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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993.
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3799 LAS VEGAS BOULEVARD SOUTH
LAS VEGAS, NEVADA 89109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(702) 891-3333
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON WHICH
REGISTERED
TITLE OF EACH CLASS
New York Stock Exchange
Common Stock, $.01 Par Value
Securities registered pursuant to Section 12(g) of the Act:
None
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. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of Registrant's Common Stock held by non-
affiliates (based on the closing price on the New York Stock Exchange--
Composite Transactions on March 14, 1994) was approximately $1.575 billion. As
of March 14, 1994, 48,844,831 shares of Registrant's Common Stock, $.01 par
value, were outstanding.
Portions of the Annual Report to Stockholders for the fiscal year ended
December 31, 1993 are incorporated by reference into Part II of this Form 10-K.
Portions of the Registrant's Proxy Statement dated March 30, 1994 are
incorporated by reference into Part III of this Form 10-K.
PART 1
ITEM 1. BUSINESS
GENERAL
MGM Grand, Inc. (the "Company") was organized as a Delaware corporation on
January 29, 1986.
Through its wholly-owned subsidiary, MGM Grand Hotel, Inc. ("MGM Grand
Hotel"), the Company commenced operations on December 18, 1993 of the MGM Grand
Hotel and Theme Park, a large-scale integrated hotel/casino entertainment
complex. The new resort is located on approximately 112 acres on Las Vegas
Boulevard South (the "Strip") in Las Vegas, Nevada, across the street from
Excalibur and the Tropicana Hotel/Casino. MGM Grand Hotel Finance Corp. ("MGM
Finance"), a wholly-owned subsidiary of the Company, was formed to issue First
Mortgage Notes to the public, to incur bank debt (the "Bank Loan") if required
and to lend the aggregate proceeds thereof to MGM Grand Hotel to finance the
construction and opening of the MGM Grand Hotel and Theme Park.
Through its wholly-owned subsidiary, MGM Grand Air, Inc. ("MGM Grand Air"),
the Company provides service as an all charter airline. MGM Grand Air operated
a scheduled airline service between New York and Los Angeles through December
1992.
In January 1990, the Company acquired the Marina Hotel and Casino (the
"Marina") located on the project site for $80 million consisting of $50 million
in cash and 1,764,706 shares of common stock. In February 1990, the Company
acquired the Tropicana Country Club and adjacent land which, along with the
Marina, constitutes the 112 acre project site, for $38 million in cash. During
November 1990, the Marina and the Tropicana Country Club were closed to prepare
for construction of the MGM Grand Hotel and Theme Park. Formal ground breaking
occurred in October 1991, and the facility opened in December 1993.
In February 1988, the Company through its wholly-owned subsidiaries, MGM
Desert Inn, Inc. ("MGM Desert Inn") and MGM Sands, Inc. ("MGM Sands"), acquired
the Desert Inn Hotel and Casino (the "Desert Inn") and the Sands Hotel and
Casino (the "Sands") together with the assets (excluding cash and receivables)
used in their operations, as well as certain adjacent undeveloped property, for
$167 million. In April 1989, the Sands was sold for $110 million in cash,
realizing a pre-tax gain of approximately $26.5 million. In January 1990, MGM
Desert Inn purchased for $28 million in cash 143 acres of previously leased
land on which the Desert Inn is located. In December 1991, the Desert Inn was
sold to a subsidiary of Tracinda Corporation ("Tracinda") for $130 million in
cash. The net sales proceeds in excess of the book value of the assets sold of
$11.8 million net of taxes were credited to Capital in Excess of Par Value.
For certain information about the Company's industry segments, see Note 17 to
the Company's Consolidated Financial Statements.
The Company's principal executive offices are currently located at 3799 Las
Vegas Boulevard South, Las Vegas, Nevada 89109. The Company's telephone number
is (702) 891-3333.
HOTELS AND GAMING
MGM Grand Hotel and Theme Park
MGM Grand Hotel opened the MGM Grand Hotel and Theme Park on December 18,
1993, more than three months ahead of the originally scheduled opening date of
April 1, 1994. The new resort is located on approximately 112 acres on the
Strip in Las Vegas Nevada, across the street from Excalibur and the Tropicana
Hotel/Casino.
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MGM Grand Hotel is a multi-themed destination resort which management
believes is a "must see" attraction for visitors to Las Vegas. The resort has
over 350 feet of frontage on the Strip and 1,450 feet on Tropicana Avenue. The
complex is easily accessible from McCarran International Airport and from
interstate 15 via Tropicana Avenue.
MGM Grand Hotel creates an exciting and unique gaming and entertainment
experience which is intended to appeal to all segments of the Las Vegas
market. The entrance to the hotel and casino on the Strip is highlighted by a
seven story lion through which visitors proceed to a 70 foot high reproduction
of the Emerald City inspired by "The Wizard of Oz".
The casino is approximately 171,500 square feet in size, and is one of the
largest casinos in the world. The casino has 3,500 slot machines and 155 table
games, a state of the art baccarat pit, a poker room, a race and sports book,
and a keno lounge. The casino features four separate themed areas: Emerald
City, Hollywood, Monte Carlo, and Sports which enhance the entertainment
experience of the casino patron.
The hotel has 5,005 rooms, which management believes is the largest in the
world. The hotel includes approximately 4,254 typical guest rooms decorated in
five different themes: Deep South, Hollywood, Monte Carlo, Emerald, and
Casablanca. The hotel also has 751 luxury suites, more than any other Las
Vegas hotel. These suites range in size from 650 to 6,000 square feet. The
hotel provides guests with a state of the art health spa, a swimming pool, and
four lighted tennis courts.
MGM Grand Hotel has Las Vegas' only full scale theme park. Situated on 33
acres, the park has 12 rides and attractions, extensive food and beverage
outlets, ten retail shops, and a large craft area where visitors can view
handcrafts being made.
Other entertainment facilities include: a 31,000 square foot Midway
containing 30 carnival games of skill; an extensive video arcade including
virtual reality simulators; two showrooms providing celebrity entertainment;
eight restaurants and a food court; a 15,200 seat special events center,
providing a venue for great entertainers such as Barbra Streisand and Luther
Vandross, as well as sporting events.
MGM Grand Hotel uses the unique characteristics of the property to target
the following segments of the Las Vegas market: (i) free and independent
travelers; (ii) tour and travel; (iii) special events/conventions; (iv) high
end gaming; and (v) local.
