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 June 30, 1994
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from - to -
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Commission File Number: 0-16760
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MGM GRAND, INC.
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(Exact name of registrant as specified in its charter)
Delaware 88-0215232
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Address of principal executive offices) (Zip Code)
(702) 891-3333
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 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 August 4, 1994
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Common Stock, $.01 par value 48,013,031 shares
MGM GRAND, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the three and six months
ended June 30, 1994 and June 30, 1993 1
Condensed Consolidated Balance Sheets
at June 30, 1994 and December 31, 1993 2
Condensed Consolidated Statements of
Cash Flows for the six months ended
June 30, 1994 and June 30, 1993 3
Notes to Condensed Consolidated Financial
Statements 4-7
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations 8-11
PART II. OTHER INFORMATION 12-13
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ----------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
REVENUES:
Casino $ 108,049 $ - $ 214,203 $ -
Rooms 36,221 - 66,751 -
Food and beverage 23,107 - 45,444 -
Other hotel/casino 32,233 - 60,568
Airline 5,314 4,719 9,216 9,657
---------- ---------- ---------- ----------
204,924 4,719 396,182 9,657
Less: promotional
allowances (12,764) - (25,162) -
---------- ---------- ---------- ----------
192,160 4,719 371,020 9,657
---------- ---------- ---------- ----------
EXPENSES:
Casino 48,434 - 95,637 -
Rooms 11,608 - 23,316 -
Food and beverage 17,609 - 33,871 -
Other hotel/casino 25,149 - 52,800 -
Airline 4,556 5,041 8,132 9,935
General and administrative 36,763 911 79,314 1,685
Depreciation and amortization 11,734 1,579 22,630 3,188
---------- ---------- ---------- ----------
155,853 7,531 315,700 14,808
---------- ---------- ---------- ----------
OPERATING PROFIT (LOSS) BEFORE
CORPORATE EXPENSE 36,307 (2,812) 55,320 (5,151)
CORPORATE EXPENSE 1,944 1,521 3,278 2,692
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 34,363 (4,333) 52,042 (7,843)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income 1,010 3,101 2,137 7,475
Interest expense, net (15,416) (786) (30,851) (4,375)
Other, net 238 (37) 221 (54)
---------- ---------- ---------- ----------
(14,168) 2,278 (28,493) 3,046
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES 20,195 (2,055) 23,549 (4,797)
Provision (benefit) for
income taxes - - - -
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 20,195 $ (2,055) $ 23,549 $ 4,797)
========== ========== ========== ==========
PER SHARE OF COMMON STOCK:
Net income (loss) $ 0.41 $ (0.04) $ 0.48 $ (0.10)
========== ========== ========== ==========
Weighted average shares
outstanding (000's) 48,891 46,859 49,286 46,831
========== ========== ========== ==========
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
June 30, December 31,
1994 1993
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 130,716 $ 211,305
Accounts receivable, net 50,277 30,516
Prepaid expenses 12,851 11,755
Inventories 15,488 12,662
----------- -----------
Total current assets 209,332 266,238
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PROPERTY AND EQUIPMENT, NET 849,919 867,284
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OTHER ASSETS:
Deposits 1,771 1,330
Licensed rights and trademarks, net 1,137 1,154
Deferred organizational costs, net 1,741 1,985
Other assets, net 26,865 22,132
----------- -----------
Total other assets 31,514 26,601
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$ 1,090,765 $ 1,160,123
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 18,859 $ 14,181
Current obligation, capital leases 2,057 1,830
Current maturities, long term debt 722 1,573
Accrued interest on long term debt 9,692 9,472
Construction payables 22,059 96,844
Other accrued liabilities 40,087 41,696
----------- -----------
Total current liabilities 93,476 165,596
----------- -----------
DEFERRED REVENUE 9,821 10,784
DEFERRED INCOME TAXES 6,517 6,517
LONG TERM OBLIGATION, CAPITAL LEASES 13,645 14,044
LONG TERM DEBT, NET OF CURRENT MATURITIES 486,080 481,427
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value,
75,000,000 shares authorized,
50,609,537 and 50,579,537 shares
issued) 506 506
Capital in excess of par value 662,709 662,365
Common stock in treasury (2,597,406 and
1,734,706 shares) (53,912) (29,490)
Retained earnings (deficit) (128,077) (151,626)
----------- -----------
Total stockholders' equity 481,226 481,755
----------- -----------
$ 1,090,765 $ 1,160,123
=========== ===========
The accompanying notes are an integral part
of these condensed consolidated financial statements.
