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MGM Resorts International 10-Q 2008

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
e10vq
Table of Contents

 
 
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File No. 001-10362
MGM MIRAGE
(Exact name of registrant as specified in its charter)
     
Delaware   88-0215232
     
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer Identification No.)
3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109
(Address of principal executive offices - Zip Code)
(702) 693-7120
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
     
Class
Common Stock, $.01 par value
  Outstanding at May 7, 2008
278,764,374 shares
 
 

 


 

MGM MIRAGE AND SUBSIDIARIES
FORM 10-Q
I N D E X
             
        Page  
  FINANCIAL INFORMATION        
 
           
  Financial Statements (Unaudited)        
 
           
 
  Consolidated Balance Sheets at March 31, 2008 and December 31, 2007     1  
 
           
 
  Consolidated Statements of Income for the Three Months Ended March 31, 2008 and March 31, 2007     2  
 
           
 
  Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and March 31, 2007     3  
 
           
 
  Condensed Notes to Consolidated Financial Statements     4-13  
 
           
  Management's Discussion and Analysis of Financial Condition and Results of Operations     14-19  
 
           
  Quantitative and Qualitative Disclosures About Market Risk     19  
 
           
  Controls and Procedures     19  
 
           
PART II. OTHER INFORMATION        
 
           
  Legal Proceedings     20  
 
           
  Risk Factors     20  
 
           
  Unregistered Sales of Equity Securities and Use of Proceeds     20  
 
           
  Exhibits     20  
 
           
SIGNATURES     21  
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2

 


Table of Contents

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
                 
    March 31,     December 31,  
    2008     2007  
ASSETS
 
               
Current assets
               
Cash and cash equivalents
  $ 327,745     $ 412,390  
Accounts receivable, net
    390,452       412,345  
Inventories
    124,190       126,116  
Deferred income taxes
    56,464       63,453  
Prepaid expenses and other
    135,269       105,412  
Assets held for sale
    54,435       55,670  
 
           
Total current assets
    1,088,555       1,175,386  
 
           
 
               
Property and equipment, net
    16,845,320       16,823,704  
 
               
Other assets
               
Investments in unconsolidated affiliates
    2,487,363       2,482,727  
Goodwill
    1,262,922       1,262,922  
Other intangible assets, net
    358,987       359,770  
Deposits and other assets, net
    852,732       623,177  
 
           
Total other assets
    4,962,004       4,728,596  
 
           
 
  $ 22,895,879     $ 22,727,686  
 
           
 
               
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
               
Current liabilities
               
Accounts payable
  $ 169,419     $ 219,556  
Construction payable
    67,546       76,524  
Income taxes payable
    20,034       284,075  
Accrued interest on long-term debt
    152,096       211,228  
Other accrued liabilities
    855,067       929,424  
Liabilities related to assets held for sale
    3,761       3,880  
 
           
Total current liabilities
    1,267,923       1,724,687  
 
           
 
               
Deferred income taxes
    3,406,120       3,416,660  
Long-term debt
    12,777,215       11,175,229  
Other long-term obligations
    348,903       350,407  
 
               
Commitments and contingencies (Note 5)
               
 
               
Stockholders’ equity
               
Common stock, $.01 par value: authorized 600,000,000 shares; Issued 368,865,942 and 368,395,926 shares; outstanding 278,721,429 and 293,768,899 shares
    3,689       3,684  
Capital in excess of par value
    3,978,213       3,951,162  
Treasury stock, at cost (90,144,513 and 74,627,027 shares)
    (3,222,272 )     (2,115,107 )
Retained earnings
    4,338,754       4,220,408  
Accumulated other comprehensive income (loss)
    (2,666 )     556  
 
           
Total stockholders’ equity
    5,095,718       6,060,703  
 
           
 
  $ 22,895,879     $ 22,727,686  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

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MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Revenues
               
Casino
  $ 790,464     $ 811,939  
Rooms
    518,741       549,004  
Food and beverage
    402,392       417,449  
Entertainment
    134,838       134,248  
Retail
    64,037       68,250  
Other
    147,973       122,070  
 
           
 
    2,058,445       2,102,960  
Less: Promotional allowances
    (174,812 )     (173,525 )
 
           
 
    1,883,633       1,929,435  
 
           
Expenses
               
Casino
    416,563       411,792  
Rooms
    136,797       135,185  
Food and beverage
    236,272       235,704  
Entertainment
    95,664       97,243  
Retail
    43,164       43,744  
Other
    92,564       68,808  
General and administrative
    320,374       311,674  
Corporate expense
    32,450       33,955  
Preopening and start-up expenses
    5,164       14,276  
Restructuring costs
    329        
Property transactions, net
    2,776       5,019  
Depreciation and amortization
    194,339       168,277  
 
           
 
    1,576,456       1,525,677  
 
           
Income from unconsolidated affiliates
    34,111       41,375  
 
           
 
               
Operating income
    341,288       445,133  
 
           
 
               
Non-operating income (expense)
               
Interest income
    3,466       2,657  
Interest expense, net
    (149,789 )     (184,011 )
Non-operating items from unconsolidated affiliates
    (9,891 )     (5,106 )
Other, net
    230       (2,728 )
 
           
 
    (155,984 )     (189,188 )
 
           
 
               
Income from continuing operations before income taxes
    185,304       255,945  
Provision for income taxes
    (66,958 )     (92,935 )
 
           
 
               
Income from continuing operations
    118,346       163,010  
 
           
 
               
Discontinued operations
               
Income from discontinued operations
          7,846  
Provision for income taxes
          (2,683 )
 
           
 
          5,163  
 
           
 
               
Net income
  $ 118,346     $ 168,173  
 
           
 
               
Basic earnings per share of common stock
               
Income from continuing operations
  $ 0.41     $ 0.57  
Discontinued operations
          0.02  
 
           
Net income per share
  $ 0.41     $ 0.59  
 
           
 
               
Diluted earnings per share of common stock
               
Income from continuing operations
  $ 0.40     $ 0.55  
Discontinued operations
          0.02  
 
           
Net income per share
  $ 0.40     $ 0.57  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

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MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Cash flows from operating activities
               
Net income
  $ 118,346     $ 168,173  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    194,339       168,277  
Amortization of debt discounts, premiums and issuance costs
    631       (1,732 )
Provision for doubtful accounts
    14,140       9,039  
Stock-based compensation
    11,203       13,827  
Property transactions, net
    2,776       5,019  
Income from unconsolidated affiliates
    (19,414 )     (33,037 )
Distributions from unconsolidated affiliates
    39,134       46,978  
Deferred income taxes
    (2,934 )     (22,716 )
Change in current assets and liabilities:
               
Accounts receivable
    15,772       (19,658 )
Inventories
    1,973       (6,815 )
Income taxes receivable and payable
    (263,090 )     62,505  
Prepaid expenses and other
    (29,690 )     (9,746 )
Accounts payable and accrued liabilities
    (187,635 )     (109,976 )
Increase in real estate under development
          (56,087 )
Residential sales deposits, net
          50,863  
Business interruption insurance recoveries
    10,439       7,295  
Change in insurance receivable
          (1,170 )
Other
    (30,312 )     (14,779 )
 
           
Net cash provided by (used in) operating activities
    (124,322 )     256,260  
 
           
 
               
Cash flows from investing activities
               
Capital expenditures, net
    (249,343 )     (580,689 )
Dispositions of property and equipment
    43       15,096  
Investments in unconsolidated affiliates
    (1,718 )      
Advances to CityCenter for development costs
    (200,000 )      
Property damage insurance recoveries
    11,361       48,475  
Other
    (34,007 )     (26,440 )
 
