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 MARCH 31, 1995
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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 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. [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 May 5, 1995
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Common Stock, $.01 par value 47,990,845 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 months ended
March 31, 1995 and March 31, 1994 .......................... 1
Condensed Consolidated Balance Sheets
at March 31, 1995 and December 31, 1994..................... 2
Condensed Consolidated Statements of
Cash Flows for the three months ended
March 31, 1995 and March 31, 1994 .......................... 3
Notes to Condensed Consolidated Financial Statements........ 4-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 9-11
PART II. OTHER INFORMATION .......................................... 12
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
Three Months Ended
-------------------------
March 31,
-------------------------
1995 1994
-------- --------
REVENUES:
Casino $ 91,326 $106,154
Rooms 38,891 30,530
Food and beverage 22,795 22,337
Entertainment, retail and other 22,649 28,335
-------- --------
175,661 187,356
Less: promotional allowances 13,776 12,398
-------- --------
161,885 174,958
-------- --------
EXPENSES:
Casino 49,732 47,203
Rooms 10,825 11,708
Food and beverage 14,712 16,262
Entertainment, retail and other 19,009 29,734
Provision for doubtful accounts and discounts 8,176 10,480
General and administrative 24,528 29,183
Depreciation and amortization 12,595 10,853
-------- --------
139,577 155,423
-------- --------
OPERATING PROFIT BEFORE CORPORATE EXPENSE 22,308 19,535
CORPORATE EXPENSE (2,002) (1,334)
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OPERATING INCOME 20,306 18,201
-------- --------
OTHER INCOME (EXPENSE):
Interest income 548 1,127
Interest expense, net (15,329) (15,435)
Other, net - (17)
-------- --------
(14,781) (14,325)
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INCOME BEFORE DISCONTINUED OPERATIONS 5,525 3,876
DISCONTINUED OPERATIONS:
Loss from discontinued operations - (522)
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,525 3,354
Provision for income taxes - -
-------- --------
NET INCOME $ 5,525 $ 3,354
======== ========
EARNINGS PER SHARE OF COMMON STOCK:
Income before discontinued operations $ .11 $ .08
Loss from discontinued operations - (.01)
-------- --------
Net income $ .11 $ .07
======== ========
Weighted average shares outstanding (000's) 48,555 49,714
======== ========
The accompanying notes are an integral part
of these condensed consolidated financial statements.
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MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
ASSETS
March 31, December 31,
1995 1994
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CURRENT ASSETS:
Cash and cash equivalents $ 29,355 $ 75,859
Accounts receivable, net 76,567 82,674
Prepaid expenses 16,757 13,431
Inventories 16,585 17,236
Note receivable 5,040 14,325
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Total current assets 144,304 203,525
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PROPERTY AND EQUIPMENT, NET 891,485 892,227
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OTHER ASSETS:
Deposits 3,043 2,434
Licensed rights and trademarks, net 1,111 1,120
Deferred organizational costs, net 1,279 1,375
Other assets, net 98,558 40,072
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Total other assets 103,991 45,001
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$1,139,780 $1,140,753
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 17,094 $ 25,202
Current obligation, capital leases 2,162 2,145
Note payable 8,000 -
Accrued interest on long term debt 23,481 9,429
Other accrued liabilities 52,872 74,597
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Total current liabilities 103,609 111,373
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DEFERRED REVENUES 9,542 8,505
DEFERRED INCOME TAXES 5,942 5,942
LONG TERM OBLIGATION, CAPITAL LEASES 12,023 12,554
LONG TERM DEBT 473,000 473,000
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value,
75,000,000 shares authorized,
50,717,351 and 50,651,016 shares
issued) 507 507
Capital in excess of par value 663,946 663,186
Common stock in treasury (2,726,506 shares) (57,264) (57,264)
Retained earnings (deficit) (71,525) (77,050)
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Total stockholders' equity 535,664 529,379
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$1,139,780 $1,140,753
========== ==========
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 FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31,
----------------------
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,525 $ 3,354
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 12,595 10,853
Amortization of debt offering costs 401 753
Provision for doubtful accounts and discounts 8,176 10,480
Change in assets and liabilities:
Accounts receivable (2,069) (28,555)
Prepaid expenses (3,326) 1,329
Inventories 651 (2,613)
Accounts payable, accrued liabilities and other (14,266) 14,142
-------- --------
Net cash from operating activities 7,687 9,743
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (12,426) (63,728)
Dispositions of property and equipment 135 -
Payments received on note receivable 9,285 -
Deposits and other assets (59,945) (2,332)
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Net cash from investing activities (62,951) (66,060)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank line of credit 8,000 -
Issuance of common stock 760 344
Repurchase of common stock - (14,458)
Payments on long term debt and capital leases - 252
-------- --------
Net cash from financing activities 8,760 (13,862)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (46,504) (70,179)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 75,859 211,305
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,355 $141,126
======== ========
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 March 31, 1995 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, a
hotel/casino and entertainment complex in Las Vegas, Nevada. The MGM Grand Hotel
commenced operations on December 18, 1993.
