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 MARCH 31, 1997
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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
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3799 Las Vegas Boulevard South, Las Vegas, Nevada 89l09
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(Address of principal executive offices) (Zip Code)
(702) 89l-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 (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of 1934 during
the preceding l2 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 2, 1997
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Common Stock, $.0l par value 57,865,929 shares
MGM GRAND, INC. AND SUBSIDIARIES
FORM 10-Q
I N D E X
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, 1997 and March 31, 1996..................... 1
Condensed Consolidated Balance Sheets
at March 31, 1997 and December 31, 1996............... 2
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 1997 and March 31, 1996..................... 3
Notes to Condensed Consolidated Financial
Statements............................................ 4-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 10-13
PART II. OTHER INFORMATION..................................... 13
Signatures............................................ 14
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(Unaudited)
Three Months Ended
March 31,
---------------------
1997 1996
-------- --------
REVENUES:
Casino $107,096 $128,948
Room 43,336 43,801
Food and beverage 21,569 20,094
Entertainment, retail and other 25,874 29,109
Income from unconsolidated affiliate 14,722 -
-------- --------
212,597 221,952
Less: promotional allowances 15,099 13,956
-------- --------
197,498 207,996
-------- --------
EXPENSES:
Casino 53,157 56,788
Room 11,116 11,325
Food and beverage 12,239 12,126
Entertainment, retail and other 18,642 22,368
Provision for doubtful accounts and
discounts 8,413 15,626
General and administrative 25,435 23,932
Depreciation and amortization 15,458 15,216
-------- --------
144,460 157,381
-------- --------
OPERATING PROFIT BEFORE CORPORATE
EXPENSE 53,038 50,615
CORPORATE EXPENSE 1,489 1,392
-------- --------
OPERATING INCOME 51,549 49,223
-------- --------
OTHER INCOME (EXPENSE):
Interest income 199 1,581
Interest expense, net of amounts
capitalized (974) (15,797)
Interest expense - unconsolidated
affiliate (2,465) -
Other, net (232) (479)
-------- --------
(3,472) (14,695)
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 48,077 34,528
Provision for income taxes (17,927) -
-------- --------
NET INCOME $ 30,150 $ 34,528
======== ========
PER SHARE OF COMMON STOCK:
Net income $ 0.51 $ 0.70
======== ========
Weighted average shares outstanding (000's) 58,765 49,604
======== ========
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
March 31, December 31,
1997 1996
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 45,373 $ 61,412
Accounts receivable, net 47,000 80,529
Prepaid expenses and other 12,073 13,208
Inventories 13,589 13,520
Deferred tax asset 28,016 58,039
---------- ----------
Total current assets 146,051 226,708
---------- ----------
PROPERTY AND EQUIPMENT, NET 895,414 884,750
OTHER ASSETS:
Investments in unconsolidated affiliates 92,020 72,896
Deposits 15,425 15,255
Excess of purchase price over fair
market value of net assets acquired, net 39,366 39,622
Other assets, net 54,674 48,458
---------- ----------
Total other assets 201,485 176,231
---------- ----------
$1,242,950 $1,287,689
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 20,306 $ 32,995
Income taxes payable 3,605 23,653
Current obligation, capital leases 2,313 2,769
Current obligation, long term debt 12,737 12,906
Other accrued liabilities 81,506 118,448
---------- ----------
Total current liabilities 120,467 190,771
---------- ----------
DEFERRED REVENUES 7,363 6,712
DEFERRED INCOME TAXES 20,009 38,477
LONG TERM OBLIGATION, CAPITAL LEASES 7,185 7,862
LONG TERM DEBT 81,378 70,485
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value,
75,000,000 shares authorized,
57,955,417 and 57,883,766 shares
issued) 580 579
Capital in excess of par value 965,570 963,688
Retained earnings 43,371 13,221
Currency translation adjustment (2,973) (4,106)
---------- ----------
Total stockholders' equity 1,006,548 973,382
---------- ----------
$1,242,950 $1,287,689
========== ==========
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)
Three Months Ended
March 31,
---------------------
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 30,150 $ 34,528
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 15,493 15,243
Amortization of debt offering costs 431 754
Provision for doubtful accounts and discounts 8,413 15,626
Income from unconsolidated affiliate, net (12,257) -
Change in assets and liabilities:
Accounts receivable 25,116 10,214
Inventories (342) 230
Prepaid expenses and other 1,135 (3,654)
Income taxes payable and deferred income
taxes (8,493) (12,318)
Accounts payable, accrued liabilities and
other (50,069) 18,567
Currency translation adjustment 48 (21)
-------- --------
Net cash from operating activities 9,625 79,169
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (23,805) (14,120)
Disposition of property and equipment, net 113 277
Investments in unconsolidated affiliates (7,160) (942)
Note receivable - 282
Deposits and other assets, net (8,503) 393
-------- --------
Net cash from investing activities (39,355) (14,110)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to banks and others (3,192) -
Borrowings under bank line of credit 15,000 2,294
Repayments of bank line of credit - (2,294)
Issuance of common stock 1,883 8,504
-------- --------
Net cash from financing activities 13,691 8,504
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (16,039) 73,563
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 61,412 110,017
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,373 $183,580
======== ========
The accompanying notes are an integral part
of these condensed consolidated financial statements.
