REGISTRATION FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NUMBER 333-82775
Prospectus Supplement
(to Prospectus dated September 9, 1999)
[LOGO OF METRO GOLDWYN MAYER INC.]
METRO-GOLDWYN-MAYER INC.
364,287
Shares of
Common Stock
----------------
We are a premier global entertainment content company, one of only seven
major film and television studios worldwide. We develop, produce and
distribute worldwide theatrical motion pictures and television programs. Our
subsidiaries include Metro-Goldwyn-Mayer Studios Inc., United Artists
Corporation and Orion Pictures Corporation.
The shares of common stock offered hereby are being offered and sold
directly by Metro-Goldwyn-Mayer Inc. to certain of our former executives. The
per-share purchase price for the shares offered hereby is $19.10. We will not
pay any underwriter's discount or broker's commissions in connection with this
offering. The shares offered hereby are being sold in more than one
transaction. We expect to deliver the shares offered hereby on or about
February 15, 2002.
Our common stock trades on the New York Stock Exchange under the symbol
"MGM." On February 14, 2002, the closing price of our common stock was $19.10
per share.
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Investment in these securities involves a high degree of risk. See "Risk
Factors" beginning on page S-3.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has determined whether this prospectus supplement or the
accompanying prospectus are truthful or complete. Nor have they made, nor will
they make, any determination as to whether anyone should buy these securities.
Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is February 15, 2002.
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TABLE OF CONTENTS
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Prospectus Supplement
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Page
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Risk Factors............................................................... S-3
Recent Developments........................................................ S-9
Use of Proceeds............................................................ S-10
Price Range of Common Stock................................................ S-10
Dividend Policy............................................................ S-10
Capitalization............................................................. S-11
Page
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Plan of Distribution....................................................... S-12
Legal Matters.............................................................. S-12
Experts.................................................................... S-12
Forward-Looking Statements................................................. S-12
Where You Can Find More Information........................................ S-13
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Prospectus
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Page
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About this Prospectus...................................................... 2
Forward-Looking Statements................................................. 2
Use of Proceeds............................................................ 3
Price Range of Common Stock................................................ 3
Dividend Policy............................................................ 3
The Company................................................................ 4
Page
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Plan of Distribution....................................................... 4
Description of Securities.................................................. 6
Legal Matters.............................................................. 6
Experts.................................................................... 7
Where You Can Find More Information........................................ 7
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You should rely only on the information incorporated by reference or
provided in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone else to provide you with different information. We
are offering shares of our common stock and seeking offers to buy shares of
our common stock only in jurisdictions where offers and sales are permitted.
You should not assume that the information in this prospectus supplement and
the accompanying prospectus is accurate as of any date other than the date on
the front of these documents regardless of the time of delivery of this
prospectus supplement or any sale of shares of our common stock.
S-2
RISK FACTORS
Before you invest in our securities, you should be aware that there are
various risks, including those described below. We urge you to carefully
consider these risk factors, together with all of the other information
included in this prospectus supplement and the accompanying prospectus as well
as the information incorporated by reference in this prospectus supplement and
the accompanying prospectus, before you decide to invest in our securities.
We have had significant losses, and we may have future losses.
We did not report an operating profit for any fiscal year from 1989 through
1999. Although we had an operating profit in 2000 and 2001, we reported a net
loss in 2001 which included a $382.3 million charge related to the adoption of
new Industry accounting guidelines. Also, while controlled by former
management in 1991, our subsidiary MGM Studios was the subject of an
involuntary bankruptcy. We cannot assure you we will be profitable in future
periods.
The accounting standards our financial statements are governed by have
changed.
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 139, which, effective for financial
statements for fiscal years beginning after December 15, 2000, rescinds
Statement of Financial Accounting Standards No. 53. The companies that were
previously subject to the requirements of Statement of Financial Accounting
Standards No. 53 shall now follow the guidance in American Institute of
Certified Public Accountants Statement of Position 00-2, "Accounting by
Producers or Distributors of Films," issued in June 2000. Statement of
Position 00-2 establishes new accounting and reporting standards for all
producers and distributors that own or hold the rights to distribute or
exploit films. Statement of Position 00-2 provides that the cumulative effect
of changes in accounting principles caused by its adoption should be included
in the determination of net income in conformity with Accounting Principles
Board Opinion No. 20, "Accounting Changes." We adopted Statement of Position
00-2 on January 1, 2001 and recorded a one-time, non-cash cumulative effect
charge to earnings of $382.3 million, primarily to reduce the carrying value
of our film and television costs. The new rules also require that advertising
costs be expensed as incurred as opposed to the old rules which allowed
advertising costs to generally be capitalized as part of film costs and
amortized using the "individual film forecast" method. Due to the significant
advertising costs incurred in the early stages of a film's release, we
anticipate that the new rules will significantly impact our results of
operations for the foreseeable future. Additionally, under the prior
accounting rules we classified additions to film costs as an investing
activity in the Statement of Cash Flows. In accordance with Statement of
Position 00-2, we now classify additions to film costs as an operating
activity. For comparative purposes, we have reclassified prior period cash
flow statements to conform with the new presentation.
We are adversely affected by gaps in our motion picture production schedule.
