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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED] |
For the fiscal year ended December 31, 2007
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
For the transition period __________ to __________
Commission
File No. 001-10362
MGM MIRAGE
(Exact name of Registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of
incorporation or organization)
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88-0215232
(I.R.S. Employer
Identification Number) |
3600 Las Vegas Boulevard South Las Vegas, Nevada 89109
(Address of principal executive office) (Zip Code)
(702) 693-7120
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange |
Title of each class
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on which registered |
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Common Stock, $.01 Par Value
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New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days: Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of the
Registrants knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K: þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ |
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Accelerated filer o |
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Non-accelerated filer o
(Do not check if a smaller reporting company) |
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Smaller Reporting Company o |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act):
Yes o No þ
The aggregate market value of the Registrants Common Stock held by non-affiliates of the
Registrant as of June 30, 2007 (based on the closing price on the New York Stock Exchange
Composite Tape on June 30, 2007) was $10.3 billion. As of
February 25, 2008, 293,845,623
shares of Registrants Common Stock, $.01 par value, were outstanding.
Portions of the Registrants definitive Proxy Statement for its 2008 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
MGM MIRAGE is referred to as the Company or the Registrant, and together with
our subsidiaries may also be referred to as we, us or our.
Overview
MGM MIRAGE is one of the worlds leading development companies with significant
gaming and resort operations. We believe the resorts we own, manage, and invest in are
among the worlds finest casino resorts. MGM MIRAGE was organized as MGM Grand, Inc. on
January 29, 1986 and is a Delaware corporation. MGM MIRAGE acts largely as a holding
company and its operations are conducted through its wholly-owned subsidiaries.
Our strategy is based on developing and maintaining competitive advantages in the
following areas:
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Developing and maintaining a strong portfolio of resorts; |
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Operating our resorts to ensure excellent customer service and maximize
revenue and profit; |
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Executing a sustainable growth strategy; |
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Leveraging our brand and management assets. |
Resort Portfolio
We execute our strategy through a portfolio approach, seeking to ensure that we
own, invest in and manage resorts in each market segment that are superior to our
competitors resorts. We also seek to own and invest in superior real estate assets,
with a blend of developing these assets on our own, partnering with others, and
strategically buying and selling real estate.
Our approach to resort ownership and investment is based on operating the premier
resorts in each geographic market and each customer segment in which we operate. We
discuss customer segments in the Resort Operation section. Regarding our approach to
resort locations, we feel it is important to selectively operate in markets with stable
regulatory environments. As seen in the table below, this means that a large portion of
our resorts are located in Nevada. In addition, we target markets with growth
potential. Currently, we believe that international markets, particularly in Asia,
offer the most attractive growth opportunities. We also believe there is growth
potential in investing in and managing non-gaming resorts. See the Sustainable Growth
and Leveraging Our Brand and Management Assets sections for further details on these
initiatives.
Our Operating Resorts
We have provided below certain information about our resorts as of December 31,
2007. Except as otherwise indicated, we wholly own and operate the resorts shown below.
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Number of |
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Approximate |
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Guestrooms |
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Casino Square |
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Gaming |
Name and Location |
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and Suites |
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Footage |
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Slots (1) |
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Tables (2) |
Las Vegas Strip, Nevada |
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Bellagio |
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3,933 |
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155,000 |
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2,328 |
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140 |
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MGM Grand Las Vegas (3) |
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6,340 |
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156,000 |
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2,530 |
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176 |
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Mandalay Bay (4) |
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4,328 |
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160,000 |
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2,025 |
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115 |
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The Mirage |
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3,044 |
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118,000 |
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2,008 |
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106 |
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Luxor |
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4,396 |
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100,000 |
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1,393 |
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87 |
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Excalibur |
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3,980 |
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91,000 |
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1,755 |
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68 |
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Treasure Island (TI) |
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2,885 |
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90,000 |
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1,637 |
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67 |
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New York-New York |
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2,024 |
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84,000 |
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1,774 |
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69 |
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Monte Carlo |
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3,002 |
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102,000 |
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1,531 |
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74 |
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Circus Circus Las Vegas (5) |
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3,764 |
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126,000 |
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2,354 |
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92 |
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Subtotal |
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37,696 |
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1,182,000 |
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19,335 |
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994 |
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Number of |
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Approximate |
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Guestrooms |
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Casino Square |
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Gaming |
Name and Location |
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and Suites |
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Footage |
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Slots (1) |
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Tables(2) |
Other Nevada |
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Circus Circus Reno (Reno) |
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1,572 |
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70,000 |
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1,165 |
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44 |
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Silver Legacy 50% owned (Reno) |
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1,710 |
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87,000 |
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1,161 |
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68 |
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Gold Strike (Jean) |
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810 |
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37,000 |
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821 |
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9 |
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Railroad Pass (Henderson) |
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120 |
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13,000 |
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330 |
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6 |
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Other Operations |
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MGM Grand Detroit (Detroit, Michigan) |
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400 |
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100,000 |
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4,376 |
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95 |
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Beau Rivage (Biloxi, Mississippi) |
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1,740 |
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72,000 |
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2,048 |
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93 |
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Gold Strike (Tunica, Mississippi) |
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1,131 |
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50,000 |
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1,350 |
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58 |
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MGM Grand Macau 50% owned (Macau) (6) |
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424 |
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270,000 |
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882 |
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382 |
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Borgata 50% owned (Atlantic City, New Jersey) |
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1,971 |
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137,000 |
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4,068 |
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178 |
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Grand Victoria 50% owned (Elgin, Illinois) |
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34,000 |
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1,150 |
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29 |
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Grand Total |
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47,574 |
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2,052,000 |
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36,686 |
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1,956 |
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(1) |
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Includes slot machines, video poker machines and other electronic gaming devices. |
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Includes blackjack (21), baccarat, craps, roulette and other table games;
does not include poker. |
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Includes 1,296 rooms available for rent at The Signature at MGM Grand. |
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Includes the Four Seasons Hotel with 424 guest rooms and THEhotel with 1,117
suites. |
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Includes Slots-a-Fun. |
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Total number of rooms, suites, and villas planned for the property is 593. |
Further, more detailed information about each of our operating resorts can be found
in Exhibit 99.1 to this Annual Report on Form 10-K, which Exhibit is incorporated herein
by reference.
Investing in Existing Resorts
We believe that ensuring our resorts are the premier resorts in their respective
markets requires significant capital investment. We have a track record of reinvesting
cash flows into our existing resorts and we have achieved strong returns on these
investments in the past.