Las Vegas Market
The MGM Grand Hotel and Theme Park operates in the Las Vegas market, and is
located on the Strip. Las Vegas is the largest city in Nevada, with a
population in excess of 900,000, and one of the largest resort destinations in
the world with over 23.5 million visitors in 1993, an increase of 7.5% over
1992.
Gaming has continued to be a strong and growing business in Las Vegas. Since
1982, Las Vegas Strip gaming revenues have increased at a compound annual
growth rate of 7.5% from $1.3 billion in 1982 to $2.9 billion in 1993.
The hotel industry in Las Vegas is highly competitive. In 1993 two other
major themed resort hotels opened on the Strip; the Luxor with 2,500 rooms and
100,000 square feet of gaming space, and Treasure Island with 3,000 rooms and
90,000 square feet of gaming space. While all of the large themed resorts pose
direct competition with the MGM Grand Hotel and Theme Park, Las Vegas Visitors
and Convention Authority ("LVCVA") statistics show that tourism growth more
than offset the increased capacity as visitor volume for 1993 increased 16%
over 1992 levels.
2
MGM Grand Hotel competes with gaming and resort facilities in their
respective markets as well as gaming and resort facilities elsewhere in the
world. To some extent, state lotteries and state-authorized card rooms such as
those present in California compete with the Company's casino/hotels.
Gambling, with various limitations and conditions, is now legal in numerous
locations throughout the United States. The proliferation of such limited
gaming facilities on riverboats and elsewhere is increasing. Also, as a result
of certain legislative and court decisions, casino-type operations are being
established at various Native American reservations throughout the country. The
development of fully operating casinos in California would likely have a
negative effect on MGM Grand Hotel's operations in Nevada.
Insurance
The MGM Grand Hotel carries insurance of the type customary in the hotel and
casino industry and in amounts deemed adequate by management to protect the
properties. The policies provide customary business and commercial coverages,
including workers' compensation, third party liability, property damage, boiler
and machinery and business interruption.
Government Regulation
The ownership and operation of casino gaming facilities in Nevada are subject
to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, the "Nevada Act"); and (ii) various local regulation.
The Company's gaming operations are subject to the licensing and regulatory
control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada
State Gaming Control Board (the "Nevada Board"), and the Clark County Liquor
and Gaming Licensing Board (the "CCLGLB"). The Nevada Commission, the Nevada
Board, and the CCLGLB are collectively referred to as the "Nevada Gaming
Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) to provide a source of state and
local revenues through taxation and licensing fees. Change in such laws,
regulations and procedures could have an adverse effect on the Company's gaming
operations.
MGM Grand Hotel operates the casino and is required to be licensed by the
Nevada Gaming Authorities. The gaming license requires the periodic payment of
fees and taxes and is not transferable. MGM Grand Hotel is also licensed as a
manufacturer and distributor of gaming devices. Another wholly-owned subsidiary
of the Company, MGM Dist., Inc. ("MGM Dist."), is also licensed by the Nevada
Gaming Authorities as a manufacturer and distributor of gaming devices, subject
to certain conditions and limitations imposed by the Nevada Commission. The
Company is required to be registered by the Nevada Commission as a publicly
traded corporation ("Registered Corporation") and as such, it is required
periodically to submit detailed financial and operating reports to the Nevada
Commission and furnish any other information that the Nevada Commission may
require. No person may become a stockholder of, or receive any percentage of
profits from, MGM Grand Hotel or MGM Dist. without first obtaining licenses and
approvals from the Nevada Gaming Authorities. The Company, MGM Grand Hotel and
MGM Dist. have obtained from the Nevada Gaming Authorities the various
registrations, approvals, permits and licenses required in order to engage in
gaming activities in Nevada.
3
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, MGM Grand
Hotel or MGM Dist. in order to determine whether such individual is suitable or
should be licensed as a business associate of a gaming licensee. Officers,
directors and certain key employees of MGM Grand Hotel and MGM Dist. must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Officers,
directors and key employees of the Company who are actively and directly
involved in the gaming activities of MGM Grand Hotel or MGM Dist. may be
required to be licensed or found suitable by the Nevada Gaming Authorities. The
Nevada Gaming Authorities may deny an application for licensing for any cause
they deem reasonable. A finding of suitability is comparable to licensing, and
both require submission of detailed personal and financial information followed
by a thorough investigation. The applicant for licensing or a finding of
suitability must pay all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities and in addition to
their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, MGM Grand Hotel or MGM Dist., the companies
involved would have to sever all relationships with such person. In addition,
the Nevada Commission may require the Company, MGM Grand Hotel or MGM Dist. to
terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada.
The Company, MGM Grand Hotel and MGM Dist. are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by MGM Grand Hotel and MGM Dist., must be reported to or approved by the Nevada
Commission.
If it was determined that the Nevada Act was violated by MGM Grand Hotel or
MGM Dist., the gaming licenses they held could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, MGM Grand Hotel, MGM Dist., the Company and
the persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission.
Further, a supervisor could be appointed by the Nevada Commission to operate
the Company's gaming property and, under certain circumstances, earnings
generated during the supervisor's appointment (except for the reasonable rental
value of the Company's gaming property) could be forfeited to the State of
Nevada. Limitation, conditioning or suspension of any gaming license or the
appointment of a supervisor could (and revocation of any gaming license would)
materially adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of the Company's
voting securities determined if the Nevada Commission has reason to believe
that such ownership would otherwise be inconsistent with the declared policies
of the State of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the Company's
voting securities to report the acquisition to the Nevada Commission. The
Nevada Act requires that beneficial owners of more than 10% of the Company's
voting securities apply to the Nevada Commission for a finding of suitability
within thirty days after the Chairman of the Nevada Board mails the written
notice requiring such filing. Under certain circumstances, an "institutional
investor," as defined in the Nevada Act, which acquires more than 10% but not
more than 15% of the Company's voting securities, may apply to the Nevada
Commission for a Waiver of such finding of suitability if such institutional
investor holds the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are
4
held in the ordinary course of business as an institutional investor and not
for the purpose of causing, directly or indirectly, the election of a majority
of the members of the board of directors of the Company, any change in the
Company's corporate charter, bylaws, management, policies or operations of the
Company or any of its gaming affiliates, or any other action which the Nevada
Commission finds to be inconsistent with holding the Company's voting
securities for investment purposes only. Activities that are not deemed to be
inconsistent with holding voting securities for investment purposes only
include: (i) voting on all matters voted on by stockholders; (ii) making
financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and
who holds, directly or indirectly, any beneficial ownership of the common stock
of a Registered Corporation beyond such period of time as may be prescribed by
the Nevada Commission may be guilty of a criminal offense. The Company is
subject to disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with the
Company, MGM Grand Hotel or MGM Dist., the Company (i) pays that person any
dividend or interest upon voting securities of the Company, (ii) allows that
person to exercise, directly or indirectly, any voting right conferred through
securities held by that person, (iii) pays remuneration in any form to that
person for services rendered or otherwise, or (iv) fails to pursue all lawful
efforts to require such unsuitable person to relinquish his voting securities
for cash at fair market value. Additionally, the CCLGLB has taken the position
that they have the authority to approve all persons owning or controlling the
stock of any corporation controlling a gaming license.
