Edgar Filing: MGM Resorts International

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Form 10-Q

UNITED STATES

SECURITIES & EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨	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 Resorts International

(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)

(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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class		Outstanding at October 31, 2011
Common Stock, $.01 par value		488,830,987 shares

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

FORM 10-Q

I N D E X


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets at September 30, 2011 and December 31, 2010		1

	Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2011 and September 30, 2010		2

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and September 30, 2010		3

	Condensed Notes to Consolidated Financial Statements		4-28

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29-44

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44

Item 4.	Controls and Procedures		44

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		45

Item 1A.	Risk Factors		46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		52

Item 6.	Exhibits		52

SIGNATURES			53

Part I. FINANCIAL INFORMATION

Item 1.

Financial Statements

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	September 30, 2011			December 31, 2010
ASSETS
Current assets
Cash and cash equivalents	$	1,815,125		$	498,964
Accounts receivable, net		463,407			321,894
Inventories		104,279			96,392
Income tax receivable		—			175,982
Deferred income taxes		79,458			110,092
Prepaid expenses and other		259,538			252,321

Total current assets		2,721,807			1,455,645

Property and equipment, net		14,868,394			14,554,350

Other assets
Investments in and advances to unconsolidated affiliates		1,659,719			1,923,155
Goodwill		2,905,378			86,353
Other intangible assets, net		5,120,662			342,804
Other long-term assets, net		577,063			598,738

Total other assets		10,262,822			2,951,050

	$	27,853,023		$	18,961,045

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	158,477		$	167,084
Income taxes payable		2,639			—
Current portion of long-term debt		351,608			—
Accrued interest on long-term debt		240,780			211,914
Other accrued liabilities		1,261,843			867,223

Total current liabilities		2,015,347			1,246,221

Deferred income taxes		2,603,418			2,469,333
Long-term debt		13,099,074			12,047,698
Other long-term obligations		193,578			199,248

Commitments and contingencies (Note 9)

Stockholders’ equity
Common stock, $.01 par value: authorized 1,000,000,000 shares; issued and outstanding 488,643,408 and 488,513,351 shares		4,886			4,885
Capital in excess of par value		4,085,783			4,060,826
Retained earnings (accumulated deficit)		2,161,463			(1,066,865	)
Accumulated other comprehensive loss		(3,276	)		(301	)

Total MGM Resorts International stockholders’ equity		6,248,856			2,998,545
Noncontrolling interests		3,692,750			—

Total stockholders’ equity		9,941,606			2,998,545

	$	27,853,023		$	18,961,045

The accompanying condensed notes are an integral part of these consolidated financial statements.

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Revenues
Casino	$	1,241,959		$	643,395		$	2,629,674		$	1,862,039
Rooms		405,173			352,766			1,170,301			1,039,472
Food and beverage		369,484			343,180			1,078,268			1,019,553
Entertainment		132,350			123,907			382,037			364,524
Retail		55,509			52,618			155,951			147,569
Other		128,204			124,033			371,253			354,288
Reimbursed costs		87,144			88,551			262,914			272,235

		2,419,823			1,728,450			6,050,398			5,059,680
Less: Promotional allowances		(186,236	)		(161,333	)		(497,975	)		(478,981	)

		2,233,587			1,567,117			5,552,423			4,580,699

Expenses
Casino		795,652			356,218			1,632,382			1,067,025
Rooms		125,864			111,711			366,736			320,466
Food and beverage		214,412			197,836			628,559			585,123
Entertainment		96,889			91,129			279,605			272,386
Retail		32,641			32,093			94,279			90,671
Other		90,021			88,144			256,710			250,298
Reimbursed costs		87,144			88,551			262,914			272,235
General and administrative		304,049			292,456			875,193			850,914
Corporate expense		43,523			30,715			120,024			87,543
Preopening and start-up expenses		—			30			(316	)		4,061
Property transactions, net		81,837			326,681			82,828			1,453,652
Gain on MGM China transaction		—			—			(3,496,005	)		—
Depreciation and amortization		249,520			158,857			579,384			486,757

		2,121,552			1,774,421			1,682,293			5,741,131

Income (loss) from unconsolidated affiliates		539			1,403			95,909			(105,709	)

Operating income (loss)		112,574			(205,901	)		3,966,039			(1,266,141	)

Non-operating income (expense)
Interest expense		(272,542	)		(285,139	)		(812,680	)		(840,483	)
Non-operating items from unconsolidated affiliates		(24,692	)		(27,185	)		(92,984	)		(82,109	)
Other, net		(1,595	)		7,298			(18,567	)		157,742

		(298,829	)		(305,026	)		(924,231	)		(764,850	)

Income (loss) before income taxes		(186,255	)		(510,927	)		3,041,808			(2,030,991	)
Benefit for income taxes		79,680			192,936			212,437			732,783

Net income (loss)		(106,575	)		(317,991	)		3,254,245			(1,298,208	)
Less: Net income attributable to noncontrolling interests		(17,211	)		—			(25,917	)		—

Net income (loss) attributable to MGM Resorts International	$	(123,786	)	$	(317,991	)	$	3,228,328		$	(1,298,208	)

Income (loss) per share of common stock attributable to MGM Resorts International
Basic	$	(0.25	)	$	(0.72	)	$	6.61		$	(2.94	)

Diluted	$	(0.25	)	$	(0.72	)	$	5.83		$	(2.94	)

The accompanying notes are an integral part of these consolidated financial statements.

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities
Net income (loss)	$	3,254,245		$	(1,298,208	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		579,384			486,757
Amortization of debt discounts, premiums and issuance costs		70,312			64,177
Gain on retirement of long-term debt		(717	)		(140,642	)
Provision for doubtful accounts		19,296			22,722
Stock-based compensation		28,661			26,156
Property transactions, net		82,828			1,453,652
Gain on MGM China transaction		(3,496,005	)		—
(Income) loss from unconsolidated affiliates		(2,925	)		191,312
Distributions from unconsolidated affiliates		54,436			27,910
Change in deferred income taxes		(222,631	)		(587,172	)
Change in current assets and liabilities:
Accounts receivable		(107,133	)		(12,578	)
Inventories		394			8,330
Income taxes receivable and payable, net		178,654			195,831
Prepaid expenses and other		6,984			(11,528	)
Accounts payable and accrued liabilities		22,500			(46,654	)
Other		12,757			333

Net cash provided by operating activities		481,040			380,398

Cash flows from investing activities
Capital expenditures, net of construction payable		(176,324	)		(128,539	)
Dispositions of property and equipment		148			6,674
Acquisition of MGM China, net of cash acquired		407,046			—
Investments in and advances to unconsolidated affiliates		(107,648	)		(408,000	)
Distributions from unconsolidated affiliates		3,077			—
Distributions from cost method investments		—			110,176
Investments in treasury securities - maturities longer than 90 days		(240,239	)		—
Proceeds from treasury securities - maturities longer than 90 days		240,070			—
Other		(253	)		(1,233	)

Net cash provided by (used in) investing activities		125,877			(420,922	)

Cash flows from financing activities
Net repayments under bank credit facilities – maturities of 90 days or less		(438,880	)		(2,902,807	)
Borrowings under bank credit facilities – maturities longer than 90 days		5,774,985			8,302,606
Repayments under bank credit facilities – maturities longer than 90 days		(4,568,257	)		(7,521,601	)
Issuance of senior notes		311,415			1,995,000
Retirement of senior notes		(365,136	)		(1,154,479	)
Debt issuance costs		—			(98,531	)
Capped call transactions		—			(81,478	)
Other		(4,550	)		(1,636	)

Net cash provided by (used in) financing activities		709,577			(1,462,926	)

Effect of exchange rate on cash		(333	)		—

Cash and cash equivalents
Net increase (decrease) for the period		1,316,161			(1,503,450	)
Balance, beginning of period		498,964			2,056,207

Balance, end of period	$	1,815,125		$	552,757

Supplemental cash flow disclosures
Interest paid, net of amounts capitalized	$	713,960		$	759,557
Federal, state and foreign income taxes paid, net of refunds		(171,032	)		(331,218	)

Non-cash investing and financing activities
Increase in investment in CityCenter related to change in completion guarantee liability	$	20,460		$	348,317

The accompanying notes are an integral part of these consolidated financial statements.

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 — ORGANIZATION

Organization. MGM Resorts International (the “Company”) is a Delaware corporation that acts largely as a holding company and, through wholly owned subsidiaries, owns and/or operates casino resorts. As of September 30, 2011, approximately 23% of the outstanding shares of the Company’s common stock were owned by Tracinda Corporation, a Nevada corporation wholly owned by Kirk Kerkorian. Tracinda Corporation has significant influence with respect to the election of directors and other matters, but it does not have the power to solely determine these matters.

The Company owns and operates the following casino resorts in Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, The Mirage, Mandalay Bay, Luxor, New York-New York, Monte Carlo, Excalibur, and Circus Circus Las Vegas. Operations at MGM Grand Las Vegas include management of The Signature at MGM Grand Las Vegas, a condominium-hotel consisting of three towers. Other Nevada operations include Circus Circus Reno, Gold Strike in Jean, and Railroad Pass in Henderson. The Company and its local partners own and operate MGM Grand Detroit in Detroit, Michigan. The Company owns and operates two resorts in Mississippi: Beau Rivage in Biloxi and Gold Strike Tunica. The Company also owns Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip resorts, Primm Valley Golf Club at the California/Nevada state line and Fallen Oak golf course in Saucier, Mississippi.

The Company owns 51% and has a controlling interest in MGM China Holdings Limited (“MGM China”), which owns MGM Grand Paradise, S.A. (“MGM Grand Paradise”), the Macau company that owns the MGM Macau resort and casino and the related gaming subconcession and land concession. MGM Macau is a five-star integrated resort located on the Macau Peninsula, with a 587-room hotel, over 1,000 slot machines and over 400 table games. See Note 3 for additional information related to MGM China.

The Company owns 50% of CityCenter, located between Bellagio and Monte Carlo. The other 50% of CityCenter is owned by Infinity World Development Corp (“Infinity World”), a wholly owned subsidiary of Dubai World, a Dubai, United Arab Emirates government decree entity. CityCenter consists of Aria, a casino resort; Mandarin Oriental Las Vegas, a non-gaming boutique hotel; Crystals, a retail, dining and entertainment district; and Vdara, a luxury condominium-hotel. In addition, CityCenter features residential units in the Residences at Mandarin Oriental and Veer. The Company receives a management fee of 2% of revenues for the management of Aria and Vdara, and 5% of EBITDA (as defined in the agreements governing the Company’s management of Aria and Vdara). In addition, the Company receives an annual fee of $3 million for the management of Crystals.

The Company has 50% interests in Grand Victoria and Silver Legacy. Grand Victoria is a riverboat casino in Elgin, Illinois; an affiliate of Hyatt Gaming owns the other 50% of Grand Victoria and also operates the resort. Silver Legacy is located in Reno, adjacent to Circus Circus Reno, and the other 50% is owned by Eldorado LLC. See Note 5 for additional information related to Silver Legacy.

MGM Hospitality seeks to leverage the Company’s management expertise and well-recognized brands through strategic partnerships and international expansion opportunities. The Company has entered into management agreements for hotels in the Middle East, North Africa, India and China.

Borgata. The Company has a 50% economic interest in Borgata Hotel Casino & Spa (“Borgata”) located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation (“Boyd”) owns the other 50% of Borgata and also operates the resort. The Company’s interest is held in trust and currently offered for sale pursuant to the Company’s settlement agreement with New Jersey Department of Gaming Enforcement (“DGE”). In March 2010, the New Jersey Casino Control Commission (“CCC”) approved the Company’s settlement agreement with the DGE pursuant to which the Company placed its 50% ownership interest in Borgata and related leased land in Atlantic City into a divestiture trust. The settlement agreement was amended on July 22, 2011 with the approval of the CCC on August 8, 2011. Following the transfer of these interests into trust, the Company ceased to be regulated by the CCC or the DGE, except as otherwise provided by the trust agreement and the settlement agreement. Boyd’s 50% interest is not affected by the settlement.

The terms of the settlement agreement, as amended, mandate the sale of the trust property by March 2014, which represents an 18-month extension compared to the original agreement. During the period ending in March 2013, which also represents an 18-month extension compared to the original agreement, the Company has the right to direct the trustee to sell the trust property, subject to approval of the CCC. If a sale is not concluded by that time, the trustee is responsible for selling the trust property during the following 12-month period. Prior to the consummation of the sale, the divestiture trust will retain any cash flows received in respect of the trust property, but will pay property taxes and other costs attributable to the trust property. The Company is the sole economic beneficiary of the trust and will be permitted to reapply for a New Jersey gaming license

beginning 30 months after the completion of the sale of the trust assets. As of September 30, 2011, the trust had $188 million of cash and investments, of which $150 million is held in U.S. treasury securities with maturities greater than three months but less than one year, and is recorded within “Prepaid expenses and other.”