For instance, between 2003 and 2006 we invested a significant amount of capital at
MGM Grand Las Vegas, with additions such as KÁ, the acclaimed show by Cirque du Soleil;
the Skylofts and West Wing room enhancements; two highly acclaimed restaurants by Joël
Robuchon; and new poker and race and sports areas. That resort earned $290 million of
operating income in 2007, a dramatic increase from the $127 million earned in 2002.
Similarly, we transformed The Mirage, a resort many market observers credit with
changing the face of the Las Vegas Strip. We felt strongly about the allure of the
resort, but also believed that customers need fresh, updated experiences. Therefore, we
invested significant capital at The Mirage between 2004 and 2006, adding several new
restaurants; a category-defining nightclub, Jet; upgraded high-limit gaming areas; and
the Beatles-themed Love show by Cirque du Soleil. The Mirage earned $108 million of
operating income in 2003; in 2007, The Mirage earned $173 million of operating income.
We expect to continue this strategy for the foreseeable future. We have made, and
continue to make, investments in Mandalay Bay, Luxor and Excalibur and will continue to
analyze the needs for similar investments in our other resorts.
In addition, we have actively managed our portfolio of land holdings. We own
approximately 700 acres of land on the Las Vegas Strip, with a meaningful portion of
those acres undeveloped or considered by us to be under-developed. In 2007, we
purchased 34 acres of land on the Las Vegas Strip adjacent to our Circus Circus Las
Vegas resort. See discussion of recent projects announced for certain of our land
holdings in Las Vegas and Atlantic City in the Sustainable Growth section.
Risks Associated with Our Portfolio Strategy
The principal risk factors relating to our current portfolio of resorts are:
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Our limited geographic diversification our major resorts are concentrated
on the Las Vegas Strip and some of our largest competitors operate in more
gaming markets than we do; |
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There are a number of gaming facilities located closer to where our
customers live than our resorts; |
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Additional new hotel-casinos and expansion projects at existing Las Vegas
hotel-casinos are under construction or have been proposed. We are unable to
determine to what extent increased competition will affect our future
operating results. |
2
Resort Operation
Our operating philosophy is predicated on creating resorts of memorable character,
treating our employees well and providing superior service for our guests. We also seek
to develop competitive advantages in specific markets and among specific customer
groups.
General
We operate primarily in one segment, the ownership and operation of casino resorts,
which includes offering gaming, hotel, dining, entertainment, retail and other resort
amenities. Over half of our net revenue is derived from non-gaming activities, a
higher percentage than many of our competitors, as our operating philosophy is to
provide a complete resort experience for our guests, including non-gaming amenities
which command a premium price based on their quality.
As a resort-based company, our operating results are highly dependent on the volume
of customers at our resorts, which in turn impacts the price we can charge for our hotel
rooms and other amenities. Since we believe that the number of walk-in customers
affects the success of our casino resorts, we design our facilities to maximize their
attraction to guests of other hotels. We also generate a significant portion of our
operating income from the high-end gaming segment, which can cause variability in our
results.
Most of our revenue is essentially cash-based, through customers wagering with cash
or paying for non-gaming services with cash or credit cards. Our resorts, like many in
the industry, generate significant operating cash flow. Our industry is capital
intensive and we rely heavily on the ability of our resorts to generate operating cash
flow to repay debt financing, fund maintenance capital expenditures and provide excess
cash for future development.
Our results of operations do not tend to be seasonal in nature, though a variety of
factors can affect the results of any interim period, including the timing of major Las
Vegas conventions, the amount and timing of marketing and special events for our
high-end customers, and the level of play during major holidays, including New Year and
Chinese New Year. 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 results do not depend on key individual customers, though our success
in marketing to customer groups, such as convention customers, or the financial health
of customer segments, such as business travelers or high-end gaming customers from a
particular country or region, can impact our results.
All of our casino resorts operate 24 hours a day, every day of the year, with the
exception of Grand Victoria which operates 22 hours a day, every day of the year. At
our wholly-owned resorts, our primary casino and hotel operations are owned and managed
by us. Other resort amenities may be owned and operated by us, owned by us but managed
by third parties for a fee, or leased to third parties. We generally have an operating
philosophy that prefers ownership of amenities, since guests have direct contact with
staff in these areas and we prefer to control all aspects of the guest experience.
However, we do lease space to retail and food and beverage operators in certain
situations, particularly for branding opportunities. We also operate many managed
outlets, utilizing third party management for specific expertise in areas such as
restaurants and nightclubs, as well as for branding opportunities.
Customers and Competition
Our casino resorts generally operate in highly competitive environments. We compete
against other gaming companies as well as other hospitality and leisure and business
travel companies. Our primary methods of competing successfully include:
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Locating our resorts in desirable leisure and business travel markets, and
operating at superior sites within those markets; |
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Constructing and maintaining high-quality resorts and facilities, including
luxurious guestrooms along with premier dining, entertainment and retail
amenities; |
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Recruiting, training and retaining well-qualified and motivated employees
who provide superior and friendly customer service; |
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Providing unique, must-see entertainment attractions; and |
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Developing distinctive and memorable marketing and promotional programs. |
Our Las Vegas casino resorts compete for customers with a large number of other
hotel-casinos in the Las Vegas area, including major hotel-casinos on or near the Las
Vegas Strip, major hotel-casinos in the downtown area, which is about five miles from
the center of the Strip, and several major facilities elsewhere in the Las Vegas area.
Our Las Vegas Strip resorts also compete, in part, with each other. According to the
Las Vegas Convention and Visitors Authority, there were approximately 133,000 guestrooms
in Las Vegas at December 31, 2007, up slightly from approximately 132,600 rooms at
December 31, 2006. Las Vegas visitor volume was 39.2 million in 2007, up slightly from
the 38.9 million reported for 2006.
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The principal segments of the Las Vegas gaming market are leisure travel; premium
gaming customers; conventions, including small meetings and corporate incentive
programs; and tour and travel. Our high-end properties, which include Bellagio, MGM
Grand Las Vegas, Mandalay Bay, and The Mirage, appeal to the upper end of each market
segment, balancing their business by using the convention and tour and travel segments
to fill the mid-week and off-peak periods. Our marketing strategy for TI, New York-New
York, Luxor and Monte Carlo is aimed at attracting middle- to upper-middle-income
wagerers, largely from the leisure travel and, to a lesser extent, the tour and travel
segments. Excalibur and Circus Circus Las Vegas generally cater to the value-oriented
and middle-income leisure travel and tour and travel segments.