The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the
Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
The Company is required to maintain a current stock ledger in Nevada that may
be examined by the Nevada Gaming Authorities at any time. If any securities are
held in trust by an agent or by a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada Gaming Authorities.
A failure to make such disclosure may be grounds for finding the record holder
unsuitable. The Company is also required to render maximum assistance in
determining the identity of the beneficial owner. The Nevada Commission has the
power to require the Company's stock certificates to bear a legend indicating
that such securities are subject to the Nevada Act. However, to date, the
Nevada Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of any securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding,
recommendation or approval by the
5
Nevada Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the securities. Any representation to
the contrary is unlawful.
On July 29, 1993, the Nevada Commission granted the Company prior approval to
make public offerings for a period of one year, subject to certain conditions
(the "Shelf Approval"). However, the Shelf Approval may be rescinded for good
cause without prior notice upon the issuance of an interlocutory stop order by
the Chairman of the Nevada Board. The Shelf Approval does not constitute a
finding, recommendation or approval by the Nevada Commission or the Nevada
Board as to the accuracy or adequacy of the prospectus or the investment merits
of the securities offered. Any representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and the Nevada Commission
concerning a variety of stringent standards prior to assuming control of such
Registered Corporation. The Nevada Commission may also require controlling
stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process of the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and(iii) promote a neutral environmental for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
board of directors in response to a tender offer made directly to the
Registered Corporation's stockholders for the purposes of acquiring control of
the Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to Clark
County, Nevada. Depending upon the particular fee or tax involved, these fees
and taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by MGM Grand Hotel where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot machine route, a
manufacturer or a distributor, such as MGM Grand Hotel and MGM Dist., also pay
certain fees and taxes to the State of Nevada.
Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside
of Nevada, is required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the expenses of
investigation of the Nevada Board of their participation in such foreign
gaming. The revolving fund is subject to increase or decrease in the discretion
of the Nevada Commission. Thereafter, Licensees are also required to comply
with certain reporting requirements imposed by the Nevada Act. Licensees are
also subject to disciplinary action by the Nevada Commission if they knowingly
violate any laws of the foreign
6
jurisdiction pertaining to the foreign gaming operation, fail to conduct the
foreign gaming operation in accordance with the standards of honesty and
integrity required of Nevada gaming operations, engage in activities that are
harmful to the State of Nevada or its ability to collect gaming taxes and fees,
or employ a person in the foreign operation who has been denied a license or a
finding of suitability in Nevada on the ground of personal unsuitability.
The sale of alcoholic beverages by MGM Grand Hotel is subject to licensing,
control and regulation by the applicable local authorities. All licenses are
revocable and are not transferable. The agencies involved have full power to
limit, condition, suspend or revoke any such license, and any such disciplinary
action could (and revocation would) have a material adverse effect upon the
operations of MGM Grand Hotel.
Pursuant to a 1985 agreement between the State of Nevada and the United
States Department of the Treasury (the "Treasury"), the Nevada Commission and
the Nevada Board have authority to enforce their own cash transaction reporting
laws applicable to casinos and that substantially parallel the federal Bank
Secrecy Act. Thus, the Nevada Act requires most gaming licensees to file
reports related to cash purchases of chips, cash wagers, cash deposits or cash
payment of gaming debts, if any such transactions aggregate more than $10,000
in a 24-hour period. Casinos are required to monitor receipts and disbursements
of currency in excess of $10,000 and report them to the Treasury. Although it
is not possible to quantify the full impact of these requirements on the
Company's business, the changes are believed to have had some adverse effect on
results of operations since 1985.
The Treasury has proposed amendments to the federal regulations promulgated
under the Bank Secrecy Act. The most significant proposed regulatory amendment
is a reduction in the threshold at which customer identification data must be
obtained and documented by the casino, from $10,000 to $3,000 (which may
include the aggregation of smaller denominations). The amendments would
substantially increase the record-keeping requirements imposed upon casinos
relative to customer data, currency and non-currency transactions. The
Company's management believes the proposed amendments, if enacted in their
current form, could adversely affect future income if middle and upper-level
play is reduced as a result thereof and operating costs are increased due to
the more extensive record-keeping requirements. While these proposed amendments
were issued as a final rule in 1993 and were scheduled to go into effect in
September 1993, the Treasury has agreed to delay implementation of these
amendments until at least December 1, 1994.
Additionally, two bills are currently pending before Congress that could
potentially affect Nevada's ability to enforce its own cash transaction
reporting laws. While the bill before the House of Representatives includes a
section that would revoke the Secretary of the Treasury's ability to allow
Nevada to enforce its own cash transaction reporting laws, the bill before the
Senate does not include such a section and would allow Nevada to continue to
enforce its own cash transaction reporting laws applicable to casinos.
In the past, the Internal Revenue Service (the "IRS") had taken the position
that gaming winnings from table games by non-resident aliens were subject to a
30% withholding tax; however, the IRS subsequently adopted a practice of not
collecting such tax. In response to this ambiguity, Congress enacted as part of
the Technical and Miscellaneous Revenue Act of 1988, a provision that exempts
from tax withholding game winnings from table games by non-resident aliens,
unless the Secretary of the Treasury determines by regulation that such
collections have become administratively feasible. When Congress enacted this
legislation, it stated its intent that future regulations imposing a
withholding tax would be formulated only when future developments permit
withholding that would not be disruptive to the operation of the games.
Currently, casino operators withhold tax from non-resident aliens only on large
wins from slot machines, keno and other high odds wins, and do not withhold
from table game winnings.
