Mirage Resorts, Incorporated Business Information, Profile, and History

Company Perspectives: We are not simply a hotel company. We provide exciting vacations and

The ability to imagine&mdashø see beyond what is, to what could be--is the ability to transform the mundane into the marvelous. Inspiration is only part of the process, for the realization of an idea requires thought, enormous effort and an abiding respect for quality.

At Mirage Resorts, our vision of what "could be" has enabled us to build the world's most dazzling resorts. We have become the industry leader by attempting the impossible, learning from our mistakes and pushing the limits further than ever before. As a result, each of our properties is unique, and each has developed its own special sense of charisma and wonder.

History of Mirage Resorts, Incorporated

Mirage Resorts, Incorporated is one of the largest developers and operators of casinos in the world, with a focus on the upper end of the market. Mirage's Las Vegas holdings include the flagship Mirage resort, the ultra-luxurious Bellagio, Treasure Island, the Holiday Inn Casino Boardwalk, and (through a joint venture with Circus Circus Enterprises Inc.) the Monte Carlo, all located on the Strip; and the Golden Nugget, the largest hotel in downtown Las Vegas. Outside Las Vegas, the company runs the Golden Nugget-Laughlin in Laughlin, Nevada; and in Biloxi, Mississippi, the Beau Rivage, the largest casino in the United States outside of Nevada. In the works is the company's return to the Atlantic City market.

Golden Nugget Origins

Mirage got its start as the Golden Nugget casino, which opened in downtown Las Vegas in August 1945. The town's largest gambling hall at the time, with 5,000 square feet of gaming floor, the Golden Nugget was decorated in a Victorian San Francisco-Barbary Coast style and was owned by a group of Las Vegas businessmen headed by Guy McAfee. McAfee had been a police captain in Los Angeles who ran a gambling operation on the side in the 1930s. When a reform mayor was elected in 1938, McAfee was forced out of southern California, and he and other gamblers migrated to Nevada, where gaming was legal. McAfee purchased a roadhouse called the Pair-O-Dice Club (a pun on Paradise Valley, the name of the area where it was located). The club was located on Highway 91, the road to Los Angeles south of town, which would later become known as the Las Vegas Strip. The new owner scheduled the club's reopening, under the name 91-Club, to exploit the burst of publicity generated by the Las Vegas divorce of movie star Clark Gable and his wife on March 7, 1939.

With the advent of World War II in late 1941, Las Vegas became a center of war-related industry, since it was considered far enough inland to be safe from the enemy bombers that were presumed to menace the coasts. The defense boom flooded Las Vegas with thousands of fliers, soldiers, and defense workers, which stimulated the local economy, in particular the prostitution and casino industries. In 1942 McAfee expanded his gambling operation when he purchased the Pioneer Club, near other casinos on glitzy Fremont Street in downtown Las Vegas. In 1945 he purchased an additional Fremont Street casino, the Frontier Club. McAfee invested the profits from this club in parcels of adjacent land, which became the site of the Golden Nugget, completed in late 1945. Both the Frontier Club and the Golden Nugget were partly owned by organized crime leader Benjamin "Bugsy" Siegel in the mid-1940s, until he was killed in 1947.

In 1948 the Golden Nugget unveiled a 100-foot-high electric sign to call attention to itself and compete with the lavish structures being built out of town on the Las Vegas Strip. With the sign, McAfee billed his casino as "the brightest night spot in the world." In the following year, the Golden Nugget company was incorporated.

Steven A. Wynn Took Over in Early 1970s

During the 1950s and 1960s, Las Vegas underwent spectacular growth, and the Golden Nugget profited, along with the rest of the hotel industry, from that growth. By the early 1970s, however, management of the casino had become lax, and it was losing money. The Golden Nugget had degenerated into a dingy, lackluster, somewhat sleazy operation by 1973, when Steven A. Wynn, a Las Vegas liquor wholesaler who had previously owned a portion of another casino property, began buying stock in the company. By the middle of the year, Wynn had acquired more than five percent of the outstanding shares, and he was able to persuade the company's leaders to put him on its board in June. Shortly thereafter, he presented members of the board with evidence of waste in the casino's operations and embezzlement by employees, and asked to be allowed to run the company. On August 1, 1973, Wynn was appointed chairman and president of Golden Nugget.