-3-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Organization and Basis of Presentation
MGM Grand, Inc. (the "Company") is a Delaware corporation, incorporated on
January 29, 1986. As of March 31, 1997, approximately 61.6% of the outstanding
shares of the Company's common stock were owned by Kirk Kerkorian and Tracinda
Corporation ("Tracinda"), a Nevada corporation wholly-owned by Kirk Kerkorian.
Through its wholly-owned subsidiary, MGM Grand Hotel, Inc., the Company
owns and operates MGM Grand Hotel/Casino ("MGM Grand Las Vegas"), a hotel/casino
and entertainment complex in Las Vegas, Nevada.
Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the
Company owns and operates the MGM Grand Diamond Beach Hotel/Casino ("MGM Grand
Australia"), a hotel/casino resort in Darwin, Australia. MGM Grand Australia
was acquired and commenced operations on September 7, 1995.
The Company and Primadonna Resorts, Inc. ("Primadonna") each own 50% of New
York-New York Hotel and Casino, LLC. ("NYNY LLC"), which completed development
of the $460,000,000 themed destination resort called New York-New York Hotel and
Casino in Las Vegas, Nevada ("NYNY") in December 1996. NYNY commenced
operations on January 3, 1997. NYNY is located on approximately 20 acres at the
northwest corner of Tropicana Avenue and Las Vegas Boulevard, across from MGM
Grand Las Vegas.
Through its wholly-owned subsidiary, MGM Grand Atlantic City, Inc., the
Company intends to construct and operate a destination resort hotel/casino,
entertainment and retail facility in Atlantic City, New Jersey, at an
approximate cost of at least $700,000,000. On July 9, 1996, the Company entered
into an agreement with FC Atlantic City Associates, L.P. (an affiliate of the
Forest City Ratner Company) to develop approximately 35 acres of land on the
Atlantic City Boardwalk. Construction of the project is subject to the receipt
of various governmental approvals. The plans for the hotel and casino resort
include, among other features, approximately 335,000 square feet of
entertainment and retail facilities. On July 24, 1996, the Company was found
suitable for licensing by the New Jersey Casino Control Commission.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the 1996 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 March 31, 1997, and the results of operations for the three month periods
ended March 31, 1997 and 1996. 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 1997 presentation.
Note 2. Statements of Cash Flows
For the three months ended March 31, 1997 and March 31, 1996, cash payments
made for interest were $2,013,000 and $2,066,000, respectively.
Cash payments made for state and federal taxes for the three months ended
March 31, 1997 and March 31, 1996 were $25,030,000 and $2,027,000, respectively.
Note 3. Long Term Debt and Notes Payable
Long term debt consisted of the following (in thousands):
March 31, December 31,
1997 1996
--------- ------------
Australian Hotel/Casino Loan
due December 1, 2000 $ 79,115 $ 83,391
Bank Credit Facility 15,000 -
--------- ------------
94,115 83,391
Less: Current Maturities (12,737) (12,906)
--------- ------------
$ 81,378 $ 70,485
========= ============
Total interest incurred for the first three months of 1997 and 1996 was
$2,492,000 and $16,914,000, respectively, of which $1,518,000 and $1,117,000
were capitalized in the 1997 and 1996 periods, respectively. During the first
three months of 1997, the Company recognized interest expense from
unconsolidated affiliate of $2,465,000.
