- the operations of the MGM
Grand Hotel and MGM Grand Air. The Company commenced operations of the MGM Grand
Hotel on December 18, 1993. Prior thereto, the Company was in the construction
phase with regard to the hotel/casino industry segment.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
-------- -------- -------- -------
Operating revenues:
Hotel/Casino & Theme Park $208,796 $ - $570,600 $ -
Airline 4,889 4,731 14,873 14,388
Eliminations (1,031) - (1,799) -
-------- -------- -------- -------
$212,654 $ 4,731 $583,674 $14,388
======== ======== ======== =======
Operating income (loss):
Hotel/Casino & Theme Park $ 49,939 $ - $104,593 $ -
Airline (2,821) (2,429) (2,638) (7,554)
Corporate & other (1,295) (1,039) (4,090) (3,758)
Hotel pre-opening expenses - (3,562) - (3,562)
-------- -------- -------- -------
45,823 (7,030) 97,865 (14,874)
Interest income 1,490 2,746 3,627 10,221
Interest expense (15,515) - (46,366) (4,375)
Other, net (13) (238) 208 (291)
Provision (benefit) for income taxes - - - -
-------- -------- -------- -------
Net income (loss) $ 31,785 $ (4,522) $ 55,334 $(9,319)
======== ======== ======== ========
-8-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Quarter versus Quarter
MGM Grand Hotel net revenues for the three months ended September 30, 1994
were $208,796,000. Casino revenues for the period were $124,181,000 with a table
games win percentage of 27%. Room revenue for the period was $39,585,000 with an
occupancy rate of 96%. Operating expenses were $158,857,000, resulting in
operating income of $49,939,000 for the quarter ended September 30, 1994.
MGM Grand Air revenues for the third quarter of 1994 were $4,889,000
compared to $4,731,000 for the third quarter of 1993, representing an increase
of $158,000 (3%). The third quarter of 1994 included $927,000 of revenue from
scheduled service which commenced on September 8, 1994, offset by a decline in
charter revenue. Third quarter operating expenses increased due to the
additional scheduled service flying combined with startup expenses of the new
scheduled service, and offset partially by a reduction in depreciation expense
resulting from the 1993 aircraft carrying value adjustment. The operating loss
of $2,821,000 in 1994 compares to an operating loss of $2,429,000 in 1993.
Corporate and other expenses were $1,295,000 in the third quarter of 1994,
compared to $1,039,000 in the same period last year.
Interest income was $1,490,000 for the third quarter of 1994 versus
$2,746,000 for the 1993 quarter. Interest income was higher during the 1993
period as a result of short term investment of construction funds.
Interest expense was $15,515,000 for the third quarter of 1994. All
interest was capitalized during the third quarter of 1993 as a result of
construction of the MGM Grand Hotel and Theme Park, which was completed December
18, 1993.
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MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Nine Months versus Nine Months
MGM Grand Hotel net revenues for the nine months ended September 30, 1994
were $570,600,000. Casino revenues for the period were $338,384,000 with a
table games win percentage of 24%. Room revenue for the period was $106,336,000
with an occupancy rate of 93%. The occupancy rate was affected by the partial
availability of hotel rooms during January 1994. Operating expenses were
$466,007,000 resulting in operating income of $104,593,000 for the nine months
ended September 30, 1994. The MGM Grand Hotel was not open during the comparable
period in 1993.
MGM Grand Air revenues for the first nine months of 1994 were $14,873,000
compared to $14,388,000 for the first nine months of 1993, representing an
increase of $485,000 (3%). The first nine months of 1993 included $1,236,000 of
revenue from a Jamaica charter program which was terminated in May 1993. This
was offset in 1994 by World Cup related charters, an increase in Las Vegas
charters, and the new scheduled service which commenced September 8, 1994.
