UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
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, 1995
--------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from - to -
------------------------ ------------------------
Commission File Number: 0-16760
---------------------------------------------------------
MGM GRAND,INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 88-0215232
- - ------------------------------------ -----------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 891-3333
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - --------------------------------------------------------------------------------
(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 November 13, 1995
- - ------------------------------ -------------------------------------------
Common Stock, $.01 par value 48,774,856 shares
MGM GRAND, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the three months and
nine months ended September 30, 1995
and September 30, 1994..................................... 1
Condensed Consolidated Balance Sheets
at September 30, 1995 and December 31,
1994....................................................... 2
Condensed Consolidated Statements of
Cash Flows for the nine months ended
September 30, 1995 and September 30,
1994....................................................... 3
Notes to Condensed Consolidated Financial
Statements................................................. 4-10
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations............. 11-15
PART II. OTHER INFORMATION.......................................... 15
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- --------------------
1995 1994 1995 1994
--------- -------- -------- --------
REVENUES:
Casino............................ $112,137 $124,181 $289,342 $338,384
Rooms............................. 40,990 39,347 120,374 106,098
Food and beverage................. 22,908 23,404 69,783 68,847
Entertainment, retail and other... 36,377 34,447 91,386 95,017
-------- -------- -------- --------
212,412 221,379 570,885 608,346
Less: promotional allowances...... 14,131 12,822 42,322 37,980
-------- -------- -------- --------
198,281 208,557 528,563 570,366
-------- -------- -------- --------
EXPENSES:
Casino............................ 51,041 44,550 148,069 140,187
Rooms............................. 10,748 11,245 33,231 33,750
Food and beverage................. 14,479 15,937 44,577 49,728
Entertainment, retail and other... 26,097 30,370 70,289 88,957
Provision for doubtful accounts
and discounts.................... 17,272 17,254 44,518 34,842
Restructuring costs............... 5,942 - 5,942 -
General and administrative........ 25,004 26,670 73,979 82,002
Depreciation and amortization..... 13,987 11,446 40,545 33,909
-------- -------- -------- --------
164,570 157,472 461,150 463,375
-------- -------- -------- --------
OPERATING PROFIT BEFORE
CORPORATE EXPENSE................. 33,711 51,085 67,413 106,991
CORPORATE EXPENSE.................. (4,771) (1,649) (9,487) (4,927)
-------- -------- -------- --------
OPERATING INCOME................... 28,940 49,436 57,926 102,064
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest income................... 380 1,490 1,370 3,627
lnterest expense, net of
capitalized interest............. (13,450) (15,515) (44,563) (46,366)
Other, net........................ - (12) 25 208
-------- -------- -------- --------
(13,070) (14,037) (43,168) (42,531)
-------- -------- -------- --------
INCOME BEFORE DISCONTINUED
OPERATIONS....................... 15,870 35,399 14,758 59,533
DISCONTINUED OPERATIONS:
Loss from discounted
operations...................... - (3,614) - (4,199)
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR
INCOME TAXES...................... 15,870 31,785 14,758 55,334
Provision for income taxes....... - - - -
-------- -------- -------- --------
NET INCOME......................... $ 15,870 $ 31,785 $ 14,758 $ 55,334
======== ======== ======== ========
PER SHARE OF COMMON STOCK:
Income before discontinued
operations....................... $ .33 $ .72 $ .30 $ 1.21
Loss from discontinued
operations....................... - (.07) - (.08)
-------- -------- -------- --------
Net income...................... $ .33 $ .65 $ .30 $ 1.13
======== ======== ======== ========
Weighted average shares
outstanding (000's).............. 48,589 48,749 48,525 49,082
======== ======== ======== ========
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 SHARES AND PER SHARE DATA)
(UNAUDITED)
ASSETS
September 30, December 31,
1995 1994
----------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents $ 96,031 $ 75,859
Accounts receivable, net 54,472 82,674
Prepaid expenses 14,902 13,431