7
Competition
The hotel industry is highly competitive. Hotels located on or near the strip
("Strip Hotels") compete primarily with other Strip Hotels and with a few major
hotels in downtown Las Vegas. Strip Hotels offering similar prices compete with
each other primarily on the basis of quality of rooms, restaurants and
facilities, entertainment offered, complimentary goods and services given,
credit limits and quality of personal attention offered to guests and casino
customers. The Company's hotel/casino operations will also compete with a large
number of hotels and motels, and gaming facilities not related to hotels or
motels, located in and near Las Vegas. The Theme Park will compete with all
other forms of entertainment, lodging and recreational activities, including
other theme parks, especially those located in southern California. Some of the
Company's competitors are larger than the Company and may have greater
resources.
According to the LVCVA, as of December 31, 1993, there were approximately
86,000 hotel and motel rooms in the Las Vegas area. In addition, the LVCVA
reports proposals to construct approximately 29,000 more hotel and motel rooms.
The Company cannot make any prediction as to how many additional rooms will be
constructed in Las Vegas. The Company's future operating results could be
adversely affected by excess Las Vegas room and gaming capacity.
In addition to competing with hotel/casino facilities elsewhere in Nevada
(i.e., the Reno/Lake Tahoe area and the rapidly expanding Laughlin area) and in
Atlantic City, the Company competes with hotel/casino facilities elsewhere in
the world and with state lotteries. Certain states have recently legalized, and
several other states are currently considering, legalizing casino gaming in
specific geographic areas, including Colorado, Illinois, Iowa, Louisiana,
Mississippi, Missouri, Oregon, South Dakota and Tennessee. Legalized casino
gambling in other states could adversely affect the Company's activities in Las
Vegas, particularly if such legalization were to occur in areas close to
Nevada, such as California. Additionally, certain gaming operations are
conducted or have been proposed on federal Indian reservations, including those
located in the primary market to be served by the MGM Grand Hotel. In addition,
with respect to group bookings, the Company's hotel/casino facilities in Las
Vegas also compete with hotels and resorts, which do not include casinos,
throughout the United States.
MGM GRAND AIR
Operating Strategy
The first element of MGM Grand Air's strategy is to promote its quality
reputation and name recognition in order to provide a distinctive alternative
to the current service offered by other airlines and charter operators to
professional sports teams, touring entertainers, upscale tour operators and
certain upscale travelers. Management of MGM Grand Air believes that these
travelers will continue to select MGM Grand Air for their travel needs because
of the convenience and premium service offered by MGM Grand Air. The second
element of MGM Grand Air's strategy is to reconfigure its markets in order to
derive a significant portion of its revenue from track flying (i.e., regularly
scheduled flying between the same destinations).
Through December 31, 1992, MGM Grand Air provided regularly scheduled service
between Los Angeles and New York. This service was discontinued in order to
concentrate on the upscale charter market. This decision was a direct result of
the low prices established by competitors, over-capacity in the Los Angeles--
New York market, and the on-going recession in the scheduled airline business.
MGM Grand Air's charter service is available using either its Boeing 727-100
or DC-8-62 aircraft. The combination of aircraft allows MGM Grand Air to offer
flexibility in size and destinations with virtual worldwide capabilities. The
aircraft are configured to offer passengers as much as 60 inches of leg room,
with a premium cabin service.
8
MGM Grand Air has a separate private terminal facility at Los Angeles
International Airport. At other airports, MGM Grand Air usually contracts with
fixed base operators which are separate from the main terminal.
Pricing and Marketing Strategy
MGM Grand Air's marketing strategy operates on the premise that sports teams,
touring entertainers and certain upscale travelers will be attracted to MGM
Grand Air due to the convenience, privacy and premium service offered by MGM
Grand Air. MGM Grand Air markets its services directly to potential customers
and also through charter brokers and tour operators. Direct sales efforts are
supported by targeted media advertising, public relations and promotional
activities and direct mail contact with selected potential customers.
Flight Equipment
Prior to commencement of operations, MGM Grand Air acquired three specially-
configured Boeing 727-100 aircraft for an aggregate cost of approximately
$11,000,000 and incurred additional expenses of approximately $8,500,000 to
repair, refurbish and equip the aircraft. The aircraft seats 36 passengers.
In December 1987, MGM Grand Air acquired three DC-8-62 aircraft for a total
purchase price of approximately $16,000,000 and subsequently incurred
additional expenses of approximately $38,300,000 to repair, refurbish, equip
and hush kit the aircraft. The aircraft seats 70 passengers. These aircraft
have been modified to conform to FAA Stage III noise standards.
Ground Facilities and Services
At Los Angeles International Airport, MGM Grand Air is currently operating
under a twenty year lease expiring in March 2007 for its passenger service
facilities, flight operations and other office space. MGM Grand Air believes
that its current Los Angeles location is unique and enhances its appeal to the
travel customer.
MGM Grand Air contracts for major maintenance, passenger and ground handling
and pre-boarding security services. Maintenance management personnel, quality
assurance personnel and airport station management personnel are MGM Grand Air
employees.
Competition
The airline industry is intensely competitive and has become more competitive
due to the enactment of the Airline Deregulation Act of 1978 (the "Deregulation
Act"). The Deregulation Act has increased competition with respect to both
routes and fares among currently certificated carriers, and reduced the
barriers to entry in the air transport industry. MGM Grand Air competes with
commercial airlines and private charter carriers, some of whom are larger with
greater resources than MGM Grand Air.
Fuel
Jet fuel accounts for the most significant portion of MGM Grand Air's
operating costs. MGM Grand Air purchases fuel on standard airline trade terms,
which do not provide protection against price increases or assure availability
of supplies.
Since February 25, 1979, jet fuel has been exempted from the price control
and allocation rules under the Emergency Petroleum Allocation Act of 1973. The
Department of Energy has adopted special
9
standby pricing and allocation rules applicable to jet fuel in the event of a
petroleum supply shortage, but, because of the recent adequacy of supply of
petroleum products, these special rules have not yet been imposed.
The future availability of fuel and the impact of fuel costs on MGM Grand Air
cannot be predicted with certainty. Substantial increases in fuel prices, such
as occurred during the mid east conflict of 1990-1991, or the unavailability of
adequate supplies could have a material adverse effect on the operations and
operating results of MGM Grand Air. In addition, MGM Grand Air's ability to
pass on increased fuel costs to its passengers through price increases may be
limited.
Summary Operating Data for Passenger Service
The following table (unaudited) sets forth selected operating data relating
to MGM Grand Air's passenger service for the periods indicated.