           
Net cash used in investing activities
    (473,664 )     (543,558 )
 
           
 
               
Cash flows from financing activities
               
Net borrowings (repayments) under bank credit facilities – maturities of 90 days or less
    506,550       (497,700 )
Borrowings under bank credit facilities – maturities longer than 90 days
    3,030,000       1,000,000  
Repayments under bank credit facilities – maturities longer than 90 days
    (1,750,000 )     (250,000 )
Retirement of senior notes
    (180,442 )      
Issuance of common stock upon exercise of stock options
    6,395       36,433  
Purchases of common stock
    (1,107,166 )     (174,586 )
Excess tax benefits from stock-based compensation
    7,072       32,651  
Other
    (96 )     (308 )
 
           
Net cash provided by financing activities
    512,313       146,490  
 
           
 
               
Cash and cash equivalents
               
Net decrease for the period
    (85,673 )     (140,808 )
Change in cash related to assets held for sale
    1,028       1,831  
Balance, beginning of period
    412,390       452,944  
 
           
Balance, end of period
  $ 327,745     $ 313,967  
 
           
 
               
Supplemental cash flow disclosures
               
Interest paid, net of amounts capitalized
  $ 208,290     $ 228,781  
Federal, state and foreign income taxes paid, net of refunds
    324,319       20,401  
 
               
Non-cash investing and financing activities
               
Increase (decrease) in construction payable
    (8,978 )     61,578  
The accompanying notes are an integral part of these consolidated financial statements.

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MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION
     Organization. MGM MIRAGE (the “Company”) is a Delaware corporation, incorporated on January 29, 1986. As of March 31, 2008, approximately 53% of the outstanding shares of the Company’s common stock were owned by Tracinda Corporation, a Nevada corporation wholly owned by Kirk Kerkorian. MGM MIRAGE acts largely as a holding company and, through wholly-owned subsidiaries, owns and/or operates casino resorts.
     The Company owns and operates the following casino resorts in Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, Treasure Island (“TI”), New York-New York, Excalibur, Monte Carlo, Circus Circus Las Vegas and Slots-A-Fun. Operations at MGM Grand Las Vegas include management of The Signature at MGM Grand Las Vegas, a condominium-hotel consisting of over 1,500 units. Other Nevada operations include Circus Circus Reno, Gold Strike in Jean, and Railroad Pass in Henderson. The Company has a 50% investment in Silver Legacy in Reno, which is adjacent to Circus Circus Reno. The Company also owns Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip resorts, and Primm Valley Golf Club at the California/Nevada state line.
     In April 2007, the Company completed the sale of Buffalo Bill’s, Primm Valley, and Whiskey Pete’s casino resorts (the “Primm Valley Resorts”), not including the Primm Valley Golf Club, with net proceeds to the Company of approximately $398 million. In June 2007, the Company completed the sale of the Colorado Belle and Edgewater in Laughlin (the “Laughlin Properties”), with net proceeds to the Company of approximately $199 million. In February 2007, the Company entered into an agreement to contribute Gold Strike, Nevada Landing (closed in March 2007) and surrounding land (the “Jean Properties”) to a joint venture. The joint venture’s purpose is to develop a mixed-use community on the site. See Note 2 for further discussion of these transactions.
     The Company is a 50% owner of CityCenter, a mixed-use development on the Las Vegas Strip between Bellagio and Monte Carlo, expected to open in late 2009. CityCenter will feature a 4,000-room casino resort designed by world-famous architect Cesar Pelli; two 400-room non-gaming boutique hotels, one of which will be managed by luxury hotelier Mandarin Oriental; approximately 425,000 square feet of retail shops, dining and entertainment venues in The Crystals retail complex; and approximately 2.3 million square feet of residential space in approximately 2,700 luxury condominium and condominium-hotel units in multiple towers. The estimated net project budget for CityCenter is $8.5 billion, after net residential proceeds of $2.7 billion. The gross project budget consists of $9.2 billion of construction costs (including capitalized interest), $1.7 billion of land, $0.2 billion of preopening expenses, and $0.1 billion of intangible assets. The Company is managing the development of CityCenter and, upon completion of construction, will manage the operations of CityCenter for a fee. The Company owned 100% of CityCenter until November 2007.
     The Company and its local partners own and operate MGM Grand Detroit, which recently opened a new permanent hotel and casino complex in downtown Detroit, Michigan. The interim facility closed on September 30, 2007 and the new casino resort opened on October 2, 2007. The Company also owns and operates two resorts in Mississippi – Beau Rivage in Biloxi, which includes the Fallen Oak golf course, and Gold Strike Tunica.
     The Company has 50% interests in three resorts outside of Nevada – Grand Victoria, Borgata and MGM Grand Macau (through its 50% ownership of MGM Grand Paradise Limited). Grand Victoria is a riverboat in Elgin, Illinois – an affiliate of Hyatt Gaming owns the other 50% of Grand Victoria and also operates the resort. Borgata is a casino resort located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation owns the other 50% of Borgata and also operates the resort. MGM Grand Macau is a casino resort that opened on December 18, 2007. Pansy Ho Chiu-King owns the other 50% of MGM Grand Paradise Limited.
     The Company owns additional land adjacent to Borgata, a portion of which consists of common roads, landscaping and master plan improvements, a portion of which is being utilized for an expansion of Borgata, and a portion of which is planned for a wholly-owned development, MGM Grand Atlantic City, preliminarily estimated to cost approximately $4.5 – $5.0 billion excluding land and associated costs. The proposed resort would include three towers with more than 3,000 rooms and suites, approximately 4,500 slot machines and 250 table games, approximately 500,000 square-feet of retail, an extensive convention center, and other typical resort amenities.