-2-
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
Six Months Ended
June 30,
---------------------
1994 1993
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 23,549 $ (4,797)
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization 22,630 3,235
Amortization of debt offering costs 1,456 1,207
Aircraft overhaul amortization 218 1,018
Provision for losses on accounts receivable 17,587 --
Change in assets and liabilities:
Accounts receivable (34,317) (863)
Prepaid expenses (1,096) 378
Inventories (2,826) (70)
Accounts payable, accrued liabilities
and other 2,326 (4,846)
Deferred income taxes -- --
-------- ---------
Net cash from operating activities 29,527 (4,738)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (8,590) (205,822)
Dispositions of property and equipment 292 224
Change in construction payables (74,785) 4,788
Deposits and other assets (6,585) (8,330)
-------- ---------
Net cash from investing activities (89,668) (209,140)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 344 776
Repurchase of common stock (24,422) --
Issuance of long term debt 3,995 368
Payments on long term debt and capital leases (365) --
-------- ---------
Net cash from financing activities (20,448) 1,144
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (80,589) (212,734)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 211,305 579,963
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $130,716 $ 367,229
======== =========
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 June 30, 1994 approximately 74.2% of the outstanding
shares of the Company's common stock were owned by Kirk Kerkorian and Tracinda
Corporation ("Tracinda"), a Nevada corporation wholly-owned by Kirk Kerkorian.
Through its wholly-owned subsidiary, MGM Grand Hotel, Inc. ("MGM Grand
Hotel"), the Company owns and operates the MGM Grand Hotel, Casino and Theme
Park, a hotel/casino and entertainment complex in Las Vegas. The MGM Grand
Hotel, Casino and Theme Park commenced operations on December 18,1993.
Through its wholly-owned subsidiary, MGM Grand Air, Inc. ("MGM Grand Air"),
the Company engages in the luxury charter airline business.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the 1993 Annual Report included in Form 10-K.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
as of June 30, 1994 and the results of operations for the three month and six
month periods ended June 30, 1994 and June 30, 1993. The results of operations
for such periods are not necessarily indicative of the results to be expected
for the full year.
Certain reclassifications have been made to prior period financial
statements to conform with the 1994 presentation.
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MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Statements of Cash Flows
For the six months ended June 30, 1994 and June 30, 1993, cash payments
made for interest were $29,394,000 and $2,835,000, (net of capitalized interest
for the first six months of 1993 of $25,356,000), respectively.
Cash payments made for state and federal taxes for the six months ended
June 30, 1994 and June 30, 1993 were $90,000 and $111,000, respectively.
During June 1994, the Company made a claim against a contractor's bonding
company for approximately $3,031,000 for services previously capitalized by MGM
Grand Hotel. As a result of this transaction, property and equipment was reduced
and a note receivable was recognized.
Note 3. Stock Offering
On August 17, 1993, the Company completed a common stock public offering.
Total common stock issued at completion of the offering was 1,955,000 shares at
a price of $37.75 per share, resulting in net proceeds of approximately
$70,600,000. The Company intends to use such funds for general corporate
purposes, including possible additions to the MGM Grand Hotel, Casino and Theme
Park and the exploration of other expansion opportunities.
Note 4. Treasury Stock
On March 9, 1994, the Company announced that it intended to acquire in open
market purchases, from time to time, as many as one million shares of its common
stock. Through June 30, 1994 and August 4, 1994, the Company had acquired
862,700 and 885,800 shares, respectively.
-5-
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Long Term Debt
On June 16, 1993, Grand Laundry, Inc., a wholly-owned subsidiary of the
Company, obtained a $10,000,000 loan from a financial institution for a laundry
facility in North Las Vegas, Nevada. Construction of the facility was completed
in December 1993. Grand Laundry, Inc. provides the laundry and dry cleaning
services for MGM Grand Hotel.
On April 1, 1994, MGM Dist., Inc., a wholly-owned subsidiary of the
Company, obtained a $4,000,000 loan from a financial institution for the
acquisition of certain signage equipment.
Long term debt consisted of the following (in thousands):
June 30, December 31,
1994 1993
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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
Laundry Facility Loan 9,807 10,000
Signage Equipment Loan 3,995 --
--------- ---------
486,802 483,000
Less: Current Maturities (722) (1,573)
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$ 486,080 $ 481,427
========= =========
Total interest incurred for the first six months of 1994 and 1993 was
$30,851,000 and $29,731,000, of which $25,356,000 was capitalized during the
1993 period. Interest was not capitalized during the 1994 period since the MGM
Grand Hotel had completed construction and had commenced operations.