As a result of the Company’s ownership interest in Borgata being placed into a trust, the Company no longer has significant influence over Borgata; therefore, the Company discontinued the equity method of accounting for Borgata at the point the assets were placed in the trust in March 2010, and accounts for its investment in Borgata under the cost method of accounting. The carrying value of the investment related to Borgata is included in “Other long-term assets, net.” Earnings and losses that relate to the investment that were previously accrued remain as a part of the carrying amount of the investment. Distributions received by the trust that do not exceed the Company’s share of earnings are recognized currently in earnings. However, distributions received by the trust that exceed the Company’s share of earnings for such periods are applied to reduce the carrying amount of its investment. The Company consolidates the trust as it is the sole economic beneficiary. The trust did not receive distributions from Borgata during the three and nine months ended September 30, 2011. In the three and nine months ended September 30, 2010, the trust received distributions from the joint venture of $105 million and $120 million, of which $10 million was paid to Boyd in accordance with the joint venture agreement, as amended. The Company recorded $88 million and $94 million as a reduction in the carrying value and $7 million and $16 million was recorded as “Other, net” non-operating income in the three and nine months ended September 30, 2010, respectively.

In July 2010, the Company entered into an agreement to sell four long-term ground leases and their respective underlying real property parcels, approximately 11.3 acres, underlying the Borgata for $73 million. The Company closed the transaction in November 2010.

The Company recorded a pre-tax impairment charge of approximately $128 million at September 30, 2010 which decreased the carrying value of its investment in Borgata to approximately $250 million. The impairment charge was based on an offer received from a potential buyer at that time. The Company ultimately did not reach final agreement with such buyer. The Company continues to negotiate with other parties who have expressed interest in the asset, but can provide no assurance that a transaction will be completed.

NOTE 2— BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 2010 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

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 September 30, 2011 and the results of its operations and cash flows for the three and nine months ended September 30, 2011 and 2010. The results of operations for such periods are not necessarily indicative of the results to be expected for the full year.

As further discussed in Note 3, the Company began consolidating the results of MGM China on June 3, 2011 and ceased recording the results of MGM Macau as an equity method investment.

Certain reclassifications, which have no effect on previously reported net income, have been made to the 2010 financial statements to conform to the 2011 presentation. The Company reclassified hotel resort fees to rooms revenue from other revenue. The total amounts reclassified to rooms revenue for the three and nine months ended September 30, 2010 were $21 million and $49 million, respectively. Pursuant to the guidance in the recently issued AICPA Audit and Accounting Guide Gaming, the Company has also reclassified certain amounts paid under slot participation agreements from a reduction in casino revenue to casino expense. Slot participation fees were $9 million and $25 million in the three and nine months ended September 30, 2011, respectively, and $9 million and $28 million in the three and nine months ended September 30, 2010, respectively. Subsequent to the issuance of the Company’s September 30, 2010 financial statements, CityCenter Holdings corrected its September 30, 2010 standalone financial statements pertaining to the allocation of construction costs to residential real estate which subsequently resulted in the reversal of $17 million in residential impairment charges for the period ending September 30, 2010. The Company recorded 50% of the impairment charge calculated prior to this adjustment in its equity method accounting in

its financial statements for the period ended September 30, 2010. This adjustment had no impact on the Company’s reported net income because it had an offsetting effect on the Company’s impairment charge related to its investment in CityCenter at September 30, 2010. The Company has reclassified approximately $9 million related to its share of the adjustment from “income (loss) from unconsolidated affiliates” to “property transactions, net” for the three and nine month periods ending September 30, 2010.

Investments in and advances to unconsolidated affiliates. The Company has investments in unconsolidated affiliates accounted for under the equity method. Under the equity method, carrying value is adjusted for the Company’s share of the investees’ earnings and losses, as well as capital contributions to and distributions from these companies. Distributions in excess of equity method earnings are recognized as a return of investment and recorded as investing cash inflows in the accompanying consolidated statements of cash flows. The Company classifies operating income and losses as well as gains and impairments related to its investments in unconsolidated affiliates as a component of operating income or loss, as the Company’s investments in such unconsolidated affiliates are an extension of the Company’s core business operations.

The Company evaluates its investments in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying value of its investment may have experienced an “other-than-temporary” decline in value. If such conditions exist, the Company compares the estimated fair value of the investment to its carrying value to determine if an impairment is indicated and determines whether the impairment is “other-than-temporary” based on its assessment of all relevant factors, including consideration of the Company’s intent and ability to retain its investment. The Company estimates fair value using a discounted cash flow analysis based on estimated future results of the investee and market indicators of terminal year capitalization rates.

Fair value measurement. Fair value measurements affect the Company’s accounting and impairment assessments of its long-lived assets, investments in unconsolidated affiliates, cost method investments, assets acquired and liabilities assumed in an acquisition, goodwill, and other intangible assets. Fair value measurements also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes: “Level 1” inputs, such as quoted prices in an active market; “Level 2” inputs, which are observable inputs for similar assets; or “Level 3” inputs, which are unobservable inputs.

The Company assessed the fair value of Circus Circus Reno using “Level 3” inputs. See Note 13 for additional information related to the impairment of Circus Circus Reno. When assessing the impairment of its investment in CityCenter at June 30, 2010 and at September 30, 2010, the Company estimated fair value utilizing “Level 3” inputs. See Note 5 for additional discussion. At September 30, 2011, the fair value of the Company’s treasury securities held by the Borgata trust was $150 million, measured using “Level 1” inputs. See Note 1 for additional information related to the Borgata trust. The Company’s $300 million 4.25% convertible senior notes due 2015 issued in June 2011 were recorded at fair value on the issue date, measured using “Level 1” inputs. See Note 8 for further discussion of the convertible senior note issuance.

Property and equipment. The Company evaluates its property and equipment and other long-lived assets for impairment based on its classification as a) held for sale or b) to be held and used. Several criteria must be met before an asset is classified as held for sale, including that management with the appropriate authority commits to a plan to sell the asset at a reasonable price in relation to its fair value and is actively seeking a buyer. For assets held for sale, the Company recognizes the asset at the lower of carrying value or fair market value less costs to sell, as estimated based on comparable asset sales, offers received, or a discounted cash flow model. For assets to be held and used, the Company reviews for impairment whenever indicators of impairment exist. The Company then compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets held for sale or assets to be held and used, are recorded as operating expenses. As discussed above, the Company recorded an impairment on Circus Circus Reno in the quarter ended September 30, 2011.

Gaming promoters. A significant portion of the high-end (“VIP”) gaming volume at MGM Macau is generated through the use of gaming promoters, also known as junket operators. These operators introduce high-end gaming players to MGM Macau, assist these customers with travel arrangements, and extend gaming credit to these players. VIP gaming at MGM Macau is conducted by the use of special purpose nonnegotiable gaming chips called “rolling chips.” Gaming promoters purchase these rolling chips from

MGM Macau and in turn they sell these chips to their players. The rolling chips allow MGM Macau to track the amount of wagering conducted by each gaming promoters’ clients in order to determine VIP gaming play. In exchange for the gaming promoters’ services, MGM Macau pays them either through rolling chip turnover-based commissions or through revenue-sharing arrangements. The estimated portion of the gaming promoter payments that represent amounts passed through to VIP customers is recorded net against casino revenue, and the estimated portion retained by the gaming promoter for its compensation is recorded to casino expense.

Currency translation. The Company translates the financial statements of foreign subsidiaries that are not denominated in U.S. dollars. Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments resulting from this process are charged or credited to other comprehensive income (loss).

Recently issued accounting standards. Certain amendments to Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements,” become effective for the Company for fiscal years beginning after December 15, 2011. Such amendments include a consistent definition of fair value, enhanced disclosure requirements for “Level 3” fair value adjustments and other changes to required disclosures. The Company does not expect this amendment to have a material effect on its financial statements and will comply with the disclosure enhancements of this amendment when the amendment is effective.

In June 2011, ASC 220, “Comprehensive Income,” was amended and will become effective for the Company for fiscal years beginning after December 15, 2011, including retrospective adjustment. Such amendments allow the Company two options for the presentation of comprehensive income. Under either option, the Company is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. As a result of the amendment, the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity is eliminated. The Company does not expect this amendment to have a material effect on its financial statements and will comply with the disclosure enhancements of this amendment when the amendment is effective.

In September 2011, ASC 350, “Intangibles-Goodwill and Others,” was amended to simplify the assessment of goodwill impairment and will become effective for the Company for fiscal years beginning after December 15, 2011. The amended guidance allows the Company to do an initial qualitative assessment of relative events and circumstances to determine if fair value of a reporting unit is more likely than not less than its carrying value, prior to performing the two-step quantitative goodwill impairment test. The Company does not expect this amendment to have a material effect on its financial statements and will comply with the disclosure enhancements of this amendment when the amendment is effective.

NOTE 3 — MGM CHINA ACQUISITION

On June 3, 2011, the Company and Ms. Ho, Pansy Catilina Chiu King (“Ms. Pansy Ho”) completed a reorganization of the capital structure of MGM China and the initial public offering of 760 million shares of MGM China on The Stock Exchange of Hong Kong Limited (the “IPO”), representing 20% of the post issuance capital stock of MGM China, at an offer price of HKD 15.34 per share. Pursuant to this reorganization, the Company, through a wholly owned subsidiary, acquired an additional 1% of the overall capital stock of MGM China for HKD 15.34 per share, or approximately $75 million, and thereby became the indirect owner of 51% of MGM China. Following the IPO, Ms. Pansy Ho sold an additional 59 million shares of MGM China pursuant to the underwriters’ overallotment option.

Through the acquisition of its additional 1% interest of MGM China, the Company obtained a controlling interest and was required to consolidate MGM China as of June 3, 2011. Prior to the IPO, the Company held a 50% interest in MGM Grand Paradise, which was accounted for under the equity method as discussed in Note 5. The acquisition of the controlling financial interest was accounted for as a business combination and the Company recognized 100% of the assets, liabilities, and noncontrolling interests of MGM China at fair value at the date of acquisition. The fair value of the equity interests of MGM China was determined by the IPO transaction price and equaled approximately $7.5 billion. The carrying value of the Company’s equity method investment was significantly less than its share of the fair value of MGM China at the acquisition date, resulting in a $3.5 billion gain on the acquisition. Under the acquisition method, the fair value was allocated to the assets acquired, liabilities assumed and noncontrolling interests recorded in the transaction. The allocation of fair value for substantially all of the assets and liabilities is preliminary and may be adjusted up

to one year after the acquisition date. The following table sets forth the preliminary allocation at June 3, 2011 (in thousands):


Current assets	$	558,037
Property and equipment and other long-term assets		704,823
Goodwill		2,821,589
Gaming subconcession		4,499,727
Land concession		84,466
Customer lists		128,564
Gaming promoter relationships		179,989
Current liabilities, excluding long-term debt		(459,518	)
Long-term debt		(642,818	)
Deferred taxes		(380,628	)

	$	7,494,231

Noncontrolling interests	$	(3,672,173	)

As discussed above, the Company recognized the identifiable intangible assets of MGM China at fair value. The gaming subconcession and land concession had historical cost bases which were being amortized by MGM Macau. The customer relationship intangible assets did not have historical cost bases at MGM Macau. The estimated fair values of the intangible assets acquired were primarily determined using the income approach based on significant inputs that were not observable. The gaming subconcession was valued using an excess earnings model based on estimated future cash flows of MGM Macau. All of the recognized intangible assets were determined to have finite lives and are being amortized over their estimated useful lives as discussed below.

Gaming subconcession. Pursuant to the agreement dated June 19, 2004 between MGM Grand Paradise and Sociedade de Jogos de Macau, S.A. (“SJM”), a gaming subconcession was acquired by MGM Grand Paradise for the right to operate casino games of chance and other casino games for a period of 15 years commencing on April 20, 2005. The Company cannot provide any assurance that the gaming subconcession will be extended beyond the original terms of the agreement; however, management believes that the gaming subconcession will be extended, given that the land concession agreement with the government extends significantly beyond the gaming subconcession. In addition, management believes that the fair value of MGM China reflected in the IPO pricing suggests that market participants have assumed the gaming subconcession will be extended beyond its initial term. As such, the Company has determined that the gaming subconcession intangible asset should be amortized on a straight-line basis over the initial term of the land concession through April 2031.