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     Financial statement impact of Hurricane Katrina and Monte Carlo fire. The Company maintains insurance for both property damage and business interruption relating to catastrophic events, such as Hurricane Katrina affecting Beau Rivage in August 2005 and the rooftop fire at Monte Carlo in January 2008. Business interruption coverage covers lost profits and other costs incurred during the closure period and up to six months following re-opening.
     Non-refundable insurance recoveries received in excess of the net book value of damaged assets, clean-up and demolition costs, and post-event costs are recognized as income in the period received or committed based on the Company’s estimate of the total claim for property damage and business interruption compared to the recoveries received at that time. All post-event costs and expected recoveries are recorded net within “General and administrative” expenses, except for depreciation of non-damaged assets, which is classified as “Depreciation and amortization.”
     Insurance recoveries are classified in the statement of cash flows based on the coverage to which they relate. Recoveries related to business interruption are classified as operating cash flows and recoveries related to property damage are classified as investing cash flows. However, the Company’s insurance policy includes undifferentiated coverage for both property damage and business interruption. Therefore, the Company classifies insurance recoveries as being related to property damage until the full amount of damaged assets and demolition costs are recovered and classifies additional recoveries up to the amount of the post-event costs incurred as being related to business interruption. Insurance recoveries beyond that amount are classified as operating or investing cash flows based on the Company’s estimated allocation of the total claim.
     Hurricane Katrina. The Company reached final settlement agreements with its insurance carriers related to Hurricane Katrina in late 2007 and received insurance recoveries of $635 million, which exceeded the $265 million net book value of damaged assets and post-storm costs incurred. The Company recognized the $370 million of insurance recoveries in income in 2007 and 2006, of which $303 million was recorded within “Property transactions, net” and $67 million related to the business interruption portion of the Company’s claim was recorded within “General and administrative expenses.” None of these amounts were recognized in the three months ended March 31, 2007. During the three months ended March 31, 2007, insurance recoveries of $7 million were classified as operating cash flows and insurance recoveries of $48 million were classified as investing activities.
     Monte Carlo fire. As of March 31, 2008, the Company had received $22 million of proceeds from its insurance carriers related to the Monte Carlo fire. The Company recorded a write-down of $4 million related to the net book value of damaged assets and demolition costs of $7 million, both fully offset by $11 million of recoveries. A recovery of $19 million was recorded for costs incurred during the closure period, but no recoveries have been recorded for lost profits. Therefore, as of March 31, 2008, the Company had a receivable of $8 million from its insurance carriers. During the three months ended March 31, 2008, insurance recoveries of $10 million were classified as operating cash flows and insurance recoveries of $11 million were classified as investing cash flows.
     Fair value measurement. The Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), on January 1, 2008. SFAS 157 establishes a framework for measuring the fair value of financial assets and liabilities and requires certain disclosures about fair value. The Company’s only significant assets and liabilities affected by the adoption of SFAS 157 are marketable securities held in connection with the Company’s deferred compensation and supplemental executive retirement plans, and the plans’ corresponding liabilities. As of March 31, 2008, the assets and liabilities related to these plans each totaled $143 million, measured entirely using “Level 1” inputs under FAS 157, which are observable inputs such as quoted prices in an active market.
     Basis of presentation. As permitted by the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company’s 2007 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.
     In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments – which include only normal recurring adjustments – necessary to present fairly the Company’s financial position as of March 31, 2008 and the results of its operations and cash flows for the three month periods ended March 31, 2008 and 2007. The results of operations for such periods are not necessarily indicative of the results to be expected for the full year. Certain reclassifications, which have no effect on previously reported net income, have been made to the 2007 financial statements to conform to the 2008 presentation. Substantially all of the prior year reclassifications relate to the classification of meals provided free to employees as a “General and administrative” expense, while in past periods the cost of these meals was charged to each operating department. The total amount reclassified to General and administrative expenses for the three months ended March 31, 2007 was $27 million.

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NOTE 2 — ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
     The sale of the Primm Valley Resorts in April 2007 resulted in a pre-tax gain of $202 million, and the sale of the Laughlin Properties in June 2007 resulted in a pre-tax gain of $64 million.
     The assets and liabilities of the Jean Properties have not been contributed to the planned joint venture and therefore are classified as held for sale. Nevada Landing closed in March 2007 and the carrying value of its building assets were written-off. These amounts are included in “Property transactions, net” in the accompanying consolidated statements of income for the three months ended March 31, 2007.
     The following table summarizes the assets held for sale and liabilities related to assets held for sale in the accompanying consolidated balance sheets:
                 
    March 31,     December 31,  
    2008     2007  
    (In thousands)  
Cash
  $ 2,706     $ 3,734  
Accounts receivable, net
    605       587  
Inventories
    777       825  
Prepaid expenses and other
    785       952  
 
           
Total current assets
    4,873       6,098  
Property and equipment, net
    47,209       47,194  
Other assets, net
    2,353       2,378  
 
           
Total assets
    54,435       55,670  
 
           
 
               
Accounts payable
    866       938  
Other current liabilities
    2,895       2,942  
 
           
Total current liabilities
    3,761       3,880  
 
           
 
               
Net assets held for sale
  $ 50,674     $ 51,790  
 
           
     The results of the Laughlin Properties and Primm Valley Resorts are classified as discontinued operations in the accompanying consolidated statements of income for the three months ended March 31, 2007. Due to our continuing investment in the Jean Properties, the results of these operations have not been classified as discontinued operations in the accompanying consolidated statements of income. The cash flows of discontinued operations are included with the cash flows of continuing operations in the accompanying consolidated statements of cash flows.
     Other information related to discontinued operations is as follows:
                 
Three months ended March 31,   2008   2007
    (In thousands)
Net revenues of discontinued operations
  $     $ 96,650  
Interest allocated to discontinued operations (based on the ratio of net assets of discontinued operations to total consolidated net assets and debt)
          4,424  
NOTE 3 — INVESTMENTS IN UNCONSOLIDATED AFFILIATES
     Investments in unconsolidated affiliates consisted of the following:
                 
    March 31,     December 31,  
    2008     2007  
    (In thousands)  
CityCenter Holdings, LLC – CityCenter (50%)
  $ 1,439,309     $ 1,421,480  
Marina District Development Company – Borgata (50%)
    452,199       453,277  
Elgin Riverboat Resort–Riverboat Casino – Grand Victoria (50%)
    297,114       297,328  
MGM Grand Paradise Limited – Macau (50%)
    261,347       258,298  
Circus and Eldorado Joint Venture – Silver Legacy (50%)
    28,604       35,152  
Turnberry/MGM Grand Towers – The Signature at MGM Grand (50%)
    5,651       5,651  
Other
    3,139       11,541  
 
           
 
  $ 2,487,363     $ 2,482,727  
 
           

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     As described in Note 1, the net project budget for CityCenter is $8.5 billion, and the joint venture expects to spend approximately $2.0 billion in construction costs during the remainder of 2008. During the three months ended March 31, 2008, the Company and Dubai World each made loans of $200 million to CityCenter to fund near-term construction costs. Subsequent to March 31, 2008, the Company and Dubai World each funded additional near-term construction costs and expect to fund additional costs on an as-needed basis. The joint venture is currently negotiating with its lenders to obtain project financing, and anticipates that such financing will include requirements to utilize the project assets as security for the financing. The other potential source of project financing is additional contributions from the Company and Dubai World, which require approval of the joint venture’s Board of Directors.
     During the three months ended March 31, 2008, the Company incurred $13 million of costs reimbursable by CityCenter, primarily employee compensation, residential sales costs, and certain allocated costs. Such costs are recorded as “Other” operating expenses, and the reimbursement of such costs is recorded as “Other” revenue, in the accompanying consolidated statements of income.
     The Company recorded its share of the results of operations of unconsolidated affiliates as follows:
                 
Three months ended March 31,   2008     2007  
    (In thousands)  
Income from unconsolidated affiliates
  $ 34,111     $ 41,375  
Preopening and start-up expenses
    (4,806 )     (3,232 )
Non-operating items from unconsolidated affiliates
    (9,891 )     (5,106 )
 
           
 
  $ 19,414     $ 33,037  
 
           
NOTE 4 — LONG-TERM DEBT
     Long-term debt consisted of the following:
                 
    March 31,     December 31,  
    2008     2007  
    (In thousands)  
Senior credit facility
  $ 5,016,100     $ 3,229,550  
$180.4 million 6.75% senior notes, due 2008, net
          180,085  
$196.2 million 9.5% senior notes, due 2008, net
    198,506       200,203  
$226.3 million 6.5% senior notes, due 2009, net
    227,201       227,356  
$1.05 billion 6% senior notes, due 2009, net
    1,052,226       1,052,577  
$297.6 million 9.375% senior subordinated notes, due 2010, net
    311,126       312,807  
$825 million 8.5% senior notes, due 2010, net
    823,812       823,689  
$400 million 8.375% senior subordinated notes, due 2011
    400,000       400,000  
$132.4 million 6.375% senior notes, due 2011, net
    133,266       133,320  
$550 million 6.75% senior notes, due 2012
    550,000       550,000  
$150 million 7.625% senior subordinated debentures, due 2013, net
    154,503       154,679  
$500 million 6.75% senior notes, due 2013
    500,000       500,000  
$525 million 5.875% senior notes, due 2014, net
    523,153       523,089  
$875 million 6.625% senior notes, due 2015, net
    879,064       879,173  
$250 million 6.875% senior notes, due 2016,
    250,000       250,000  
$750 million 7.5% senior notes, due 2016
    750,000       750,000  
$100 million 7.25% senior debentures, due 2017, net
    84,751       84,499  
$750 million 7.625% senior notes, due 2017
    750,000       750,000  
Floating rate convertible senior debentures, due 2033
    8,472       8,472  
$150 million 7% debentures, due 2036, net
    155,818       155,835  
$4.3 million 6.7% debentures, due 2096
    4,265       4,265  
Other notes
    4,952       5,630  
 