On July 3, 1996, the Company deposited $523,231,000 (the "Defeasance
Deposit") with the Trustee, U.S. Trust of California, to fund the defeasance of
MGM Grand Hotel Finance Corp. First Mortgage Notes ("FMN's") in accordance with
the terms of the bond indenture. The Defeasance Deposit was made in the form of
U.S. Government securities and was used to fund interest payments on the
FMN's through May 1, 1997, the call as of such date of the 11-3/4% FMN's at
101.958% of the outstanding principal, and the call as of such date of the 12%
FMN's at 105.333% of the outstanding principal. On October 29, 1996, the liens
on the assets of MGM Grand Hotel, Inc. were released and accordingly, the
defeasance was finalized.
-5-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Long Term Debt and Notes Payable (continued)
On July 1, 1996, the Company secured a new $500,000,000 Senior Reducing
Revolving Credit Facility with BA Securities (the "Facility"), an affiliate of
Bank of America NT&SA ("BofA"). In August 1996, the Facility was increased to
$600,000,000. The Facility contains various restrictive covenants on the Company
which includes the maintenance of certain financial ratios and limitations on
additional debt, dividends, capital expenditures and disposition of assets. The
Facility also restricts acquisitions and similar transactions. Interest on the
Facility is based on the bank reference rate or Eurodollar rate. The Facility
matures in December 2001. During the quarter ended March 31, 1997, $15,000,000
was drawn down against the Facility and remained outstanding as of March 31,
1997.
The Australian bank facility originally provided a total availability of
approximately $82,299,000 (AUD$105,000,000), which was reduced by a $3,192,000
(AUD$4,062,000) principal payment made in accordance with the terms of the bank
facility, and as of March 31, 1997, $79,115,000 (AUD$100,938,000) remained
outstanding. The facility includes funding for general corporate purposes.
Interest on the facility is based on the Australian Bank Bill rate. The loan
agreement contains various restrictive covenants on the Company and MGM Grand
Australia, including the maintenance of certain financial ratios and limitations
on additional debt, dividends, and disposition of assets. The loan agreement
also restricts acquisitions and similar transactions. The indebtedness, which
matures in December 2000, has been wholly guaranteed by the Company.
MGM Grand Australia has a $15,676,000 (AUD$20,000,000) uncommitted standby
line of credit, with a funding period of 91 days for working capital purposes.
No amount was outstanding during the three months ended March 31, 1997, and
$2,294,000 was borrowed and repaid under the line of credit during the three
months ended March 31, 1996.
Upon commencement of operations of NYNY on January 3, 1997 (see Note 1),
the $285,000,000 non-revolving construction line of credit converted to a five-
year reducing revolver. The Company and Primadonna (the "Partners") have
executed a joint and several unlimited Keep-Well Agreement, which provides that
in the event of insufficient cash flow from NYNY to comply with financial
covenants, the Partners will make cash infusions which are sufficient to bring
NYNY LLC into compliance with the financial covenants. During the first three
months of 1997, $8,000,000 in principal repayments were made by NYNY LLC.
Outstanding balances were $277,000,000 as of March 31, 1997 and $285,000,000 as
of December 31, 1996. On January 21, 1997, NYNY LLC completed an additional
$20,000,000 equipment financing with a financial institution.
-6-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Issuance of Common Stock
On May 7, 1996, the Company made a commitment to grant 15 shares of Company
Common Stock to each of its employees in exchange for continued active
employment through the one year anniversary date of the commitment. As a result
of the stock grant commitment, deferred compensation in the amount of $4,982,000
was charged to stockholders' equity and is being amortized monthly to
compensation expense over the one year commitment period. As of March 31, 1997,
approximately $3,688,000 has been amortized to expense, with $2,819,000 of such
expense recognized in the 1996 year.
On May 24, 1995, and as amended on November 27, 1995, the Company and MGM
Grand Hotel, Inc. entered into a Promotion Agreement with Don King Productions,
Inc. ("DKP"), pursuant to which, among other things, MGM Grand Las Vegas will
have the exclusive right to present six of Mike Tyson's fights. In addition, MGM
Grand Hotel, Inc. made a non-interest bearing working capital advance of
$15,000,000 to DKP which calls for repayment on January 25, 1998, and the
Company sold DKP 618,557 treasury shares of the Company's Common Stock (the
"Shares") for $15,000,000 in exchange for a non-interest bearing promissory
note. Through March 31, 1997, four fights have occurred pursuant to the
agreement, and the stock promissory note has been paid. The original agreement
was amended by a Trust Agreement dated October 23, 1996, in which the Shares
were placed in the name of, and held by, an independent trustee, pending
disposition at the direction of the Company. The Trust Agreement extended the
payment date of the working capital advance and the guaranteed share price of
$48.50 to March 31, 1998. As of March 31, 1997, the Company has expensed
approximately $5,052,000 over the life of the agreement. At March 31, 1997, the
total cash requirement of the guarantee is approximately $7,577,000.