Outside Las Vegas, our other wholly-owned Nevada operations compete with each other
and with many other similar sized and larger operations. A significant portion of our
customers at these resorts come from California. We believe the expansion of Native
American gaming has had a negative impact on all of our Nevada resorts not located on
the Las Vegas Strip, and additional expansion in California could have a further adverse
effect on these resorts. Our Nevada resorts not located in Las Vegas appeal primarily to
middle-income customers attracted by room, food and beverage and entertainment prices
that are lower than those offered by major Las Vegas hotel-casinos. Our target customer
for these resorts is the value-oriented leisure traveler and the value-oriented local
customer.
Outside Nevada, our wholly-owned resorts mainly compete for customers in local
gaming markets, where location is a critical factor to success. In Tunica, Mississippi,
one of our competitors is closer to Memphis, the areas principal market. In addition,
we compete with gaming operations in surrounding jurisdictions and other leisure
destinations in each region. For instance, in Detroit, Michigan we also compete with a
casino in nearby Windsor, Canada and with
Native American casinos in Michigan. In Biloxi, Mississippi we also compete with regional
riverboat and land-based casinos in Louisiana, Native American casinos in central
Mississippi, the Florida market, and with casinos in the Bahamas.
Our unconsolidated affiliates mainly compete for customers against casino resorts
in their respective markets, and in some cases against our wholly-owned operations.
Much like our wholly-owned resorts, our unconsolidated affiliates compete through the
quality of amenities, the value of the experience offered to guests, and the location of
their resorts.
Our casino resorts also compete for customers with hotel-casino operations located
in other areas of the United States and other parts of the world, and for leisure and
business travelers with non-gaming tourist destinations such as Hawaii, Florida and
cruise ships. Our gaming operations compete to a lesser extent with state-sponsored
lotteries, off-track wagering, card parlors, and other forms of legalized gaming in the
United States.
Marketing
We advertise on radio, television and billboards and in newspapers and magazines in
selected cities throughout the United States and overseas, as well as on the Internet
and by direct mail. We also advertise through our regional marketing offices located in
major United States and foreign cities. A key element of marketing to premium gaming
customers is personal contact by our marketing personnel. Direct marketing is also
important in the convention segment. We maintain Internet websites which inform
customers about our resorts and allow our customers to reserve hotel rooms, make
restaurant reservations and purchase show tickets. We also operate call centers to
allow customer contact by phone to make hotel and restaurant reservations and purchase
show tickets.
We utilize our world-class golf courses in marketing programs at our Las Vegas
Strip resorts. Our major Las Vegas resorts offer luxury suite packages
that include golf privileges at Shadow Creek. In connection with our marketing
activities, we also invite our premium gaming customers to play Shadow Creek on a
complimentary basis. We use Primm Valley Golf Club for marketing purposes at our Las
Vegas resorts, including offering room and golf packages at special rates.
Additionally, marketing efforts at Beau Rivage benefit from the Fallen Oak golf course
just 20 minutes north of Beau Rivage.
Employees and Management
We believe that knowledgeable, friendly and dedicated employees are a key success
factor in the casino resort industry. Therefore, we invest heavily in recruiting,
training and retaining our employees, as well as seeking to hire and promote the
strongest management team possible. We have numerous programs, both at the corporate
and business unit level, designed to achieve these objectives. For example, our
diversity program extends throughout our Company, and focuses on the unique strengths of
our individuals combined with a culture of working together to achieve greater
performance. Our diversity program has been widely recognized, including the honor of
Top 50 Best Companies for Diversity given by DiversityInc magazine. We have also
invested heavily in training, and we believe our programs, such as the MGM Grand
University and MGM MIRAGE leadership programs, are best-in-class among our industry
peers.
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Technology
We utilize technology to maximize revenue and efficiency in our operations. Our
Players Club program links our major resorts, and consolidates all slots and table games
activity for customers with a Players Club account. Customers qualify for benefits
across all of the participating resorts, regardless of where they play. We believe that our Players
Club enables us to more effectively market to our customers. A large
number of
the slot machines at our resorts operate with International Game Technologys EZ-Pay
cashless gaming system. We believe that this system enhances the customer experience
and increases the revenue potential of our slot machines.
Technology is a critical part of our strategy in non-gaming and administrative
operations as well. Our hotel systems include yield management modules which allow us
to maximize occupancy and room rates. Additionally, these systems capture charges made
by our customers during their stay, including allowing customers of our resorts to
charge meals and services at certain other MGM MIRAGE resorts to their hotel accounts. We
implemented a new hotel management system at most of our major resorts in 2007, which we
expect will enhance our guest service and improve our yield management across our
portfolio of resorts.
Internal Controls
We have a strong culture of compliance, driven by our history in the highly
regulated gaming industry and our belief that compliance is often a value-added
activity. Our system of internal controls and procedures including internal control
over financial reporting is designed to ensure reliable and accurate financial
records, transparent disclosures, compliance with laws and regulations, and protection
of our assets. Our internal controls start at the source of business transactions, and
we have rigorous enforcement through controllership at both the business unit and
corporate level. Our corporate management also review each of our businesses on a
regular basis and we have a corporate internal audit function that performs reviews
around gaming compliance, internal controls over financial reporting, and operational
areas.
In connection with the supervision of gaming activities at our casinos, we maintain
stringent controls on the recording of all receipts and disbursements and other
activities, such as cash transaction reporting. These controls include:
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Locked cash boxes on the casino floor; |
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Daily cash counts performed by employees who are independent of casino
operations; |
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Constant observation and supervision of the gaming area; |
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Observation and recording of gaming and other areas by closed-circuit
television; |
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Constant computer monitoring of our slot machines; and |
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Timely analysis of deviations from expected performance. |
Marker play represents a significant portion of the table games volume at Bellagio,
MGM Grand Las Vegas, Mandalay Bay and The Mirage. Our other facilities do not emphasize
marker play to the same extent, although we offer markers to customers at certain of
those casinos as well. We maintain strict controls over the issuance of markers and
aggressively pursue collection from those customers who fail to pay their marker
balances timely. These collection efforts are similar to those used by most large
corporations when dealing with overdue customer accounts, including the mailing of
statements and delinquency notices, personal contacts, the use of outside collection
agencies and civil litigation.
In Nevada, Mississippi, Michigan, and Illinois, amounts owed for markers which are
not timely paid are enforceable under state laws. All other states are required to
enforce a judgment for amounts owed for markers entered into in Nevada, Mississippi,
Illinois or Michigan which are not timely paid, pursuant to the Full Faith and Credit
Clause of the United States Constitution. Amounts owed for markers which are not timely
paid are not legally enforceable in some foreign countries, but the United States assets
of foreign customers may be reached to satisfy judgments entered in the United States.
Risks Associated With Our Operating Strategy
The principal risk factors relating to our operating strategy are:
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Our guestroom, dining and entertainment prices are often higher than those
of most of our competitors in each market, although we believe that the
quality of our facilities and services is also higher; |
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Our hotel-casinos compete to some extent with each other for customers.