1992 QUARTERS 1993 QUARTERS
----------------------------------- -----------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
-------- ------- ------- ------- ------- ------- ------- --------
Operating revenues
(000).................. $ 14,195 $11,977 $12,859 $10,974 $ 4,938 $ 4,719 $ 4,732 $ 6,395
Depreciation & amortiza-
tion (000) (1)......... $ 1,727 $ 1,730 $ 1,742 $ 1,750 $ 1,596 $ 1,567 $ 1,568 $ 1,640
Operating income (loss)
(000) (2).............. $ (1,066) $(2,287) $(1,521) $(8,858) $(2,326) $(2,799) $(2,429) $(70,891)
Aircraft block hours
flown.................. 2,848 2,497 2,562 2,567 1,066 964 813 1,004
Yield per block hour
flown (3).............. $ 4,984 $ 4,797 $ 5,019 $ 4,275 $ 4,632 $ 4,895 $ 5,820 $ 6,618
- --------
(1) Excludes 1993 fourth quarter aircraft carrying value adjustment--see also
(2).
(2) Includes 1993 fourth quarter aircraft carrying value adjustment of
$68,948,000.
(3) The average revenues per block hour flown.
Insurance
MGM Grand Air carries insurance of the type customary in the airline industry
and in amounts deemed adequate to protect MGM Grand Air and its property. The
policies provide customary business and commercial coverages, including
workers' compensation, public liability, aircraft liability, airport liability,
passenger liability, baggage and cargo liability, shippers risk, property
damage and loss of or damage to flight equipment.
Government Regulation
Economic. Under the Federal Aviation Act of 1958, as amended (the "Aviation
Act"), interstate air carriers are subject to regulation by the United States
Department of Transportation (the "DOT") and the Federal Aviation
Administration (the "FAA"). The DOT has jurisdiction over the issuance of
Certificates of Public Convenience and Necessity (the "401 Certificates"),
pursuant to which air carriers are permitted to operate. The DOT has the power
to amend, modify, suspend or revoke such 401 Certificates. In addition, 401
Certificates are not transferable without DOT approval. MGM Grand Air has
received a 401 Certificate to operate as a scheduled and charter interstate air
carrier and has been certified by the FAA.
Environmental. Under federal law and regulations pertaining to aircraft noise
promulgated under the Noise Control Act of 1972 and the Aviation Safety and
Noise Abatement Act of 1979, commercial jet aircraft are classified in three
categories, Stage I, II and III, with Stage III being the quietest and Stage I
being the noisiest. Stage I aircraft were banned from use in the United States,
effective January 1, 1986. MGM Grand Air's Boeing 727-100 aircraft are
classified as Stage II aircraft and currently comply with applicable noise
regulations. Hush kits can be purchased to enable these aircraft to comply with
Stage III. MGM Grand Air's DC-8-62 aircraft, which have hush kits installed,
are classified as Stage III. Because of the mix of Stage II and Stage III
aircraft in the MGM Grand air fleet, all six aircraft are qualified to operate
until January 1, 1999.
10
The legislatures and other governmental bodies in several states have from
time to time considered noise-reduction measures including limitations on hours
of operation of jet aircraft generally or of specific types of aircraft. Any
such regulations affecting the aircraft utilized by MGM Grand Air could
substantially increase costs or curtail operations.
Under the Federal Clean Air Act, the Environmental Protection Agency (the
"EPA") has been given authority to promulgate aircraft emission standards, and
the adoption or enforcement of site or local aircraft emission standards is
expressly barred. The EPA has not yet promulgated emission standards affecting
any of the aircraft which it is anticipated will be operated by MGM Grand Air.
Other Regulations. The FAA has jurisdiction to regulate flight operations
generally, including the licensing of pilots and maintenance personnel, the
establishment of minimum standards for training and maintenance and technical
standards for flight, communications and ground equipment. All of MGM Grand
Air's aircraft must have and maintain airworthiness certificates issued by the
FAA. The FAA must also approve MGM Grand Air's pilot and flight attendant
training programs. MGM Grand Air's flight personnel procedures, aircraft,
maintenance facilities and other procedures are subject to inspection by the
FAA. The FAA has the authority to suspend temporarily or revoke permanently the
authority of an air carrier or its licensed personnel for failure to comply
with federal aviation regulations promulgated by the FAA and to levy civil
penalties for such failures. The FAA may also suspend or revoke airworthiness
certificates of such aircraft which the FAA determines are or may be unsafe or
which do not meet applicable regulations.
The Federal Communications Commission has jurisdiction over certain aspects
of the operations of airlines involving the use of radio-facilities and in-
flight telephone service. In addition, the National Mediation Board has
jurisdiction over the labor relations of MGM Grand Air under the Railway Labor
Act, as amended. The Food and Drug Administration has regulatory authority over
airplane galleys, and various government agencies regulate the sale of
alcoholic beverages aboard aircraft.
EMPLOYEES
As of December 31, 1993, the Company employed approximately 8,500 full time
equivalent employees at its corporate offices, MGM Grand Air, MGM Grand
Laundry, Inc., and MGM Grand Hotel.
None of the Company's employees are covered by collective bargaining
agreements.
ITEM 2. PROPERTIES
The Company's principal executive offices are located at 3799 Las Vegas
Boulevard South, Las Vegas, Nevada 89109, where it rents approximately 7,028
square feet from MGM Grand Hotel.
In January and February 1990, the Company acquired approximately 112 acres of
real property in Las Vegas, Nevada, consisting of the Marina land and the
Tropicana land and adjacent land thereto, for approximately $88 million in cash
and 1,764,706 shares of Common Stock which together, constitute the MGM Grand
Hotel, Casino and Theme Park property. (See Item 1. Business.)
MGM Grand Hotel's principal executive offices are also located at 3799 Las
Vegas Boulevard South, Las Vegas, Nevada, 89109. Pursuant to a lease expiring
in March 1999, certain other office and warehouse space is leased by MGM Grand
Hotel consisting of approximately 112,000 square feet at 3155 W. Harmon, Las
Vegas, Nevada, 89103, for an annual rent of approximately $372,000.
11
MGM Grand Air maintains its headquarters at 1500 Rosecrans Avenue, Suite 350,
Manhattan Beach, California 90266. Pursuant to a lease which expires in January
1999, MGM Grand Air leases approximately 12,300 square feet, 3,100 of which is
sublet to an unrelated party. MGM Grand Air's annual aggregate rent payments
for its office, terminal and other facilities are approximately $405,000.