Inventories 15,831 17,236
Note receivable 4,254 14,325
----------------- ----------------
Total current assets 185,490 203,525
----------------- ----------------
PROPERTY AND EQUIPMENT, NET 903,478 880,023
OTHER ASSETS:
Investments in unconsolidated affiliates 52,395 10,955
Deposits 18,683 2,434
Licensed rights and trademarks, net 1,094 1,120
Deferred organizational costs, net 1,188 1,375
Excess of purchase price over fair market
value of net assets acquired, net 40,786 -
Other assets, net 48,515 41,321
----------------- ----------------
Total other assets 162,661 57,205
----------------- ----------------
$1,251,629 $1,140,753
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 17,656 $ 25,202
Current obligation, capital leases 2,170 2,145
Note payable - -
Accrued interest on long term debt 23,481 9,429
Other accrued liabilities 77,967 74,597
----------------- ----------------
Total current liabilities 121,274 111,373
----------------- ----------------
DEFERRED REVENUES 9,050 8,505
DEFERRED INCOME TAXES 10,230 5,942
LONG TERM OBLIGATION, CAPITAL LEASES 10,947 12,554
LONG TERM DEBT 548,480 473,000
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value,
75,000,000 shares authorized,
48,771,523 and 50,651,016 shares
issued) 488 507
Capital in excess of par value 623,452 663,186
Note receivable from stock sales (10,000) -
Common stock in treasury (2,726,506 shares) - (57,264)
Retained earnings (deficit) (62,292) (77,050)
----------------- ----------------
Total stockholders' equity 551,648 529,379
----------------- ----------------
$1,251,629 $1,140,753
================= ================
The accompanying notes are an integral part
of these condensed consolidated financial statements.
-2-
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine Months Ended
September 30,
-----------------------
1995 1994
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,758 $ 55,334
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 40,545 34,776
Amortization of debt offering costs 2,532 2,202
Provision for doubtful accounts and discounts 44,518 34,842
Change in assets and liabilities:
Accounts receivable (16,316) (64,279)
Prepaid expenses (1,471) (197)
Inventories 512 (3,915)
Accounts payable, accrued liabilities and other 9,752 31,181
--------- ---------
Net cash from operating activities 94,830 89,944
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (24,707) (99,051)
Acquisition of MGM Grand Diamond Beach Hotel/Casino (74,172) -
Dispositions of property and equipment 181 417
Payments received on note receivable 10,071 -
Deposits and other assets (69,022) (20,531)
--------- ---------
Net cash from investing activities (157,649) (119,165)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from banks and others 75,480 -
Borrowings under bank line of credit 15,000 -
Repayment on bank line of credit (15,000) -
Issuance of common stock 7,511 822
Repurchase of common stock - (25,539)
--------- ---------
Net cash from financing activities 82,991 (24,717)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20,172 (53,938)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 75,859 211,305
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 96,031 $ 157,367
========= =========
The accompanying notes are an integral part
of these condensed consolidated financial statements.
-3-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
MGM Grand, Inc. (the "Company") is a Delaware corporation, incorporated on
January 29, 1986. As of September 30, 1995 approximately 74% 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 fully
integrated hotel/casino and entertainment complex in Las Vegas, Nevada. The MGM
Grand Hotel commenced operations on December 18, 1993.
Through its wholly-owned subsidiary, MGM Grand Australia Pty, Ltd., the
Company owns and operates the MGM Grand Diamond Beach Hotel and Casino ("MGM
Grand Australia"), a hotel/casino resort in Darwin, Australia. The results of
operations of MGM Grand Australia are included from September 7, 1995, the date
of acquisition (see Note 5).
On December 28, 1994, the Company and Primadonna Resorts, Inc. executed
definitive agreements for the development of NEW YORK-NEW YORK, a $450,000,000
themed hotel/casino. 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 and retail outlets. The Company and
Primadonna Resorts will jointly own, develop and operate NEW YORK-NEW YORK. The
project costs were increased by $75,000,000 to $450,000,000 to provide for a
larger facility, enhancements to the structure and amenities. In addition,
capital lease financing of up to $75,000,000 is anticipated during 1996. The
Company may contribute additional equity for its share of the amount necessary
to complete the project.