Bellagio, MGM Grand Las Vegas, Mandalay Bay and The Mirage, in particular,
compete for some of the same premium gaming customers; MGM Grand Las Vegas and
Mandalay Bay also compete to some extent against each other in the large-scale
conference and convention business; and |
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Additional new hotel-casinos and expansion projects at existing Las Vegas
hotel-casinos are under construction or have been proposed. We are unable to
determine to what extent increased competition will affect our future
operating results. |
5
Sustainable Growth
In allocating capital, our financial strategy is focused on managing a proper mix
of investing in existing resorts, spending on new resorts or initiatives, repaying
long-term debt, and returning capital to shareholders. We have actively allocated
capital to each of these areas historically, and expect to continue to do so. We
believe there are reasonable investments for us to make in new initiatives that will
provide returns in excess of the other options. Primarily, we feel these opportunities
are in the areas of large-scale, mixed-use development in established gaming markets,
international opportunities for gaming expansion particularly in Asia and expansion
into non-gaming operations.
The following sections discuss certain of our current and potential development
opportunities. We regularly evaluate possible expansion and acquisition opportunities
in both the domestic and international markets, but cannot determine the likelihood of
proceeding with specific development opportunities. Opportunities we evaluate may
include the ownership, management and operation of gaming and other entertainment
facilities in Nevada or in states other than Nevada or outside of the United States. We
may undertake these opportunities either alone or in cooperation with one or more third
parties.
CityCenter
We and our joint venture partner are developing CityCenter located on a 67-acre
site on the Las Vegas Strip, between Bellagio and Monte Carlo. CityCenter will feature a
4,000-room casino resort designed by world-famous architect Cesar Pelli; two 400-room
non-gaming boutique hotels, one of which will be managed by luxury hotelier Mandarin
Oriental; approximately 425,000 square feet of retail shops, dining and entertainment
venues; and approximately 2.3 million square feet of residential space in approximately
2,700 luxury condominium and condominium-hotel units in multiple towers. CityCenter is
expected to open in late 2009. Until November 15, 2007, we owned 100% of CityCenter.
At that time, we completed a transaction with a wholly-owned
subsidiary of Dubai World, a Dubai, United Arab Emirates
government decree entity, to form a 50/50 joint venture for the CityCenter development.
We will continue to serve as developer of CityCenter and will receive additional
consideration of up to $100 million if the project is completed on time and actual
development costs, net of residential proceeds, are within specified parameters. Upon
completion of construction, we will manage CityCenter for a fee.
Atlantic City, New Jersey
We own approximately 130 acres on Renaissance Pointe in Atlantic City, New Jersey.
We lease ten acres to Borgata under long-term leases for use in its current operations
and for its expansion. Of the remaining 120 acres, approximately 72 acres are suitable
for development. We lease nine of these developable acres to Borgata on a short-term
basis for surface parking and a portion of the remaining acres consists of common roads,
landscaping and master plan improvements which we designed and developed as required by
our agreement with Boyd. We own an additional 15 developable acres in the Marina
District near Renaissance Pointe.
In October 2007 we announced the development of MGM Grand Atlantic City which will
be located at the 72-acre site. The proposed resort would include three towers with more
than 3,000 total rooms and suites, approximately 5,000 slot machines, 200 table games,
500,000 square-feet of retail, an extensive convention center and other typical resort
amenities.
Kerzner/Istithmar Joint Venture
In September 2007, the Company entered into a definitive agreement with Kerzner
International and Istithmar forming a joint venture to develop a multi-billion dollar
integrated resort to be located on the southwest corner of Las Vegas Boulevard and
Sahara Avenue. The Company will contribute 40 acres of land, which is being valued at
$20 million per acre, for fifty percent of the equity in the joint venture. Kerzner
International and Istithmar will contribute cash totaling $600
million and each will obtain twenty-five
percent of the equity in the joint venture.
Jean Properties
We have entered into an operating agreement to form a 50/50 joint venture with
Jeanco Realty Development, LLC, a venture owned by American Nevada Corporation. The
venture will master plan and develop a mixed-use community in Jean, Nevada. We will
contribute Gold Strike and the surrounding land to the joint venture. The value of this
contribution per the operating agreement will be $150 million. We expect to receive a
distribution of $55 million upon contribution of the assets to the venture, which is
subject to the venture obtaining necessary regulatory and other approvals, and $20
million no later than August 2008.
6
Risks Associated With Our Growth Strategy
The principal risk factors relating to our growth strategy are:
|
|
|
Development and operation of gaming facilities in new or
existing jurisdictions are
subject to many contingencies. Several of these contingencies are outside of
our control and may include the passage of appropriate gaming legislation, the
issuance of necessary permits, licenses and approvals, the availability of
appropriate financing and the satisfaction of other conditions; |
|
|
|
|
Expansion projects involve risks and uncertainties. For instance, the
design, timing and costs of the projects may change and are subject to risks
attendant to large-scale projects. |
Leveraging Our Brand and Management Assets
We also seek to leverage our management expertise and well recognized brands
through strategic partnerships and international expansion opportunities. We feel that
several of our brands, particularly the MGM Grand brand, are well suited to new
projects in both gaming and non-gaming developments. The recently opened MGM Grand
Macau, the planned MGM Grand Atlantic City, the recently announced MGM Grand Abu Dhabi,
and the MGM Grand branded resort currently under construction adjacent to Foxwoods, are
all part of our brand expansion strategy.
In 2007, we formed MGM MIRAGE Hospitality, LLC (Hospitality). The purpose of
this entity is to source strategic resort investment and management opportunities, both
gaming and non-gaming. Hospitality will have a particular focus on international
opportunities, where we feel future growth opportunities are greatest. We have
strategically hired senior operating and development personnel with established
backgrounds in hospitality management and international operations to maximize the
profit potential of Hospitalitys operations.
Mubadala Development Company
In November 2007, we announced plans to develop MGM Grand Abu Dhabi, a
multi-billion dollar, large-scale, mixed-use development that will serve as an incoming
gateway to Abu Dhabi, a United Arab Emirate, located at a prominent downtown waterfront site on Abu Dhabi
Island. The project will be wholly owned by Mubadala; we will serve as developer of the
project and manage the development for a fee. The initial phase will utilize 50 acres
and consist of an MGM Grand hotel, two additional MGM branded luxury hotels, and a
variety of luxury residential offerings. Additionally, the development will feature a
major entertainment facility, high-end retail shops, and world-class dining and
convention facilities.