Land concession. MGM Grand Paradise entered into a contract with the Macau government to use the land under MGM Macau commencing from April 6, 2006. The land use right has an initial term through April 6, 2031, subject to renewal for additional periods. The land concession intangible asset will be amortized on a straight-line basis over the remaining initial contractual term.

Customer lists. The Company recognized an intangible asset related to customer lists with an estimated value of $129 million, which will be amortized on an accelerated basis over its estimated useful life of five years.

Gaming promoter relationships. The Company recognized an intangible asset related to its relationships with gaming promoters, which will be amortized on a straight-line basis over its estimated useful life of four years.

Deferred taxes. The Company recorded a net deferred tax liability of $381 million for the acquisition of the controlling financial interest in MGM China and a corresponding increase to goodwill. The net deferred tax liability represents the excess of the financial reporting amounts of the net assets of MGM China over their respective bases under Macau tax law measured at the enacted tax rates expected to apply to taxable income in the periods such differences are expected to be realized, net of a valuation allowance of $72 million. The tax-effected components of the net deferred tax liability at June 3, 2011 are as follows (in thousands):


Deferred tax assets- foreign
Accruals, reserves and other	$	121
Bad debt reserve		3,161
Long-term debt		2,816
Net operating loss carryforward		58,781
Preopening and start-up expenses		3,838
Property and equipment		7,822

		76,539
Less: Valuation allowance		(71,670	)

		4,869

Deferred tax liabilities- foreign
Intangible assets		(385,497	)

Net deferred tax liability	$	(380,628	)

Income generated from gaming operations of MGM Grand Paradise is exempted from Macau’s 12% complementary tax through the period ending December 31, 2016 pursuant to approval from the Macau government granted on September 22, 2011. Non-gaming operations remain subject to the complementary tax. MGM Grand Paradise has a complementary tax net operating loss carryforward of $490 million resulting from non-gaming operations that will expire if not utilized against non-gaming income in years 2011 through 2013. The Macanese net operating loss carryforwards are fully offset by a valuation allowance.

MGM Grand Paradise’s exemption from the Macau 12% complementary tax on gaming profits does not apply to dividend distributions of such profits to MGM China, its sole shareholder. The complementary tax would be levied on MGM China at the time such profits are distributed. MGM Grand Paradise has submitted a request to the Macau government to settle the complementary tax that would be due on such distributions by paying a flat annual fee regardless of the amount of distributable dividends. MGM China would not be subject to the complementary tax on such distributions if such an arrangement were in place.

At June 3, 2011, the Company had an excess amount for financial reporting over the U.S. tax basis of its investment in MGM China of $3.6 billion that management does not consider to be essentially permanent in duration. The Company expects this basis difference to resolve through repatriations of future MGM China earnings. The Company has not provided deferred taxes for such excess financial reporting basis because there would be sufficient foreign tax credits to offset all U.S. income tax that would result from the future repatriation of such earnings.

Consolidated results. MGM China’s net revenue for the three months ended September 30, 2011 was $623 million, operating income was $41 million and net income was $30 million. Net revenue for the period from June 3, 2011 through September 30, 2011 was $816 million, operating income was $60 million and net income was $45 million.

Pro forma information. The operating results for MGM China and its subsidiaries are included in the accompanying consolidated statements of income from the date of acquisition. The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the Company’s acquisition of its controlling financial interest had occurred as of January 1, 2010 and does not include the gain recognized by the Company:


	Nine Months Ended September 30,
	2011			2010
	*(In thousands, except per share data)*
Net revenues	$	6,623,454		$	5,582,038
Operating income (loss)		480,664			(1,402,217	)
Net loss		(247,991	)		(1,444,177	)
Net loss attributable to MGM Resorts International		(323,876	)		(1,394,002	)

Loss per share of common stock attributable to MGM Resorts International:
Basic	$	(0.66	)	$	(3.16	)
Diluted	$	(0.66	)	$	(3.16	)

NOTE 4 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consisted of the following:


	September 30, 2011			December 31, 2010
	*(In thousands)*
Casino	$	327,702		$	229,318
Hotel		160,845			119,887
Other		85,229			66,449

		573,776			415,654
Less: Allowance for doubtful accounts		(110,369	)		(93,760	)

	$	463,407		$	321,894

NOTE 5 — INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Investments in and advances to unconsolidated affiliates includes:


	September 30, 2011		December 31, 2010
	*(In thousands)*
CityCenter Holdings, LLC – CityCenter (50%)	$	1,331,887	$	1,417,843
Elgin Riverboat Resort–Riverboat Casino – Grand Victoria (50%)		291,228		294,305
MGM Grand Paradise Limited – Macau (50%)		—		173,030
Circus and Eldorado Joint Venture – Silver Legacy (50%)		25,372		25,408
Other		11,232		12,569

	$	1,659,719	$	1,923,155

The Company recorded its share of the results of operations of unconsolidated affiliates as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	*(In thousands)*
Income (loss) from unconsolidated affiliates	$	539		$	1,403		$	95,909		$	(105,709	)
Preopening and start-up expenses		—			—			—			(3,494	)
Non-operating items from unconsolidated affiliates		(24,692	)		(27,185	)		(92,984	)		(82,109	)

	$	(24,153	)	$	(25,782	)	$	2,925		$	(191,312	)

Borgata

As discussed in Note 1, the Company discontinued the equity method of accounting for Borgata in March 2010 at the point the assets were placed in the trust, and accounts for its rights under the trust arrangement under the cost method of accounting.

Silver Legacy

Silver Legacy has approximately $143 million of outstanding senior notes due in March 2012. Silver Legacy is exploring various alternatives for refinancing or restructuring its obligations under the notes. There can be no assurance, however, that it will be able to refinance or restructure the notes on acceptable terms, or at all. If Silver Legacy is unable to refinance or restructure its obligations with respect to the mortgage notes, the holders of the notes will be entitled to exercise the remedies provided in the indenture governing the notes, including foreclosing on the assets securing the mortgage notes.

MGM Macau

As discussed in Note 3, the Company obtained a controlling financial interest in MGM China as of June 3, 2011 and therefore was required to consolidate MGM China beginning on that date. Prior thereto, the Company’s investment in MGM Grand Paradise was accounted for under the equity method. Prior to the transaction the Company received distributions from MGM Macau of approximately $192 million in the fourth quarter of 2010 and $31 million in the first quarter of 2011. No distributions have been received from MGM China subsequent to June 3, 2011.

CityCenter

January 2011 debt restructuring transactions. In January 2011, CityCenter completed a series of transactions including the issuance of $900 million in aggregate principal amount of 7.625% senior secured first lien notes due 2016 and $600 million in aggregate principal amount of 10.75%/11.50% senior secured second lien PIK toggle notes due 2017 in a private placement. The interest rate on the second lien notes is 10.75% for interest paid in cash, and 11.50% if CityCenter pays interest in the form of additional debt. CityCenter received net proceeds from the offering of the notes of $1.46 billion after initial purchaser’s discounts and commissions but before other offering expenses.

Effective concurrently with the notes offering, CityCenter’s senior credit facility was amended and restated which extended the maturity of $500 million of the $1.85 billion outstanding loans until January 21,

2015. The restated senior credit facility does not include a revolving loan component. All borrowings under the senior credit facility in excess of $500 million were repaid using the proceeds of the first lien notes and the second lien notes. In addition, net proceeds from the note offerings, together with equity contributions of $73 million from the members, were used to fund the interest escrow account of $159 million for the benefit of the holders of the first lien notes and the lenders under the restated senior credit facility. The restated senior credit facility is secured, on a pari passu basis with the first lien notes, by a first priority lien on substantially all of CityCenter’s assets and those of its subsidiaries, except that any proceeds generated by the sale of Crystals outside of bankruptcy or foreclosure proceedings will be paid first to the lenders under the restated senior credit facility. CityCenter recorded a loss on the debt modification of $24 million in the first quarter of 2011 related to the above transactions.

Completion guarantee. The Company entered into an amended completion and cost overrun guarantee in connection with CityCenter’s restated senior credit facility agreement and issuance of $1.5 billion of senior secured first lien notes and senior secured second lien notes, as discussed in Note 9.

Investment impairment. At June 30, 2010, the Company reviewed its CityCenter investment for impairment using revised operating forecasts developed by CityCenter management late in the second quarter. Based on the then current and forecasted market conditions and because CityCenter’s results of operations through June 30, 2010 were below previous forecasts, and the revised operating forecasts were lower than previous forecasts, management concluded it should review the carrying value of its investment. Based on its analysis, the Company determined that the carrying value of its investment exceeded its fair value and therefore an impairment was indicated. The Company intends to and believes it will be able to retain its investment in CityCenter; however, due to the extent of the shortfall and the Company’s assessment of the uncertainty of fully recovering its investment, the Company determined that the impairment was “other-than-temporary” and recorded an impairment charge of $1.12 billion included in “Property transactions, net.”

At September 30, 2010, the Company recognized an increase of $232 million in its total net obligation under its CityCenter completion guarantee, and a corresponding increase in its investment in CityCenter. The increase primarily reflects revisions to prior estimates based on the Company’s assessment of the most current information derived from the CityCenter close-out and litigation processes and does not reflect certain potential recoveries that are being pursued as part of the litigation process. The Company completed an impairment review as of September 30, 2010 and as a result recorded an additional “other-than-temporary” impairment of $191 million in the third quarter of 2010, included in “Property transactions, net.”

The Company’s discounted cash flow analysis for CityCenter included future cash inflows from operations, including residential sales, and estimated future cash outflows for capital expenditures. Both analyses used an 11% discount rate and a long-term growth rate of 4% related to forecasted cash flows for CityCenter’s operating assets.

Residential inventory impairment. Upon substantial completion of construction of the Mandarin Oriental residential inventory in the first quarter of 2010 and the Veer residential inventory in the second quarter of 2010, CityCenter is required to carry its residential inventory at the lower of its carrying value or fair value less costs to sell. Fair value of the residential inventory is determined using a discounted cash flow analysis based on management’s current expectations of future cash flows. The key inputs in the discounted cash flow analysis include estimated sales prices of units currently under contract and new unit sales, the absorption rate over the sell-out period, and the discount rate.

CityCenter recorded a residential impairment charge of $53 million in the second quarter of 2011. The Company recognized 50% of such impairment charge, resulting in a pre-tax charge of approximately $26 million.

In the three and nine months ended September 30, 2010, CityCenter recorded residential impairment charges of $76 million and $304 million, respectively. The Company recognized 50% of such impairment charges, resulting in pre-tax charges of approximately $38 million and $152 million in the three and nine months ended September 30, 2010, respectively.

Harmon. During the third quarter of 2010, CityCenter management determined that it was unlikely that the Harmon Hotel & Spa (“Harmon”) would be completed using the building as it stood. As a result, CityCenter recorded an impairment charge of $279 million in the third quarter of 2010 related to construction in progress assets. The impairment of Harmon did not affect the Company’s loss from unconsolidated affiliates in the third quarter of 2010, because the Company’s 50% share of the impairment charge had previously been recognized by the Company in connection with prior impairments of its investment balance. See Note 9 for additional information about Harmon.

CityCenter summary financial information. Summarized balance sheet information of the CityCenter joint venture is as follows:


	September 30, 2011		December 31, 2010
	*(In thousands)*
Current assets	$	430,584	$	211,646
Property and other long-term assets, net		9,141,186		9,430,171
Current liabilities		332,243		381,314
Long-term debt and other liabilities		2,550,116		2,752,196
Equity		6,689,411		6,508,307

Summary results of operations for CityCenter are provided below:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	*(In thousands)*
Net revenues	$	260,002		$	413,483		$	812,906		$	1,074,877
Operating expenses, except preopening expenses		(300,011	)		(796,929	)		(979,560	)		(1,835,541	)
Preopening and start-up expenses		—			—			—			(6,202	)

Operating loss		(40,009	)		(383,446	)		(166,654	)		(766,866	)
Other non-operating expense		(66,628	)		(65,806	)		(220,979	)		(179,252	)

Net loss	$	(106,637	)	$	(449,252	)	$	(387,633	)	$	(946,118	)

Net revenues related to residential operations were $5 million and $20 million in the three and nine months ended September 30, 2011, respectively and $166 million and $464 million in the three and nine months ended September 30, 2010, respectively.