ITEM 3. LEGAL PROCEEDINGS
In October, 1992, the Los Angeles Superior Court issued a minute order
favorable to the Company in the litigation between the Company and Walt Disney
Co. ("Disney"). Disney sought unspecified compensatory and punitive damages
from the Company, and an injunction prohibiting the Company from using the MGM
or MGM Grand names in connection with the new theme park in Las Vegas. The
court found in favor of the Company on every count of Disney's claim. The
Company has been informed that Disney has determined not to appeal the
decision, which is now final.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
FRED BENNINGER (age 77) has served as a Director of the Company since
February 1986, and as Chairman of the Board since August 1987. He also served
as President of the Company from August 1987 to March 1990. He served as
Chairman of the Executive Committee on the Board of Directors of MGM/UA
Communications Co. from July 1988 to January 1990. He was President of Tracinda
from March 1982 to July 1987 and Chairman of the Executive Committee of MGM
Grand Hotels, Inc. from 1971 to April 1986. He was Director and Chairman of the
Executive Committee of MGM/UA Entertainment Co. from June 1980 to March 1986.
ROBERT R. MAXEY (age 56) has served as President, Chief Executive Officer and
Director of the Company since January 1991. From May 1989 to January 1991, he
was President and Chief Executive Officer of MarCor Resort Properties, Inc. a
hotel/casino operator. Prior thereto, from October 1985 to May 1989, he was a
Consultant to Golden Nugget, a hotel/casino operator.
ALEX YEMENIDJIAN (age 38) has served as Executive Vice President of the
Company since June 1992, as Chairman of the Executive Committee from January
1991 to June 1992, and as President and Chief Operating Officer of the Company
from March 1990 to January 1991. Since January 1990, he has also served as an
executive of Tracinda. Chairman of the Executive Committee and Director of
MGM/UA from January to November 1990. For more than five years prior thereto,
he served as managing partner of Parks, Palmer, Turner and Yemenidjian, a
public accounting firm to December 1989.
K. EUGENE SHUTLER (age 55) has served as Executive Vice President and General
Counsel and Director of the Company since February 1991. For more than 5 years
prior thereto, he was a member of the law firm of Troy and Gould Professional
Corporation.
JOSEPH T. MURPHY (age 53) has served as Vice President and Chief Financial
Officer since July 1987. Prior thereto he served in various capacities with
Transamerica Airlines from October 1968 to June 1987, most recently as Senior
Vice President Finance and Administration.
SCOTT LANGSNER (age 40) has served as Secretary/Treasurer of the Company
since July 1987. For more than five years prior to July 1987, he served as
Controller of Tracinda.
12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange. For
price information with respect to such Common Stock, see page 31 of the
Company's 1993 Annual Report to Stockholders, which information is incorporated
herein by this reference.
As of March 14, 1993, there were approximately 2,800 record holders of the
Company's Common Stock.
The Company has not paid any dividends to date on the Common Stock. The
declaration of dividends (which is within the discretion of the Company's Board
of Directors) will depend on the earnings, financial position and capital
requirements of the Company and other relevant factors existing at the time.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth on page 1 of the Company's 1993 Annual Report to
Stockholders is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth on pages 16 to 18 of the Company's 1993 Annual
Report to Stockholders is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth on pages 19 to 31 of the Company's 1993 Annual
Report to Stockholders is incorporated herein by this reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by PART III (Items 10, 11, 12 and 13) has been
omitted, as the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the end of its fiscal year a
definitive Proxy Statement pursuant to Regulation 14A, except that the
information regarding the Company's executive officers called for by Item 10 of
PART III has been included in PART I of this Form 10-K under the heading
"Executive Officers of the Registrant."
13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The financial statements and schedules listed in the accompanying Index
to Financial Statements at page 17 herein are filed as part of this Form 10-K.
(b) Exhibits
The exhibits listed in the accompanying Exhibit Index on pages 23-24 are
filed as part of this Form 10-K.
14
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Robert R. Maxey
By: _________________________________
Robert R. Maxey
President and Chief Executive
Officer
(Principal Executive Officer)
Joseph T. Murphy
By: _________________________________
Joseph T. Murphy
Vice President and Chief Financial
Officer
Dated: March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Fred Benninger
- ------------------------------------
Fred Benninger Chairman of the Board March 25, 1994
Robert R. Maxey
- ------------------------------------
Robert R. Maxey President and Chief
Executive Officer and
Director March 25, 1994
James D. Aljian
- ------------------------------------
James D. Aljian Director March 25, 1994
Terry N. Christensen
- ------------------------------------
Terry N. Christensen Director March 25, 1994
- ------------------------------------
Glenn C. Cramer Director March , 1994
- ------------------------------------
Willie D. Davis Director March , 1994
- ------------------------------------
Alexander M. Haig, Jr. Director March , 1994
- ------------------------------------
Lee A. Iacocca Director March , 1994
- ------------------------------------
Kirk Kerkorian Director March , 1994
15
SIGNATURE TITLE DATE
--------- ----- ----
Walter M. Sharp March 25, 1994
- ------------------------------------
Walter M. Sharp Director
K. Eugene Shutler March 25, 1994
- ------------------------------------
K. Eugene Shutler Director
March , 1994
- ------------------------------------
E. Parry Thomas Director
Alex Yemenidjian March 25, 1994
- ------------------------------------
Alex Yemenidjian Director
16
INDEX TO FINANCIAL STATEMENTS
(ITEM 14(A))
ANNUAL
REPORT TO FORM
STOCKHOLDERS 10-K
PAGE PAGE
------------ ----
Report of Independent Public Accountants...................... 30
Consolidated Statements of Operations--For the years ended
December 31, 1993, 1992 and 1991............................. 19
Consolidated Balance Sheets as of December 31, 1993 and 1992.. 20
Consolidated Statements of Cash Flows--For the years ended
December 31, 1993, 1992 and 1991............................. 21
Consolidated Statements of Stockholders' Equity--For the years
ended December 31, 1993, 1992 and 1991....................... 22
Notes to Consolidated Financial Statements.................... 23
Selected Quarterly Financial Results (unaudited).............. 31
Report of Independent Public Accountants on Supplemental
Schedules.................................................... 18
Schedule V--Property, Plant and Equipment..................... 19
Schedule VI--Accumulated Depreciation, Depletion, and Amorti-
zation of Property, Plant and Equipment......... 20
Schedule VIII--Valuation and Qualifying Accounts.............. 21
Schedule X--Supplementary Income Statement Information........ 22
All other schedules have been omitted either as inapplicable or not required
under the instructions contained in Regulation S-X or because the information
is included in the financial statements or the notes thereto.