           
 
  $ 12,777,215     $ 11,175,229  
 
           

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     Amounts due within one year of the balance sheet date are classified as long-term in the accompanying consolidated balance sheets because the Company has both the intent and ability to repay these amounts with available borrowings under the senior credit facility.
     Interest expense, net consisted of the following:
                 
Three months ended March 31,   2008     2007  
    (In thousands)  
Total interest incurred
  $ 189,067     $ 233,253  
Interest capitalized
    (39,278 )     (44,818 )
Interest allocated to discontinued operations
          (4,424 )
 
           
 
  $ 149,789     $ 184,011  
 
           
     The senior credit facility has a total capacity of $7 billion, and matures in 2011. The Company has the ability to solicit additional lender commitments to increase the capacity to $8 billion. The components of the senior credit facility include a term loan facility of $2.5 billion and a revolving credit facility of $4.5 billion. At March 31, 2008, the Company had approximately $1.9 billion of available borrowing capacity under the senior credit facility.
     In February 2008, the Company repaid the $180.4 million of 6.75% senior notes at maturity using borrowings under the senior credit facility.
     The Company’s long-term debt obligations contain customary covenants requiring the Company to maintain certain financial ratios. At March 31, 2008, the Company was required to maintain a maximum leverage ratio (debt to EBITDA, as defined) of 6.5:1 and a minimum coverage ratio (EBITDA to interest charges, as defined) of 2.0:1. At March 31, 2008, the Company’s leverage and interest coverage ratios were 3.5:1 and 4.1:1, respectively.
NOTE 5 — COMMITMENTS AND CONTINGENCIES
     Mashantucket Pequot Tribal Nation. The Company entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Ledyard, Connecticut. The Company and MPTN have formed a jointly owned company – Unity Gaming, LLC – to acquire or develop future gaming and non-gaming enterprises. The Company will provide a loan of up to $200 million to finance a portion of MPTN’s investment in future joint projects.
     Kerzner/Istithmar Joint Venture. In September 2007, the Company entered into a definitive agreement with Kerzner International and Istithmar forming a joint venture to develop a multi-billion dollar integrated resort to be located on the southwest corner of Las Vegas Boulevard and Sahara Avenue. The Company will contribute 40 acres of land, which is being valued at $20 million per acre, for fifty percent of the equity in the joint venture. Kerzner International and Istithmar will contribute cash totaling $600 million, of which $200 million will be distributed to the Company, for the other 50% of the equity.
     Guarantees. The Company is party to various guarantee contracts in the normal course of business, which are generally supported by letters of credit issued by financial institutions. The Company’s senior credit facility limits the amount of letters of credit that can be issued to $250 million, and the amount of available borrowings under the senior credit facility is reduced by any outstanding letters of credit. At March 31, 2008, the Company had provided $85 million of total letters of credit, including $50 million to support bonds issued by the Economic Development Corporation of the City of Detroit, which are recorded as a liability of the Company.
     Litigation. The Company is a party to various legal proceedings, most of which relate to routine matters incidental to its business. Management does not believe that the outcome of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.

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     Sales and use tax on complimentary meals. In March 2008, the Nevada Supreme Court ruled, in a case involving another casino company, that food and non-alcoholic beverages purchased for use in providing complimentary meals to customers and to employees was exempt from sales and use tax. The Company had previously paid use tax on these items and has generally filed for refunds for the periods from January 2001 to February 2008 related to this matter. The amount subject to these refunds, including amounts related to the Mandalay Resort Group properties prior to the Company’s 2005 acquisition of Mandalay Resort Group, is approximately $33 million.
     The Nevada Department of Taxation has filed a petition for rehearing, and there is no set timetable for the Nevada Supreme Court to respond. As of March 31, 2008, the Company had not recorded income related to this matter since it is still subject to court action. However, the Company is claiming the exemption on sales and use tax returns for periods after February 2008 in light of the Nevada Supreme Court decision.
NOTE 6 — INCOME PER SHARE OF COMMON STOCK
     The weighted-average number of common and common equivalent shares used in the calculation of basic and diluted earnings per share consisted of the following:
                 
Three months ended March 31,   2008     2007  
    (In thousands)  
Weighted-average common shares outstanding (used in the calculation of basic earnings per share)
    288,943       284,021  
Potential dilution from stock options and restricted stock
    9,457       11,556  
 
           
Weighted-average common and common equivalent shares (used in the calculation of diluted earnings per share)
    298,400       295,577  
 
           
     Approximately 3.6 million and 0.7 million stock options and stock appreciation rights were excluded from the calculation of diluted earnings per share in the three months ended March 31, 2008 and 2007, respectively, since including these stock options and stock appreciation rights would have been anti-dilutive.
NOTE 7 — COMPREHENSIVE INCOME
     Comprehensive income consisted of the following:
                 
Three months ended March 31,   2008     2007  
    (In thousands)  
Net income
  $ 118,346     $ 168,173  
Currency translation adjustments
    (3,222 )     18  
 
           
 
  $ 115,124     $ 168,191  
 
           
NOTE 8 — STOCKHOLDERS’ EQUITY
     Tender Offer. In February 2008, the Company and a wholly-owned subsidiary of Dubai World completed a joint tender offer to purchase 15 million shares of Company common stock at a price of $80 per share. The Company purchased 8.5 million shares at a total purchase price of $680 million.
     Stock repurchases. In addition to the tender offer, the Company repurchased 7.0 million and 2.5 million shares of common stock in the three months ended March 31, 2008 and 2007, respectively, at a total cost of $427 million and $175 million, respectively. At March 31, 2008, the Company had 2.6 million shares available for repurchase under a December 2007 authorization.

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NOTE 9 — STOCK-BASED COMPENSATION
     The Company adopted an omnibus incentive plan in 2005 which allows it to grant stock options, stock appreciation rights (“SARs”), restricted stock, and other stock-based awards to eligible directors, officers and employees. The plans are administered by the Compensation Committee (the “Committee”) of the Board of Directors. Salaried officers, directors and other key employees of the Company and its subsidiaries are eligible to receive awards. The Committee has discretion under the omnibus plan regarding which type of awards to grant, the vesting and service requirements, exercise price and other conditions, in all cases subject to certain limits, including:
    The omnibus plan allowed for the issuance of up to 20 million shares or share-based awards;
 
    For stock options and stock appreciation rights, the exercise price of the award must be at least equal to the fair market value of the stock on the date of grant and the maximum term of such an award is ten years.
     To date, the Committee has only awarded stock options and SARs under the omnibus plan. The Company’s practice has been to issue new shares upon the exercise of stock options and SARs. Under the Company’s previous plans, the Committee had issued stock options and restricted stock. Stock options and SARs granted under all plans generally have either 7-year or 10-year terms, and in most cases vest in either four or five equal annual installments.
     As of March 31, 2008, the aggregate number of share-based awards available for grant under the omnibus plan was 2.1 million. A summary of activity under the Company’s share-based payment plans for the three months ended March 31, 2008 is presented below:
Stock options and stock appreciation rights
                 