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MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Income Taxes
For the period ended June 30, 1994, the Company reduced its valuation
allowance on deferred tax assets by $7,798,000 due to the utilization of
its net operating loss carryforward for income tax purposes.
Note 7. Earnings (Loss) per Share
Primary and fully diluted earnings (loss) per share has been
computed based on the weighted average number of shares of common stock
and common stock equivalents, if dilutive, outstanding during each period
(48,891,401 and 46,859,161 shares for the three month periods ended June
30, 1994 and June 30, 1993, respectively, and 49,286,347 and 46,831,370
shares for the six month periods ended June 30, 1994 and June
30, 1993, 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 operates in two industry segments - the operations of the MGM
Grand Hotel, Casino and Theme Park and MGM Grand Air. The Company commenced
operations of the MGM Grand Hotel, Casino and Theme Park on December 18, 1993.
Prior thereto, the Company was in the construction phase with regard to the
hotel/casino industry segment.
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1994 1993 1994 1993
-------- ------- -------- -------
(In thousands)
Operating revenues:
Hotel/Casino & Theme Park $186,846 $ - $361,804 $ -
Airline 5,841 4,719 9,985 9,657
Eliminations (527) - (769) -
-------- ------- -------- -------
$192,160 $ 4,179 $371,020 $ 9,657
======== ======= ======== =======
Operating income (loss):
Hotel/Casino & Theme Park $ 35,714 $ - $ 54,654 $ -
Airline 463 (2,799) 183 (5,125)
Corporate & other (1,814) (1,534) (2,795) (2,718)
-------- ------- -------- -------
34,363 (4,333) 52,042 (7,843)
Interest income 1,010 3,101 2,137 7,475
Interest expense (15,416) (786) (30,851) (4,375)
Other, net 238 (37) 221 (54)
Provision (benefit) for income
taxes - - - -
-------- ------- -------- -------
Net income (loss) $ 20,195 $(2,055) $ 23,549 $(4,797)
======== ======= ======== =======
-8-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Quarter versus Quarter
MGM Grand Hotel net revenues for the three months ended June 30, 1994 were
$186,846,000. Casino revenues for the period were $108,049,000 with a table
games win percentage of 25.6%. Room revenue for the period was $36,221,000 with
an occupancy rate of 97.1%. Operating expenses were $151,132,000, resulting in
operating income of $35,714,000 for the quarter ended June 30, 1994.
MGM Grand Air revenues for the second quarter of 1994 were $5,841,000
before eliminations, compared to $4,719,000 for the second quarter of 1993,
representing an increase of $1,122,000 (24%). Revenues were higher than in 1993
due primarily to World Cup related charters and an increase in casino related
charters. Operating expenses decreased $2,140,000 (28%) primarily due to a
$1,461,000 reduction in depreciation expense resulting from the 1993 aircraft
carrying value adjustment, and a 3% reduction in block hours flown. Operating
income of $463,000 in 1994 compares to an operating loss of $2,799,000 in 1993.
Corporate and other expenses were $1,814,000 in the second quarter of 1994
compared to $1,534,000 in the same period last year.
Interest income was $1,010,000 for the second quarter of 1994 versus
$3,101,000 for the 1993 quarter. Interest income was higher during the 1993
period as a result of short term investment of construction funds.
Interest expense was $15,416,000 for the second quarter of 1994, compared
to $786,000 in 1993 which was net of capitalized interest of $14,075,000.
-9-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Six Months versus Six Months
MGM Grand Hotel net revenues for the six months ended June 30, 1994 were
$361,804,000. Casino revenues for the period were $214,203,000 with a table
games win percentage of 22.2%. Room revenue for the period was $66,751,000
with an occupancy rate of 91.1%. The occupancy rate was affected by the
partial availability of hotel rooms during January 1994. Operating expenses were
$307,150,000 resulting in operating income of $54,654,000 for the six months
ended June 30, 1994.
MGM Grand Air revenues for the first six months of 1994 were $9,985,000
before eliminations, compared to $9,657,000 for the first six months of 1993,
representing an increase of $328,000 (3%). Revenues were higher than in 1993
primarily due to World Cup related charters and an increase in casino related
charters. Operating expenses decreased $4,980,000 (34%) due to a $3,012,000
reduction in depreciation expense resulting from the 1993 aircraft carrying
value adjustment, and a 16% reduction in block hours flown. Operating income of
$183,000 in 1994 compares to an operating loss of $5,125,000 in 1993.