17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULES
To MGM Grand, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in MGM Grand, Inc.'s Annual Report
to stockholders incorporated by reference in this Form 10-K, and have issued
our report thereon dated February 24, 1994. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The
supplemental schedules V, VI, VIII and X as shown on pages 17 through 20 are
the responsibility of the Company's management, are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen & Co.
Las Vegas, Nevada February 24, 1994
18
MGM GRAND, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
BALANCE BALANCE
AT AT END
BEGINNING ADDITIONS OF
CLASSIFICATION OF PERIOD AT COST RETIREMENTS OTHER(A) PERIOD
-------------- --------- --------- ----------- --------- --------
FOR THE YEAR ENDED DECEMBER 31, 1993:
Airframes, engines, other
flight equipment and de-
ferred overhaul costs... $ 89,775 $ 5,533 $13,466 $ -- $ 81,842
Furniture, equipment and
leasehold improvements.. 5,047 101,615 1,580 (1,564) 103,518
Land and land improve-
ments................... 81,927 540 -- 8,370 90,837
Buildings and building
improvements............ -- 374,225 -- 286,387 660,612
Equipment under capital
lease................... -- 15,423 -- 1,564 16,987
Development and construc-
tion costs.............. 294,757 -- -- (294,757) --
-------- -------- ------- --------- --------
$471,506 $497,336 $15,046 $ -- $953,796
======== ======== ======= ========= ========
FOR THE YEAR ENDED DECEMBER 31, 1992:
Airframes, engines, other
flight equipment and de-
ferred overhaul costs... $ 87,822 $ 4,394 $ 2,441 $ -- $ 89,775
Furniture, equipment and
leasehold improvements.. 6,184 353 1,490 -- 5,047
Land and land improve-
ments................... 81,927 -- -- -- 81,927
Buildings and building
improvements............ -- -- -- -- --
Development and construc-
tion costs.............. 78,481 216,276 -- -- 294,757
-------- -------- ------- --------- --------
$254,414 $221,023 $ 3,931 $ -- $471,506
======== ======== ======= ========= ========
FOR THE YEAR ENDED DECEMBER 31, 1991:
Airframes, engines, other
flight equipment and de-
ferred overhaul costs... $ 83,855 $ 4,344 $ 377 $ -- $ 87,822
Furniture, equipment and
leasehold improvements.. 32,595 2,466 1,868 (27,009) 6,184
Land and land improve-
ments................... 137,436 -- -- (55,509) 81,927
Buildings and building
improvements............ 50,028 26 -- (50,054) --
Development and construc-
tion costs.............. 48,346 30,135 -- -- 78,481
-------- -------- ------- --------- --------
$352,260 $ 36,971 $ 2,245 $(132,572) $254,414
======== ======== ======= ========= ========
- --------
(A)Amounts in 1991 represent Desert Inn assets sold. The amounts in 1993
represent the reclassification of MGM Grand Hotel assets from construction
costs due to completion of construction on December 18, 1993.
19
MGM GRAND, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
ADDITIONS
CHARGED BALANCE
BALANCE AT TO COSTS AT END
BEGINNING AND OF
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS OTHER(A)(B) PERIOD
----------- ---------- --------- ----------- ----------- -------
FOR THE YEAR ENDED DECEMBER 31, 1993:
Airframes, engines,
other flight equipment
and deferred overhaul
costs.................. $19,755 $ 6,446 $13,308 $68,948 $81,841
Furniture, equipment and
leasehold improvements. 2,011 2,520 935 -- 3,596
Land and land improve-
ments.................. -- -- -- -- --
Buildings and building
improvements........... 30 855 -- -- 885
Equipment under capital
lease.................. -- 190 -- -- 190
------- ------- ------- -------- -------
$21,796 $10,011 $14,243 $68,948 $86,512
======= ======= ======= ======== =======
FOR THE YEAR ENDED DECEMBER 31, 1992:
Airframes, engines,
other flight equipment
and deferred overhaul
costs.................. $13,546 $ 8,050 $ 1,841 $ -- $19,755
Furniture, equipment and
leasehold im-
provements............. 2,075 819 883 -- 2,011
Land and land improve-
ments.................. -- -- -- -- --
Buildings and building
improvements........... 11 19 -- -- 30
------- ------- ------- -------- -------
$15,632 $ 8,888 $ 2,724 $ -- $21,796
======= ======= ======= ======== =======
FOR THE YEAR ENDED DECEMBER 31, 1991:
Airframes, engines,
other flight equipment
and deferred overhaul
costs.................. $ 7,267 $ 6,651 $ 372 $ -- $13,546
Furniture, equipment and
leasehold improvements. 12,643 5,449 1,195 (14,822) 2,075
Land and land improve-
ments.................. 1,360 473 -- (1,833) --
Buildings and building
improvements........... 5,959 2,287 -- (8,235) 11
------- ------- ------- -------- -------
$27,229 $14,860 $ 1,567 $(24,890) $15,632
======= ======= ======= ======== =======
- --------
(A)Amounts in 1991 represent Desert Inn assets sold.
(B) The accumulated depreciation and amortization at December 31, 1993 includes
the $68,948,000 reduction in the carrying value of aircraft and related
equipment.
20
MGM GRAND, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
ADDITIONS
CHARGED
BALANCE AT TO COSTS AMOUNTS BALANCE
BEGINNING AND WRITTEN AT END OF
DESCRIPTION OF PERIOD EXPENSES OFF PERIOD
----------- ---------- --------- ------- ---------
FOR THE YEAR ENDED DECEMBER 31, 1993:
Allowances for doubtful accounts...... $ 1,531 $3,855 $ 653 $ 4,733
======= ====== ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1992:
Allowances for doubtful accounts...... $10,682 $ 238 $ 9,389 $ 1,531
======= ====== ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1991:
Allowances for doubtful accounts...... $12,328 $7,183 $ 8,829 $10,682
======= ====== ======= =======
21
MGM GRAND, INC. AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
CHARGED TO
COSTS AND
ITEM EXPENSES
---- ----------
FOR THE YEAR ENDED DECEMBER 31, 1993:
Maintenance and repairs........................................... $10,524
Depreciation and amortization of intangible assets and similar
deferrals........................................................ 8,018
Advertising costs................................................. 590
Taxes other than payroll and income............................... 479
FOR THE YEAR ENDED DECEMBER 31, 1992:
Maintenance and repairs........................................... $ 5,699
Depreciation and amortization of intangible assets and similar
deferrals........................................................ 6,998
Advertising costs................................................. 2,892
Taxes other than payroll and income............................... 386
FOR THE YEAR ENDED DECEMBER 31, 1991:
Maintenance and repairs........................................... $ 8,297
Depreciation and amortization of intangible assets and similar
deferrals........................................................ 691
Advertising costs................................................. 5,644
Taxes other than payroll and income............................... 4,781
22
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3(1) Certificate of Incorporation of Company, as amended (incorporated by
reference to Exhibit 3(1) to Registration Statement No. 33-3305).