NOTE 6 — GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets consisted of the following:


	September 30, 2011		December 31, 2010
	*(In thousands)*
Goodwill:
Mirage Resorts acquisition (2000)	$	39,648	$	39,648
Mandalay Resort Group acquisition (2005)		45,510		45,510
MGM China acquisition (2011)		2,819,025		—
Other		1,195		1,195

	$	2,905,378	$	86,353

Indefinite-lived intangible assets:
Detroit development rights	$	98,098	$	98,098
Trademarks, license rights and other		234,573		235,672

		332,671		333,770

Finite-lived intangible assets:
Macau gaming subconcession		4,421,487		—
Macau land concession		82,998		—
Macau customer lists		109,794		—
Macau gaming promoter relationships		165,132		—
Other intangible assets, net		8,580		9,034

		4,787,991		9,034

	$	5,120,662	$	342,804

See Note 3 for additional information related to the goodwill and intangible assets recognized as part of the MGM China transaction.

NOTE 7 — OTHER ACCRUED LIABILITIES

Other accrued liabilities includes:


	September 30, 2011		December 31, 2010
	*(In thousands)*
Payroll and related	$	313,020	$	256,305
Advance deposits and ticket sales		123,813		114,808
Casino outstanding chip liability		259,776		79,987
Casino front money deposits		87,797		97,586
Other gaming related accruals		144,544		79,062
Taxes, other than income taxes		171,424		63,888
CityCenter completion guarantee		13,648		79,583
Other		147,821		96,004

	$	1,261,843	$	867,223

NOTE 8 — LONG-TERM DEBT

Long-term debt consists of the following:


	September 30, 2011			December 31, 2010
	*(In thousands)*
Senior credit facility:
$1,834 million term loans, net	$	1,717,494		$	1,686,043
Revolving loans		1,329,000			470,000
MGM Grand Paradise credit facility		551,020			—
$325.5 million 8.375% senior subordinated notes, repaid in 2011		—			325,470
$128.7 million 6.375% senior notes, due 2011, net		128,731			128,913
$534.7 million 6.75% senior notes, due 2012		534,650			544,650
$462.2 million 6.75% senior notes, due 2013		462,226			484,226
$150 million 7.625% senior subordinated debentures, due 2013, net		151,709			152,366
$750 million 13% senior secured notes, due 2013, net		723,616			716,045
$508.9 million 5.875% senior notes, due 2014, net		508,153			507,922
$650 million 10.375% senior secured notes, due 2014, net		639,147			636,578
$875 million 6.625% senior notes, due 2015, net		877,345			877,747
$1,450 million 4.25% convertible senior notes, due 2015, net		1,466,390			1,150,000
$242.9 million 6.875% senior notes, due 2016		242,900			242,900
$732.7 million 7.5% senior notes, due 2016		732,749			732,749
$500 million 10% senior notes, due 2016, net		495,130			494,600
$743 million 7.625% senior notes, due 2017		743,000			743,000
$850 million 11.125% senior secured notes, due 2017, net		831,721			830,234
$475 million 11.375% senior notes, due 2018, net		464,651			463,869
$845 million 9% senior secured notes, due 2020		845,000			845,000
Floating rate convertible senior debentures, due 2033		36			8,472
$0.6 million 7% debentures, due 2036, net		573			573
$4.3 million 6.7% debentures, due 2096		4,265			4,265
Other notes		1,176			2,076

		13,450,682			12,047,698
Less: Current portion		(351,608	)		—

	$	13,099,074		$	12,047,698

In September 2011, the Company borrowed an additional $879 million under its senior credit facility to increase its capacity for issuing additional secured indebtedness; these borrowings were repaid immediately after quarter end. As a result, outstanding senior notes due within one year of the balance sheet date in excess of the available capacity under the Company’s senior credit facility were classified as current obligations at September 30, 2011. Amounts outstanding under the MGM Grand Paradise credit facility were classified as long-term as MGM Grand Paradise has both the intent and ability to repay amortization payments under the term loan due within one year of the balance sheet date with available borrowings under the revolving loan.

At December 31, 2010, long-term debt due within one year of the balance sheet date was classified as long-term because the Company had both the intent and ability to repay these amounts with available borrowings under the senior credit facility. The Company did not capitalize interest in the three and nine months ending September 30, 2011 and 2010.

Senior credit facility. The Company’s senior credit facility matures in February 2014 and consists of approximately $1.8 billion in term loans and a $1.7 billion revolving loan. Giving effect to the subsequent repayment discussed above, the Company would have had approximately $1.2 billion of available borrowing capacity under its senior credit facility at September 30, 2011. Substantially all of the assets of MGM Grand Detroit serve as collateral to secure its $450 million obligation outstanding as a co-borrower under the Company’s senior credit facility. In addition, substantially all of the assets of Gold Strike Tunica and certain land across from the Luxor serve as collateral to secure up to $300 million of obligations outstanding under the Company’s senior credit facility.

Interest on the senior credit facility is based on a LIBOR margin of 5.00%, with a LIBOR floor of 2.00%, and a base rate margin of 4.00%, with a base rate floor of 4.00%. The interest rate on outstanding borrowings under the senior credit facility at September 30, 2011 and December 31, 2010 was 7.0%.

At September 30, 2011, the Company and its restricted subsidiaries were required under the senior credit facility to maintain a minimum trailing annual EBITDA (as defined in the agreement governing the Company’s senior credit facility) of $1.15 billion, which increases to $1.2 billion as of December 31, 2011, with periodic increases thereafter. EBITDA for the trailing twelve months ended September 30, 2011 calculated in accordance with the terms of the senior credit facility was $1.26 billion. Additionally, the Company and its restricted subsidiaries are limited to $500 million of annual capital expenditures (as defined) during 2011; the Company was in compliance with the maximum capital expenditures covenants at September 30, 2011.

MGM Grand Paradise credit facility. MGM Grand Paradise’s credit facility is comprised of approximately $551 million in term loans and a $400 million revolving loan. The outstanding balance of MGM Grand Paradise’s credit facility at September 30, 2011 is comprised solely of term loans. Based on exchange rates at that date, the outstanding balance is equivalent to approximately $551 million. Scheduled amortization on the term loan begins in July 2012 with a lump sum payment of approximately $276 million upon final maturity in July 2015. The revolving loan may be redrawn, but is required to be repaid in full on the last date of the respective term loan, no later than July 2015. Interest on the term loan facility is based on HIBOR plus a margin ranging between 3% and 4.5%, based on MGM Grand Paradise’s adjusted leverage ratio, as defined in its credit facility agreement. Interest on the revolving facility can be denominated in either Hong Kong dollars or U.S. dollars and is based on the same margin range, plus HIBOR or LIBOR, as appropriate. As of September 30, 2011, the credit facility is denominated entirely in Hong Kong dollars and interest is based on the margin range of 3%, plus HIBOR. Substantially all of the assets of MGM Grand Paradise serve as collateral for the MGM Grand Paradise credit facility, which is guaranteed by MGM China and certain of its direct and indirect subsidiaries.

At September 30, 2011, MGM Grand Paradise was required to maintain a specified adjusted leverage ratio, as defined, at the end of each quarter while the loans are outstanding. The adjusted leverage ratio is required to be no greater than 4.00 to 1.00 for each quarter during 2011 and no greater than 3.50 to 1.00 thereafter. In addition, MGM Grand Paradise is required to maintain a debt service coverage ratio, as defined of no less than 1.50 to 1.00 at each quarter end. At September 30, 2011, MGM Grand Paradise was in compliance with its adjusted leverage ratio and debt service coverage ratios.

Convertible notes. In June 2011, the Company sold $300 million in aggregate principal amount of the Company’s 4.25% convertible senior notes due 2015 (the “Notes”) on terms that were consistent with those governing the Company’s existing convertible senior notes due 2015 for a purchase price of 103.805% of the principal amount to an indirect wholly owned subsidiary of Ms. Pansy Ho in a transaction exempt from registration under the Securities Act of 1933, as amended. The Notes are convertible at an initial conversion rate, subject to adjustment under certain circumstances, of approximately 53.83 shares of the Company’s common stock per $1,000 principal amount of the Notes. The Company received approximately $311 million in proceeds related to this transaction.

The initial agreement to sell the Notes occurred in April 2011, and the Notes were not sold until June 2011. The agreement to issue the Notes at a later date based on the fixed terms described above constituted a derivative instrument. At issuance, the fair value of the derivative instrument was equal to the difference between the fair value of the Notes and the Notes’ issuance price. The Notes were recorded at fair value determined by the trading price (105.872%) of the Company’s existing convertible notes on the date of

issuance of the Notes, with the difference recorded as a premium to be recognized over the term of the Notes. The Company recorded a loss of $6 million related to the change in fair value of the derivative in “Other, net” non-operating income (expense) during the second quarter of 2011.

Senior and senior secured notes. In February 2011, the Company repaid the $325 million of outstanding principal amount of its 8.375% senior subordinated notes due 2011 at maturity.

During the three months ended September 30, 2011, the Company repurchased $10 million principal amount of its 6.75% senior notes due 2012 and $22 million principal amount of its 6.75% senior notes due 2013 in open market repurchases and recognized a gain of approximately $1 million in “Other, net” related to these transactions.

Substantially all of the assets of New York-New York serve as collateral for the Company’s 13% senior secured notes due 2013, substantially all of the assets of Bellagio and The Mirage serve as collateral for the Company’s 10.375% senior secured notes due 2014 and the 11.125% senior secured notes due 2017, and substantially all of the assets of MGM Grand serve as collateral for the Company’s 9.00% senior secured notes due 2020. Upon the issuance of the 10.375%, 11.125% and 9.00% notes, the holders of the Company’s 13% senior secured notes due 2013 obtained an equal and ratable lien in all collateral securing these notes.

Fair value of long-term debt. The estimated fair value of the Company’s long-term debt at September 30, 2011 was approximately $13.0 billion. Fair value was estimated using quoted market prices for the Company’s senior notes, senior subordinated notes and senior credit facility. Carrying value of the MGM Grand Paradise credit facility approximates fair value. At December 31, 2010, the estimated fair value of the Company’s long-term debt was approximately $12.4 billion, and was based on quoted market prices.

NOTE 9 — COMMITMENTS AND CONTINGENCIES

CityCenter completion guarantee. In January 2011, the Company entered into an amended completion and cost overrun guarantee in connection with CityCenter’s restated senior credit facility agreement and issuance of $1.5 billion of senior secured first lien notes and senior secured second lien toggle notes, as previously discussed. Consistent with the terms of the previous completion guarantee, the terms of the amended completion guarantee provide for the ability to utilize the then remaining $124 million of net residential proceeds to fund construction costs, or to reimburse the Company for construction costs previously expended, though the timing of receipt of such proceeds is uncertain. The completion guarantee is collateralized by substantially all of the assets of Circus Circus Las Vegas, as well as certain undeveloped land adjacent to that property.

As of September 30, 2011, the Company has funded $624 million under the completion guarantee. The Company has recorded a receivable from CityCenter of $108 million related to these amounts, which represents amounts reimbursable to the Company from CityCenter from future residential proceeds. The Company has a remaining estimated net obligation under the completion guarantee of $14 million which includes estimated litigation costs related to the resolution of disputes with contractors as to the final construction costs and estimated amounts to be paid to contractors either through the joint venture’s extra-judicial settlement process or through the legal process related to the Perini litigation. The Company’s accrual also reflects certain estimated offsets to the amounts claimed by the contractors. CityCenter has reached, or expects to reach, settlement agreements with most of the construction subcontractors. However, significant disputes remain with the general contractor and certain subcontractors. Amounts claimed by such parties exceed amounts included in the Company’s completion guarantee accrual by approximately $200 million, as such amounts exceed the Company’s best estimate of its liability. Moreover, the Company has not accrued for any contingent payments to CityCenter related to the Harmon Hotel & Spa component, which is unlikely to be completed using the building as it now stands. The Clark County Building Division (the “Building Division”) requested that CityCenter conduct an analysis, based on all available information, as to the structural stability of the Harmon under building-code-specified load combinations. On July 11, 2011 a consulting engineer engaged by CityCenter for this review submitted the results of his analysis of the Harmon tower and podium in its current as-built condition. The engineer opined, among other things, that “[i]n a code-level earthquake, using either the permitted or current code specified loads, it is likely that critical structural members in the tower will fail and become incapable of supporting gravity loads, leading to a partial or complete collapse of the tower. There is missing or misplaced reinforcing steel in columns, beams, shear walls, and transfer walls throughout the structure of the tower below the twenty-first floor.” In response to this opinion, on July 12, 2011 the Building Division required CityCenter, no later than August 15, 2011, “to provide a plan of action that will abate the potential for structural collapse and protect impacted uses and occupancies.” Under the relevant building code provision, “abate” means repair, rehabilitation, demolition or removal of the subject building.