Operating expenses of $17,511,000 in the first nine months of 1994 declined
$4,431,000 compared to 1993, due primarily to a reduction in depreciation
expense resulting from the 1993 aircraft carrying value adjustment. The
operating loss was $2,638,000 for the first nine months of 1994 compared to
$7,554,000 in 1993.
Corporate and other expenses were $4,090,000 in the first nine months of
1994 compared to $3,758,000 in the same period last year.
Interest income was $3,627,000 for the first nine months of 1994 versus
$10,221,000 in 1993. Interest income was higher during the 1993 period as a
result of short term investment of construction funds.
Interest expense was $46,366,000 for the first nine months of 1994,
compared to $4,375,000 in 1993 which was net of capitalized interest of
$40,201,000.
-10-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Liquidity and Capital Resources -
As of September 30, 1994 and December 31, 1993, the Company held cash and
cash equivalents of $157,367,000 and $211,305,000, respectively. Cash provided
by operating activities for the first nine months of 1994 was $86,961,000 versus
cash used by operations of $1,137,000 for the first nine months of 1993.
Capital expenditures during the first nine months of 1994, other than
payments on construction payables of $86,933,000 were approximately $12,118,000
consisting primarily of $5,002,000 for expenditures related to the MGM Grand
Hotel, Casino and Theme Park, $6,205,000 for aircraft parts and refurbishment,
and $911,000 related to other furniture, fixtures and equipment.
In addition to final construction expenditures of $9,911,000 accrued at
September 30, 1994, remaining capital expenditures for 1994 are expected to be
$10,620,000, consisting of $10,025,000 for the MGM Grand Hotel, Casino and Theme
Park for general property improvements, and $595,000 for aircraft refurbishment
by MGM Grand Air, including airframe and engine overhauls and spare parts.
Planning and design of the monorail linking the MGM Grand Hotel and Bally's
Las Vegas is complete, and construction began during July 1994. The project is
a one-mile, high-capacity, transit-grade system with a budget of $25,000,000.
The project costs are shared equally with Bally's Las Vegas. As of September
30, 1994, each partner has contributed $7,000,000 to the joint project. The
system is scheduled to be operational by June 1995.
The Company expects to finance operations and capital expenditures through
cash flow from operations, cash on hand, and the bank line of credit.
-11-
MGM GRAND, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION (CONTINUED)
None of the items 1 through 4, and 6 of Part II are applicable.
Item 5. Other Information
MGM Grand Hotel entered into a two year lease effective as of May 1, 1994,
with Tracinda for the 18-acre property (the "Leased Property"), at the northwest
corner of Tropicana Avenue and the Strip in Las Vegas, Nevada, directly across
the street from the MGM Grand Hotel. The Company had planned to use the Leased
Property to provide additional temporary parking for the MGM Grand Hotel. The
lease was approved by the Company's Board of Directors, including a majority of
independent directors, at their May 10, 1994 meeting.
An independent appraisal of the Leased Property indicated the fair market
lease rental was $287,500 per month. Tracinda leased the property to MGM Grand
Hotel for $172,500 per month, which management believes was on terms which were
better than those available from a third party in an arm's length transaction.
On August 4, 1994, the Company announced plans to enter into a joint
venture with Primadonna Resorts, Inc. to develop, own and operate a hotel/casino
on the Leased Property. As a result of the change in plans, the lease was
terminated on September 1, 1994. In addition, Tracinda agreed to extend, to
September 1, 1995, the term of the option to acquire the Leased Property
previously granted to the Company. The Company intends to exercise the option
to acquire the Leased Property during the fourth quarter of 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MGM GRAND, INC.
______________________________________
(Registrant)
Date: November 11, 1994 ALEJANDRO YEMENIDJIAN
______________________________________
Alejandro Yemenidjian
Executive Vice President
and Chief Financial Officer
(principal financial
and accounting officer)
Date: November 11, 1994 SCOTT LANGSNER
______________________________________
Scott Langsner
Secretary/Treasurer
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