The Company and Bally's are nearing completion of their joint development
of an elevated monorail linking the MGM Grand Hotel with the corner of Flamingo
Road and the Las Vegas Strip. The project is a one-mile, high-capacity, transit-
grade monorail system with a budget cost of $25 million. The project costs are
shared equally with Bally's. The system is scheduled to be operational by June
1995.
On December 28, 1994, the Company and Primadonna Resorts, Inc. executed the
definitive agreement for the development of a $350 million themed hotel/casino
called NEW YORK-NEW YORK. The project is located on the northwest corner of
Tropicana Avenue and Las Vegas Boulevard, across from the MGM Grand Hotel.
Groundbreaking occurred on March 30, 1995. The plans for NEW YORK-NEW YORK call
for the destination resort to include a 2,100-room hotel and casino, themed
entertainment attractions and restaurant/retail outlets. The Company and
Primadonna Resorts will jointly own, develop and operate NEW YORK-NEW YORK.
The Company operated MGM Grand Air, a scheduled and charter airline
service, through its wholly-owned subsidiary, MGM Grand Air, Inc., from
September 1987 until December 31, 1994, when MGM Grand Air was sold.
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 1994 Annual Report included in Form 10-K.
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MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION (CONT'D).
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
as of March 31, 1995 and the results of operations for the three month periods
ended March 31, 1995 and March 31, 1994. 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 1995 presentation.
NOTE 2. STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and March 31, 1994, cash payments
made for interest were $529,000 and $416,000 respectively.
Cash payments made for state and federal taxes for the three months ended
March 31, 1995 and March 31, 1994 were $500,000 and $30,000 respectively.
NOTE 3. SALE OF MGM GRAND AIR
On December 31, 1994, MGM Grand, Inc. completed the sale of MGM Grand Air
for a note receivable totalling approximately $14,325,000, realizing a pretax
gain of $8,048,000.
The operating results of MGM Grand Air have been accounted for as
discontinued operations, and financial statements for prior periods have been
restated.
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 March 31, 1995, the Company had acquired 991,800 shares of
Company stock. No further purchases of shares have occurred through May 5, 1995.
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MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5. LONG TERM DEBT
In 1992, the Company secured a commitment from several banks for a
$60,000,000 line of credit for the MGM Grand Hotel, which became available in
1993. No amounts were outstanding under the line of credit through 1994. As of
March 31, 1995, $8 million had been drawn down under the facility.
Long term debt consisted of the following (in thousands):
March 31, December 31,
1995 1994
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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
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$473,000 $473,000
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Total interest incurred for the first three months of 1995 and 1994 was
$15,329,000 and $15,435,000, respectively.
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MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 6. INCOME TAXES
The Company accounts for income taxes according to Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires the recognition of deferred tax assets, net of applicable reserves,
related to net operating loss carryforwards and certain temporary differences.
The standard requires recognition of a deferred tax asset to the extent that
realization of such asset is more likely than not. Otherwise, a valuation
allowance is applied. As of March 31, 1995, the Company determined that
$30,320,000 of deferred tax assets did not satisfy the recognition criteria set
forth in the standard because of the Company's prior operating results.
Accordingly, a valuation allowance was recorded to reserve for the applicable
deferred tax assets.
There was no provision for income taxes for the three months ended March
31, 1995 and March 31, 1994.
Reconciliation of the Federal income tax rate and the Company's effective
tax rate is as follows:
March 31,
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1995 1994
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Federal income tax rate 35% 35%
Reduction in valuation allowance (35) (35)
---- ----
Effective tax rate --% --%
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MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 6. INCOME TAXES (CONT'D.)
As of March 31, 1995 and December 31, 1994, after having given effect to
SFAS 109, the major tax effected components of the Company's net deferred tax
liability is as follows (in thousands):
March 31, December 31,
1995 1994
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DEFERRED TAX ASSETS $ 70,314 $ 67,643
Less: Valuation allowance (30,320) (32,150)
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Net deferred tax assets 39,994 35,493
DEFERRED TAX LIABILITIES (45,936) (41,435)
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NET DEFERRED TAX LIABILITY $ (5,942) $ (5,942)
======== ========
At March 31, 1995, the Company had a net operating loss carryforward for
income tax purposes of approximately $135,452,000. At March 31, 1995, the
Company had an Alternative Minimum Tax credit carryover of $1,555,000.
NOTE 7. EARNINGS PER SHARE
Earnings 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 (48,554,545 and 49,713,907 shares for the three month periods
ended March 31, 1995 and March 31, 1994, respectively).
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MGM GRAND, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company, through its wholly-owned subsidiary, owns and operates the MGM
Grand Hotel. The Company commenced operations of the MGM Grand Hotel/Casino
on December 18, 1993. Airline operations have been reclassified for the years
presented to Discontinued Operations as a result of the sale of the airline (see
Note 3).