Our revenues and operating results have been and may continue to be
adversely affected by the change in ownership of MGM Studios in 1996 and by
management changes in 1999. Such changes may result in a degree of uncertainty
among top artistic and creative talent about the viability of projects, which
could result in projects first being offered to our competitors. Additionally,
management changes have resulted in delays in commencement of production of
motion pictures. We released nine motion pictures between August 1, 1996 and
August 1, 1997, most of which were produced by others, ten motion pictures in
1999, eight motion pictures in 2000 and 11 motion pictures in 2001.
We require outside financing to meet our anticipated cash requirements.
Our operations are capital intensive and our capacity to generate cash from
operations is presently insufficient to meet our anticipated cash
requirements. Accordingly, we utilize substantial sources of outside
financing. Such financing may not be available in sufficient amounts for us to
implement our business plan or may be available only on terms which are
disadvantageous to our stockholders.
S-3
Under our current strategy and business plan, we will continue to require a
substantial amount of cash for the following reasons:
. We will continue to make substantial investments in the production of
new feature films and television programs; and
. We may make additional investments to develop new distribution channels
to further exploit our motion picture library, including video-on-
demand; however, we will evaluate the level of our investments in light
of our available capital and changing market conditions.
If there are cash shortfalls, cash conserving measures may adversely affect
our long term prospects.
If necessary in order to manage our cash needs, we could delay or alter
production or release schedules or reduce our aggregate investment in new film
and television production costs. We cannot assure you that any of these steps
would be adequate or timely, or that acceptable arrangements could be reached
with third parties if necessary. In addition, although these steps would
improve our short-term cash flow and, in the case of partnering, reduce our
exposure should a motion picture perform below expectations, these steps could
reduce our long-term cash flow and adversely affect our results of operations.
Our credit facility contains restrictive covenants.
While our credit facility was amended in 2000 to eliminate restrictive
covenants relative to strategic investments and acquisitions, as well as off-
balance sheet film financings, it still contains various covenants limiting
indebtedness, dividends and capital expenditures and requires maintenance of
certain financial ratios. We cannot assure you that we will be able to comply
with these or other covenants or conditions in the future, or that we will
generate sufficient cash flow to repay our indebtedness. We further cannot
assure you that, in the event the need arises, we will be able to obtain
additional financing or to refinance our indebtedness on terms acceptable to
us, or at all.
Our substantial leverage could adversely affect our financial health.
We are highly leveraged. Our substantial indebtedness could have important
adverse consequences to you. For example, it could:
. require us to dedicate a substantial portion of our cash flow to the
repayment of our indebtedness, reducing the amount of cash flow
available to fund film and television production and other operating
expenses;
. limit our ability to obtain additional financing, if necessary, for
operating expenses;
. place us at a disadvantage compared to competitors with less debt or
greater financial resources;
. limit our flexibility in planning for, or reacting to, downturns in our
business, in our industry or in the economy in general; and
. limit our ability to pursue strategic acquisitions and other business
opportunities that may be in our best interests.
Our revenues and results of operations may fluctuate significantly.
Our revenues and results of operations are dependent significantly upon the
commercial success of the motion pictures and television programming that we
distribute, which cannot be predicted with certainty, as well as the timing of
our releases. Accordingly, our revenues and results of operations may
fluctuate significantly from period to period, and the results of any one
period may not be indicative of the results for any future periods.
S-4
In addition, entertainment industry accounting practices may accentuate
fluctuations in our operating results. In accordance with generally accepted
accounting principles and industry practice, we amortize film and television
programming costs using the "individual-film-forecast" method. Under this
accounting method, we amortize film and television programming costs for each
film or television program based on the following ratio:
Revenue earned by title in the current period
----------------------------------
Estimated total revenues by title
We regularly review, and revise when necessary, our total revenue estimates
on a title-by-title basis. This may result in a change in the rate of
amortization and/or a write-down of the film or television asset to net
realizable value. Results of operations in future years depend upon our
amortization of our film and television costs. Periodic adjustments in
amortization rates may significantly affect these results. The likelihood of
our reporting of losses is increased because the industry's accounting method
requires the immediate recognition of the entire loss where it is expected
that a motion picture or television program will not recover our investment.
In addition, as a result of adopting Statement of Position 00-2 on January 1,
2001, we are required to expense film advertising costs as incurred as opposed
to our prior practice of capitalizing these costs and amortizing them as part
of film costs. On the other hand, the profit of a successful motion picture or
television program must be recognized over the entire revenue stream expected
to be generated by the individual picture or television program.
We may have lower revenues as a result of our motion picture production
strategy.
Based on our current business plan, MGM's annual release slate may include
proportionately fewer large budget "event" motion pictures than the current
release slates of the other major studios. We also contemplate a stronger
focus on pictures which will appeal to a younger demographic and a greater
number of co-productions than our prior strategy. We cannot assure you that
our strategic approach will enable us to produce commercially successful
motion pictures. Additionally, our current motion picture strategy involves
co-producing or co-financing a substantial portion of our motion pictures.
These co-production arrangements could reduce our long-term cash flow from
pictures which perform above expectations.
We may not be able to meet our production goals and schedule.
The production, completion and distribution of motion pictures are subject
to numerous uncertainties, including financing requirements, the availability
of desired talent and quality material and the release schedule of the motion
pictures of our competitors. We cannot assure you that any of the pictures
scheduled for release in future periods will be completed or released on
schedule or budget, or at all.
We could be adversely affected by strikes or other union job actions.