            Weighted  
            Average  
    Shares     Exercise  
    (000’s)     Price  
Outstanding at January 1, 2008
    26,674     $ 31.90  
Granted
    1,102       65.48  
Exercised
    (464 )     13.62  
Forfeited or expired
    (46 )     52.89  
 
             
Outstanding at March 31, 2008
    27,266       33.51  
 
             
Exercisable at March 31, 2008
    13,933       20.93  
 
             
     As of March 31, 2008, there was a total of $114 million of unamortized compensation related to stock options and stock appreciation rights expected to vest, which is expected to be recognized over a weighted-average period of 2.4 years. The following table includes additional information related to stock options and SARs:
                 
Three months ended March 31,   2008   2007
    (In thousands)
Intrinsic value of stock options and SARs exercised
  $ 22,871     $ 111,421  
Income tax benefit from stock options and SARs exercised
    7,967       37,788  
Proceeds from stock option exercises
    6,395       36,433  
     The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”) on January 1, 2006 using the modified prospective method. The Company recognizes the fair value of awards granted under the Company’s omnibus plan in the income statement based on the fair value of these awards measured at the date of grant using the Black-Scholes model. For awards granted prior to adoption, the unamortized expense is being recognized on an accelerated basis, since this was the method used for disclosure purposes prior to the adoption of SFAS 123(R). For awards granted after adoption, such expense is being recognized on a straight-line basis over the vesting period of the awards. Forfeitures are estimated at the time of grant, with such estimate updated periodically and with actual forfeitures recognized currently to the extent they differ from the estimate.

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     The following table shows information about compensation cost recognized:
                 
Three months ended March 31,   2008     2007  
    (In thousands)  
Compensation cost
  $ 11,242     $ 14,133  
Less: Compensation cost capitalized
    (39 )     (306 )
 
           
Compensation cost recognized as expense
    11,203       13,827  
Less: Related tax benefit
    (3,847 )     (4,797 )
 
           
Compensation expense, net of tax benefit
  $ 7,356     $ 9,030  
 
           
Compensation cost for stock options and stock appreciation rights was based on the fair value of each award, measured by applying the Black-Scholes model on the date of grant, using the following weighted-average assumptions:
                 
Three months ended March 31,   2008   2007
 
Expected volatility
    37 %     30 %
Expected term
  4.5 years   4.1 years
Expected dividend yield
    0 %     0 %
Risk-free interest rate
    2.5 %     4.5 %
Forfeiture rate
    3.4 %     4.6 %
Weighted-average fair value of options granted
  $ 22.79     $ 20.15  
NOTE 10 — PROPERTY TRANSACTIONS, NET
     Net property transactions consisted of the following:
                 
Three months ended March 31,   2008     2007  
    (In thousands)  
Write-downs and impairments
  $ 2,643     $ 5,097  
Demolition costs
    84        
Net (gains) losses on sale or disposal of fixed assets
    49       (78 )
 
           
 
  $ 2,776     $ 5,019  
 
           
     Write-downs and impairments in 2008 primarily related to a damaged marquee sign at Bellagio and assets written off in conjunction with retail store changes at Mandalay Bay.
     Write-downs and impairments in 2007 primarily related to the write-off of the carrying value of the building assets of Nevada Landing which closed in March 2007.

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NOTE 11 — CONSOLIDATING CONDENSED FINANCIAL INFORMATION
     The Company’s subsidiaries (excluding MGM Grand Detroit, LLC and certain minor subsidiaries) have fully and unconditionally guaranteed, on a joint and several basis, payment of the senior credit facility, the senior notes and the senior subordinated notes. Separate condensed financial statement information for the subsidiary guarantors and non-guarantors as of March 31, 2008 and December 31, 2007 and for the three month periods ended March 31, 2008 and 2007 is as follows:
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
                                         
    As of March 31, 2008  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
                    (In thousands)                  
Current assets
  $ 113,292     $ 911,310     $ 63,953     $     $ 1,088,555  
Property and equipment, net
          16,076,177       781,115       (11,972 )     16,845,320  
Investments in subsidiaries
    19,506,253       490,825             (19,997,078 )      
Investments in unconsolidated affiliates
          2,226,014       261,349             2,487,363  
Other non-current assets
    242,692       2,120,675       111,274             2,474,641  
 
                             
 
  $ 19,862,237     $ 21,825,001     $ 1,217,691     $ (20,009,050 )   $ 22,895,879  
 
                             
 
                                       
Current liabilities
  $ 153,235     $ 1,081,043     $ 33,645     $     $ 1,267,923  
Intercompany accounts
    (29,384 )     (261,518 )     290,902              
Deferred income taxes
    3,406,120                         3,406,120  
Long-term debt
    11,148,255       1,282,860       346,100             12,777,215  
Other non-current liabilities
    88,293       206,931       53,679             348,903  
Stockholders’ equity
    5,095,718       19,515,685       493,365       (20,009,050 )     5,095,718  
 
                             
 
  $ 19,862,237     $ 21,825,001     $ 1,217,691     $ (20,009,050 )   $ 22,895,879  
 
                             
                                         
    As of December 31, 2007  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
    (In thousands)  
Current assets
  $ 81,379     $ 1,033,407     $ 60,600     $     $ 1,175,386  
Property and equipment, net
          16,044,642       791,034       (11,972 )     16,823,704  
Investments in subsidiaries
    19,169,892       484,047             (19,653,939 )      
Investments in unconsolidated affiliates
          2,224,429       258,298             2,482,727  
Other non-current assets
    244,857       1,890,308       110,704             2,245,869  
 
                             
 
  $ 19,496,128     $ 21,676,833     $ 1,220,636     $ (19,665,911 )   $ 22,727,686  
 
                             
 
                                       
Current liabilities
  $ 459,968     $ 1,217,506     $ 47,213     $     $ 1,724,687  
Intercompany accounts
    125,094       (396,080 )     270,986              
Deferred income taxes
    3,416,660                         3,416,660  
Long-term debt
    9,347,527       1,467,152       360,550             11,175,229  
Other long-term obligations
    86,176       209,554       54,677             350,407  
Stockholders’ equity
    6,060,703       19,178,701       487,210       (19,665,911 )     6,060,703  
 
                             
 
  $ 19,496,128     $ 21,676,833     $ 1,220,636     $ (19,665,911 )   $ 22,727,686  
 
                             

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
                                         
    For the Three Months Ended March 31, 2008  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
    (In thousands)  
Net revenues
  $     $ 1,733,987     $ 149,646     $     $ 1,883,633  
Equity in subsidiaries’ earnings
    306,733       18,920             (325,653 )      
Expenses:
                                       
Casino and hotel operations
    3,762       932,979       84,283             1,021,024  
General and administrative
    2,725       289,396       28,253             320,374  
Corporate expense
    4,431       27,629       390             32,450  
Preopening and start-up expenses
          4,970       194             5,164  
Restructuring costs
          329                   329  
Property transactions, net
    (280 )     3,048       8             2,776  
Depreciation and amortization
    449       179,539       14,351             194,339  
 
                             
 
    11,087       1,437,890       127,479             1,576,456  
 
                             
Income from unconsolidated affiliates
          24,218       9,893             34,111  
 
                             
Operating income
    295,646       339,235       32,060       (325,653 )     341,288  
Interest income (expense), net
    (119,861 )     (22,268 )     (4,194 )           (146,323 )
Other, net
    3,815       (5,853 )     (7,623 )           (9,661 )
 