Mashantucket Pequot Tribal Nation
The Company entered into a series of agreements to implement a strategic alliance
with the Mashantucket Pequot Tribal Nation (MPTN), which owns and operates Foxwoods
Casino Resort in Ledyard, Connecticut. Under the strategic alliance, we are consulting
with MPTN in the development of a new $700 million casino resort currently under
construction adjacent to the existing Foxwoods casino resort. The new resort will
utilize the MGM Grand brand name and is scheduled to open
in May 2008. The Company
and MPTN have also formed a jointly owned company Unity Gaming, LLC to acquire or
develop future gaming and non-gaming enterprises. The Company will provide a loan of up
to $200 million to finance a portion of MPTNs investment in joint projects. Unity
Gaming, LLC, along with its minority partners, have applied to develop and manage a
resort in Kansas, the Chisholm Creek Casino Resort. Other entities have also applied to
develop and operate casinos in Kansas and no assurances can be given that the
application we are part of will be selected or approved.
China
We have signed a definitive agreement with the Diaoyutai State Guesthouse in
Beijing, Peoples Republic of China, to form a joint venture to develop luxury
non-gaming hotels and resorts globally, initially targeting prime locations, including
Beijing, in the Peoples Republic of China.
7
Risks Associated With Our Brand and Management Strategy
The principal risk factors relating to our brand and management strategy are:
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|
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Management of non-gaming resorts is a somewhat new business for us.
Whenever a company enters into a new venture, it is possible that existing
management and personnel will not have the requisite expertise in the new
venture and will not be able to compete effectively; |
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Operations in which we may engage in foreign territories are subject to
risk pertaining to international operations. These may include financial
risks: Foreign currency, adverse tax consequences, inability to adequately
enforce our rights; or regulatory and political risks: Foreign government
regulations, general geopolitical risks such as political and economic
instability, hostilities with neighboring countries, and changes in diplomatic
and trade relationships. |
In addition, to the extent we become involved with development projects as an owner
or investor, we are subject to similar risks as described in the Sustainable Growth
section.
Employees and Labor Relations
As
of December 31, 2007, we had approximately 54,700 full-time and
12,700 part-time
employees. At that date, we had collective bargaining contracts with unions covering
approximately 31,300 of our employees. We consider our employee relations to be good.
In August 2007, we entered a new five-year collective bargaining agreement covering
approximately 21,000 of our Las Vegas Strip employees. This does not include the
collective bargaining agreement covering employees at MGM Grand Las Vegas, which expires
in 2008. In addition, in October 2007 we entered into a new four year agreement
covering approximately 2,900 employees at MGM Grand Detroit.
Regulation and Licensing
The gaming industry is highly regulated, and we must maintain our licenses and pay
gaming taxes to continue our operations. Each of our casinos is subject to extensive
regulation under the laws, rules and regulations of the jurisdiction where it is
located. These laws, rules and regulations generally concern the responsibility,
financial stability and character of the owners, managers, and persons with financial
interest in the gaming operations. Violations of laws in one jurisdiction could result
in disciplinary action in other jurisdictions. A more detailed description of the
regulations to which we are subject is contained in Exhibit 99.2 to this Annual Report
on Form 10-K, which Exhibit is incorporated herein by reference.
Our businesses are subject to various federal, state and local laws and regulations
in addition to gaming regulations. These laws and regulations include, but are not
limited to, restrictions and conditions concerning alcoholic beverages, environmental
matters, employees, currency transactions, taxation, zoning and building codes, and
marketing and advertising. Such laws and regulations could change or could be
interpreted differently in the future, or new laws and regulations could be enacted.
Material changes, new laws or regulations, or material differences in interpretations by
courts or governmental authorities could adversely affect our operating results.
Forward-Looking Statements
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
This Form 10-K and our 2007 Annual Report to Stockholders contain some
forward-looking statements. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that they do
not relate strictly to historical or current facts. They contain words such as
anticipate, estimate, expect, project, intend, plan, believe, may,
could, might, and other words or phrases of similar meaning in connection with any
discussion of future operating or financial performance. In particular, these include
statements relating to future actions, new projects, future performance, the outcome of
contingencies such as legal proceedings, and future financial results. From time to
time, we also provide oral or written forward-looking statements in our Forms 10-Q and
8-K, as well as press releases and other materials we release to the public. Any or all
of our forward-looking statements in this Form 10-K, in our 2007 Annual Report to
Stockholders and in any other public statements we make may turn out to be wrong. They
can be affected by inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in this Form 10-K for example, government
regulation and the competitive environment will be important in determining our future
results. Consequently, no forward-looking statement can be guaranteed. Our actual
future results may differ materially.
8
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are advised,
however, to consult any further disclosures we make on related subjects in our Forms
10-K, 10-Q and 8-K reports to the Securities and Exchange Commission (SEC). Also note
that we provide a discussion of risks, uncertainties and possible inaccurate assumptions
relevant to our business in Item 1A, Risk Factors. This discussion is provided as
permitted by the Private Securities Litigation Reform Act of 1995.
You should also be aware that while we from time to time communicate with
securities analysts, we do not disclose to them any material non-public information,
internal forecasts or other confidential business information. Therefore, you should
not assume that we agree with any statement or report issued by any analyst,
irrespective of the content of the statement or report. To the extent that reports
issued by securities analysts contain projections, forecasts or opinions, those reports
are not our responsibility.
Executive Officers of the Registrant
The following table sets forth, as of February 15, 2008, the name, age and position
of each of our executive officers. Executive officers are elected by and serve at the
pleasure of the Board of Directors.
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Name |
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Age |
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Position |
J. Terrence Lanni
|
|
|
64 |
|
|
Chairman and Chief Executive Officer |
James J. Murren
|
|
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46 |
|
|
President, Chief Operating Officer and Director |
Robert H. Baldwin
|
|
|
57 |
|
|
Chief Design and Construction Officer and Director |
Gary N. Jacobs
|
|
|
62 |
|
|
Executive Vice President, General Counsel, Secretary and Director |
Aldo Manzini
|
|
|
44 |
|
|
Executive Vice President and Chief Administrative Officer |
Daniel J. DArrigo
|
|
|
39 |
|
|
Executive Vice President and Chief Financial Officer |
Robert C. Selwood
|
|
|
52 |
|
|
Executive Vice President and Chief Accounting Officer |
Alan Feldman
|
|
|
49 |
|
|
Senior Vice PresidentPublic Affairs |
Bruce Gebhardt
|
|
|
59 |
|
|
Senior Vice PresidentGlobal Security |
Phyllis A. James
|
|
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55 |
|
|
Senior Vice President and Senior Counsel |
Punam Mathur
|
|
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47 |
|
|
Senior Vice PresidentCorporate Diversity and Community Affairs |
Cynthia Kiser Murphey
|
|
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50 |
|
|
Senior Vice PresidentHuman Resources |
Shawn T. Sani
|
|
|
42 |
|
|
Senior Vice PresidentTaxes |
Cathryn Santoro
|
|
|
39 |
|
|
Senior Vice President and Treasurer |
Bryan L. Wright
|
|
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44 |
|
|
Senior Vice President, Assistant General Counsel and Assistant Secretary |
Mr. Lanni has served as Chairman of the Company since July 1995. He served as
Chief Executive Officer of the Company from June 1995 to December 1999, and since March
2001.