3(2) Bylaws of Company, as amended (incorporated by reference to Exhibit
3(2) to Registration Statement No. 33-30337).
4 Indenture, dated as of May 1, 1992, among MGM Grand Hotel Finance
Corp. ("MGM
Finance"), as issuer, the Company, as guarantor, MGM Grand Hotel,
Inc. ("MGM Grand Hotel"), as obligor with respect to certain cove-
nants, and U.S. Trust Company of California, N.A., a national bank-
ing corporation validly organized and existing under the laws of the
United States, as Trustee (the "Trustee"), relating to First Mort-
gage Notes, including forms of First Mortgage Notes (incorporated by
reference to Exhibit (A)(IV) of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1992).
10(1)* MGM Grand, Inc. Nonqualified Stock Option Plan (incorporated by ref-
erence to Exhibit A to Proxy Statement dated March 30, 1990).
10(2)* MGM Grand, Inc. Incentive Stock Option Plan (incorporated by refer-
ence to Exhibit B to Proxy Statement dated March 30, 1990).
10(3) Agreement of Purchase and Sale, dated as of July 23, 1991, as amend-
ed, between MGM Desert Inn and a wholly-owned subsidiary of Tracinda
Corporation (incorporated by reference to Exhibit 1 of the Company's
Current Report on Form 8-K dated December 20, 1991).
10(4) Guaranty of Completion by the Company in favor of the Trustee (in-
corporated by reference to Exhibit 10(4) of the Company's Annual Re-
port on Form 10-K for the fiscal year ended December 31, 1992 (the
"1992 10-K")).
10(5) Escrow Agreement by and among MGM Finance, the Trustee and Valley
Bank of Nevada, a Nevada corporation ("Escrow Agent"), together with
the consent thereto of MGM Grand Hotel (incorporated by reference to
Exhibit 10(5) of the Company's 1992 10-K).
10(6) Disbursement Agreement by and among MGM Finance, the Trustee and Ne-
vada Title Company, a Nevada corporation ("Disbursement Agent"), to-
gether with the consent thereto of MGM Grand Hotel (incorporated by
reference to Exhibit 10(6) of the Company's 1992 10-K).
10(7) Commitment Agreement by and among the Company, MGM Grand Hotel, and
Tracinda Corporation, a Nevada corporation ("Tracinda") (incorpo-
rated by reference to Exhibit 10(7) of the Company's 1992 10-K).
10(8) Credit Agreement among MGM Finance, MGM Grand Hotel and Bank of
America N.T. & S.A. ("Bank Agent") and the banks named therein (the
"Banks") (incorporated by reference to Exhibit 10(8) of the
Company's 1992 10-K).
10(9) Guaranty executed by the Company in favor of Bank Agent and the
Banks (incorporated by reference to Exhibit 10(9) of the Company's
1992 10-K).
10(10) Intercreditor Agreement by and among the Trustee, Bank Agent and
Continental Bank, N.A., a national banking association ("Secured
Lenders' Agent"), together with the consent thereto of MGM Finance
(incorporated by reference to Exhibit 10(10) of the Company's 1992
10-K).
10(11) Collateral Assignment by MGM Finance in favor of Secured Lender's
Agent, together with the consent thereto of the Company, MGM Grand
Hotel, and MGM Grand Movieworld, Inc., a Nevada corporation
("Movieworld") (incorporated by reference to Exhibit 10(11) of the
Company's 1992 10-K).
23
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10(12) Stock Pledge Agreement by and between the Company and Secured Lend-
ers' Agent (incorporated by reference to Exhibit 10(12) of the
Company's 1992 10-K).
10(13) Loan Agreement between MGM Grand Hotel and MGM Finance (incorporated
by reference to Exhibit 10(13) of the Company's 1992 10-K).
10(14) Secured Promissory Note by MGM Grand Hotel in favor of MGM Finance
(incorporated by reference to Exhibit 10(14) of the Company's 1992
10-K).
10(15) Deed of Trust, Assignment of Rents and Security Agreement (the "Deed
of Trust") by MGM Grand Hotel to Nevada Title Company, a Nevada cor-
poration, as trustee, for the benefit of MGM Finance, as beneficiary
(incorporated by reference to Exhibit 10(15) of the Company's 1992
10-K).
10(16) Loan Guaranty by the Company in favor of MGM Finance (incorporated
by reference to Exhibit 10(16) of the Company's 1992 10-K).
10(17)* Letter Agreements, dated December 21, 1990 and February 9, 1993, be-
tween the Company and Robert Maxey (incorporated by reference to Ex-
hibit 10(17) of the Company's 1992 10-K).
10(18)* Letter Agreements, dated December 13, 1990 and February 26, 1993,
between the Company and K. Eugene Shutler (incorporated by reference
to Exhibit 10(18) of the Company's 1992 10-K).
10(19)* Letter Agreements, dated January 3, 1991 and February 9, 1993, be-
tween the Company and Alex Yemenidjian (incorporated by reference to
Exhibit 10(19) of the Company's 1992 10-K).
10(20)* Letter Agreement, dated February 9, 1993, between the Company and
Fred Benninger (incorporated by reference to Exhibit 10(20) of the
Company's 1992 10-K).
10(21) Participation Agreement, dated as of November 9, 1993, entered into
among MGM Grand Hotel, as Subleasee, the Company, as Guarantor, The
Certificate Purchasers identified therein and Norwest Bank Minneso-
ta, National Association, as Trustee, together with exhibits there-
to.
10(22) Letter of Credit and Reimbursement Agreement, dated as of November
17, 1993, between the Company, as Account Party and Bank of America
National Trust and Savings Association.
13** The Company's 1993 Annual Report to stockholders.
21 List of Subsidiaries.
23 Consent of Independent Accountants.
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* Management contract.
** Except for those portions which are expressly incorporated herein by
reference, such Annual Report is furnished for the information of the
Securities and Exchange Commission and is not to be deemed "filed" as part
of the Report.
24