When Wynn took over, Golden Nugget owned just one casino in downtown Las Vegas, which generated annual revenues of $19 million. The casino was known as a place for low rollers, but its new president soon brought his own flashy style to the operation, repositioning the Golden Nugget as a haven for big spenders. Wynn liked to hobnob with celebrities, and he brought high-profile acts to the Golden Nugget to entertain. In addition, he provided a corporate jet to ferry high rollers to the casino. In the late 1970s, Wynn defied conventional wisdom about the viability of his casino in a somewhat run-down area, far from the glitzy Strip or the center of Las Vegas, by constructing a luxury high-rise hotel with 579 rooms, including lavish suites, for Golden Nugget patrons. Under its new leadership, the made-over casino began to turn a profit.

Turned Attention to Atlantic City in Late 1970s

In addition to its Las Vegas operations, Golden Nugget turned its attention eastward. When New Jersey became the second state after Nevada to legalize casino gambling, the company acted quickly to get in on the ground floor of this potentially lucrative market. In October 1978, Golden Nugget completed its purchase of a one-square-block property occupied by a motel on the Atlantic City Boardwalk, and announced plans to build a hotel-casino complex on the site. With 500 rooms, the project was slated to cost $75 million. In the next several months, Golden Nugget struggled to raise the money it needed to build its Atlantic City project. Coming off a year of low profits, with a money-losing fourth quarter, the company's stock price was not high enough for it to generate the necessary income through the sale of additional shares. Finally, under the tutelage of investment bankers from Drexel Burnham Lambert, who had pioneered the use of junk bonds, Golden Nugget was able to put together a package of debt and equity financing that made it possible for the company to raise funds equaling its current assets twice over. With this money, Golden Nugget broke ground on its Atlantic City development on September 5, 1979.

While it was making rapid progress in construction in the East, the company ran into legal difficulties in Las Vegas in 1980, when a Nevada grand jury subpoenaed company records to determine whether insider trading of Golden Nugget stock had taken place. As a result of this investigation, Wynn was forced to resign temporarily as head of the company's New Jersey subsidiary in order to expedite Golden Nugget's petition for a temporary license to operate its Atlantic City casino.

Fifteen months after construction began, on December 12, 1980, the Golden Nugget-Atlantic City opened its doors, becoming the sixth operating casino in town. The project's final costs totaled $160 million. Although it was somewhat smaller, the casino replicated the Las Vegas original in its decor and its appeal to high-rolling customers. Its lounge featured such A-list performers as Frank Sinatra and Dean Martin, and the company ferried favored customers from New York to Atlantic City in its own fleet of helicopters.

By January 1981 the Atlantic City casino was doing well, racking up a $2 million pretax profit, twice that of the Las Vegas casino, in that month alone. It had become the most profitable casino in Atlantic City almost overnight. Unlike some other casinos, Golden Nugget was able to make money despite the strict New Jersey regulatory environment, which raised costs for casino operators. The company reaped the advantages of its casino's design, which allowed a high density of gambling equipment per square foot and utilized the fewest number of employees possible under New Jersey law.

Building on this initial success, Golden Nugget announced in February 1981 that it would purchase 48 acres of real estate on the Las Vegas Strip, on which it would build a massive new casino and $430 million resort. In the ensuing months, however, the Las Vegas gambling industry was hit by a recession, and the company canceled its plans for the new development in December.

Six months later, in June 1982, Golden Nugget announced that it would indeed expand, but in New Jersey. The company put forth a proposal to purchase a 17-acre site outside Atlantic City that held a discount department store and was located far away from the congestion of the Boardwalk. This would allow extensive parking facilities and room for expansion. One obstacle, however, was the need to obtain a zoning variance to construct a casino at that location. When this proved insurmountable, Golden Nugget purchased instead, for $25 million, a 15-acre parcel of land in Atlantic City previously owned by MGM-Grand Hotels, in early 1983. The company announced plans for a 500-acre hotel and casino complex, on which it would begin construction later in the year.