The motion picture and television programs produced by MGM Studios, and the
other major U.S. studios, generally employ actors, writers and directors who
are members of the Screen Actors Guild ("SAG"), Writers Guild of America
("WGA"), and Directors Guild of America ("DGA"), pursuant to industry-wide
collective bargaining agreements. The collective bargaining agreement with WGA
was successfully renegotiated and became effective beginning May 2, 2001 for a
term of three years. Negotiations regarding the collective bargaining
agreement with SAG were successfully completed on July 3, 2001, and the
agreement was ratified as of July 1, 2001 for a term of three years. The DGA
collective bargaining agreement was successfully renegotiated and ratification
is expected. When ratified, it will have a term of three years from July 1,
2002. Many productions also employ members of a number of other unions,
including without limitation the International Alliance of Theatrical and
Stage Employees and Teamsters. A strike by one or more of the unions who
provide personnel essential to the production of motion pictures or television
programs could delay or halt our ongoing production activities. Such a halt or
delay, depending on the length of time involved, could cause delay or
interruption in our release of new motion pictures and television programs and
thereby could adversely affect our cash flow and
S-5
revenues. Our revenues from motion pictures and television product in our
library should not be affected and may partially offset the effects of a
strike to the extent, if any, that television exhibitors buy more library
product to compensate for interruption in their first-run programming.
We are limited in our ability to exploit our library.
Our rights to the titles in our library vary. In some cases we have only
the right to distribute titles in certain media and territories for a limited
term. Our rights in approximately 33 percent of our titles are limited in
time. Our rights with respect to approximately six percent of our titles will
expire over the next two years (i.e., through the end of 2003) and with
respect to another approximately 23 percent over the seven years thereafter
(from 2004 to 2011). While in the past we have generally been able to renew
expiring rights on acceptable terms, we cannot assure you that we will
continue to be able to do so in the future. In accordance with industry
practice, for purposes of calculating the size of our library, we include any
title in which we have any distribution rights.
Additionally, prior managements granted long-term domestic and major
international television licenses covering a substantial portion of our
library, in exchange for pre-paid fees. A cross-section of our library is
subject to one or more of these licenses, including substantially all of the
MGM/UA titles produced prior to 1990, which have been licensed in the U.S. and
Europe, and approximately 51 percent (some are starting to expire) of the
Orion and PolyGram titles, which have been licensed in one or more of France,
Spain, Germany and the United Kingdom. Until these agreements expire and the
rights revert to us, we expect contributions to earnings and cash flow from
these markets to continue to be below those of our competitors for similar
products. We cannot assure you that our sales or profitability will increase
after these agreements expire.
We may not be able to realize the anticipated benefits of business
combinations.
We believe that we should, through business combinations or other strategic
alternatives, either grow into or become part of a larger, vertically
integrated organization, in order to maximize the value of our assets. To that
end, we have been regularly evaluating business combination opportunities and
other strategic alternatives as opportunities arise, and intend to continue to
do so. No agreements regarding a transaction of such nature have been reached
and there can be no assurance that we will decide to enter into any such
transaction. In addition, business combinations and other strategic
alternatives involve numerous risks, including diversion of management's
attention away from our operating activities. We cannot assure you that we
will not encounter unanticipated problems or liabilities with respect to any
business combinations that have been or may be completed by us, nor can we
assure you that the anticipated benefits of any such transactions will be
achieved.
We face risks relating to the international distribution of our product.
Because we have historically derived approximately 40 percent of our
revenues from non-U.S. sources, our business is subject to risks inherent in
international trade, many of which are beyond our control. These risks
include:
. changes in laws and policies affecting trade, investment and taxes,
including laws and policies relating to the repatriation of funds and to
withholding taxes;
. differing degrees of protection for intellectual property;
. the instability of foreign economies and governments; and
. fluctuating foreign exchange rates.
Until October 31, 2000, we distributed our motion pictures in theatrical
markets outside the U.S. and Canada through United International Pictures
B.V., or "UIP," a partnership among the company, Paramount Pictures
Corporation and Universal Studios, Inc. Effective November 1, 2000, we
withdrew from UIP and our international theatrical distribution is now
conducted through Fox Filmed Entertainment. While our cost structure is lower,
we cannot assure that we will realize the anticipated revenue enhancements of
our withdrawal from UIP.
S-6
Production of first-run syndicated television programming may involve
financial risks.
Our television products have historically been first-run syndicated
television programming that is generally licensed based on a pilot episode
that we finance. If an insufficient number of stations license the
programming, our pilot costs will not be recouped. There is also financial
exposure to us after the programming is licensed to the extent that
advertising revenues and/or license fees we receive are not sufficient to
cover production costs. In addition, we may have certain financial obligations
to the producer of a first-run syndicated series if we cancel production prior
to commencement of production for any broadcast season for which the series
was licensed.
Risks relating to implementing our branded cable and satellite programming
channels.
We may consider strategic opportunities to create branded cable and
satellite programming channels. We cannot assure you that we will have the
financing that may be necessary for such acquisitions or investments, that we
will consummate any such transactions or that we will be able to realize any
anticipated benefits from any such transactions. See "Recent Developments."
Advances in technology may create alternate forms of entertainment.
The entertainment industry in general, and the motion picture industry in
particular, continue to undergo significant changes, primarily due to
technological developments. Due to this rapid growth of technology and
shifting consumer tastes, we cannot accurately predict the overall effect that
such changes may have on the potential revenue from and profitability of
feature-length motion pictures and television programming.
Some of our competitors have greater financial resources than we do.