Note 5. Earnings per Share
The Company calculates earnings per share ("EPS") in accordance with
Accounting Principles Board Opinion 15, "Earnings per Share" ("APB 15").
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.
Such amounts were approximately 58,765,000 and 49,604,000 shares for the three
month periods ended March 31, 1997 and 1996, respectively.
In March 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"), which upon adoption will supersede APB 15 and is intended to simplify and
harmonize the EPS calculations in the United States with those common in other
countries and to present two EPS calculations: (i) basic earnings per common
share which is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the periods presented, and (ii)
diluted earnings per common share which is determined on the assumptions that
options issued to employees
-7-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Earnings per Share (continued)
are exercised and repurchased at the average price for the periods presented.
SFAS 128 is effective for financial statements for the year ended December 31,
1997, and although early application is prohibited, the following reflects the
expected effect of SFAS 128 for the periods presented (in thousands except per
share amounts):
Three Months Ended
March 31,
-------------------
1997 1996
-------- -------
Net Income $ 30,150 $34,528
======== =======
Weighted Average Shares 57,836 48,952
======== =======
Basic Earnings per Share $ 0.52 $ 0.71
======== =======
Weighted Average Shares (includes
options to purchase 858,000 and
652,000 shares issued to employees for
the periods March 31, 1997 and 1996,
respectively, and 78,000 employee
grant shares (see Note 4) for the
period ended March 31, 1997) 58,772 49,604
======== =======
Diluted Earnings per Share $ 0.51 $ 0.70
======== =======
Note 6. Income Taxes
The Company accounts for income taxes according to Statement of Financial
Accounting Standards 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 future tax benefit to the extent that
realization of such benefit is more likely than not. Otherwise, a valuation
allowance is applied. At March 31, 1997 and December 31, 1996, the Company
believes that it is more likely than not that its deferred tax assets are fully
realizable because of the future reversal of existing taxable temporary
differences and future projected taxable income.
The provision for income taxes for the three months ended March 31, 1997
and 1996, is as follows (in thousands):
Three Months Ended
March 31,
-------------------
1997 1996
------- --------
Current - Federal $ 5,203 $ 9,811
Deferred - Federal 12,724 (9,811)
------- --------
Provision for income taxes $17,927 $ -
======= ========
-8-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 6. Income Taxes (continued)
The reconciliation of the income tax rate and the Company's effective tax
rate is as follows:
Three Months Ended
March 31,
------------------
1997 1996
------ ------
Federal income tax rate 35.0% 35.0%
Permanent, foreign and other
tax differences 2.3 1.5
Reduction in valuation allowance - (36.5)
------ ------
Effective tax rate 37.3% - %
====== ======
As of March 31, 1997 and December 31, 1996, the major tax-effected
components of the Company's net deferred tax asset are as follows (in
thousands):
March 31, December 31,
1997 1996
--------- ------------
DEFERRED TAX ASSETS - FEDERAL $ 69,148 $ 94,556
Less: Valuation allowance - -
--------- ------------
Net deferred tax assets 69,148 94,556
DEFERRED TAX LIABILITIES (61,141) (74,994)
--------- ------------
NET DEFERRED TAX ASSETS $ 8,007 $ 19,562
========= ============
At March 31, 1997, the Company had a United States net operating loss
carryforward for income tax purposes of approximately $5,675,000 which expires
in different periods through 2010, an Australian net operating loss carryforward
of $7,330,000 which does not expire, General Business Credit carryovers of
$2,573,000 which expire in different periods through 2010, and an Alternative
Minimum Tax credit carryover of $33,954,000 which does not expire.
-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 MGM
Grand Las Vegas and MGM Grand Australia (see Note 1). The Company also owns 50%
of New York-New York Hotel and Casino, which commenced operations on January 3,
1997 (see Note 1).