By early 1984, industry watchers had become intrigued as Golden Nugget proceeded with plans for its $300 million Atlantic City project in secrecy. In an unusual move, all workers were asked to sign contracts forbidding disclosure of any aspect of the project to outsiders. By that fall, however, increasing competition in the Atlantic City market had slowed growth in the company's profits, and Wynn decided that the market was not strong enough to merit what was by then a $400 million investment. Golden Nugget took a $15.3 million loss when it canceled its plans for the second Atlantic City casino, contributing to an 86 percent drop in net income for the year.

In addition to falling profits in 1984, Golden Nugget faced regulatory difficulties as a result of the organized-crime connections of Edward M. Doumani, a Las Vegas businessman who was its second largest shareholder after Wynn. The Doumani stake had first attracted attention three years earlier, and the family was now ordered to sell its holdings in the company.

In April 1985 Golden Nugget made a move to expand in another fashion when it offered to buy more than a quarter of the much larger Hilton Hotels Corporation, as a first step toward taking it over entirely. The move, which was ultimately blocked by Hilton, seemed designed to enhance the image of Wynn as a gambler not just in casinos, but in the world of corporate takeovers as well. Under the tutelage of his friend Michael Milken, the Drexel Burnham Lambert junk-bond king, Wynn used Golden Nugget's casino earnings to purchase stakes in companies ripe for takeover, and then sold those holdings at a profit. In addition, Golden Nugget made a stab at the takeover of the Dunes Hotel and Casino, another Las Vegas property, which was also rejected.

Sold Atlantic City Hotel in 1987

Throughout the 1980s, Golden Nugget's Atlantic City casino remained profitable, contributing a large portion of the company's profits. Nevertheless, in anticipation of increasing competition and declining profits in New Jersey, Golden Nugget sold its Atlantic City casino to the Bally Manufacturing Corporation, which owned other nearby gaming properties, in March 1987 for $440 million, resulting in a $170 million pretax profit. The Golden Nugget-Atlantic City had been a gold mine, and in its seven years of operation in New Jersey, the company had gone from being a minor, single-property operation in Las Vegas to a major contender in the casino industry, largely on the strength of the windfall profits it reaped in the early days of legalized gambling in New Jersey.

After pulling out of the East Coast market, Golden Nugget turned its full attention to its operations in Nevada. As it was finalizing the lucrative Atlantic City sale, the company put the finishing touches on a major expansion and renovation of its flagship property in downtown Las Vegas. Now more opulent than ever, the renovated Golden Nugget included additional hotel rooms; several restaurants, including one reserved for high rollers; a pool with a computerized misting system to simulate tropical humidity in the desert; a spa, beauty salon, and gym; meeting rooms; and a display featuring a huge nugget of gold, weighing 61 pounds.

Golden Nugget found itself on the other side of the corporate takeover game in mid-1987, when it attracted the unwelcome attention of casino owner Donald Trump. Trump, who had made no secret of his desire to move into the Las Vegas market, purchased 4.9 percent of the company's outstanding stock in a tentative bid to take control of Golden Nugget. Although the attempt ultimately failed, the move earned Trump the lasting enmity of Wynn.

In November 1987 Golden Nugget broke ground on a massive project on the Las Vegas Strip next to the top-of-the-line casino Caesars Palace. The new project was designed to expand the company's presence in the Las Vegas market, push it into the top tier of casino operations, and position Golden Nugget in the front of the race for the future of Las Vegas, in which the city would be marketed as a resort destination that offered much more than mere gambling. Golden Nugget planned to make its new hotel one of the world's largest, with 3,030 rooms.

The following year, Golden Nugget made a somewhat belated and modest entry into the booming casino market of Laughlin, Nevada, a town located on the bank of the Colorado River, which formed the border with neighboring Arizona. The company purchased an old casino, called the Nevada Club, which it renamed the Golden Nugget, and a small related hotel across the river in Bullhead, Arizona. The cost of the properties was $40 million. Subsequently, the company expanded and upgraded the casino and added a parking garage.

In 1989 the company increased its Nevada property holdings when it opened the Shadow Creek golf course, designed as a perquisite for high rollers at its casinos. At a cost of $37 million, the course featured 10,000 pine trees brought in by truck to disguise the arid nature of the course's true landscape.