Most of the other major studios are part of large diversified corporate
groups with a variety of other operations, including television networks and
cable channels, that can provide both a means of distributing their products
and stable sources of earnings and cash flows that offset fluctuations in the
financial performance of their motion picture and television operations. The
number of films released by our competitors, particularly the other major film
studios, in any given period may create an oversupply of product in the
market, thereby potentially reducing our share of gross box office admissions
and making it more difficult for our films to succeed. In addition, television
networks are now producing more programs internally and thus may reduce their
demand for outside programming.
The Tracinda Group owns a majority of our common stock and has the power to
elect our board of directors and influence our affairs.
Tracinda and one of its affiliates, which we refer to collectively as the
Tracinda Group, beneficially own 194,992,644 shares, approximately 81.0
percent of our outstanding common stock. In the aggregate, the Tracinda Group
and our directors and executive officers beneficially own approximately 81.5
percent of our outstanding common stock. Our common stock does not have
cumulative voting rights and, since we anticipate that the Tracinda Group will
continue to own greater than 50 percent of our outstanding common stock for
the foreseeable future, it will have the ability to elect our entire board of
directors and determine the outcome of other matters submitted to our
stockholders, such as the approval of significant transactions, and otherwise
to influence our affairs.
Our common stock has a relatively small public "float."
Of the 240,726,291 shares of our common stock outstanding as of February
14, 2002, approximately 44,486,522 shares are owned by persons other than the
Tracinda Group and our executive officers and directors. Without a
significantly larger public float, our common stock will be less liquid than
the common stock of companies with broader public ownership and, as a result,
the trading prices for our common stock may be more volatile. Among other
things, trading of a relatively small volume of our common stock may have a
greater impact on the trading price for our stock than would be the case if
our public float were larger.
S-7
Future sales of shares of the common stock could decrease its market price.
We will have approximately 241,090,578 shares of our common stock
outstanding after giving effect to this offering, of which approximately
196,239,769 will be "restricted" securities under Rule 144 of the Securities
Act and/or held by directors, officers or holders of ten percent or more of
our outstanding common stock. We have also granted, as of January 31, 2002,
options to purchase a total of 27,441,465 shares of our common stock.
Furthermore, we have granted to Tracinda, and certain other holders of our
common stock or outstanding options, registration rights with respect to the
shares they own or that we may issue to them. Possible or actual sales of any
of these shares, particularly by our directors and officers, under Rule 144 or
otherwise, may in the future decrease the price of shares of our common stock.
S-8
RECENT DEVELOPMENTS
Cable Investment and Joint Venture
In April 2001, we invested $825.0 million in cash for a 20 percent interest
in two general partnerships which own and operate the American Movie Channel,
Bravo, the Independent Film Channel and WE: Women's Entertainment (formerly
Romance Classics). These partnerships were wholly-owned by Rainbow Media,
which is 74 percent owned by Cablevision Systems Corporation and 26 percent
owned by NBC. The proceeds of our $825.0 million investment were used as
follows: (1) $365.0 million was used to repay bank debt of the partnerships;
(2) $295.5 million was used to repay intercompany loans from Cablevision and
its affiliates; and (3) $164.5 million was added to the working capital of the
partnerships.
While we are not involved in the day-to-day operations of the cable
channels, our approval is required before either partnership may: (1) declare
bankruptcy or begin or consent to any reorganization or assignment for the
benefit of creditors; (2) enter into any new transaction with a related party;
(3) make any non-proportionate distributions; (4) amend the partnership
governing documents; or (5) change its tax structure.
We have the right to participate on a pro rata basis in any sale to a third
party by Rainbow Media of its partnership interests, and Rainbow Media can
require us to participate in any such sale. If a third party invests in either
partnership, our interest and that of Rainbow Media will be diluted on a pro
rata basis. Neither we nor Rainbow Media will be required to make additional
capital contributions to the partnerships. However, if Rainbow Media makes an
additional capital contribution and we do not, our interest in the
partnerships will be diluted accordingly. If the partnerships fail to attain
certain financial projections provided to us by Rainbow Media for the years
2002 through 2005, inclusive, we will be entitled, 30 days after receipt of
partnership financial statements for 2005, to require Rainbow Media to acquire
our partnership interests for fair market value at the time, as determined
pursuant to the agreement. We formed a wholly-owned subsidiary, MGM Networks
U.S. Inc., which made the above-described investment, and is the MGM entity
which holds the aforesaid general partnership interests and rights attendant
thereto.
In February and March 2001, pursuant to our shelf registration statement,
we sold 16,080,590 shares of common stock to unaffiliated investors in private
placements for aggregate net proceeds of $310.6 million. In addition, we sold
15,715,667 shares of our Series B preferred stock to Tracinda for $325.0
million. We used the net proceeds of this sale to help finance our cable
channel investment. The preferred stock does not bear dividends but has a
liquidation preference of $0.01 per share. The preferred stock became
convertible, at the option of the holder, into common stock on a share-for-
share basis upon stockholder approval of the issuance of the common stock to
Tracinda on May 2, 2001, at which time the preferred stock was converted into
approximately 15,715,667 shares of common stock. Tracinda had a demand
registration right for the common stock it received upon conversion of the
preferred stock. The Tracinda Group currently beneficially owns approximately
81 percent of our outstanding common stock.