Three Months Ended
March 31,
---------------------
1995 1994
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(In thousands)
Operating revenues:
Hotel/Casino $161,885 $174,958
======== ========
Operating income:
Hotel/Casino $ 22,333 $ 19,307
Corporate and other (2,027) (1,106)
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20,306 18,201
Interest income 548 1,127
Interest expense (15,329) (15,435)
Other, net - (17)
Loss from discontinued operations - (522)
Provision for income taxes - -
-------- --------
Net income $ 5,525 $ 3,354
======== ========
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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 March 31, 1995 were
$161,885,000 compared to $174,958,000 for the same period in 1994. Casino
revenues for the period were $91,326,000 compared to $106,154,000 for the same
period in 1994. The reduction in Casino revenues is principally due to a low
table game win percentage. Room revenues for the first quarter 1995 were
$38,891,000 on an occupancy rate of 86.7% versus $30,530,000 on an occupancy
rate of 85% for the first quarter 1994. Room revenues were higher in the 1995
period as a result of higher average room rates, and the partial availability of
hotel rooms during the start up quarter in the prior year period. Operating
expenses were $139,552,000, resulting in operating income of $22,333,000 for the
quarter ended March 31, 1995, compared to operating expenses of $155,651,000 and
operating income of $19,307,000 for the start up quarter ended March 31, 1994.
Operating expenses have decreased as a result of cost containment efforts
instituted since the first quarter 1994, which included significant
discretionary start-up expenditures.
CORPORATE AND OTHER expenses were $2,027,000 in the first quarter of 1995,
compared to $1,106,000 in the same period last year.
INTEREST INCOME was $548,000 for the first quarter of 1995 versus
$1,127,000 for the 1994 quarter. Interest income was higher during the 1994
quarter as a result of short-term investment of the remaining construction fund
balances.
INTEREST EXPENSE was $15,329,000 for the first quarter of 1995 compared to
$15,435,000 in 1994.
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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 March 31, 1995 and December 31, 1994, the Company held cash and cash
equivalents of $29,335,000 and $75,859,000, respectively. Cash provided by
operating activities for the first three months of 1995 was $7,687,000 versus
$9,743,000 for the first three months of 1994.
Capital expenditures during the first three months of 1995, other than the
Monorail project and NEW YORK-NEW YORK project of $711,000 and $36,273,000,
respectively, were approximately $12,426,000, consisting primarily of
expenditures related to the MGM Grand Hotel and the EFX production show.
Remaining expenditures for 1995 are expected to be $17,100,000 at the MGM
Grand Hotel and Casino for general property improvements, including completion
of construction of the Star Lane Shopping Mall.
Construction of the monorail linking the MGM Grand Hotel and Bally's Las
Vegas is nearing completion. 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 March 31, 1995, each partner has contributed
$10,250,000 to the joint project. The system is scheduled to be operational by
June 1995.
On December 28, 1994, the Company and Primadonna Resorts, Inc.
("Primadonna") executed the definitive agreement for the development of a $350
million themed hotel/casino called NEW YORK-NEW YORK. The plans for NEW YORK-NEW
YORK call for the destination resort to include a 2,100-room hotel and casino,
themed entertainment attractions and restaurant/retail outlets. The Company and
Primadonna will jointly own, develop and operate NEW YORK-NEW YORK, which broke
ground on March 30, 1995. The 18-acre site, located on the busiest intersection
in Nevada, was contributed to the venture by the Company during January 1995,
and on February 1, 1995, NEW YORK-NEW YORK acquired an adjacent two acre parcel.
Completion is scheduled for late 1996.
The Company expects to finance operations and capital expenditures through
cash flow from operations, cash on hand, and the bank line of credit.
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MGM GRAND, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION (CONTINUED)
None of the items 1 through 5 of Part II are applicable.
ITEM 5. OTHER INFORMATION
On March 27, 1995, the Company entered into an agreement to acquire the
Diamond Beach Hotel and Casino in Darwin, Australia, for approximately $75
million, including debt assumption of approximately $13 million. The Diamond
Beach resort is located on 18 acres of beachfront property on the north central
coast of Australia. The resort includes a public and private casino,
approximately 100 rooms and suites, restaurants, and other facilities.
Concurrently with the closing of the transaction, MGM Grand will grant to
certain of the sellers an option to acquire 22-1/2% of the stock of the
Company's Australian subsidiary. The option, which will be granted for a nominal
consideration, will be exercisable at any time during the third and fourth years
following the closing, at an exercise price of approximately $13.8 million,
subject to certain adjustments. The option holders will also grant to the
Company two year options to purchase 25% interests in Aspinall's Club in London,
U.K., and Aspinall Casino SA in Le Touquet, France, with an exercise price in
each case based on the amount of the owners' respective investments in such
casinos.
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.
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(Registrant)
Date: May 5, 1995 ALEJANDRO YEMENIDJIAN
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Alejandro Yemenidjian
Executive Vice President
and Chief Financial Officer
(principal financial
and accounting officer)
Date: May 5, 1995 SCOTT LANGSNER
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Scott Langsner
Secretary/Treasurer
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