On August 15, 2011, after expert consultation, CityCenter submitted its reply to the Building Division. CityCenter informed the Building Division that it has decided to abate the potential for structural collapse of the Harmon in the event of a code-level earthquake by demolishing the building, and enclosed a plan of action for demolition by implosion prepared by LVI Environmental Services of Nevada, Inc. CityCenter also advised that prior to undertaking the demolition plan of action, it will seek relief from a standing order of the District Court judge presiding over the Perini litigation that prohibits alteration or destruction of the building without court approval. In addition, CityCenter supplied the foundational data for the engineering conclusions stated in the July 11, 2011 letter declaring the Harmon’s structural instability in the event of a code-level earthquake.

The Building Division advised CityCenter that the Building Division’s staff will review CityCenter’s August 15, 2011 submission and then issue its conclusions to CityCenter, but the Building Division did not specify a date for such guidance. By letter dated August 18, 2011, the Building Division requested further information from, and a meeting with, CityCenter’s retained engineering firm concerning the latter’s data, computations and conclusions regarding the Harmon’s as-built condition. Pursuant to this request by the Building Division, representatives from CityCenter’s retained engineering firm have met with the Building Division and directly responded to the Building Division’s inquiries.

CityCenter’s restated senior credit facility provides that certain demolition expenses may be funded only by equity contributions from the members of the CityCenter venture or certain specified extraordinary receipts (which include any proceeds from the Perini litigation).

CityCenter construction litigation. In March 2010, Perini Building Company, Inc. (“Perini”), general contractor for the CityCenter development project (the “Project”), filed a lawsuit in the Eighth Judicial District Court for Clark County, State of Nevada, against MGM MIRAGE Design Group (a wholly owned subsidiary of the Company which was the original party to the Perini construction agreement) and certain direct or indirect subsidiaries of CityCenter Holdings, LLC (the “CityCenter Owners”). Perini asserts that the Project was substantially completed, but the defendants failed to pay Perini approximately $490 million allegedly due and owing under the construction agreement for labor, equipment and materials expended on the Project. The complaint further charges the defendants with failure to provide timely and complete design documents, late delivery to Perini of design changes, mismanagement of the change order process, obstruction of Perini’s ability to complete the Harmon Hotel & Spa component, and fraudulent inducement of Perini to compromise significantly amounts due for its general conditions. The complaint advances claims for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing, unjust enrichment and promissory estoppel, and fraud and intentional misrepresentation. Perini seeks compensatory damages, punitive damages, attorneys’ fees and costs.

In April 2010, Perini served an amended complaint in this case which joins as defendants many owners of CityCenter residential condominium units (the “Condo Owner Defendants”), adds a count for foreclosure of Perini’s recorded master mechanic’s lien against the CityCenter property in the amount of approximately $491 million, and asserts the priority of this mechanic’s lien over the interests of the CityCenter Owners, the Condo Owner Defendants and the Project lenders in the CityCenter property.

The CityCenter Owners and the other defendants dispute Perini’s allegations, and contend that the defendants are entitled to substantial amounts from Perini, including offsets against amounts claimed to be owed to Perini and its subcontractors and damages based on breach of their contractual and other duties to CityCenter, duplicative payment requests, non-conforming work, lack of proof of alleged work performance, defective work related to the Harmon Hotel & Spa component, property damage and Perini’s failure to perform its obligations to pay Project subcontractors and to prevent filing of liens against the Project. Parallel to the court litigation CityCenter management conducted an extra-judicial program for settlement of Project subcontractor claims. CityCenter has resolved the claims of the majority of the 223 first-tier subcontractors, with only several remaining for further proceedings along with trial of Perini’s claims and CityCenter’s Harmon-related counterclaim and other claims by CityCenter against Perini and its parent guarantor, Tutor Perini. In December 2010, Perini recorded an amended notice of lien reducing its lien to approximately $313 million.

The CityCenter Owners and the other defendants will continue to vigorously assert and protect their interests in the lawsuit. The Company believes that a loss with respect to Perini’s punitive damages claim is neither probable nor reasonably possible. Please refer to the disclosure above for further discussion on the Company’s completion guarantee obligation which may be impacted by the outcome of the above litigation and the joint venture’s extra-judicial settlement process.

Call center litigation. Lori Zaragoza v. MGM MIRAGE, Inc. and MGM Resorts International, Case No. BC 461912, Los Angeles County Superior Court, filed May 18, 2011. This putative class action complaint alleges that during the one year prior to the filing defendant’s call center reservation agents monitored and recorded consumer telephone calls for hotel room and other hospitality-related bookings, without prior notice to plaintiff and other California consumers in violation of various provisions of the California Penal Code. The plaintiff seeks certification of a class action, compensatory damages including consequential or statutory damages pursuant to California Penal Code §637.2, whichever is greater, injunctive relief, prejudgment interest and costs of suit. The case is in its early stages and the Company cannot reasonably estimate a possible range of loss at this time. The Company contests that the complaint has merit and will vigorously defend itself against the claims in this lawsuit. Based on fact investigation conducted to date in this case, defendant does not expect to incur a material loss with respect to this case.

Other 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 September 30, 2011, the Company had provided $37 million of total letters of credit.

Other 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, results of operations or cash flows.

NOTE 10 — INCOME (LOSS) PER SHARE OF COMMON STOCK

The weighted-average number of common and common equivalent shares used in the calculation of basic and diluted income (loss) per share consisted of the following:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011		2010
	*(In thousands)*
Numerator:
Net income (loss) attributable to MGM Resorts International - basic	$	(123,786	)	$	(317,991	)	$	3,228,328	$	(1,298,208	)
Interest on convertible debt, net of tax		—			—			28,141		—

Net income (loss) attributable to MGM Resorts International - diluted	$	(123,786	)	$	(317,991	)	$	3,256,469	$	(1,298,208	)

Denominator:
Weighted-average common shares outstanding - basic		488,636			441,328			488,595		441,289
Potential dilution from share-based awards		—			—			1,773		—
Potential dilution from assumed conversion of convertible debt		—			—			68,176		—

Weighted-average common and common equivalent shares-diluted		488,636			441,328			558,544		441,289

Anti-dilutive share-based awards excluded from the calculation of diluted earnings per share		28,791			26,008			19,900		26,008

NOTE 11 — STOCKHOLDERS’ EQUITY, NONCONTROLLING INTERESTS AND COMPREHENSIVE INCOME (LOSS)

Authorized common stock. In June 2011, the stockholders of the Company approved a proposal to amend and restate the Amended and Restated Certificate of Incorporation of the Company to increase the Company’s number of authorized shares of common stock to 1,000,000,000 shares.

Noncontrolling interests. As discussed in Note 3, the Company became the controlling shareholder of MGM China and began consolidating the financial position of MGM China in its financial statements as of June 3, 2011. The noncontrolling interests in MGM China and other minor subsidiaries are presented as a separate component of stockholders’ equity in the Company’s consolidated balance sheets, and the net income attributable to noncontrolling interests is presented on the Company’s consolidated statements of operations.

Net income attributable to noncontrolling interests was $17 million and $26 million for the three and nine months ended September 30, 2011, respectively.

Supplemental equity information. The following table presents the Company’s changes in equity and accumulated other comprehensive income (loss) for the nine months ended September 30, 2011:


	Common Stock		Capital in Excess of Par Value			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Total MGM Resorts International Stockholders’ Equity			Noncontrolling Interests			Total Stockholders’ Equity
	*(In thousands)*
Balances, January 1, 2011	$	4,885	$	4,060,826		$	(1,066,865	)	$	(301	)	$	2,998,545		$	—		$	2,998,545
Net income		—		—			3,228,328			—			3,228,328			25,917			3,254,245
Currency translation adjustment		—		—			—			(2,938	)		(2,938	)		(3,424	)		(6,362	)
Other comprehensive loss from unconsolidated affiliate, net		—		—			—			(37	)		(37	)		—			(37	)

Total comprehensive income													3,225,353			22,493			3,247,846

MGM China acquisition		—		—			—						—			3,672,173			3,672,173
Stock-based compensation		—		31,104			—			—			31,104			856			31,960
Change in excess tax benefit from stock-based compensation		—		(5,609	)		—			—			(5,609	)		—			(5,609	)
Issuance of common stock pursuant to stock-based compensation awards		1		(684	)		—			—			(683	)		—			(683	)
Cash distributions		—		—			—			—			—			(2,772	)		(2,772	)
Other		—		146			—			—			146			—			146

Balances, September 30, 2011	$	4,886	$	4,085,783		$	2,161,463		$	(3,276	)	$	6,248,856		$	3,692,750		$	9,941,606

Comprehensive income (loss). Comprehensive income (loss) consisted of the following:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	*(In thousands)*
Net income (loss) including noncontrolling interests	$	(106,575	)	$	(317,991	)	$	3,254,245		$	(1,298,208	)
Currency translation adjustment		(3,528	)		1,151			(6,362	)		388
Other		—			—			(37	)		(70	)

		(110,103	)		(316,840	)		3,247,846			(1,297,890	)
Less: comprehensive income attributable to noncontrolling interests		(15,439	)		—			(22,493	)		—

Comprehensive income (loss) attributable to MGM Resorts International	$	(125,542	)	$	(316,840	)	$	3,225,353		$	(1,297,890	)

NOTE 12 — STOCK-BASED COMPENSATION

2005 Omnibus Incentive Plan. The Company’s omnibus incentive plan, as amended (“Omnibus Plan”), allows it to grant stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), and other stock-based awards to eligible directors, officers and employees of the Company and its subsidiaries. The plans are administered by the Compensation Committee (the “Committee”) of the Board of Directors. 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:

•

As amended, the omnibus plan allows for the issuance of up to 35 million shares or share-based awards; and

•

For stock options and SARs, 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 10 years.

Stock options and SARs granted under all plans generally have terms of either seven or ten years, and in most cases vest in either four or five equal annual installments. RSUs granted vest ratably over four years.

As of September 30, 2011, the Company had an aggregate of approximately 11 million shares of common stock available for grant as share-based awards under the Company’s omnibus incentive plan. A summary of activity under the Company’s share-based payment plans for the nine months ended September 30, 2011 is presented below:

Stock options and stock appreciation rights (“SARs”)


	Shares (000’s)			Weighted Average Exercise Price
Outstanding at January 1, 2011		28,129		$	21.73
Granted		785			11.56
Exercised		(268	)		10.38
Forfeited or expired		(809	)		27.04

Outstanding at September 30, 2011		27,837			21.40

Exercisable at September 30, 2011		18,907			25.44

As of September 30, 2011, there was a total of $45 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 1.7 years.

Restricted stock units (“RSUs”)


	Shares (000’s)			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2011		1,144		$	13.90
Granted		—			—
Vested		(104	)		18.76
Forfeited		(86	)		13.98

Nonvested at September 30, 2011		954			13.36

As of September 30, 2011, there was a total of $21 million of unamortized compensation related to RSUs which is expected to be recognized over a weighted-average period of 1.2 years.

The following table includes additional information related to stock options, SARs and RSUs:


	Nine Months Ended September 30,
	2011		2010
	*(In thousands)*
Intrinsic value of share-based awards exercised or RSUs vested	$	2,485	$	2,125
Income tax benefit from share-based awards exercised or RSUs vested		863		739

The Company net settles stock option exercises, whereby shares of common stock are issued equivalent to the intrinsic value of the option less applicable taxes. Accordingly, the Company does not receive proceeds from the exercise of stock options.

MGM China Share Option Plan. The Company’s subsidiary, MGM China, adopted an equity award plan in 2011 for grants of stock options to purchase ordinary shares of MGM China to eligible directors, employees and non-employees of MGM China and its subsidiaries (“MGM China Plan”). The MGM China

Plan is administered by MGM China’s Board of Directors, which has the discretion to determine the exercise price and term of the award, as well as other conditions, in all cases subject to certain limits, including:

•

The current MGM China Plan allows for a maximum of 30% of the total number of shares of MGM China in issue at the date of approval of the MGM China Plan to be issued upon exercise; and

•

The exercise price of the award must be the higher of the closing price of the stock on the offer date, or the average of the closing price for the five business days immediately preceding the offer date, and the maximum term of the award must not exceed ten years.