In August 2001, through our wholly-owned subsidiary MGM On Demand Inc., we
acquired a 20 percent interest in a joint venture established to create an on-
demand movie service to offer a broad selection of theatrically-released
motion pictures via digital delivery for broadband internet users in the
United States. Other partners in the joint venture include Sony Pictures
Entertainment, Universal Studios, Warner Bros. and Paramount Pictures. We
funded $7.5 million for our equity interest and our share of operating
expenses of the joint venture as of December 31, 2001. We financed our
investment through borrowings under our credit facilities. We are committed to
fund our share of the joint venture's operating expenses, as required.
S-9
USE OF PROCEEDS
We will not receive any cash proceeds from the sale of the shares offered
hereby. See "Plan of Distribution."
PRICE RANGE OF COMMON STOCK
The common stock is listed on the NYSE and trades under the symbol "MGM."
The following table sets forth for the quarters indicated the high and low
composite per share closing sales prices as reported by the NYSE.
High Low
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2000
First Quarter............................................... $28.06 $21.69
Second Quarter.............................................. 30.38 23.94
Third Quarter............................................... 26.50 22.00
Fourth Quarter.............................................. 22.81 14.94
2001
First Quarter............................................... $21.77 $15.35
Second Quarter.............................................. 22.93 15.76
Third Quarter............................................... 22.47 13.86
Fourth Quarter.............................................. 21.90 15.81
2002
First Quarter (through February 14)......................... $22.27 $19.10
The last reported sales price of the common stock on the NYSE on February
14, 2002 was $19.10 per share. As of February 14, 2002, there were more than
2,000 beneficial holders of our common stock.
DIVIDEND POLICY
We have not paid any dividends to date on the common stock and currently
intend to retain any earnings to fund the operation and expansion of our
business and to service and repay our debt. Therefore, we do not intend to pay
cash dividends on our common stock for the foreseeable future. Furthermore, as
a holding company with no independent operations, our ability to pay dividends
will depend upon the receipt of dividends or other payments from our
subsidiaries. In addition, our primary credit facility contains financial
covenants that restrict our ability to pay dividends. Subject to the
foregoing, our Board of Directors has the sole discretion to pay cash
dividends.
S-10
CAPITALIZATION
The following table sets forth our consolidated cash and capitalization as
of December 31, 2001 (A) on a historical basis and (B) as adjusted to give
effect to this offering as if the foregoing had occurred as of December 31,
2001, with an assumed offering price of $19.10 per share and estimated expenses
of $100,000.
As of December 31, 2001
-------------------------------------
Actual As Adjusted
---------------- -------------------
(unaudited)
(in thousands, except share data)
Cash...................................... $ 2,698 $ 2,598
================ ================
Debt:
Credit facility:
Term loans.............................. $ 668,500 $ 668,500
Revolving credit facility............... 159,000 159,000
Other borrowings.......................... 8,686 8,686
---------------- ----------------
Total debt............................ 836,186 836,186
---------------- ----------------
Stockholders' equity:
Preferred stock, $.01 par value per share,
25,000,000 shares authorized;
none issued; .......................... -- --
Common stock, $.01 par value per share,
500,000,000 shares authorized;
239,629,500 shares issued and
outstanding; 239,993,787 shares issued
and outstanding as adjusted............ 2,396 2,400
Additional paid-in capital............... 3,717,767 3,724,621
Deficit.................................. (1,203,565) (1,203,565)
Accumulated other comprehensive loss..... (27,116) (27,116)
---------------- ----------------
Total stockholders' equity................ 2,489,482 2,496,340
---------------- ----------------
Total capitalization.................. $ 3,325,668 $ 3,332,526
================ ================
S-11
PLAN OF DISTRIBUTION
We are offering shares of our common stock directly to two of our former
executives in lieu of cash payments due to them under our Senior Management
Bonus Plan instituted in 1997. Pursuant to the Plan, the two former executives
are entitled to receive cash payment of $3,914,981 and $3,042,894,
respectively, on April 15, 2002. Pursuant to Bonus Payment Agreements, the
former executives have agreed to accept 204,973 shares and 159,314 shares,
respectively, of our common stock and to sell such shares on the open market
prior to April 15, 2002, subject to certain limitations. We have agreed to pay
the former executives the difference, if any, of the amount due to them
pursuant to the Senior Management Bonus Plan and the net proceeds from their
sale of the shares. To the extent either of the former executives receives net
proceeds in excess of the amount due to him under the Plan from the sale of
their shares, they have agreed to pay such excess to us. In addition, we have
agreed to pay certain costs, expenses and liabilities in connection with the
transaction. No underwriter, broker or finder is being used by us in
connection with this offering. Therefore, we will not pay any underwriter's
discounts, broker's commissions or finder's fees in connection with this
offering. The shares offered hereby will be sold to the purchasers in more
than one transaction. We expect to deliver the shares we sell concurrently
with the execution of the Bonus Payment Agreements.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for us by Jay Rakow, Senior Executive Vice President and General
Counsel.
EXPERTS
The audited consolidated financial statements and schedules incorporated by
reference into this prospectus supplement and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said reports.
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus contain or
incorporate by reference forward-looking statements, within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. Forward-looking statements typically can be identified by the use of
forward-looking words, such as "may," "will," "could," "project," "believe,"
"anticipate," "expect," "estimate," "continue," "potential," "plan," "intend,"
"forecast" and the like. These statements appear in a number of places in this
prospectus supplement and the accompanying prospectus and the information
incorporated by reference and include statements regarding our current
intentions, plans, strategies, beliefs and expectations.