Mirage Opened in 1989, Treasure Island in 1993

On November 22, 1989, Golden Nugget opened its spectacular new Las Vegas attraction, called the Mirage, after two years of construction. The cost of the project was reported to be $620 million, but some in the industry felt it was closer to $700 million. The company had risked a large portion of its capital to complete the project and taken on large debts, floating a $540 million bond issue through Drexel Burnham Lambert and the soon-to-be-jailed Milken. Observers predicted that the Mirage would need to take in $1 million a day just to break even. To justify the expense, the project included a host of unique features. The most eye-catching of these was a five-story manmade volcano that erupted on schedule every 15 minutes. In addition, there were lagoons, a waterfall, abundant palm trees, an aquarium of sharks and stingrays, and a dolphin pool surrounded by bars, restaurants, and stores. Guests could also see live white tigers behind a glass wall, a preview of the entertainment in the hotel's showroom, and a magic and tiger-taming act by Siegfried and Roy, the most popular entertainers on the Strip.

To prevent the Mirage from infringing on the business of the Golden Nugget casino across town, the company attempted to shift the older casino's clientele base downward slightly, adding more slot machines and reducing the prices of drinks to bring in crowds, making up for the loss of the highest rollers, particularly the most coveted players from Asia, the Middle East, and Mexico. In further efforts to woo these essential players to the Mirage, the company hired well-connected employees from other casinos to market the Mirage overseas, and made two private jets available to ferry high rollers to Nevada. Golden Nugget badly needed capital from the new resort, since it had posted losses of $7.6 million in 1988, and $11.4 million over the first nine months of 1989.

In addition to the various attractions at the Mirage, Golden Nugget set out to attract gamblers by staging boxing matches at the hotel. In February 1990 the company tried to woo Buster Douglas, who had just defeated Mike Tyson to win the World Heavyweight title, away from his promoter Don King, promising him $50 million and $2 million in stock for two title bouts at the Mirage. This move quickly resulted in a flurry of lawsuits to prevent the fighter from switching promoters. Nevertheless, Douglas fought Evander Holyfield at the Mirage in 1990. Although the company lost $2 million promoting the fight, the increased revenues to the casino made up the difference.

In 1991 Golden Nugget sponsored additional matches at the Mirage, including two bouts between Tyson and Razor Ruddick, though the company did not promote the match or receive any portion of the gate receipts. The addition of the Mirage helped the company's net income to jump 57 percent in 1991, enabling the company to pay off one-third of the debt it had taken on to build the project. The tropical resort's success came at the expense of the older Golden Nugget casino, however, as its revenues slipped by more than one-fifth during this time. To emphasize Golden Nugget's transformation from a casino operator to an entertainment company, its name was changed to Mirage Resorts, Incorporated.

In October 1991 Mirage announced its intention to construct a second lavish resort on the Las Vegas Strip, adjacent to the Mirage. To be called Treasure Island, this project was designed to appeal to middle-class customers. With a cost estimated at $300 million, which would soon rise to $430 million, the hotel was slated to have 3,000 rooms. In front, to attract attention, stuntmen dressed as pirates and British sailors would stage mock gun battles on exploding ships floating in an artificial lagoon dubbed Buccaneer Bay. "Customers will be caught in the crossfire," noted the company's promotional literature. Construction began on the project in March 1992, and Treasure Island opened in October 1993. The addition of the Mirage and Treasure Island helped Mirage Resorts increase its net revenues from $299.8 million in 1989 to $1.25 billion in 1994.

In February 1992 Mirage completed improvements to its Laughlin property, which included an atrium with foliage and a waterfall, similar to the one so prominently featured at the Mirage, and additional restaurant and lounge facilities. The company constructed a 300-room hotel on the site, completed in late 1992.

Monte Carlo, Bellagio, and Beau Rivage Added in the Mid-to-Late 1990s

In the early 1990s Wynn was finally able to effectuate the purchase of the Dunes Hotel, which he then had demolished in 1993 and 1994. On the site, Mirage Resorts planned to develop two additional properties. June 1996 saw the opening of the first, the Monte Carlo, a 3,000-room resort catering to middle-class clientele through an atmosphere of "casual elegance." Jointly owned by Circus Circus Enterprises Inc., the Monte Carlo was developed for $350 million.