Mr. Murren has served as President of the Company since December 1999 and as Chief
Operating Officer since August 2007. He was Chief Financial Officer from January 1998
to August 2007 and Treasurer from November 2001 to August 2007.
Mr. Baldwin has served as Chief Design and Construction Officer since August 2007.
He served as Chief Executive Officer of Mirage Resorts from June 2000 to August 2007 and
President and Chief Executive Officer of Bellagio, LLC from June 1996 to March 2005.
Mr. Jacobs has served as Executive Vice President and General Counsel of the
Company since June 2000 and as Secretary since January 2002. Prior thereto, he was a
partner with the law firm of Christensen, Glaser, Fink, Jacobs, Weil & Shapiro, LLP, and
is currently of counsel to that firm.
Mr. Manzini has served as Executive Vice President and Chief Administrative Officer
since March 2007. Prior thereto, he served as Senior Vice President of Strategic
Planning for the Walt Disney Company and in various senior management positions
throughout his tenure from April 1990 to January 2007.
Mr. DArrigo has served as Executive Vice President and Chief Financial Officer
since August 2007. He served as Senior Vice PresidentFinance of the Company from
February 2005 to August 2007 and as Vice PresidentFinance of the Company from December
2000 to February 2005.
Mr. Selwood has served as Executive Vice President and Chief Accounting Officer
since August 2007. He served as Senior Vice PresidentAccounting of the Company from
February 2005 to August 2007 and as Vice PresidentAccounting of the Company from
December 2000 to February 2005.
Mr. Feldman has served as Senior Vice PresidentPublic Affairs of the Company since
September 2001. He served as Vice President Public Affairs of the Company from June
2000 to September 2001.
9
Mr. Gebhardt has served as Senior Vice PresidentGlobal Security of the Company
since November 2004. Prior thereto, he served as a Special Agent of the Federal Bureau
of Investigation for over 30 years, and was the FBIs Deputy Director for two years
prior to his retirement in October 2004.
Ms. James has served as Senior Vice President and Senior Counsel of the Company
since March 2002. From 1994 to 2001 she served as Corporation (General) Counsel and Law
Department Director for the City of Detroit. In that capacity she also served on
various public and quasi-public boards and commissions on behalf of the City, including
the Election Commission, the Detroit Building Authority and the Board of Ethics.
Ms. Mathur has served as Senior Vice PresidentCorporate Diversity and Community
Affairs of the Company since May 2004. She served as Vice PresidentCorporate Diversity
and Community Affairs of the Company from December 2001 to May 2004. She served as Vice
PresidentCommunity Affairs of the Company from November 2000 to December 2001.
Ms. Murphey has served as Senior Vice PresidentHuman Resources of the Company
since November 2000.
Mr. Sani has served as Senior Vice PresidentTaxes of the Company since July 2005.
He served as Vice PresidentTaxes of the Company from June 2002 to July 2005. Prior
thereto he was a partner in the Transaction Advisory Services practice of Arthur
Andersen LLP, having served that firm in various other capacities since 1988.
Ms. Santoro has served as Senior Vice President and Treasurer since August 2007.
She served as Vice President Treasury of the Company from August 2004 to August 2007.
Prior thereto she was a Vice President for Wells Fargo Bank, serving in the gaming
division.
Mr. Wright has served as Senior Vice President and Assistant General Counsel of the
Company since March 2005. He served as Vice President and Assistant General Counsel of
the Company from July 2001 to March 2005. He has served as Assistant Secretary of the
Company since January 2002. Prior to joining the Company, Mr. Wright served as Vice
President and Assistant General Counsel of Boyd Gaming Corporation and in other legal
capacities for Boyd Gaming Corporation from September 1993 to July 2001.
Available Information
We maintain a website, www.mgmmirage.com, which includes financial and other
information for investors. We provide access to our SEC filings on our website, free of
charge, through a link to the SECs EDGAR database. Through that link, our filings are
available as soon as reasonably practical after we file the documents.
These filings are also available on the SECs website at www.sec.gov. In addition,
the public may read and copy any materials that we file with the SEC at the SECs Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Our Corporate Governance Policies, the charter of our Audit Committee and our Code
of Business Conduct and Ethics and Conflict of Interest Policy, along with any
amendments or waivers to the Code, are available on our website under the Investor
Relations link. We will provide a copy of these documents without charge to any
stockholder upon receipt of a written request addressed to MGM MIRAGE, Attn: Corporate
Secretary, 3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109.
Reference in this document to our website address does not constitute incorporation
by reference of the information contained on the website.
ITEM 1A. RISK FACTORS
You should be aware that the occurrence of any of the events described in this
section and elsewhere in this report or in any other of our filings with the SEC could
have a material adverse effect on our business, financial position, results of
operations and cash flows. In evaluating us, you should consider carefully, among other
things, the risks described below.
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We have significant indebtedness. At December 31, 2007, we had approximately
$11.2 billion of indebtedness. The interest rate on a large portion of our
long-term debt will be subject to fluctuation based on changes in short-term
interest rates and the level of debt-to-EBITDA (as defined) under the provisions of
our senior credit facility. Our current senior credit facility and the indentures
governing our debt securities do not prohibit us from borrowing additional funds in
the future. Our interest expense could increase as a result of these factors.