Forward-looking statements do not guarantee future performance and involve
risks and uncertainties that could cause actual results to differ materially
from those anticipated. The information contained in this prospectus
supplement and the accompanying prospectus, including the information
contained in "Risk Factors" beginning on p. S-3, or incorporated by reference,
identifies important factors that could cause such differences.
S-12
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC, in accordance with the Securities Exchange Act of
1934. You may read and copy any document we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from the SEC's web
site at: http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus
supplement and the accompanying prospectus the information we file with them,
which means that we can disclose important information to you by referring to
our filed SEC documents. The information incorporated by reference is
considered to be part of this prospectus supplement and the accompanying
prospectus. Information we file with the SEC after the date of this document
will update and supersede the information in this prospectus supplement and
the accompanying prospectus. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934 until this offering is
completed:
(1) Our Annual Report on Form 10-K for the year ended December 31, 2001;
and
(2) The description of capital stock contained in Item 1 of our
Registration Statement on Form 8-A, filed with the SEC on October 14,
1997, as amended.
We have also filed a Registration Statement on Form S-3 with the SEC for
the securities offered by this prospectus supplement and the accompanying
prospectus. This prospectus supplement and the accompanying prospectus do not
contain all of the information set forth in the registration statement. You
should read the registration statement for further information about our
common stock and us. The registration statement can be found in the SEC's
public reference room or on the SEC's website referred to above, and you may
request a copy of any of these filings, at no cost, by writing or calling
William A. Jones, Senior Executive Vice President and Secretary of the
company, at:
Metro-Goldwyn-Mayer Inc.
2500 Broadway Street
Santa Monica, California 90404
(310) 449-3000
You can find additional information by visiting our website at:
http://www.mgm.com.
S-13
PROSPECTUS
[METRO GOLDWYN MAYER INC. LOGO]
METRO-GOLDWYN-MAYER INC.
Common Stock
Subscription Rights
We may use this prospectus to offer and sell, separately or together,
common stock and subscription rights.
These securities will have an aggregate initial public offering price not
to exceed $862,500,000 and will be offered and sold at prices and on terms to
be determined at the time of sale. The specific terms of the securities for
which this prospectus is being delivered will be set forth in an accompanying
supplement to this prospectus. These terms may include, where applicable, the
initial public offering price, the net proceeds to the company and whether the
subscription rights, if any, will be listed on any securities exchange.
Our common stock trades on the NYSE under the symbol "MGM." On September 7,
1999, the closing price of the common stock was $20 per share. Any
subscription rights which are issued will be transferable, and we anticipate
that the rights would be authorized for trading on the NYSE under the symbol
"MGM rt."
As will be described in more detail in any prospectus supplement, the
securities may be offered through an underwriter or underwriting syndicates
represented by one or more managing underwriters or through dealers. The
securities may also be sold directly or through agents to investors. See "Plan
of Distribution."
This prospectus may not be used to consummate sales of offered securities
unless accompanied by a prospectus supplement.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is September 9, 1999.
Table Of Contents
Page
----
About this Prospectus...................................................... 2
Forward-Looking Statements................................................. 2
Use of Proceeds............................................................ 3
Price Range of Common Stock................................................ 3
Dividend Policy............................................................ 3
The Company................................................................ 4
Page
----
Plan of Distribution....................................................... 4
Description of Securities.................................................. 6
Legal Matters.............................................................. 6
Experts.................................................................... 7
Where You Can Find More Information........................................ 7
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may from time to time over approximately the next two
years, sell any combination of the securities described in this prospectus in
one or more offerings up to a total dollar amount of $862,500,000. This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement also may add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information" on page 7 below.
You should rely only on the information or representations incorporated by
reference or provided in this prospectus and in the accompanying prospectus
supplement. We have not authorized anyone to provide you with different
information. You may obtain copies of the Registration Statement, or any
document which we have filed as an exhibit to the Registration Statement or to
any other SEC filing, either from the SEC or from the Secretary of the company
as described below. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or in the accompanying prospectus supplement is
accurate as of any date other than the dates printed on the front of each such
document.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements, within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act. Forward-looking statements
typically can be identified by the use of forward-looking words, such as
"may," "will," "could," "project," "believe," "anticipate," "expect,"
"estimate," "continue," "potential," "plan," "intend," "forecast" and the
like. These statements appear in a number of places in this prospectus and the
information incorporated by reference and include statements regarding our
current intentions, plans, strategies, beliefs and expectations.
Forward-looking statements do not guarantee future performance and involve
risks and uncertainties that could cause actual results to differ materially
from those anticipated. The information contained in this prospectus, or
incorporated by reference, identifies important factors that could cause such
differences.
2
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement, we plan to use
substantially all of the net proceeds from the sale of the offered securities
to repay any outstanding amounts under our bridge loan and then to reduce
amounts that we owe under the revolving portion of our $1.3 billion primary
credit facility. We will use any remaining proceeds for general corporate
purposes. Our business plan calls for substantial continued borrowing under
this facility, subject to our compliance with its terms. For example, on
September 1, 1999, we drew upon funds from the facility to make the second
payment to Warner Home Video of $112.5 million, plus interest, in connection
with the termination of our home video distribution arrangement. As of
September 9, 1999, there was approximately $250 million outstanding under our
bridge loan (which is required to be repaid out of the proceeds of any equity
offering), and we owed approximately $359 million under the revolving portion
of our primary credit facility, which bear interest at the rate of 7.08% and
7.75% per annum, respectively, and are due (1) in the case of the bridge loan,
upon the earlier of the receipt of any net cash proceeds from the sale of the
offered securities or July 2006 and (2) in the case of the revolving portion
of our credit facility, in October 2003, subject to extension under certain
conditions. During the past 12 months, borrowings under the bridge loan and
the credit facility were used to (a) fund the PolyGram acquisition, (b) make
our payments to Warner Home Video and (c) provide working capital for general
corporate purposes.