(in thousands)
Three Months Ended
March 31,
--------------------
1997 1996
---- ----
Net revenues:
MGM Grand Las Vegas $175,295 $199,474
MGM Grand Australia 7,766 8,797
Income from unconsolidated affiliate 14,722 -
Eliminations and other (285) (275)
-------- --------
197,498 207,996
======== ========
Operating profit:
MGM Grand Las Vegas 38,574 52,426
MGM Grand Australia (258) (1,811)
Income from unconsolidated affiliate 14,722 -
-------- --------
53,038 50,615
Corporate expense (1,489) (1,392)
-------- --------
Operating income 51,549 49,223
Interest income 199 1,581
Interest expense, net of amounts
capitalized (974) (15,797)
Interest expense - unconsolidated affiliate (2,465) -
Other, net (232) (479)
-------- --------
Income before provision for income taxes 48,077 34,528
Provision for income taxes (17,927) -
-------- --------
Net income $ 30,150 $ 34,528
======== ========
-10-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Quarter versus Quarter
Net revenues for the first quarter of 1997 were $197,498,000, representing
a decrease of $10,498,000 (5.0%) when compared with $207,996,000 during the same
period last year. The decrease in net revenues was largely due to lower casino
revenue in the 1997 period, partially offset by income from the Company's 50%
ownership in NYNY (see Note 1).
Consolidated casino revenues for the first quarter of 1997 were
$107,096,000, representing a decrease of $21,852,000 (16.9%) when compared with
$128,948,000 during the same period in the prior year. MGM Grand Las Vegas
casino revenues were $100,947,000, representing a decrease of $20,491,000
(16.9%) when compared with $121,438,000 during the same period in the prior
year. The reduction in casino revenues at MGM Grand Las Vegas was a result of
lower table game win percentages, despite an overall increase in table game
volume when compared with the prior year period. MGM Grand Australia reported
casino revenues of $6,149,000, which decreased $1,360,000 (18.1%) when compared
with $7,509,000 during the same period in the prior year, primarily attributable
to lower volume and win percentages in table games partially offset by an
increase in slot win.
Consolidated room revenues were $43,336,000 for the first quarter of 1997
compared with $43,801,000 in the prior year's first quarter representing a
decrease of $465,000. MGM Grand Las Vegas room revenues were $42,961,000
representing a decrease of $562,000 when compared with $43,523,000 in the same
period of the prior year. The decrease was primarily due to a lower occupancy of
92.1% for the first quarter of 1997 when compared with 93.3% in the same period
of the prior year, which was partially offset by an increase in the average room
rate for the first quarter to $104 from $103 for the 1996 first quarter. MGM
Grand Australia room revenues were $418,000 for the first quarter of 1997
representing an increase of $95,000 (29.4%) when compared with $323,000 for the
prior year period. The prior year revenues were affected by the room
refurbishment program.
Consolidated food and beverage revenues were $21,569,000 in the first
quarter of 1997, representing an increase of $1,475,000 (7.3%) when compared
with $20,094,000 in the first quarter of the prior year. The increase was
attributable to MGM Grand Las Vegas which had food and beverage revenues of
$20,032,000 during the first quarter of 1997, an increase of $1,165,000 (6.2%)
when compared with $18,867,000 in the first quarter of 1996. This increase
resulted from the Company's decision to operate the Studio Cafe, which during
the 1996 period had been a leased facility. MGM Grand Australia reported food
and beverage revenues of $1,574,000 representing an increase of $331,000 (26.6%)
when compared with $1,243,000 during the same period in the prior year.
Consolidated entertainment, retail and other revenues decreased $3,235,000
(11.1%) from $29,109,000 in the 1996 period to $25,874,000 in the 1997 period.
The decrease in entertainment, retail and other revenues is a result of lower
EFX revenues, lower retail revenues, and the downsizing of the midway/arcade to
a smaller facility. These decreases were partially offset by increases in MGM
Grand Garden Arena revenues and increased theme park revenues from the
SkyScreamer thrill ride which was not operational during the 1996 period.
-11-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Quarter versus Quarter (continued)
Income from unconsolidated affiliate was $14,722,000 for the first quarter
of 1997, representing the Company's 50% share of NYNY's operating income. The
operating results from NYNY are not consolidated with those of the Company,
reflecting the Company's 50% ownership (see Note 1).