Additionally, our indebtedness could increase our vulnerability to general adverse
economic and industry conditions, limit our flexibility in planning for or reacting
to changes in our business and industry, limit our ability to borrow additional
funds, and place us at a competitive disadvantage compared to other less leveraged
competitors. Our ability to reduce our outstanding debt will be subject to our
future cash flows, other capital requirements and other factors, some of which are
not within our control. |
10
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Our casinos in Las Vegas and elsewhere are destination resorts that compete with
other destination travel locations throughout the United States and the world. We
do not believe that our competition is limited to a particular geographic area, and
gaming operations in other states or countries could attract our customers. To the
extent that new casinos enter our markets or hotel room capacity is expanded by
others in major destination locations, competition will increase. Major
competitors, including new entrants, have either recently expanded their hotel room
capacity or are currently expanding their capacity or constructing new resorts in
Las Vegas. Also, the recent growth of gaming in areas outside Las Vegas, including
California, has increased the competition faced by our operations in Las Vegas and
elsewhere. In particular, as large scale gaming operations in Native American
tribal lands increase, competition will increase. |
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The expansion of Native American gaming in California has already impacted our
operations. According to the California Gambling Control Commission, more than 60
compacts with tribes had been approved by the federal government as of December 31,
2007, with more than 50 of the tribes legally operating casinos in California in
accordance with these compacts. Additional expansion of gaming in California could
have an adverse impact on our results of operations. |
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The ownership and operation of gaming facilities are subject to extensive
federal, state and local laws, regulations and ordinances, which are administered
by the relevant regulatory agencies in each jurisdiction. These laws, regulations
and ordinances vary from jurisdiction to jurisdiction, but generally concern the
responsibility, financial stability and character of the owners and managers of
gaming operations as well as persons financially interested or involved in gaming
operations. As such, our gaming regulators can require us to disassociate
ourselves from suppliers or business partners found unsuitable by the regulators.
In addition, unsuitable activity on our part or on the part of our domestic or
foreign unconsolidated affiliates in any jurisdiction could have a negative impact
on our ability to continue operating in other jurisdictions. For a summary of
gaming regulations that affect our business, see Regulation and Licensing. The
regulatory environment in any particular jurisdiction may change in the future and
any such change could have a material adverse effect on our results of operations.
In addition, we are subject to various gaming taxes, which are subject to possible
increase at any time. |
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Our business is affected by economic and market conditions in the markets in
which we operate and in the locations our customers reside. Bellagio, MGM Grand
Las Vegas, Mandalay Bay and The Mirage are particularly affected by economic
conditions in the Far East, and all of our Nevada resorts are affected by economic
conditions in the United States, and California in particular. A recession,
economic slowdown or other economic issues affecting consumers could cause a
reduction in visitation to our resorts, which would adversely affect our operating
results. For example, the current downturn in the real estate market in Nevada,
and the broader housing and credit market issues in the United States, could have a
negative impact on our CityCenter joint ventures ability to sell residential units
on the Las Vegas Strip and could negatively impact our customers visitation and
spending patterns. |
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Certain of our casino properties are located in areas that may be subject to
extreme weather conditions, including, but not limited to, hurricanes. Such extreme
weather conditions may interrupt our operations, damage our properties, and reduce
the number of customers who visit our facilities in such areas. Although we
maintain both property and business interruption insurance coverage for certain
extreme weather conditions, such coverage is subject to deductibles and limits on
maximum benefits, including limitation on the coverage period for business
interruption, and we cannot assure you that we will be able to fully insure such
losses or fully collect, if at all, on claims resulting from such extreme weather
conditions. Furthermore, such extreme weather conditions may interrupt or impede
access to our affected properties and may cause visits to our affected properties to
decrease for an indefinite period. For example, in August 2005, Hurricane Katrina
caused significant damage to our Beau Rivage resort, which remained closed for a
year. See Managements Discussion and Analysis of Financial Condition and Results
of Operations Financial Statement Impact of Hurricane Katrina. |
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We are a large consumer of electricity and other energy. Accordingly, increases
in energy costs, such as those experienced recently, may have a negative impact on
our operating results. Additionally, higher energy and gasoline prices which
affect our customers may result in reduced visitation to our resorts and a
reduction in our revenues. |
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Many of our customers travel by air. As a result, the cost and availability of
air service and the impact of any events which disrupt air travel can affect our
business. Additionally, there is one principal interstate highway between Las
Vegas and Southern California, where a large number of our customers reside.
Capacity constraints of that highway or any other traffic disruptions may affect
the number of customers who visit our facilities. |
11
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Leisure and business travel, especially travel by air, are particularly
susceptible to global geopolitical events, such as terrorist attacks or acts of war
or hostility, which can create economic and political uncertainties that could
adversely impact our business levels. Furthermore, although we have been able to
purchase some insurance coverage for certain types of terrorist acts, insurance
coverage against loss or business interruption resulting from war and some forms of
terrorism continues to be unavailable. |
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Our joint venture in Macau S.A.R. involves significant risks. The operations of
MGM Grand Macau, 50% owned by us, are subject to unique risks, including risks
related to: (a) Macaus regulatory framework; (b) our ability to adapt to the
different regulatory and gaming environment in Macau while remaining in compliance
with the requirements of the gaming regulatory authorities in the jurisdictions in
which we currently operate, as well as other applicable federal, state, or local
laws in the United States and Macau; (c) potential political or economic
instability; and (d) the extreme weather conditions in the region. |
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Furthermore, such operations in Macau or any future operations in which we may engage
in any other foreign territories are subject to risk pertaining to international
operations. These may include financial risks: Foreign economy, adverse tax
consequences, inability to adequately enforce our rights; or regulatory and political
risks: Foreign government regulations, general geopolitical risks such as political
and economic instability, hostilities with neighboring counties, and changes in
diplomatic and trade relationships. |
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Our plans for future construction can be affected by a number of factors,
including time delays in obtaining necessary governmental permits and approvals and
legal challenges. We may make changes in project scope, budgets and schedules for
competitive, aesthetic or other reasons, and these changes may also result from
circumstances beyond our control. These circumstances include weather
interference, shortages of materials and labor, work stoppages, labor disputes,
unforeseen engineering, environmental or geological problems, and unanticipated
cost increases. Any of these circumstances could give rise to delays or cost
overruns. Major expansion projects at our existing resorts can also result in
disruption of our business during the construction period. |
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Claims have been brought against us and our subsidiaries in various legal
proceedings, and additional legal and tax claims arise from time to time. It is
possible that our cash flows and results of operations could be affected by the
resolution of these claims. We believe that the ultimate disposition of current
matters will not have a material impact on our financial condition or results of
operations. Please see the further discussion under Legal Proceedings. |
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Tracinda Corporation beneficially owned approximately 52% of our outstanding
common stock as of December 31, 2007. As a result, Tracinda Corporation has the
ability to elect our entire Board of Directors and determine the outcome of other
matters submitted to our stockholders, such as the approval of significant
transactions. |
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A significant portion of our labor force is covered by collective bargaining
agreements. Approximately 31,300 of our 67,400 employees are covered by
collective bargaining agreements. A prolonged dispute with the covered employees
could have an adverse impact on our operations. In addition, wage and or benefit
increases resulting from new labor agreements may be significant and could also
have an adverse impact on our results of operations. For example, in August 2007,
we entered a new five-year collective bargaining agreement covering approximately
21,000 of our Las Vegas Strip employees. This does not include the collective
bargaining agreement covering employees at MGM Grand Las Vegas, which expires in
2008. The new agreement is retroactive to May 31, 2007 and provides for average
annual increases in wages and benefits of approximately 4%. In addition, in
October 2007 we entered into a new four-year labor agreement covering approximately
2,900 employees at MGM Grand Detroit which provides for average annual increases in
wages and benefits of approximately 6%. |
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
12
ITEM 2. PROPERTIES
Our principal executive offices are located at Bellagio. The following table lists our
significant land holdings. Unless otherwise indicated, all properties are wholly-owned. We also
own or lease various other improved and unimproved property in Las Vegas and other locations in
the United States and certain foreign countries.