A much larger undertaking was the Bellagio, adjacent to the Monte Carlo and connected to it by a monorail system. Opened in October 1998, the 3,005-room Bellagio was considered the most expensive casino ever built, with a $1.6 billion price tag. It was also considered the most elegant casino ever, featuring a Northern Italian village theme, complete with an artificial eight-acre lake, 1,200 fountains, gardens, and red-tile-roofed Tuscan villas. The Bellagio also featured a botanical conservatory; an art gallery with a $300 million collection of works by such artists as Van Gogh, Monet, and Renoir; a collection of high-end shops and restaurants; and a water-oriented Cirque de Soleil spectacle. The art gallery provoked controversy even prior to Bellagio's opening, with some Mirage shareholders objecting to the lavish spending; consequently, in January 1998 Wynn bought four of the works of art for a total price of $25.6 million. Bellagio's art gallery therefore included paintings owned both by Mirage Resorts and Wynn. Bellagio's initial months of operation were highly successful, with the casino pulling in more than $3 million per day in gross revenues, a record-setting pace.

In June 1998 Mirage Resorts added to its Las Vegas Strip holdings through the $112 million purchase of Boardwalk Casino, Inc., whose assets included the Holiday Inn Casino Boardwalk, a 653-room casino located between the Monte Carlo and Bellagio. The acquisition also brought additional undeveloped land to the company, giving Mirage Resorts 40 acres and 817 feet of frontage on the Strip for possible development.

At the same time that it was bolstering its Las Vegas presence, the company was also pursuing expansion elsewhere, including a return to Atlantic City and an entrance into the burgeoning gambling town of Biloxi, Mississippi. In Atlantic City, Mirage Resorts initially entered into a joint agreement with Circus Circus and Boyd Gaming Corporation to develop a complex of three gambling resorts. In early 1998 the City of Atlantic City conveyed to Mirage Resorts 125 developable acres of land in the Marina area--the largest potential casino site in the city--in exchange for the company agreeing to clean up the site (a former municipal landfill) and to develop a hotel-casino there. Shortly thereafter, Mirage Resorts pulled out of the agreement with Circus Circus and Boyd Gaming, saying it would proceed on its own. Its former partners sued Mirage. But in July 1998 Mirage and Boyd entered into a new 50-50 joint venture for the development of a $750 million, 1,200-room hotel casino on a 25-acre portion of the site. Construction of the Borgata (Italian for "village"; the Borgata would be somewhat similar to the Bellagio in regard to its Italian village concept) was slated to begin in the fall of 1999. At the same time, Mirage Resorts was proceeding on its own to develop the $1 billion Le Jardin luxury casino resort, to be built adjacent to the Borgata.

In Biloxi--located on the Mississippi Gulf Coast, the third largest U.S. gambling market after Las Vegas and Atlantic City--Mirage Resorts developed the $680 million Beau Rivage casino resort, which opened in March 1999. With 1,780 rooms, the Beau Rivage was the largest casino-hotel in the United States outside the state of Nevada. It was also one of the most elegant casinos in the region, and even featured a deluxe marina able to accommodate yachts of up to 125 feet in length.

With the company's tremendous 1990s expansion, net revenues reached $1.52 billion by 1998. For 1998, however, net income fell from the $207.6 million figure of 1997 to $81.7 million, thanks in part to the $88 million spent on the extravagant opening of the Bellagio. But this was likely a short-term setback, as Mirage Resorts was on a roll in developing and running increasingly elaborate, and profitable, entertainment resorts.

Principal Subsidiaries: AC Holding Corp.; AC Holding Corp. II; Atlandia Design and Furnishings, Inc.; Beau Rivage Resorts, Inc.; Bellagio; GNL, Corp.; GNLV, Corp.; GNS Finance Corp.; Golden Nugget Aviation Corp.; LV Concrete Corp.; MAC, Corp.; MH, Inc.; The Mirage Casino-Hotel; MRGS Corp.; Treasure Island Corp.