The Company and Bally's Las Vegas completed their joint development of the
elevated monorail linking the MGM Grand Hotel with the corner of Flamingo Road
and the Las Vegas Strip. The project, a one-mile, high-capacity, transit-grade
monorail system cost approximately $25,000,000. The project costs were shared
equally with Bally's. The system began operations on June 14, 1995.
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.
-4-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION-(CONTINUED)
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
as of September 30, 1995, and the results of operations for the three month and
nine month periods ended September 30, 1995 and 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 nine months ended September 30, 1995 and 1994, cash payments made
for interest were $30,258,000 and $30,251,000, respectively.
Cash payments made for state and federal taxes for the nine months ended
September 30, 1995 and September 30, 1994 were $590,000 and $575,000,
respectively.
On June 5, 1995, the Company retired all shares of common stock held in
Treasury, which thereupon resumed the status of authorized unissued shares, in a
non-cash transaction in the amount or $57,264,000.
NOTE 3. ISSUANCE OF COMMON STOCK
On May 24, 1995, the Company and MGM Grand Hotel entered into a Promotion
Agreement with Don King Productions, Inc. ("DKP"), pursuant to which, among
other things: (i) MGM Grand Hotel will have the exclusive right to present Mike
Tyson's first six fights; (ii) MGM Grand Hotel made a non-interest bearing
working capital advance of $15,000,000 to DKP, to be repaid on September 25,
1997; (iii) the Company sold DKP 618,557 treasury shares of the Company's Common
Stock for $15,000,000, evidenced by non-interest bearing promissory note to be
repaid in three $5,000,000 installments out of the proceeds of each of the first
three Tyson fights; (iv) the Company guaranteed to DKP that the market value of
the shares will equal or exceed $30,000,000 ($48.50 per share) as of September
25, 1997; and (v) the Company and DKP entered into security agreements and a
registration rights agreement with respect thereto. The remaining balance
outstanding of $10,000,000 on the non-interest bearing promissory note is
reflected as a note receivable from stock sales and is included in stockholders'
equity.
-5-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE 4. COMPANY RESTRUCTURING PLAN
On August 1, 1995, the Company announced details of a comprehensive
restructuring plan designed to reduce costs and improve efficiency of operations
at the MGM Grand Hotel. This restructuring resulted in a one-time charge against
earnings in the third quarter of 1995 totaling approximately $5,900,000.
NOTE 5. AUSTRALIAN CASINO ACQUISITION
On September 7, 1995, the Company completed the acquisition of the Diamond
Beach Hotel and Casino in Darwin, Australia, for approximately U.S. $74,172,000,
subject to certain adjustments. The acquisition costs include $59,972,000 for
the purchase of stock and $14,200,000 of debt refinancing. MGM Grand Australia
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. The Company financed the
acquisition through an Australian bank facility (see Note 8). The acquisition
was accounted for using the purchase method, whereby the assets acquired were
appraised and recorded at their fair market values. The amount by which the
purchase price exceeded the net asset values acquired of $40,852,000, will be
amortized over forty years. The purchase price allocation is as follows:
(In thousands)
Plant, property and equipment $36,088
Other, assets 1,520
Goodwill 40,852
Deferred income taxes (4,288)
-------
$74,172
=======
Concurrent with the closing of the transaction on September 7, 1995, the
Company granted to certain of the sellers an option to acquire 22-1/2% of the
stock of the Company's Australian subsidiary. The option, which was granted for
a nominal consideration, is exercisable at any time during the third and fourth
years following the closing, at an exercise price of approximately $14,400,000
subject to certain adjustments. The option holders also granted 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.
-6-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE 6. SALE OF MGM GRAND AIR
On December 31, 1994, MGM Grand, Inc. completed the sale of MGM Grand Air
for a note receivable totaling approximately $14,325,000, realizing a pretax
gain of $8,048,000. As of November 13, 1995, the principal on the note had been
reduced approximately $2,200,000.
The operating results of MGM Grand Air have been accounted for as
discontinued operations, and financial statements for prior periods have been
reclassified.