PRICE RANGE OF COMMON STOCK
The common stock is listed on the NYSE and trades under the symbol "MGM."
The following table sets forth for the quarters indicated the high and low
composite per share closing sales prices as reported by the NYSE.
High Low
-------- ---------
1998
First Quarter........................................... $24 3/16 $17 3/4
Second Quarter.......................................... 26 1/2 21 15/16
Third Quarter........................................... 22 1/8 13 7/8
Fourth Quarter.......................................... 13 3/4 8
1999
First Quarter........................................... $13 9/16 $10 3/8
Second Quarter.......................................... 18 5/8 12 11/16
Third Quarter (through September 7)..................... 22 16 1/2
The last reported sales price of the common stock on the NYSE on September
7, 1999 was $20 per share. As of June 30, 1999, there were more than 2,000
beneficial holders.
DIVIDEND POLICY
We have not paid any dividends since 1996. For the foreseeable future, we
intend to retain any earnings to fund the operation of our business and to
service and repay our debt rather than pay cash dividends to our stockholders.
Furthermore, as a holding company with no independent operations, our ability
to pay dividends will depend upon the receipt of dividends or other payments
from our subsidiaries. Finally, our primary credit facility contains financial
covenants that could restrict our ability to pay dividends. Subject to the
foregoing, our Board of Directors has the sole discretion to pay cash
dividends.
3
THE COMPANY
Overview
We develop, produce and distribute worldwide theatrical motion pictures and
television programs. Our subsidiaries include Metro-Goldwyn-Mayer Studios
Inc., United Artists Corporation, United Artists Films Inc. and Orion Pictures
Corporation. We are one of only seven major film and television studios
worldwide. Our library contains over 4,100 theatrically released feature film
titles and 8,900 television episodes, and is the largest collection of post-
1948 feature films in the world. Films in our library have won nearly 200
Academy Awards, including the Best Picture Award for Annie Hall, The
Apartment, The Best Years of Our Lives, Dances with Wolves, Hamlet, In the
Heat of the Night, Marty, Midnight Cowboy, Platoon, Rain Man, Rocky, Silence
of the Lambs, Tom Jones and West Side Story. We also have in our library 20
titles in the James Bond film franchise, five titles in the Rocky film
franchise and nine titles in the Pink Panther film franchise.
As used in this prospectus, the terms "we," "our," "us," "MGM" and "the
company" refer to Metro-Goldwyn-Mayer Inc. and our subsidiaries unless the
context indicates otherwise.
PLAN OF DISTRIBUTION
We may sell the securities being offered hereby:
. directly to one or more purchasers;
. through agents;
. to or through one or more dealers;
. to or through one or more underwriters;
. through one or more rights offerings to our stockholders; or
. through a combination of any such methods of sales.
The distribution of such securities pursuant to any prospectus supplement
may occur from time to time in one or more transactions either:
. at a fixed price or prices which may be changed;
. at market prices prevailing at the time of sale;
. at prices related to such prevailing market prices; or
. at negotiated prices.
We may enter into a standby arrangement with Tracinda Corporation and one
of its affiliates pursuant to which the Tracinda group would agree to buy
securities being offered hereby which are not purchased by the public.
Offers to purchase the securities being offered hereby may be solicited
directly by us or by agents designated by us from time to time. Any such
agent, who may be deemed to be our "underwriter" as that term is defined in
the Securities Act, involved in the offer or sale of such securities will be
named, and any commissions payable by us to such agent will be set forth, in
the applicable prospectus supplement.
If a dealer is utilized in the sale of such securities, we will sell such
securities to the dealer, as principal. The dealer, who may be deemed to be an
"underwriter" as that term is defined in the Securities Act, may then resell
such securities to the public at varying prices to be determined by such
dealer at the time of resale.
4
If an underwriter is, or underwriters are, utilized in the sale, we will
execute an underwriting agreement with such underwriters at the time of sale
to them and the names of the underwriters will be set forth in the applicable
prospectus supplement, which will be used by the underwriters to make resales
of such shares to the public. In connection with the sale of such securities,
such underwriters may be deemed to have received compensation from us in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of such securities for whom they may act as agents.
Underwriters may sell such shares to or though dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agents. Any underwriting compensation paid by us to underwriters in
connection with the offering of such securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable prospectus supplement.
If we sell shares of common stock through one or more rights offerings, we
will distribute to our stockholders, as of a record date to be determined,
transferable rights to purchase common stock. The terms of such rights,
including the period during which rights may be exercised, the exercise price,
oversubscription privileges, if any, and subscription procedures, will be set
forth in the applicable prospectus supplement. If a dealer manager is, or
dealer managers are, utilized by us in connection with a rights offering, the
applicable prospectus supplement will identify the dealer manager or dealer
managers and describe the compensation arrangements with such dealer manager
or dealer managers.