                             
Income before income taxes
    179,600       311,114       20,243       (325,653 )     185,304  
Provision for income taxes
    (61,254 )     (4,381 )     (1,323 )           (66,958 )
 
                             
Net income
  $ 118,346     $ 306,733     $ 18,920     $ (325,653 )   $ 118,346  
 
                             
 
    For the Three Months Ended March 31, 2007  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
    (In thousands)  
Net revenues
  $     $ 1,813,301     $ 116,134     $     $ 1,929,435  
Equity in subsidiaries’ earnings
    417,841       36,977             (454,818 )      
Expenses:
                                       
Casino and hotel operations
    3,750       925,027       63,699             992,476  
General and administrative
    4,046       292,399       15,229             311,674  
Corporate expense
    5,734       28,221                   33,955  
Preopening and start-up expenses
    192       11,705       2,379             14,276  
Property transactions, net
    472       4,546       1             5,019  
Depreciation and amortization
    449       161,866       5,962             168,277  
 
                             
 
    14,643       1,423,764       87,270             1,525,677  
 
                             
Income from unconsolidated affiliates
          32,289       9,086             41,375  
 
                             
Operating income
    403,198       458,803       37,950       (454,818 )     445,133  
Interest income (expense), net
    (157,363 )     (23,874 )     (117 )           (181,354 )
Other, net
    13,974       (22,006 )     198             (7,834 )
 
                             
Income from continuing operations before income taxes
    259,809       412,923       38,031       (454,818 )     255,945  
Provision for income taxes
    (88,760 )     (3,121 )     (1,054 )           (92,935 )
 
                             
Income from continuing operations
    171,049       409,802       36,977       (454,818 )     163,010  
Discontinued operations
    (2,876 )     8,039                   5,163  
 
                             
Net income
  $ 168,173     $ 417,841     $ 36,977     $ (454,818 )   $ 168,173  
 
                             
 
    CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
 
    For the Three Months Ended March 31, 2008
            Guarantor   Non-Guarantor        
    Parent   Subsidiaries   Subsidiaries   Elimination   Consolidated
    (In thousands)
Net cash provided by (used in) operating activities
  $ (499,102 )   $ 370,585     $ 4,195     $     $ (124,322 )
Net cash used in investing activities
          (466,858 )     (5,410 )     (1,396 )     (473,664 )
Net cash provided by (used in) financing activities
    537,823       (28,423 )     1,517       1,396       512,313  
 
    For the Three Months Ended March 31, 2007
            Guarantor   Non-Guarantor        
    Parent   Subsidiaries   Subsidiaries   Elimination   Consolidated
    (In thousands)
Net cash provided by (used in) operating activities
  $ (249,798 )   $ 466,185     $ 39,873     $     $ 256,260  
Net cash used in investing activities
          (468,663 )     (73,636 )     (1,259 )     (543,558 )
Net cash provided by (used in) financing activities
    270,418       (147,990 )     22,803       1,259       146,490  

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
     Overview
     At March 31, 2008, our primary operations consisted of 17 wholly-owned casino resorts and 50% investments in four other casino resorts, including:
         
 
  Las Vegas, Nevada:   Bellagio, MGM Grand Las Vegas, Mandalay Bay, Mirage, Luxor, TI, New York-New York, Excalibur, Monte Carlo, Circus Circus Las Vegas and Slots-A-Fun.
 
 
  Other:   Circus Circus Reno and Silver Legacy (50% owned) in Reno, Nevada; Gold Strike in Jean, Nevada; Railroad Pass in Henderson, Nevada; MGM Grand Detroit; Beau Rivage in Biloxi, Mississippi and Gold Strike Tunica in Tunica, Mississippi; Borgata (50% owned) in Atlantic City, New Jersey; Grand Victoria (50% owned) in Elgin, Illinois; and MGM Grand Macau (50% owned).
     MGM Grand Las Vegas includes The Signature at MGM Grand, a condominium hotel consisting of over 1,500 units in three towers which we manage as a hotel. Other operations include the Shadow Creek golf course in North Las Vegas; two golf courses south of Primm, Nevada at the California state line; and Fallen Oak golf course in Saucier, Mississippi. In addition, we own 50% of CityCenter Holdings, LLC which is developing CityCenter located on a 67-acre site on the Las Vegas Strip, between Bellagio and Monte Carlo. CityCenter will feature a 4,000-room casino resort designed by world-famous architect Cesar Pelli; two 400-room non-gaming boutique hotels, one of which will be managed by luxury hotelier Mandarin Oriental; approximately 425,000 square feet of retail shops, dining and entertainment venues; and approximately 2.3 million square feet of residential space in approximately 2,700 luxury condominium and condominium-hotel units in multiple towers. CityCenter is expected to open in late 2009. The other 50% of CityCenter is owned by Infinity World Development Corp., a wholly-owned subsidiary of Dubai World. We will continue to serve as developer of CityCenter and, upon completion of construction, we will manage CityCenter for a fee. We owned 100% of CityCenter until November 2007.
     In April 2007, we sold the Primm Valley Resorts (Whiskey Pete’s, Buffalo Bill’s and Primm Valley Resort in Primm, Nevada), not including the two golf courses. In June 2007, we sold the Laughlin Properties (Colorado Belle and Edgewater). In February 2007, we entered into an agreement to contribute Gold Strike and Nevada Landing (the “Jean Properties”) and surrounding land to a joint venture, and we closed Nevada Landing in March 2007. See “Liquidity and Capital Resources – Other Factors Affecting Liquidity.”
     We operate primarily in one segment, the operation of casino resorts, which includes offering gaming, hotel, dining, entertainment, retail and other resort amenities. Over half of our net revenue is derived from non-gaming activities, a higher percentage than many of our competitors, as our operating philosophy is to provide a complete resort experience for our guests, including non-gaming amenities which command a premium price based on their quality. Our significant convention and meeting facilities allow us to maximize hotel occupancy and customer volumes during off-peak times such as mid-week or during traditionally slower leisure travel periods, which also leads to better labor utilization. We believe that we own several of the premier casino resorts in the world, and a main focus of our strategy is to continually reinvest in these resorts to maintain that competitive advantage.
     As a resort-based company, our operating results are highly dependent on the volume of customers at our resorts, which in turn impacts the price we can charge for our hotel rooms and other amenities. We also generate a significant portion of our operating income from high-end gaming customers, which can cause variability in our results. Key performance indicators related to revenue are:
  Casino revenue indicators – table games drop and slots handle (volume indicators); “win” or “hold” percentage, which is not fully controllable by us. Our normal table games win percentage is in the range of 18% to 22% of table games drop and our normal slots win percentage is in the range of 6.5% to 7.5% of slots handle;
 
  Rooms revenue indicators – hotel occupancy (volume indicator); average daily rate (“ADR,” price indicator); revenue per available room (“REVPAR”), a summary measure of hotel results combining ADR and occupancy rate.