Consolidated operating expenses were $144,460,000 in the first quarter of
1997, representing a decrease of $12,921,000 (8.2%) when compared with
$157,381,000 for the same period last year. The overall decrease was
attributable to MGM Grand Las Vegas which had lower operating expenses in the
1997 period as a result of lower casino taxes due to decreased casino revenues,
lower casino marketing costs associated with special events, and lower costs
related to EFX. Additionally, the provision for doubtful accounts and discounts
decreased by $7,260,000 at MGM Grand Las Vegas as a result of changes in
anticipated collectibility and collections made on previously reserved
receivable balances. MGM Grand Australia operating expenses decreased from
$10,608,000 in the 1996 period to $8,024,000 in the 1997 period as a result of
continuing cost containment efforts.
Interest Income of $199,000 for the period ended March 31, 1997 decreased
by $1,382,000 from $1,581,000 in the first quarter of 1996. The decrease was
attributable to lower invested cash balances at MGM Grand Las Vegas during the
first quarter of 1997.
Interest Expense in the first quarter of 1997 of $974,000 (net of amounts
capitalized) decreased by $14,823,000 when compared with $15,797,000 in the same
period of 1996. The decrease in the first quarter of 1997 was primarily due to
the defeasance of the MGM Grand Hotel Finance Corp. First Mortgage Notes (see
Note 3). Also, the Company recognized interest expense from unconsolidated
affiliate of $2,465,000 during the 1997 period.
Income Tax Provision of $17,927,000 has been recorded at a rate of 37.3%
for the three months ended March 31, 1997, compared with the prior year when
there was no provision due to the benefit resulting from the reduction of the
valuation allowance (see Note 7).
Liquidity and Capital Resources
As of March 31, 1997 and December 31, 1996, the Company held cash and cash
equivalents of $45,373,000 and $61,412,000, respectively. Cash provided by
operating activities for the three months of 1997 was $9,625,000 compared with
$79,169,000 for the same period of 1996.
On May 6, 1996, MGM Grand Las Vegas announced details of a 30-month,
$250,000,000 Master Plan designed to transform the facility into "The City of
Entertainment." The Master Plan features a series of substantive improvements
and additions throughout its 113-acre destination resort property, including
refurbishment of the lion entry, the porte cochere, casino areas, luxury suites,
parking facilities, and the theme park. In addition, new facilities include a
convention center, additional entertainment/retail venues, and a second porte
cochere entrance. Approximately $98,500,000 is expected to be expended during
1997 related to the Master Plan, of which $10,599,000 has been expended through
March 31, 1997.
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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 (continued)
Capital expenditures during the first three months of 1997 were
$23,805,000, consisting primarily of $10,390,000 related to MGM Grand Las Vegas
for general property improvements, $10,599,000 for the Master Plan project,
$431,000 at MGM Grand Australia for general property improvements and $2,385,000
for MGM Grand Atlantic City land purchases and pre-construction activities. The
total capital expenditures remaining for 1997 related to general property
improvements are approximately $40,500,000 for MGM Grand Las Vegas and
approximately $2,436,000 for MGM Grand Australia. During the remainder of 1997,
the Company also anticipates capital expenditures of approximately $46,600,000
related to land acquisitions and pre-construction activities for MGM Grand
Atlantic City.
The Company made a capital contribution of $7,000,000 to NYNY LLC during
the first three months of 1997. As a lender requirement for the project
financing, both the Company and Primadonna were required to enter into a joint
and several Keep-Well Agreement (see Note 3).
The Company expects to finance operations and capital expenditures through
cash flow from operations, cash on hand and the bank lines of credit.
Safe Harbor Provision
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
report contains statements that are forward-looking, such as statements relating
to plans for future expansion and other business development activities, as well
as other capital spending, financing sources, the effects of regulation
(including gaming and tax regulations) 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 global economic
conditions (including sensitivity to fluctuations in foreign currencies),
changes in federal or state tax laws or the administration of such laws, changes
in gaming laws or regulations (including the legalization of gaming in certain
jurisdictions) and application for licenses and approvals under applicable
jurisdictional laws and regulations (including gaming laws and regulations).
PART II. OTHER INFORMATION
None of Items 1 through 6 of Part II are applicable.
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MGM GRAND, INC. AND SUBSIDIARIES
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)
/s/ Alejandro Yemenidjian
Date: May 2, 1997 _________________________________
Alejandro Yemenidjian
President, Chief Operating
Officer, and Chief Financial
Officer
(principal financial officer)
Date: May 2, 1997 /s/ Scott Langsner
_________________________________
Secretary/Treasurer
(principal accounting officer)
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