NOTE 7. 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 1,000,000 shares of its common
stock. Through December 31, 1994, the Company had acquired 991,800 shares of
Company stock. No further purchases of shares have been made or are anticipated.
On June 5, 1995, the Company retired all shares of common stock held in
treasury, which thereupon resumed the status of authorized but unissued shares.
NOTE 8. LONG TERM DEBT AND NOTE PAYABLE
Long term debt consisted of the following (in thousands):
September 30, December 31,
1995 1994
-------------- -------------
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
Australian Hotel/Casino Loan 75,480 -
-------- --------
$548,480 $473,000
======== ========
Total interest incurred for the first nine months of 1995 and 1994 was
$46,826,000 and $46,366,000, respectively, of which $2,263,000 was capitalized
in the 1995 period, related to construction of the Company's joint venture
project New York-New York.
The Company has a $60,000,000 line of credit with several banks for the MGM
Grand Hotel. No amounts were outstanding under the line of credit through 1994.
During the nine months of 1995, the Company borrowed and repaid $15,000,000
under the bank line of credit, and as of September 30, 1995, no amounts were
outstanding under the facility.
The First Mortgage Notes Indenture and the Bank Line of Credit contain
provisions which generally limit dividend and other restricted payments by MGM
Grand Hotel to the Company unless (1) no default shall have occurred thereunder,
(2) the consolidated net worth of MGM Grand Hotel is greater than $415,000,000,
(3) MGM Grand Hotel meets its indebtedness tests and (4) such dividends and
other restricted payments do not exceed the sum of $25,000,000 plus 50% of
cumulative consolidated net income.
-7-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE 8. LONG TERM DEBT AND NOTE PAYABLE (CONTINUED)
On September 7, 1995, the Company completed the acquisition of the Diamond
Beach Hotel/Casino in Darwin, Australia (see Note 5). The acquisition cost was
financed by an Australian bank facility which provides a total availability of
approximately $79,000,000 and includes funding for general corporate purposes.
Interest on the facility is based on the bank reference rate or eurodollar rate.
The loan agreement contains various restrictive covenants on MGM Grand
Australia, including the maintenance of certain financial ratios and limitations
on additional debt, dividends, and disposition of assets. It also restricts
acquisitions and similar transactions. The facility matures in December 2000.
The indebtedness has been wholly guaranteed by the Company.
On September 20, 1995, New York-New York Hotel, LLC, ("NYNY Hotel"), a
joint venture between the Company and Primadonna Resorts, Inc. (see Note 1)
completed its bank financing for up to $225,000,000. The non-revolving
construction line of credit converts to a reducing revolver upon completion of
construction and commencement of operations. The Company and Primadonna Resorts,
Inc. (the "Partners") have guaranteed completion of the project as a condition
to facility availability, and have executed a joint and several unlimited Keep-
Well Agreement which provides that in the event of insufficient bank loan ratios
by NYNY Hotel, the Partners will make cash infusions which are sufficient to
bring NYNY Hotel into compliance with covenants.
NOTE 9. 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 September 30, 1995, the Company determined that
$29,000,000 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 nine months ended
September 30, 1995 and 1994, due to the realization of the net operating loss
carryforward previously reserved.
Reconciliation of the income tax rate and the Company's effective tax rate
is as follows:
September 30,
----------------------
1995 1994
--------- ---------
Effective income tax rate 35% 35%
Net operating loss - no benefits recognized - -
Reduction in valuation allowance (35) (35)
--------- ---------
Effective tax rate -% -%
========= =========
As of September 30, 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 are as follows (in thousands):
September 30, December 31,
1995 1994
------------ ------------
DEFERRED TAX ASSETS - FEDERAL $ 74,350 $ 67,643
Less: Valuation allowance (29,042) (32,150)
------------ ------------
Net deferred tax assets 45,308 35,493
DEFERRED TAX LIABILITIES (55,538) (41,435)
------------ ------------
NET DEFERRED TAX LIABILITY $(10,230) $ (5,942)
============ ============
-8-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE 9. INCOME TAXES (CONTINUED)
The increase in net deferred taxes is the result of the recognition of a
deferred tax liability, as required under SFAS 109, for the difference in the
stepped up book basis and the tax basis of the MGM Grand Australia assets (see
Note 5).