Underwriters, dealers, agents, dealer managers, and other persons,
including the Tracinda group, may be entitled, under agreements that may be
entered into with us, to indemnification by us against certain civil
liabilities, including the liabilities under the Securities Act, or to
contribution with respect to payments which they may be required to make in
respect thereof. Underwriters, dealers, dealer managers and agents may engage
in transactions with, or perform services for us in the ordinary course of
business.
If so indicated in the applicable prospectus supplement, we will authorize
underwriters, dealers, dealer managers, or other persons to solicit offers by
certain institutions to purchase from us securities offered hereby pursuant to
contracts providing for payment and delivery on a future date or dates set
forth in the applicable prospectus supplement. Institutions with which such
contacts may be made may include, but are not limited to, commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others. The obligations of any
purchaser under any such contract will not be subject to any conditions except
that (a) the purchase of such securities shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such purchaser is
subject and (b) if such securities are also being sold to underwriters, we
shall have sold to such underwriters the securities offered hereby which are
not sold for delayed delivery. The underwriters, dealers, dealer managers and
such other persons will not have any responsibility in respect to the validity
or performance of such contracts. The prospectus supplement relating to such
contracts will set forth the price to be paid for such securities pursuant to
such contracts, the commissions payable for solicitation of such contracts and
the date or dates in the future for delivery of such shares pursuant to such
contracts.
The anticipated date of delivery of securities offered hereby will be set
forth in the applicable prospectus supplement relating to each offer.
We intend to offer the common stock covered hereby in an underwritten
public offering commencing on or about September 13, 1999, and will file a
prospectus supplement with the Commission in connection with such offering.
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DESCRIPTION OF SECURITIES
Common Stock
Our authorized common stock consists of 500,000,000 shares of common stock.
All authorized shares of common stock have a par value of $0.01 per share and
are entitled to one vote per share on all matters submitted to a vote of
stockholders. In the event of a liquidation, dissolution or winding up of the
company, the holders of the common stock are entitled to share ratably in all
assets remaining after all liabilities and the liquidation preference
attributable to any outstanding preferred stock have been paid. The holders of
the common stock have no pre-emptive rights or cumulative voting rights and no
rights to convert their common stock into any other securities.
As of June 30, 1999, there were outstanding 151,170,833 shares of the
common stock. As of June 30, 1999, there were reserved for issuance upon the
exercise of options 8,437,567 shares of the common stock, of which options for
7,775,301 shares were outstanding, 4,437,155 of which were vested and
exercisable or would become vested and exercisable within 60 days.
Subscription Rights
The following description sets forth the general terms and provisions of
any subscription rights which may be issued and to which any prospectus
supplement may relate. The particular terms of the subscription rights and
extent, if any, to which such general provisions may not apply will be
described in the prospectus supplement relating to such subscription rights.
The subscription rights will be issued in connection with one or more
rights offerings. The subscription rights will be issued without charge to our
stockholders and will be transferable. The number of rights to be issued for
each outstanding share of our common stock as well as the subscription price
will be determined at the time of the rights offering, if any, and described
in the related prospectus supplement. We anticipate that the subscription
rights will be traded on the New York Stock Exchange, the exchange where our
common stock is traded.
We anticipate there will be two types of subscription privileges associated
with the subscription rights. Under the basic subscription privilege, a rights
holder would be entitled to purchase one share of common stock for each right
held. Under the oversubscription privilege, any rights holder who exercises
the basic subscription privilege for all rights held would be entitled to
subscribe for additional shares of common stock at the time the basic
subscription privilege is exercised. Shares will be available for the
oversubscription privilege to the extent that other rights holders do not
exercise their basic subscription privilege in full and will be subject to
proration if necessary. In each case, the rights holder must specify the
number of shares to be purchased and submit the subscription price to the
subscription agent.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for us by Christensen, Miller, Fink, Jacobs, Glaser, Weil &
Shapiro, LLP, Los Angeles, California.
6
EXPERTS
The company's financial statements and schedules for the years ended
December 31, 1998 and December 31, 1997 and for the period from October 11,
1996 to December 31, 1996 and for MGM Studios for the period from January 1,
1996 to October 10, 1996 incorporated by reference into this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC, in accordance with the Securities Exchange Act of
1934. You may read and copy any document we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from the SEC's web
site at: http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with them, which means that we can disclose important
information to you by referring to our filed SEC documents. The information
incorporated by reference is considered to be part of this prospectus.
Information we file with the SEC after the date of this document will update
and supersede the information in this prospectus. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until this offering is completed:
(1) Our Annual Report on Form 10-K for the year ended December 31, 1998;
(2) Our Quarterly Reports on Form 10-Q for the periods ended March 31, 1999
and June 30, 1999;
(3) Our Current Report on Form 8-K dated March 16, 1999;
(4) The description of capital stock contained in Item 1 of our
Registration Statement on Form 8-A, filed with the SEC on October 14,
1997, as amended; and
(5) Our Proxy Statement dated June 15, 1999.
We have also filed a Registration Statement on Form S-3 with the SEC under
the Securities Act for the securities offered by this prospectus. This
prospectus does not contain all of the information set forth in the
registration statement. You should read the registration statement for further
information about our common stock and us. The Registration Statement can be
found in the SEC's public reference room or on the SEC's website referred to
above, and you may request a copy of any of these filings, at no cost, by
writing or calling William A. Jones, Senior Executive Vice President and
Secretary of the company, at:
Metro-Goldwyn-Mayer Inc.
2500 Broadway Street
Santa Monica, California 90404
(310) 449-3000
You can find additional information by visiting our website at:
http://www.mgm.com.
7