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     Most of our revenue is essentially cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our resorts generate significant operating cash flow. Our industry is capital intensive and we rely heavily on the ability of our resorts to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide excess cash for future development.
     We generate a majority of our net revenues and operating income from our resorts in Las Vegas, Nevada, which exposes us to certain risks outside of our control, such as competition from other recently opened or expanded Las Vegas resorts, and the impact from expansion of gaming in California. We are also exposed to risks related to tourism and the general economy, including national and global economic conditions and terrorist attacks or other global events.
     Our results of operations do not tend to be seasonal in nature, though a variety of factors may affect the results of any interim period, including the timing of major Las Vegas conventions, the amount and timing of marketing and special events for our high-end customers, and the level of play during major holidays, including New Year and Chinese New Year. We market to different customer segments to manage our hotel occupancy, such as targeting large conventions to ensure mid-week occupancy. Our results do not depend on key individual customers, though our success in marketing to customer groups, such as convention customers, or the financial health of customer segments, such as business travelers or high-end gaming customers from a particular country or region, can impact our results.
     Financial Results
     The following discussion is based on our consolidated financial statements for the three months ended March 31, 2008 and 2007. On a consolidated basis, the most important factors and trends contributing to our operating performance for the periods were:
  The weakness in the United States economy, particularly the impacts on leisure travelers of: 1) the weak housing market; 2) credit concerns and related effect on housing sales and prices; 3) increase in travel costs due to higher gas prices; 4) overall weakness in the employment market; and 5) stock market volatility. Additionally, the convention and conference group market segment was impacted by cancellations and reduced attendance, leading to a 13% decrease in group room nights. These factors contributed to a decline in Las Vegas Strip REVPAR for the quarter, the first such decline since 2003. Other resort-based revenues were similarly impacted. Regional markets, such as Detroit and Mississippi, are being impacted by the current economic situation to a greater extent than the Las Vegas Market. See “Operating Results — Detailed Revenue Information.”
 
  The closure of Monte Carlo from January 25, 2008 through February 14, 2008 due to a rooftop fire; additionally, a significant portion of Monte Carlo’s rooms and suites remained out of service through March 31, 2008. While we maintain insurance coverage for both property damage and business interruption, we do not record recovery of lost profits until all contingencies with the insurance claim have been resolved. Monte Carlo earned operating income of $8 million for the first quarter of 2008 compared to $28 million for the first quarter of 2007.
 
  Our share of profits from MGM Grand Macau, which opened in December 2007.
     Our net revenue decreased 2% in the first quarter from the prior year period, due to the factors described above. Decreases in room prices and occupancy more than offset increased revenues from new restaurants and other amenities at several of our resorts, as well as increased revenues from the new casino and hotel at MGM Grand Detroit.
     Operating income decreased 23% for the quarter to $341 million as a result of the following factors: 1) an overall decrease in revenue, a significant element of which was the result of lower ADR; 2) while we were able to address staffing levels for volume decreases, those reductions were offset by increased wage rates and benefits; and 3) the increased costs of operating the larger MGM Grand Detroit. Our operating margin decreased from 23% to 18%. As discussed further below in “Operating Results — Details of Certain Charges,” during the first quarter of 2008 we had lower preopening and start-up expenses in the quarter. We have been reviewing our operating costs for several quarters, and most recently in April 2008 reduced our salaried management positions by over 400. We are working on several other initiatives to increase the efficiency of our operations and at MGM Grand Detroit, we continue to adjust costs following the opening, a normal process in the initial stages of a new operation.

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     Operating Results – Detailed Revenue Information
     The following table presents details of our net revenues:
                         
    Three Months Ended March 31,  
            Percentage        
    2008     Change     2007  
    (In thousands)  
Casino revenue, net:
                       
Table games
  $ 308,348       (5 %)   $ 324,928  
Slots
    453,665       (1 %)     457,433  
Other
    28,451       (4 %)     29,578  
 
                   
Casino revenue, net
    790,464       (3 %)     811,939  
 
                   
Non-casino revenue:
                       
Rooms
    518,741       (6 %)     549,004  
Food and beverage
    402,392       (4 %)     417,449  
Entertainment, retail and other
    346,848       7 %     324,568  
 
                   
Non-casino revenue
    1,267,981       (2 %)     1,291,021  
 
                   
 
    2,058,445       (2 %)     2,102,960  
Less: Promotional allowances
    (174,812 )     1 %     (173,525 )
 
                   
 
  $ 1,883,633       (2 %)   $ 1,929,435  
 
                   
     Table games revenue decreased primarily due to a 4% decrease in table games volume, including baccarat, at our Las Vegas Strip resorts. Table games hold percentages were above the mid-point of the Company’s normal range in both periods, and slightly higher in 2008. Slots revenue benefitted from a 9% increase at MGM Grand Detroit, though these results are below our long-term expectations for the resort, given the significant increase in capacity with the permanent casino. Slots revenue decreased 2% on the Las Vegas Strip, though flat excluding Monte Carlo, with increases at Bellagio, The Mirage, and Mandalay Bay offset by decreases at other resorts. Slots revenue decreased 5% at our Mississippi resorts; our mid-market resorts and resorts in regional markets were more severely impacted by the current economy.
     Room revenues decreased 6% overall, with a 4% decrease in Las Vegas Strip REVPAR. We had 44,000 fewer rooms available company-wide, 60,000 on the Las Vegas Strip, with the closure of Monte Carlo and current year room remodel activity offset partially by the new MGM Grand Detroit hotel and rooms back in service after 2007 room remodels. The following table shows key hotel statistics for our Las Vegas Strip resorts:
                 
Three months ended March 31,   2008   2007
 
Occupancy %
    93 %     96 %
Average Daily Rate (ADR)
  $ 165     $ 169  
Revenue per Available Room (REVPAR)
    155       162  
     While food and beverage revenue decreased as well – down 4% – entertainment revenue was flat, as our Cirque du Soleil production shows performed well and offset an events calendar with fewer concerts and sporting events in the 2008 quarter. Other revenue increased $26 million, or 21%, in the first quarter of 2008. This was due primarily to increased revenue at The Signature of MGM Grand – Tower 3 was not open in the 2007 quarter – and revenue related to reimbursement by CityCenter of costs we incur in managing the project’s development. For both of these items, the corresponding expenses are reflected in “Other” operating expenses, which also increased significantly in the quarter.
     Operating Results – Details of Certain Charges
     Preopening and start-up expenses were $5 million in the 2008 quarter versus $14 million in 2007. The current year amount consists largely of our portion of CityCenter’s preopening expenses.
     Property transactions, net consisted of the following:
                 
Three months ended March 31,   2008     2007  
    (In thousands)  
Write-downs and impairments
  $ 2,643     $ 5,097  
Demolition costs
    84        
Net (gains) losses on sale or disposal of fixed assets
    49       (78 )
 
           
 
  $ 2,776     $ 5,019  
 
           