At September 30, 1995, the Company had a net operating loss carryforward
for income tax purposes of approximately $142,787,000, an Alternative Minimum
Tax credit carryover of $1,400,000, and General Business Credit carryovers of
$2,170,000.
NOTE 10. EARNINGS PER SHARE
Earnings per share is based on the weighted average number of shares of
common stock and common stock equivalents, if dilutive, outstanding during each
period (48,588,986 and 48,749,371 shares for the three month periods ended
September 30, 1995 and 1994, respectively, and 48,524,666 and 49,081,905 shares
for the nine month periods ended September 30, 1995 and 1994, respectively).
-9-
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 subsidiaries, owns and operates the
MGM Grand Hotel/Casino in Las Vegas, Nevada, which commenced operations on
December 18, 1993, and the MGM Grand Australia Hotel/Casino, which was acquired
on September 7, 1995 (See Note 5). Airline operations have been reclassified for
the years presented to Discontinued Operations as a result of the sale of the
airline (see Note 6).
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
(In thousands)
Operating revenues:
Hotel/Casino $198,513 $208,947 $529,031 $570,747
Eliminations (232) (390) (468) (381)
-------- -------- -------- --------
$198,281 $208,557 $528,563 $570,366
======== ======== ======== ========
Operating income:
Hotel/Casino $ 33,388 50,182 67,140 105,344
Corporate and other (4,448) (1,538) (9,214) (4,841)
Eliminations - 792 - 1,561
-------- -------- -------- --------
28,940 49,436 57,926 102,064
Interest income 380 1,490 1,370 3,627
Interest expense, net (13,450) (15,515) (44,563) (46,366)
Other, net - (12) 25 208
Loss from discontinued
operations - (3,614) - (4,199)
Provision for income taxes - - - -
-------- -------- -------- --------
Net income $ 15,870 $ 31,785 $ 14,758 $ 55,334
======== ======== ======== ========
The Company has not recorded a provision for income taxes, since future tax
benefits not realized in prior years have offset any provision for the current
period.
-10-
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, 1995
were $196,269,000 compared to $208,796,000 for the same period in 1994. Casino
revenues for the period were $110,504,000 compared to $124,181,000 for the same
period in 1994. The reduction in Casino revenues is principally due to a lower
table game win percentage. Room revenues for the period were $40,838,000 on an
occupancy rate of 91.8% versus $39,585,000 on an occupancy rate of 96.1% for the
third quarter 1994. In the 1995 quarter, higher average room rates offset lower
average occupancy rates, resulting in higher room revenues. Operating expenses
were $163,673,000, resulting in operating income of $32,596,000 for the quarter
ended September 30, 1995, compared to operating expenses of $158,614,000 and
operating income of $50,182,000 for the third quarter ended September 30, 1994.
Operating expenses were higher in the third quarter 1995 primarily due to the
one-time restructuring charge of $5,900,000, coupled with expenses related to
the Mike Tyson boxing event.
CORPORATE AND OTHER expenses increased to $4,448,000 in the third quarter
of 1995, compared to $1,538,000 in the same period of 1994, primarily as a
result of increased personnel costs and amortization of costs related to the
Tyson boxing event.
INTEREST INCOME was $380,000 for the third quarter of 1995 versus
$1,490,000 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 (net of capitalized interest) was $13,450,000 for the
third quarter of 1995 compared to $15,515,000, in 1994. Interest of $2,263,000
was capitalized in the 1995 quarter as a result of the Company's New York-New
York construction project.