Corporate and other expenses were $2,795,000 in the first six months of
1994 compared to $2,718,000 in the same period last year.
Interest income was $2,137,000 for the first six months of 1994 versus
$7,475,000 in 1993. Interest income was higher during the 1993 period as a
result of short term investment of construction funds.
Interest expense was $30,851,000 for the first six months of 1994, compared
to $4,375,000 in 1993 which was net of capitalized interest of $25,356,000.
-10-
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
Liquidity and Capital Resources -
As of June 30, 1994 and December 31, 1993, the Company held cash and cash
equivalents of $130,716,000 and $211,305,000, respectively. Cash provided by
operating activities for the first six months of 1994 was $29,527,000 versus
cash used by operations of $4,738,000 for the first six months of 1993.
Capital expenditures during the first six months of 1994, other than
payments on construction payables of $74,785,000, were approximately $8,590,000
consisting primarily of $3,150,000 for expenditures related to the MGM Grand
Hotel, Casino and Theme Park, $4,672,000 for aircraft parts and refurbishment,
and $768,000 related to other furniture, fixtures and equipment.
In addition to final construction expenditures of $22,059,000 accrued at
June 30, 1994, remaining capital expenditures for 1994 are expected to be
$13,978,000, consisting of $11,850,000 at the MGM Grand Hotel, Casino and Theme
Park for general property improvements, and $2,128,000 for aircraft
refurbishment by MGM Grand Air, including airframe and engine overhauls and
spare parts.
Planning and design of the monorail linking the MGM Grand Hotel and Bally's
Las Vegas is complete, and construction began during July 1994. The project is a
one-mile, high-capacity, transit-grade system with a budget of $25,000,000. The
project costs will be shared equally by Bally's Las Vegas. As of June 30, 1994,
each partner has contributed $6,000,000 to the joint project. The system is
scheduled to be operational by June 1995.
The Company expects to finance operations and capital expenditures through
cash flow from operations, cash on hand, and bank line of credit.
The Company does not currently provide any post retirement benefits.
Accordingly, the Statement of Financial Accounting Standards No. 106, will have
no effect on the Company's financial position.
-11-
MGM GRAND, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
None of the items 2, 3, 4, and 6 of Part II are applicable.
Item 1. Legal Proceedings
On April 26, 1994, a purported class action lawsuit was filed in the United
States District Court, Middle District of Florida, against 41 manufacturers,
distributors and casino operators of video poker and electronic slot machines,
including the Company. The suit alleges that the defendants have engaged in a
course of fraudulent and misleading conduct intended to induce persons to play
such games by collectively misrepresenting how the gaming machines should
operate, as well as the extent to which there is an opportunity to win. It also
alleges violations of the Racketeer Influenced and Corrupt Organizations Act, as
well as claims of common law fraud, unjust enrichment and negligent
misrepresentation, and seeks damages in excess of $6 billion. Management
believes that the claims are wholly without merit and does not expect that the
lawsuit will have a material adverse effect on the Company's financial condition
or results of operations.
-12-
MGM GRAND, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION (CONTINUED)
Item 5. Other Information
MGM Grand Hotel entered into a two year lease effective as of May 1, 1994,
with Tracinda for the 18-acre property (the "Leased Property"), at the northwest
corner of Tropicana Avenue and the Strip in Las Vegas, Nevada, directly across
the street from the MGM Grand Hotel. The lease was approved by the Company's
Board of Directors, including a majority of independent directors, at their May
10, 1994 meeting.
An independent appraisal of the property indicated the fair market lease
rental for the property is $287,500 per month. Tracinda has agreed to lease the
property to MGM Grand Hotel for $172,500 per month, which management believes is
on terms which are better than those available from a third party in an arm's
length transaction.
In addition, Tracinda has agreed to extend, to April 30, 1996, the term of
the option to acquire the property previously granted to the Company.
On August 4, 1994, the Company announced plans to enter into a joint
venture with Primadonna Resorts, Inc. to develop, own and operate a hotel/casino
on the Leased Property. The Company had previously planned to use the Leased
Property to provide additional temporary parking for the MGM Grand Hotel.
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: August 4, 1994 ALEJANDRO YEMENIDJIAN
-----------------------
Alejandro Yemenidjian
Executive Vice President
and Chief Financial Officer
(principal financial
and accounting officer)
Date: August 4, 1994 SCOTT LANGSNER
-----------------------
Scott Langsner
Secretary/Treasurer
-13-