Stock options currently granted under the MGM China Plan have a term of ten years, and vest in four equal annual installments. Expense is recognized on a straight-line basis over the vesting period of the awards net of estimated forfeitures. 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. The Company estimates the fair value of stock options granted under the MGM China Plan using the Black-Scholes model. Expected volatilities are based on historical volatility from a selection of companies in MGM China’s peer group due to MGM China’s lack of historical information. The Company determined expected term based on a binomial model. The risk-free interest rate was based on rates in effect at the grant date for the Hong Kong Exchange Fund Note with maturities matching the relevant expected term of the award.

As of September 30, 2011, MGM China had an aggregate of approximately 1.1 billion shares of options available for grant as share-based awards. A summary of activity under the MGM China Plan for the nine months ended September 30, 2011 is presented below:

Stock options


	Shares (000’s)		Weighted Average Exercise Price
Outstanding at January 1, 2011		—	$	—
Granted		19,100		2.00

Outstanding at September 30, 2011		19,100		2.00

Exercisable at September 30, 2011		—		—

As of September 30, 2011, there was a total of $21 million of unamortized compensation related to stock options expected to vest, which is expected to be recognized over a weighted-average period of 4.0 years.

Recognition of compensation cost. Compensation cost for both the Omnibus Plan and MGM China Plan was recognized as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	*(In thousands)*
Omnibus Plan:
Stock options and SARS	$	5,650		$	4,951		$	17,307		$	14,971
RSUs		4,148			4,870			12,906			14,996
MGM China Plan		1,347			—			1,748			—

Total compensation cost		11,145			9,821			31,961			29,967
Less: CityCenter reimbursed costs		(1,091	)		(1,222	)		(3,300	)		(3,811	)

Compensation cost recognized as expense		10,054			8,599			28,661			26,156
Less: Related tax benefit		(3,031	)		(2,996	)		(9,368	)		(9,102	)

Compensation expense, net of tax benefit	$	7,023		$	5,603		$	19,293		$	17,054

Compensation cost for SARs granted under the 2005 Omnibus Plan is 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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Expected volatility		69	%		74	%		68	%		74	%
Expected term		4.9	yrs.		4.8	yrs.		4.9	yrs.		4.8	yrs.
Expected dividend yield		0	%		0	%		0	%		0	%
Risk-free interest rate		1.0	%		1.2	%		1.3	%		1.6	%
Forfeiture rate		6.1	%		4.8	%		6.1	%		4.8	%
Weighted-average fair value of options granted	$	5.91		$	6.24		$	6.51		$	7.32

Expected volatility is based in part on historical volatility and in part on implied volatility based on traded options on the Company’s stock. The expected term considers the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury instruments with maturities matching the relevant expected term of the award.

Compensation cost for stock options granted under the MGM China Plan is 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 September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
Expected volatility		60	%		NA		60	%		NA
Expected term		8.0	yrs.		NA		8.0	yrs.		NA
Expected dividend yield		0	%		NA		0	%		NA
Risk-free interest rate		1.6	%		NA		1.6	%		NA
Weighted-average fair value of options granted	$	1.10			NA	$	1.26			NA

NOTE 13 — PROPERTY TRANSACTIONS, NET

Property transactions, net includes:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	*(In thousands)*
CityCenter investment impairment charge	$	—	$	190,763	$	—	$	1,313,219
Borgata impairment charge		—		128,395		—		128,395
Circus Circus Reno impairment charge		79,658		—		79,658		—
Other property transactions, net		2,179		7,523		3,170		12,038

	$	81,837	$	326,681	$	82,828	$	1,453,652

See Note 5 for discussion of the CityCenter investment impairment charge and the Borgata impairment charge.

At September 30, 2011 the Company reviewed the carrying value of its Circus Circus Reno long-lived assets for impairment using revised operating forecasts developed by management for that resort in the third quarter of 2011. Due to current and forecasted market conditions and results of operations through September 30, 2011 being lower than previous forecasts, the Company recorded a non-cash impairment charge of $80 million in the third quarter of 2011 in “Property transactions, net,” related to a writedown of Circus Circus Reno’s long-lived assets. The Company’s discounted cash flow analysis for Circus Circus Reno included estimated future cash inflows from operations and estimated future cash outflows for capital expenditures utilizing an estimated discount rate and terminal year capitalization rate.

NOTE 14 — SEGMENT INFORMATION

The Company’s management views each of its casino resorts as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure. The Company’s principal operating activities occur in two geographic regions: the United States and Macau S.A.R. The Company has aggregated its operations into two reportable segments based on the similar characteristics of the operating segments within the regions in which they operate: wholly owned domestic resorts and MGM China. The Company’s operations related to investments in unconsolidated affiliates, MGM Hospitality, and certain other corporate and management operations have not been identified as separate reportable segments; therefore, these operations are included in corporate and other in the following segment disclosures to reconcile to consolidated results.

The Company’s management utilizes Adjusted Property EBITDA as the primary profit measure for its reportable segments. Adjusted Property EBITDA is a non-GAAP measure defined as Adjusted EBITDA before corporate expense and stock compensation expense related to the MGM Resorts stock option plan, which are not allocated to the reportable segments. MGM China recognizes stock compensation expense related to its stock compensation plan which is included in the calculation of Adjusted Property EBITDA for MGM China. Adjusted EBITDA is a non-GAAP measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, and property transactions, net.

The following table presents the Company’s segment information:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	*(In thousands)*
Net Revenues:
Wholly owned domestic resorts	$	1,509,375		$	1,460,467		$	4,421,113		$	4,264,608
MGM China		623,050			—			816,034			—

Reportable segment net revenues		2,132,425			1,460,467			5,237,147			4,264,608
Corporate and other		101,162			106,650			315,276			316,091

	$	2,233,587		$	1,567,117		$	5,552,423		$	4,580,699

Adjusted EBITDA:
Wholly owned domestic resorts	$	347,594		$	315,387		$	978,942		$	895,472
MGM China		139,326			—			185,748			—

Reportable segment Adjusted Property EBITDA		486,920			315,387			1,164,690			895,472
Corporate and other		(42,989	)		(35,720	)		(32,760	)		(217,143	)

		443,931			279,667			1,131,930			678,329

Other operating income (expense):
Preopening and start-up expenses		—			(30	)		316			(4,061	)
Property transactions, net		(81,837	)		(326,681	)		(82,828	)		(1,453,652	)
Gain on MGM China transaction		—			—			3,496,005			—
Depreciation and amortization		(249,520	)		(158,857	)		(579,384	)		(486,757	)

Operating income (loss)		112,574			(205,901	)		3,966,039			(1,266,141	)

Non-operating income (expense):
Interest expense, net		(272,542	)		(285,139	)		(812,680	)		(840,483	)
Non-operating items from unconsolidated affiliates		(24,692	)		(27,185	)		(92,984	)		(82,109	)
Other, net		(1,595	)		7,298			(18,567	)		157,742

		(298,829	)		(305,026	)		(924,231	)		(764,850	)

Income (loss) before income taxes		(186,255	)		(510,927	)		3,041,808			(2,030,991	)
Benefit for income taxes		79,680			192,936			212,437			732,783

Net income (loss)		(106,575	)		(317,991	)		3,254,245			(1,298,208	)
Less: Net income attributable to noncontrolling interests		(17,211	)		—			(25,917	)		—

Net income (loss) attributable to MGM Resorts International	$	(123,786	)	$	(317,991	)	$	3,228,328		$	(1,298,208	)


	September 30, 2011		December 31, 2010
	*(In thousands)*
Total assets:
Wholly owned domestic resorts	$	13,669,519	$	14,047,237
MGM China		8,909,349		—

Reportable segment total assets		22,578,868		14,047,237
Corporate and other		5,274,155		4,913,808

	$	27,853,023	$	18,961,045


	Nine Months Ended September 30,
	2011		2010
	*(In thousands)*
Capital expenditures:
Wholly owned domestic resorts	$	142,815	$	82,818
MGM China		14,438		—

Reportable segment capital expenditures		157,253		82,818
Corporate and other		19,071		45,721

	$	176,324	$	128,539

NOTE 15 — RELATED PARTY TRANSACTIONS

MGM China. Ms. Pansy Ho is member of the board of directors of, and holds a minority ownership interest in, MGM China. Ms. Pansy Ho is also the managing director of Shun Tak Holdings Limited (together with its subsidiaries “Shun Tak”), a leading conglomerate in Hong Kong with core businesses in transportation, property, hospitality and investments. Shun Tak provides various services and products, including ferry tickets, travel products, rental of hotel rooms, laundry services, advertising services and property cleaning services to MGM China and MGM China provides rental of hotel rooms at wholesale room rates to Shun Tak and receives rebates for ferry tickets from Shun Tak. For the period from June 3, 2011 through September 30, 2011, MGM China incurred expenses of $4 million related to such services and recorded revenue of less than $1 million related to hotel rooms provided to Shun Tak. As of September 30, 2011, MGM China did not have a material payable to or receivable from Shun Tak.

In connection with the MGM China IPO, MGM Branding and Development Holdings, Ltd., an entity included in the Company’s consolidated financial statements in which Ms. Pansy Ho indirectly holds a noncontrolling interest, entered into a brand license agreement with MGM China. MGM China pays a license fee to MGM Branding and Development Holdings, Ltd. equal to 1.75% of MGM China’s consolidated net revenue, subject to an annual cap of $25 million for the initial year of the agreement, prorated to $14.5 million for the portion of 2011 subsequent to the date of the IPO. The annual cap will increase by 20% per annum for each subsequent calendar year during the term of the agreement. During the period from June 3, 2011 through September 30, 2011, total license fees of $14 million were incurred by MGM China. Such amounts have been eliminated in consolidation. An entity owned by Ms. Pansy Ho received a distribution of $3 million during the three and nine months ended September 30, 2011 in connection with the ownership of a noncontrolling interest in MGM Branding and Development Holdings, Ltd.

In June 2011, the Company sold $300 million in aggregate principal amount of the Company’s 4.25% convertible senior notes due 2015 to an indirect wholly owned subsidiary of Ms. Pansy Ho. See Note 8 for additional information related to the convertible notes.

NOTE 16 — CONSOLIDATING CONDENSED FINANCIAL INFORMATION

Excluding MGM Grand Detroit, LLC, MGM China and certain minor subsidiaries, the Company’s subsidiaries that are 100% directly or indirectly owned have fully and unconditionally guaranteed, on a joint and several basis, payment of the senior credit facility, the senior notes, senior secured notes and the senior subordinated notes. Separate condensed financial statement information for the subsidiary guarantors and non-guarantors as of September 30, 2011 and December 31, 2010 and for the three and nine month periods ended September 30, 2011 and 2010 is as follows:

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION


	At September 30, 2011
	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Elimination			Consolidated
	*(In thousands)*
Current assets	$	1,085,266	$	888,912		$	747,629	$	—		$	2,721,807
Property and equipment, net		—		13,561,385			1,318,981		(11,972	)		14,868,394
Investments in subsidiaries		24,268,323		7,735,699			—		(32,004,022	)		—
Investments in and advances to unconsolidated affiliates		—		1,659,719			—		—			1,659,719
Other non-current assets		261,542		628,052			7,713,509		—			8,603,103

	$	25,615,131	$	24,473,767		$	9,780,119	$	(32,015,994	)	$	27,853,023

Current liabilities	$	637,502	$	905,935		$	471,910	$	—		$	2,015,347
Intercompany accounts		501,384		(531,643	)		30,259		—			—
Deferred income taxes		2,219,581		—			383,837		—			2,603,418
Long-term debt		12,163,173		(65,119	)		1,001,020		—			13,099,074
Other long-term obligations		151,885		41,200			493		—			193,578

Total liabilities		15,673,525		350,373			1,887,519		—			17,911,417

MGM Resorts stockholders’ equity		9,941,606		24,123,394			4,199,850		(32,015,994	)		6,248,856
Noncontrolling interests		—		—			3,692,750		—			3,692,750

Total stockholders’ equity		9,941,606		24,123,394			7,892,600		(32,015,994	)		9,941,606

	$	25,615,131	$	24,473,767		$	9,780,119	$	(32,015,994	)	$	27,853,023


	At December 31, 2010
	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Elimination			Consolidated
	*(In thousands)*
Current assets	$	358,725		$	930,936	$	165,984	$	—		$	1,455,645
Property and equipment, net		—			13,925,224		641,098		(11,972	)		14,554,350
Investments in subsidiaries		16,520,722			471,283		—		(16,992,005	)		—
Investments in and advances to unconsolidated affiliates		—			1,923,155		—		—			1,923,155
Other non-current assets		294,165			436,353		297,377		—			1,027,895