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     Write-downs and impairments in 2008 primarily related to a damaged marquee sign at Bellagio and assets written off in conjunction with retail store changes at Mandalay Bay.
     Write-downs and impairments in 2007 primarily related to the write-off of the carrying value of the Nevada Landing building assets due to its closure in March 2007.
     Operating Results – Income from Unconsolidated Affiliates
     Income from unconsolidated affiliates decreased by $7 million in the quarter, as our share of income from MGM Grand Macau (which opened in December 2007) – $10 million – was offset by several items: 1) Lower income at Borgata and Silver Legacy; 2) prior year profits from the unit sales at The Signature at MGM Grand of $8 million; and 3) our share of CityCenter’s preopening expenses in the current year while the project was wholly-owned in 2007.
     Non-operating Results
     Net interest expense decreased to $150 million in the 2008 first quarter from $184 million in the 2007 period. Gross interest was lower due to a combination of lower market interest rates and the decrease in average debt balances outstanding as a result of the net proceeds of approximately $3.7 billion from the CityCenter transaction and Dubai World stock sale in November 2007, offset by recent share repurchase activity. Capitalized interest decreased, as we are no longer capitalizing interest on our investment in MGM Grand Macau or the Detroit permanent casino, and capitalization of interest on our CityCenter investment was lower than our former capitalization of interest on CityCenter construction costs when the project was wholly-owned. These items were offset partially by new capitalized interest on MGM Grand Atlantic City construction and related land costs.
Liquidity and Capital Resources
     Cash Flows – Operating Activities
     Cash used in operations was $124 million for the three months ended March 31, 2008, compared to cash provided by operations of $256 million in the prior year period. The decrease was primarily due to the decrease in operating income and significant income tax payment made in the first quarter of 2008 related to the contribution of CityCenter to a joint venture. At March 31, 2008, we held cash and cash equivalents of $328 million.
     Cash Flows – Investing Activities
     Capital expenditures of $249 million in 2008 consisted of room remodel costs, primarily at The Mirage, TI, and Excalibur; trailing payments on the construction of MGM Grand Detroit; payments for corporate aircraft; payments for the showroom at Luxor that will feature a new show by Cirque du Soleil and Criss Angel; and other routine capital expenditures. Capital expenditures in 2007 included significant spending on the CityCenter and MGM Grand Detroit development projects as well as room remodel costs, payments for corporate aircraft, and other routine capital expenditures. We also funded $200 million of CityCenter’s construction costs during the first quarter of 2008 – see “Other Factors Affecting Liquidity.”
     Cash Flows – Financing Activities
     In the three months ended March 31, 2008, we borrowed net debt of $1.6 billion. In February 2008, we completed, along with a wholly-owned subsidiary of Dubai World, a joint tender offer to purchase 15 million shares of Company common stock at a price of $80 per share. The Company purchased 8.5 million shares at a total purchase price of $680 million. In addition, we repurchased 7 million shares of our common stock on the open market at a cost of $427 million during the three months ended March 31, 2008, leaving 2.6 million shares available under our current share repurchase authorization. We also repaid $180 million of 6.75% senior notes at maturity in February 2008. At March 31, 2008 our senior credit facility had an outstanding balance of $5.0 billion, with available liquidity of $1.9 billion.

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     Other Factors Affecting Liquidity
     Long-term Debt Payable in 2008. We have a total of $196 million in senior notes that we expect to repay at maturity in 2008. In addition, holders of our $150 million of 7% debentures due 2036 will have the option to require us to repurchase such debt late in 2008.
     CityCenter. The estimated net project budget for CityCenter is $8.5 billion, after net residential proceeds of $2.7 billion. The gross project budget consists of $9.2 billion of construction costs (including capitalized interest), $1.7 billion of land, $0.2 billion of preopening expenses, and $0.1 billion of intangible assets.
     The joint venture expects to spend approximately $2.0 billion in construction costs during the remainder of 2008. During the three months ended March 31, 2008, we and Dubai World each made loans of $200 million to CityCenter to fund near-term construction costs. Subsequent to March 31, 2008, we and Dubai World each funded additional near-term construction costs and expect to fund additional costs on an as-needed basis. The joint venture is currently negotiating with its lenders to obtain project financing, and anticipates that such financing will include requirements to utilize the project assets as security for the financing. The other potential source of project financing is additional contributions from us and Dubai World, which require approval of the joint venture’s Board of Directors.
     MGM Grand Atlantic City Development. In October 2007, we announced plans for a multi-billion dollar resort complex on our 72-acre site in Atlantic City. The new resort, MGM Grand Atlantic City, is preliminarily estimated to cost approximately $4.5 to $5.0 billion, not including land and associated costs. The proposed resort would include three towers with more than 3,000 total rooms and suites, approximately 4,500 slot machines and 250 table games, approximately 500,000 square-feet of retail, an extensive convention center, and other typical resort amenities.
     Mashantucket Pequot Tribal Nation. We have entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Ledyard, Connecticut. Under the strategic alliance, a new casino resort owned and operated by MPTN and adjacent to the existing Foxwoods casino resort will carry the “MGM Grand” brand name. The resort is scheduled to open in May 2008, and we are receiving a branding fee in connection with this agreement. We have also formed a jointly owned company with MPTN – Unity Gaming, LLC – to acquire or develop future gaming and non-gaming enterprises. We will provide a loan of up to $200 million to finance a portion of MPTN’s investment in future joint projects.
     Jean Properties. We have entered into an operating agreement to form a 50/50 joint venture with Jeanco Realty Development, LLC. The venture will master plan and develop a mixed-use community in Jean, Nevada. We will contribute the Jean Properties and surrounding land to the joint venture. The value of this contribution per the operating agreement will be $150 million. We expect to receive a distribution of $55 million upon transfer of the Jean Properties and surrounding land to the venture, which is subject to the venture obtaining necessary regulatory and other approvals, and $20 million no later than August 2008. Nevada Landing closed in March 2007.
Market Risk
     Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed rate borrowings and short-term borrowings under our bank credit facilities.
     As of March 31, 2008, long-term fixed rate borrowings represented approximately 61% of our total borrowings. Assuming a 100 basis-point change in LIBOR at March 31, 2008, our annual interest cost would change by approximately $50 million.

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Forward-looking Statements
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
     This Form 10-Q contains some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “could,” “might” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, new projects, future performance, the outcome of contingencies such as legal proceedings and future financial results. From time to time, we also provide oral or written forward-looking statements in our Forms 10-K, Annual Reports to Stockholders, Forms 8-K, press releases and other materials we release to the public. Any or all of our forward-looking statements in this Form 10-Q and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in this Form 10-Q — for example, government regulation and the competitive environment — will be important in determining our future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may differ materially.
     We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-K, 10-Q and 8-K reports to the Securities and Exchange Commission. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.
     You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     We incorporate by reference the information appearing under “Market Risk” in Part I, Item 2 of this Form 10-Q.
Item 4. Controls and Procedures
     Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of March 31, 2008. This conclusion is based on an evaluation conducted under the supervision and with the participation of Company management. Disclosure controls and procedures are those controls and procedures which ensure that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported in a timely manner and in accordance with Securities and Exchange Commission rules and regulations.
     During the quarter ended March 31, 2008, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
     For a complete description of the facts and circumstances surrounding material litigation we are a party to, see our Annual Report on Form 10-K for the year ended December 31, 2007. There have been no significant developments in any of the cases disclosed in our Form 10-K in the three months ended March 31, 2008.
Item 1A. Risk Factors
     A complete description of certain factors that may affect our future results and risk factors is set forth in our Annual Report on Form 10-K for the year ended December 31, 2007. There have been no material changes to those factors in the three months ended March 31, 2008.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
     Our share repurchases are only conducted under repurchase programs approved by our Board of Directors and publicly announced. The following table includes information about our share repurchases for the quarter ended March 31, 2008:
                                 
                    Shares Purchased   Maximum
    Total   Average   As Part of a   Shares Still
    Shares   Price Per   Publicly-Announced   Available for
    Purchased   Share   Program   Repurchase
January 1 – January 31, 2008
        $             18,150,000 (1)
February 1 – February 28, 2008
    8,500,000       80.00       8,500,000       9,650,000 (1)
March 1 – March 31, 2008
    7,017,486       60.85       7,017,486       2,632,514 (1)
 
                               
 
    15,517,486               15,517,486          
 
                               
 
(1)   The December 2007 repurchase program was announced in December 2007 for up to 20 million shares with no expiration.
Item 6. Exhibits
31.1   Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
 
31.2   Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
 
32.1   Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
 
32.2   Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  MGM MIRAGE
 
 
Date: May 9, 2008  By:   /s/ J. TERRENCE LANNI    
    J. Terrence Lanni   
    Chairman and Chief Executive Officer
(Principal Executive Officer) 
 
 
     
Date: May 9, 2008    /s/ DANIEL J. D’ARRIGO    
    Daniel J. D’Arrigo   
    Executive Vice President and Chief Financial Officer
(Principal Financial Officer) 
 

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