-11-
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, 1995
were $526,788,000 compared to $570,596,000 for the same period in 1994. Casino
revenues for the period were $287,709,000 compared to $338,384,000 for the same
period in 1994. The reduction in casino revenues is principally due to a lower
table game win percentage. Room revenues for the period were $120,345,000 on an
occupancy rate of 91.7%, versus $106,336,000 on an occupancy rate of 92.9% for
the prior year period. Room revenues were higher in the 1995 period as a result
of higher average room rates. Operating expenses were $460,440,000 resulting in
operating income of $66,348,000 for the nine months ended September 30, 1995,
compared to operating expenses of $465,252,000 and operating income of
$105,344,000 for the same period in 1994. Operating expenses have decreased
principally as a result of continuing cost containment efforts, partially offset
by the restructuring charge of $5,900,000, expenses related to the Mike Tyson
boxing event, and additional reserves for casino receivables which reflect
changes in anticipated collectibility.
CORPORATE AND OTHER expenses increased to $9,214,000 in the first nine
months of 1995 compared to $4,841,000 in the same period last year, principally
as a result of increased personnel costs and amortization of costs related to
the Tyson boxing event.
INTEREST INCOME was $1,370,000 for the first nine months of 1995 versus
$3,627,000 in 1994. Interest income was higher in the prior year as a result of
short term investment of construction funds.
INTEREST EXPENSE (net of capitalized interest) was $44,563,000 for the
first nine months of 1995, compared to $46,366,000 in 1994. Interest capitalized
during the nine months of 1995 was $2,263,000 related to the Company's New York-
New York construction project.
-12-
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, 1995 and December 31, 1994, the Company held cash and
cash equivalents of $96,031,000 and $75,859,000, respectively. Cash provided by
operating activities for the first nine months of 1995 was $94,830,000 versus
$89,944,000 for the first nine months of 1994.
Capital expenditures during the first nine months of 1995, other than the
Monorail project and NEW YORK-NEW YORK project of $3,044,000 and $38,537,000,
respectively, were $24,707,000, consisting primarily of expenditures related
to the MGM Grand Hotel for general property improvements and construction of the
Star Lane Shopping Mall. During the first nine months of 1995, MGM Grand Hotel
also expended $11,113,000 on the EFX production show.
The Company plans expenditures of approximately $11,600,000 at MGM
Grand Australia for a major renovation program, of which $8,600,000 is
anticipated to be expended through 1995 for upgraded accommodations, new gaming
facilities, and other improvements. Since acquisition on September 7, 1995 (see
Note 5) and through September 30, 1995, $492,000 has been expended for such
construction. In addition, on October 24, 1995, the Company expended
approximately $3,774,000 to acquire the remaining 14.3% minority shareholder's
interest in the Territory Property Trust, which owned the land and buildings of
MGM Grand Australia.
Remaining expenditures for 1995 are expected to be approximately $5,321,000
at the MGM Grand Hotel for general property improvements and remaining
construction expenditures for the Star Lane Shopping Mall.
Construction of the monorail linking the MGM Grand Hotel and Bally's Las
Vegas is completed. The project is a one-mile, high-capacity, transit-grade
system which cost approximately $25,000,000. The project costs were shared
equally with Bally's Las Vegas. As of September 30, 1995, each partner
contributed $12,500,000 to the joint project. The system commenced operations on
June 14, 1995.
On December 28, 1994, the Company and Primadonna Resorts, Inc.
("Primadonna") executed definitive agreements for the development of NEW
YORK-NEW YORK, a $450,000,000 themed hotel/casino. The plans for NEW Y0RK-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. Bank financing of up to $225,000,000 was
completed by New York-New York Hotel, LLC, and the first draw down occurred on
September 20, 1995. Capital lease financing of up to $75,000,000 is anticipated
during 1996. The Company may contribute additional equity for its share of the
amount necessary to complete the project. As a lender requirement for the
project financing, both the Company and Primadonna were required to enter into a
joint and several completion guarantee, as well as a Keep Well Agreement (see
Note 8).
-13-
MGM GRAND, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES-(CONTINUED)
PART II. OTHER INFORMATION
None of the items 1 through 5 of Part II are applicable.
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 13, 1995 ALEJANDRO YEMENIDJIAN
-----------------------------------------
Alejandro Yemenidjian
President, Chief Operating
Officer, and Chief Financial Officer
(principal financial officer)
Date: November 13, 1995 SCOTT LANGSNER
-----------------------------------------
Scott Langsner
Secretary/Treasurer
(principal accounting officer)
-14-