	$	17,173,612		$	17,686,951	$	1,104,459	$	(17,003,977	)	$	18,961,045

Current liabilities	$	305,354		$	911,731	$	29,136	$	—		$	1,246,221
Intercompany accounts		(44,380	)		38,277		6,103		—			—
Deferred income taxes		2,469,333			—		—		—			2,469,333
Long-term debt		11,301,034			296,664		450,000		—			12,047,698
Other long-term obligations		143,726			54,828		694		—			199,248
Stockholders’ equity		2,998,545			16,385,451		618,526		(17,003,977	)		2,998,545

	$	17,173,612		$	17,686,951	$	1,104,459	$	(17,003,977	)	$	18,961,045

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION


	For the Three Months Ended September 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated
	*(In thousands)*
Net revenues	$	—		$	1,457,306		$	776,281		$	—		$	2,233,587
Equity in subsidiaries’ earnings		28,197			30,251			—			(58,448	)		—
Expenses:
Casino and hotel operations		2,122			910,809			529,692			—			1,442,623
General and administrative		2,520			243,227			58,302			—			304,049
Corporate expense		15,619			27,233			671			—			43,523
Property transactions, net		—			81,538			299			—			81,837
Depreciation and amortization		—			141,337			108,183			—			249,520

		20,261			1,404,144			697,147			—			2,121,552

Income (loss) from unconsolidated affiliates		—			630			(91	)		—			539

Operating income (loss)		7,936			84,043			79,043			(58,448	)		112,574
Interest expense		(254,149	)		(4,771	)		(13,622	)		—			(272,542	)
Other, net		6,207			(20,261	)		(12,233	)		—			(26,287	)

Income before income taxes		(240,006	)		59,011			53,188			(58,448	)		(186,255	)
Benefit (provision) for income taxes		116,220			(33,455	)		(3,085	)		—			79,680

Net income (loss)		(123,786	)		25,556			50,103			(58,448	)		(106,575	)
Less: net income (loss) attributable to noncontrolling interests		—			2,695			(19,906	)		—			(17,211	)

Net income (loss) attributable to MGM Resorts International	$	(123,786	)	$	28,251		$	30,197		$	(58,448	)	$	(123,786	)


	For the Three Months Ended September 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination		Consolidated
	*(In thousands)*
Net revenues	$	—		$	1,447,617		$	119,500		$	—	$	1,567,117
Equity in subsidiaries’ earnings		(261,353	)		36,205			—			225,148		—
Expenses:
Casino and hotel operations		2,822			900,701			62,159			—		965,682
General and administrative		2,171			266,745			23,540			—		292,456
Corporate expense		3,681			27,140			(106	)		—		30,715
Preopening and start-up expenses		—			30			—			—		30
Property transactions, net		—			327,165			(484	)		—		326,681
Depreciation and amortization		—			148,617			10,240			—		158,857

		8,674			1,670,398			95,349			—		1,774,421

Income (loss) from unconsolidated affiliates		—			(27,977	)		29,380			—		1,403

Operating income (loss)		(270,027	)		(214,553	)		53,531			225,148		(205,901	)
Interest expense		(267,785	)		(9,483	)		(7,871	)		—		(285,139	)
Other, net		22,275			(34,074	)		(8,088	)		—		(19,887	)

Income (loss) before income taxes		(515,537	)		(258,110	)		37,572			225,148		(510,927	)
Benefit (provision) for income taxes		197,546			(3,407	)		(1,203	)		—		192,936

Net income (loss)	$	(317,991	)	$	(261,517	)	$	36,369		$	225,148	$	(317,991	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION



	For the Nine Months Ended September 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated
	*(In thousands)*
Net revenues	$	—		$	4,291,746		$	1,260,677		$	—		$	5,552,423
Equity in subsidiaries’ earnings		3,859,740			3,664,502			—			(7,524,242	)		—
Expenses:
Casino and hotel operations		7,416			2,698,689			815,080			—			3,521,185
General and administrative		7,388			747,652			120,153			—			875,193
Corporate expense		46,743			72,606			675			—			120,024
Preopening and start-up expenses		—			(316	)		—			—			(316	)
Property transactions, net		—			82,149			679			—			82,828
Gain on MGM China transaction		—			—			(3,496,005	)		—			(3,496,005	)
Depreciation and amortization		—			424,696			154,688			—			579,384

		61,547			4,025,476			(2,404,730	)		—			1,682,293

Income (loss) from unconsolidated affiliates		—			(19,089	)		114,998			—			95,909

Operating income (loss)		3,798,193			3,911,683			3,780,405			(7,524,242	)		3,966,039
Interest expense		(766,992	)		(14,416	)		(31,272	)		—			(812,680	)
Other, net		17,189			(87,030	)		(41,710	)		—			(111,551	)

Income before income taxes		3,048,390			3,810,237			3,707,423			(7,524,242	)		3,041,808
Benefit (provision) for income taxes		179,938			46,488			(13,989	)		—			212,437

Net income (loss)		3,228,328			3,856,725			3,693,434			(7,524,242	)		3,254,245
Less: net income (loss) attributable to noncontrolling interests		—			2,695			(28,612	)		—			(25,917	)

Net income (loss) attributable to MGM Resorts International	$	3,228,328		$	3,859,420		$	3,664,822		$	(7,524,242	)	$	3,228,328


	For the Nine Months Ended September 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination		Consolidated
	*(In thousands)*
Net Revenues	$	—		$	4,175,120		$	405,579		$	—	$	4,580,699
Equity in subsidiaries’ earnings		(1,384,862	)		100,859			—			1,284,003		—
Expenses:
Casino and hotel operations		8,542			2,634,796			214,866			—		2,858,204
General and administrative		6,802			769,424			74,688			—		850,914
Corporate Expense		12,195			76,871			(1,523	)		—		87,543
Preopening and start-up expenses		—			4,061			—			—		4,061
Property transactions, net		—			1,454,136			(484	)		—		1,453,652
Depreciation and amortization		—			456,174			30,583			—		486,757

		27,539			5,395,462			318,130			—		5,741,131

Income (loss) from unconsolidated affiliates		—			(177,073	)		71,364			—		(105,709	)

Operating income (loss)		(1,412,401	)		(1,296,556	)		158,813			1,284,003		(1,266,141	)
Interest expense		(803,154	)		(14,753	)		(22,576	)		—		(840,483	)
Other, net		171,381			(65,724	)		(30,024	)		—		75,633

Income (loss) before income taxes		(2,044,174	)		(1,377,033	)		106,213			1,284,003		(2,030,991	)
Benefit (provision) for income taxes		745,966			(9,425	)		(3,758	)		—		732,783

Net income (loss)	$	(1,298,208	)	$	(1,386,458	)	$	102,455		$	1,284,003	$	(1,298,208	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION


	For the Nine Months Ended September 30, 2011
	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Elimination		Consolidated
	*(In thousands)*
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	(442,532	)	$	729,814		$	193,758		$	—	$	481,040

Cash flows from investing activities
Capital expenditures, net of construction payable		—			(156,525	)		(19,799	)		—		(176,324	)
Dispositions of property and equipment		—			108			40			—		148
Acquisition of MGM China, net of cash paid		—			—			407,046			—		407,046
Investments in and advances to unconsolidated affiliates		(71,000	)		(36,648	)		—			—		(107,648	)
Distributions from unconsolidated affiliates		—			3,077			—			—		3,077
Investments in treasury securities - maturities longer than 90 days		—			(240,239	)		—			—		(240,239	)
Proceeds from treasury securities - maturities longer than 90 days		—			240,070			—			—		240,070
Other		—			(253	)		—			—		(253	)

Net cash provided by (used in) investing activities		(71,000	)		(190,410	)		387,287			—		125,877

Cash flows from financing activities
Net repayments under bank credit facilities - maturities of 90 days or less		34,391			—			(473,271	)		—		(438,880	)
Borrowings under bank credit facilities - maturities longer than 90 days		4,492,866			—			1,282,119			—		5,774,985
Repayments under bank credit facilities - maturities longer than 90 days		(3,668,257	)		—			(900,000	)		—		(4,568,257	)
Issuance of senior notes, net		311,415			—			—			—		311,415
Retirement of senior notes		(356,700	)		(8,436	)		—			—		(365,136	)
Intercompany accounts		632,911			(590,201	)		(42,710	)		—		—
Other		(777	)		(946	)		(2,827	)		—		(4,550	)

Net cash provided by (used in) financing activities		1,445,849			(599,583	)		(136,689	)		—		709,577

Effect of exchange rate on cash		—			—			(333	)		—		(333	)

Cash and cash equivalents
Net increase (decrease) for the period		932,317			(60,179	)		444,023			—		1,316,161
Balance, beginning of period		72,457			278,801			147,706			—		498,964

Balance, end of period	$	1,004,774		$	218,622		$	591,729		$	—	$	1,815,125

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION


	For the Nine Months Ended September 30, 2010
	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Elimination		Consolidated
	*(In thousands)*
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	(315,301	)	$	640,617		$	55,082		$	—	$	380,398

Cash flows from investing activities
Capital expenditures, net of construction payable		—			(125,666	)		(2,873	)		—		(128,539	)
Dispositions of property and equipment		—			365			6,309			—		6,674
Investments in and advances to unconsolidated affiliates		(408,000	)		—			—			—		(408,000	)
Distributions from cost method investments, net		—			110,176			—			—		110,176
Other		—			(1,233	)		—			—		(1,233	)

Net cash used in investing activities		(408,000	)		(16,358	)		3,436			—		(420,922	)

Cash flows from financing activities
Net repayments under bank credit facilities - maturities of 90 days or less		(2,732,807	)		—			(170,000	)		—		(2,902,807	)
Borrowings under bank credit facilities maturities longer than 90 days		6,952,606			—			1,350,000			—		8,302,606
Repayments under bank credit facilities maturities longer than 90 days		(6,341,601	)		—			(1,180,000	)		—		(7,521,601	)
Issuance of senior notes, net		1,995,000			—			—			—		1,995,000
Retirement of senior notes		(857,523	)		(296,956	)		—			—		(1,154,479	)
Debt issuance costs		(98,531	)		—			—			—		(98,531	)
Intercompany accounts		356,238			(302,844	)		(53,394	)		—		—
Capped call transactions		(81,478	)		—			—			—		(81,478	)
Other		(635	)		(951	)		(50	)		—		(1,636	)

Net cash used in financing activities		(808,731	)		(600,751	)		(53,444	)		—		(1,462,926	)

Cash and cash equivalents
Net decrease for the period		(1,532,032	)		23,508			5,074			—		(1,503,450	)
Balance, beginning of period		1,718,616			263,386			74,205			—		2,056,207

Balance, end of period	$	186,584		$	286,894		$	79,279		$	—	$	552,757

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis of financial condition and results of operations (“MD&A”) contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes for the fiscal year ended December 31, 2010, which were included in our Form 10-K, filed with the SEC on February 28, 2011. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. MGM Resorts International together with its subsidiaries may be referred to as “we,” “us” or “our.” MGM China Holdings Limited together with its subsidiaries is referred to as “MGM China.”

Executive Overview

Our primary business is the ownership and operation of casino resorts, which includes offering gaming, hotel, dining, entertainment, retail and other resort amenities. Most of our revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards.

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 believe that we own several of the premier casino resorts in the world and have continually reinvested in our resorts to maintain our competitive advantage.

Our results of operations are affected by decisions we make related to our capital allocation, our access to capital, and our cost of capital. Our general cost of debt has increased over the past few years due to the global recession and instability in the capital markets. We have been able to access the capital markets to meet our near term liquidity needs but our ability to refinance our debt at more favorable rates depends on the future state of the economy and credit markets.

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 conventions, the amount and timing of marketing and special events for our high-end gaming customers, and the level of play during major holidays, including New Year and Chinese New Year. Our results do not depend on key individual customers, although our success in marketing to customer groups, such as convention customers, and the financial health of customer segments, such as business travelers or high-end gaming customers from a particular country or region, can affect our results. 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.

We have two reportable segments that are based on the regions in which we operate: wholly owned domestic resorts and MGM China. We currently operate 15 wholly owned resorts in the United States. MGM China’s operations currently consist of the MGM Macau resort and casino. We have additional business activities including our investments in unconsolidated affiliates, our MGM Hospitality operations, and certain other corporate and management operations. CityCenter is our most significant unconsolidated affiliate, which we also manage for a fee. Our operations which have not been segregated into separate reportable segments are reported as corporate and other operations in our reconciliations of segment results to consolidated results.

Wholly Owned Domestic Resorts

Historically, over half of our net revenue from our wholly owned domestic resorts is derived from non-gaming activities, as our operating philosophy is to provide a complete resort experience for our guests, including non-gaming amenities for which our guests are willing to pay a premium. 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. Our operating results are highly dependent on the volume of customers at our resorts, which in turn affects the price we can charge for our hotel rooms and other amenities. We market to different customer segments to manage our hotel occupancy, such as targeting large conventions to increase mid-week occupancy.

A significant portion of our operating results for our wholly owned domestic resorts is dependent upon the high-end gaming business, which can be a cause for variability in our results. Key performance indicators related to gaming and hotel revenue at our wholly owned domestic resorts are:

•

Gaming 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 hold percentage is in the range of 19% to 23% of table games drop and our normal slots hold percentage is in the range of 7.5% to 8.5% of slots handle;

•

Hotel revenue indicators – hotel occupancy (a volume indicator); average daily rate (“ADR,” a price indicator); and revenue per available room (“REVPAR,” a summary measure of hotel results, combining ADR and occupancy rate).

We generate a significant portion of our revenue from our wholly owned domestic resorts in Las Vegas, Nevada, which exposes us to certain risks, such as increased competition from new or expanded Las Vegas resorts, and from the expansion of gaming in California.

The state of the U.S. economy has negatively affected the results of our wholly owned domestic resorts over the past several years, and we expect these operations to continue to be sensitive to certain aspects of the current economic conditions, such as weaknesses in employment and the housing market as well as constrained consumer spending. While we have begun to see a rebound in our U.S. customer groups, including convention business, and we have achieved increases in REVPAR throughout 2011, we expect adverse conditions currently or recently present in the economic environment to continue to negatively affect our operating results.

MGM China

On June 3, 2011, we and Ms. Ho, Pansy Catilina Chiu King (“Ms. Pansy Ho”) completed a reorganization of the capital structure and the initial public offering of 760 million shares of MGM China on The Stock Exchange of Hong Kong Limited (the “IPO”), representing 20% of the post issuance base capital stock of MGM China, at an offer price of HKD 15.34 per share. Pursuant to this reorganization, we acquired, through a wholly owned subsidiary, an additional 1% of the overall capital stock of MGM China for HKD 15.34 per share, or approximately $75 million, and thereby became the owner of 51% of MGM China. Following the IPO, the underwriters partially exercised their overallotment option and Ms. Pansy Ho sold an additional 59 million shares of MGM China.

Through the acquisition of the additional 1% interest of MGM China, we obtained a controlling interest and were required to consolidate MGM China as of June 3, 2011. Prior to the IPO, we held a 50% interest in MGM Grand Paradise, which was accounted for under the equity method. The acquisition of the controlling financial interest was accounted for as a business combination and we recognized 100% of the assets, liabilities, and noncontrolling interests of MGM China at fair value at the date of acquisition. The fair value of the equity of MGM China was determined by the IPO transaction price and equaled approximately $7.5 billion. The carrying value of our equity method investment was significantly less than our share of the fair value of MGM China, resulting in a $3.5 billion gain on the acquisition.

We believe this acquisition plays an important role in extending our reach internationally and will foster future growth and profitability. Asia is the fastest-growing gaming market in the world and Macau is the world’s largest gaming destination in terms of revenue and has continued to grow over the past few years despite the global economic downturn.

Our MGM China operations primarily relate to operations at MGM Macau resort and casino. Revenues at MGM Macau are generated primarily from gaming operations made up of two distinct market segments: main floor and high-end (“VIP”). MGM China main floor operations consist of both table games and slot machines on the main gaming floors for the public, which usually consists of walk-in and day trip visitors. VIP players play mostly in dedicated VIP rooms or designated gaming areas. VIP customers can be further divided into customers sourced by in-house VIP programs and those sourced through gaming promoters.

A significant portion of our VIP volume is generated through the use of gaming promoters, also known as junket operators. These operators introduce high-end gaming players to MGM Macau, assist these customers with travel arrangements, and extend gaming credit to these players. VIP gaming at MGM Macau is conducted by the use of special purpose nonnegotiable gaming chips called “rolling chips.” Gaming

promoters purchase these rolling chips from MGM Macau and in turn they sell these chips to their players. The rolling chips allow MGM Macau to track the amount of wagering conducted by each gaming promoters’ clients in order to determine VIP gaming play. In exchange for the gaming promoters’ services, MGM Macau pays them either through rolling chip turnover-based commissions or through revenue-sharing arrangements. The estimated portion of the gaming promoter payments that represent amounts passed through to VIP customers is recorded net against casino revenue, and the estimated portion retained by the gaming promoter for its compensation is recorded to casino expense.

In addition to the key performance indicators used by our wholly owned domestic resorts, MGM Macau utilizes “turnover” which is the sum of rolling chip wagers won by MGM Macau (rolling chips purchased plus rolling chips exchanged less rolling chips returned). Turnover provides a basis for measuring VIP casino win percentage. Normal win for VIP gaming operations at MGM Macau is in the range of 2.7% to 3.0% of turnover. MGM Macau’s main floor historical table games hold percentage is in the range of 20% to 26% of table games drop. Normal slots hold percentage at MGM Macau is in the range of 5.5% to 7.5% of slots handle.

Other Executive Overview Items

Borgata. We have a 50% economic interest in Borgata Hotel Casino & Spa (“Borgata”) located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation (“Boyd”) owns the other 50% of Borgata and also operates the resort. Our interest is held in trust and currently offered for sale pursuant to our settlement agreement with New Jersey Department of Gaming Enforcement (“DGE”). In March 2010, the New Jersey Casino Control Commission (“CCC”) approved the settlement agreement with the DGE pursuant to which we placed our 50% ownership interest in Borgata and related leased land in Atlantic City into a divestiture trust. The settlement agreement was amended on July 22, 2011 with the approval of the CCC on August 8, 2011. Following the transfer of these interests into trust, we ceased to be regulated by the CCC or the DGE, except as otherwise provided by the trust agreement and the settlement agreement. Boyd’s 50% interest is not affected by the settlement.

The terms of the settlement agreement, as amended, mandate the sale of the trust property by March 2014, which represents an 18-month extension compared to the original agreement. During the period ending in March 2013, which also represents an 18-month extension compared to the original agreement we have the right to direct the trustee to sell the trust property, subject to approval of the CCC. If a sale is not concluded by that time, the trustee is responsible for selling the trust property during the following 12-month period. Prior to the consummation of the sale, the divestiture trust will retain any cash flows received in respect of the trust property, but will pay property taxes and other costs attributable to the trust property. We are the sole economic beneficiary of the trust and will be permitted to reapply for a New Jersey gaming license beginning 30 months after the completion of the sale of the trust assets. As of September 30, 2011, the trust had $188 million of cash and investments, of which $150 million is held in U.S. treasury securities with maturities greater than three months but less than one year, and is recorded within “Prepaid expenses and other.”

As a result of our ownership interest in Borgata being placed into a trust, we no longer have significant influence over Borgata; therefore, we discontinued the equity method of accounting for Borgata at the point the assets were placed in the trust in March 2010, and account for our investment in Borgata under the cost method of accounting. The carrying value of the investment related to Borgata is included in “Other long-term assets, net.” Earnings and losses that relate to the investment that were previously accrued remain as a part of the carrying amount of the investment. Distributions received by the trust that do not exceed our share of earnings are recognized currently in earnings. However, distributions received by the trust that exceed our share of earnings for such periods are applied to reduce the carrying amount of its investment. We consolidate the trust as we are the sole economic beneficiary. The trust did not receive distributions from Borgata during the three and nine months ended September 30, 2011. In the three and nine months ended September 30, 2010, the trust received distributions from the joint venture of $105 million and $120 million, of which $10 million was paid to Boyd in accordance with the joint venture agreement, as amended. We recorded $88 million and $94 million as a reduction in the carrying value and $7 million and $16 million was recorded as “Other, net” non-operating income in the three and nine months ended September 30, 2010, respectively.

In July 2010, we entered into an agreement to sell four long-term ground leases and their respective underlying real property parcels, approximately 11.3 acres, underlying the Borgata for $73 million. We closed the transaction in November 2010.

We recorded a pre-tax impairment charge of approximately $128 million at September 30, 2010 which decreased the carrying value of our investment in Borgata to approximately $250 million. The impairment charge was based on an offer received from a potential buyer at that time. We ultimately did not reach final agreement with such buyer. We continue to negotiate with other parties who have expressed interest in the asset, but can provide no assurance that a transaction will be completed.

Gold Strike Tunica. On May 2, 2011, the Mississippi Gaming Commission mandated the closure of Gold Strike Tunica along with eight other Tunica area casino resorts. The property reopened on May 18, 2011. We recorded $8 million in “General and administrative” expense during the second quarter of 2011 related to costs associated with flood prevention and other costs incurred during the time the property was closed. We carry flood and business interruption insurance, but we cannot determine the amount or timing of any reimbursements until we submit our claims and receive notice of approval from our insurers.

Impairments. A complete discussion of our critical accounting policies related to impairments of long-lived assets and investments in unconsolidated affiliates is included in our Form 10-K for the period ending December 31, 2010. We reviewed the carrying value of our Circus Circus Reno long-lived assets at September 30, 2011 and our investment in CityCenter and the carrying value of our Borgata asset at September 30, 2010 as further discussed in “Operating Results – Details of Certain Charges.” Other than as noted above, we did not identify circumstances that existed that would indicate the carrying value of our long-lived assets may not be recoverable; therefore, we did not review any of our other wholly owned long-lived asset groups – generally our operating resorts – for impairment as of September 30, 2011. Historically, the undiscounted cash flows of our significant long-lived assets have exceeded their carrying values by a substantial margin.

Results of Operations

The following discussion is based on our consolidated financial statements for the three and nine months ended September 30, 2011 and 2010.

Summary Financial Results

The following table presents selected summary consolidated financial results:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011		2010
				*(In thousands)*
Net revenues	$	2,233,587		$	1,567,117		$	5,552,423	$	4,580,699
Operating income (loss)		112,574			(205,901	)		3,966,039		(1,266,141	)
Net income (loss)		(106,575	)		(317,991	)		3,254,245		(1,298,208	)
Net income (loss) attributable to MGM Resorts International		(123,786	)		(317,991	)		3,228,328		(1,298,208	)

Our results of operations for the three and nine months ending September 30, 2011 include the results of MGM China from June 3, 2011 on a consolidated basis. Prior thereto, results of operations of MGM China were reflected under the equity method of accounting – see “Operating Results – Income from Unconsolidated Affiliates.” Net revenue and operating income attributable to MGM China for the quarter ended September 30, 2011 were $623 million and $41 million, respectively. Net revenue and operating income attributable to MGM China for the period from June 3, 2011 through September 30, 2011 were $816 million and $60 million, respectively. Operating income benefited from improved performance at each of MGM Macau, CityCenter resort operations and our wholly owned domestic resorts.

The following items also affected comparability in our operating results:

•

A gain of $3.5 billion related to the MGM China transaction during the second quarter of 2011;

•

An $80 million impairment of Circus Circus Reno in the third quarter of 2011;

•

Our share of CityCenter residential inventory impairment charges of $26 million in the nine months ended September 30, 2011, $38 million in the three months ended September 30, 2010, and $152 million in the nine months ended September 30, 2010;

•

Our share of CityCenter forfeited residential deposits income of $14 million and $54 million in the three and nine month periods of 2010, respectively; and

•

A $191 million and a $1.3 billion impairment on our investment in CityCenter in the three and nine months ended September 30, 2010.

Operating Results – Detailed Segment Information

The following table presents net revenue and Adjusted EBITDA by reportable segment. Management uses Adjusted Property EBITDA as the primary profit measure for our reportable segments. See “Non-GAAP measures” for additional Adjusted EBITDA information:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	*(In thousands)*
Net revenue:
Wholly owned domestic resorts	$	1,509,375	$	1,460,467	$	4,421,113	$	4,264,608
MGM China		623,050		—		816,034		—

Reportable segment net revenue		2,132,425		1,460,467		5,237,147		4,264,608
Corporate and other		101,162		106,650		315,276		316,091

	$	2,233,587	$	1,567,117	$	5,552,423

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company