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Approximate |
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Name and Location |
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Acres |
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Notes |
Las Vegas, Nevada operations: |
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Bellagio
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82 |
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Two acres of the site are subject to two ground leases that
expire (giving effect to our renewal options) in 2019 and 2073.
Approximately five acres are leased to CityCenter under a long-term
lease. |
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MGM Grand Las Vegas
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102 |
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Mandalay Bay
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100 |
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|
|
|
The Mirage
|
|
|
102 |
|
|
Site is shared with TI. |
|
|
Luxor
|
|
|
60 |
|
|
|
|
|
TI
|
|
NA
|
|
See The Mirage. |
|
|
New York-New York
|
|
|
20 |
|
|
|
|
|
Excalibur
|
|
|
53 |
|
|
|
|
|
Monte Carlo
|
|
|
28 |
|
|
|
|
|
Circus Circus Las Vegas
|
|
|
69 |
|
|
Includes Slots-a-Fun. Six acres of this land will be contributed to
our planned Kerzner joint venture. |
|
|
Shadow Creek Golf Course
|
|
|
240 |
|
|
|
|
|
|
|
|
|
|
|
|
Other Nevada operations: |
|
|
|
|
|
|
|
|
Circus Circus Reno
|
|
|
10 |
|
|
A portion of the site is subject to two ground leases, which
expire in 2032 and 2033, respectively. |
|
|
Primm Valley Golf Club
|
|
|
448 |
|
|
Located in California, four miles from the Primm Valley Resorts. |
|
|
Gold Strike, Jean, Nevada
|
|
|
51 |
|
|
|
|
|
Railroad Pass, Henderson, Nevada
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
Other domestic operations: |
|
|
|
|
|
|
|
|
MGM Grand Detroit
|
|
|
27 |
|
|
|
|
|
Beau Rivage, Biloxi, Mississippi
|
|
|
41 |
|
|
Includes 10 acres of tidelands leased from the State of
Mississippi under a lease that expires (giving effect to our
renewal options) in 2049. |
|
|
Fallen Oak Golf Course, Saucier, Mississippi
|
|
|
508 |
|
|
|
|
|
Gold Strike, Tunica, Mississippi
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
Other land: |
|
|
|
|
|
|
|
|
CityCenter-Support
|
|
|
12 |
|
|
Includes approximately 10 acres behind New York-New York, being
used for project administration offices and approximately two
acres adjacent to New York-New York, being used for the
residential sales pavilion. We own this land and these
facilities, and we are leasing them to CityCenter on a rent free
basis. |
|
|
Las Vegas Strip south
|
|
|
20 |
|
|
Located immediately south of Mandalay Bay. |
|
|
|
|
|
15 |
|
|
Located across the Las Vegas Strip from Luxor. |
|
|
Las Vegas Strip north
|
|
|
34 |
|
|
Located north of Circus Circus. We will contribute this land to |
|
|
|
|
|
|
|
|
our planned joint venture with Kerzner International and
Istithmar. |
|
|
North Las Vegas, Nevada
|
|
|
66 |
|
|
Located adjacent to Shadow Creek. |
|
|
Other Las Vegas
|
|
|
9 |
|
|
Warehouse located a few miles from the Las Vegas Strip. |
|
|
Henderson, Nevada
|
|
|
47 |
|
|
Adjacent to Railroad Pass. |
|
|
Jean, Nevada
|
|
|
116 |
|
|
Located adjacent to, and across 1-15 from, Gold Strike. We will
contribute this land to our planned joint venture with Jean
Realty Development, LLC. |
|
|
Sloan, Nevada
|
|
|
89 |
|
|
|
|
|
Stateline, California at Primm
|
|
|
125 |
|
|
Adjacent to the Primm Valley Golf Club. |
|
|
Detroit, Michigan
|
|
|
8 |
|
|
Site of former temporary casino. |
|
|
Tunica, Mississippi
|
|
|
388 |
|
|
We own an undivided 50% interest in this site with another,
unaffiliated, gaming company. |
|
|
Atlantic City, New Jersey
|
|
|
153 |
|
|
Approximately 19 acres are leased to Borgata including nine
acres under a short-term lease. Of the remaining land,
approximately 78 acres are suitable for development. |
13
Borgata occupies approximately 46 acres at Renaissance Pointe, including 19 acres
we lease to Borgata. Borgata owns approximately 27 acres which are used as collateral
for bank credit facilities in the amount of up to $850 million. As of December 31,
2007, $723 million was outstanding under the bank credit facility.
MGM Grand Macau occupies an approximately 10 acre site which it possesses under a
25 year land use right agreement with the Macau government. MGM Grand Paradise
Limiteds interest in the land use right agreement is used as collateral for MGM Grand
Paradise Limiteds bank credit facility. As of December 31, 2007, approximately $700
million was outstanding under the bank credit facility.
Silver Legacy occupies approximately five acres in Reno, Nevada, adjacent to Circus
Circus Reno. The site is used as collateral for Silver Legacys senior credit facility
and 10.125% mortgage notes. As of December 31, 2007, $160 million of principal of the
10.125% mortgage notes were outstanding.
CityCenter occupies approximately 67 acres of land between Bellagio and Monte
Carlo, five acres of which are leased from Bellagio under a long-term lease. We expect
that the site will be used as collateral for the permanent CityCenter financing.
Other than as described above, none of our other assets serve as collateral.
ITEM 3. LEGAL PROCEEDINGS
Fair and Accurate Credit Transaction Act Litigation
On June 22, 2007, the Company was served with a purported nationwide class action
lawsuit filed in federal district court in Nevada (Lety Ramirez v. MGM MIRAGE, Inc., et
al.) for alleged willful violations of the Fair and Accurate Credit Transactions Act
(FACTA). The lawsuit asserts that the Company failed to comply timely with FACTAs
directive that merchants who accept credit and/or debit cards not display more than the
last 5 digits of the card number or the card expiration date on electronically-generated
receipts provided to customers at the point of sale. FACTAs compliance deadline for
electronic machines that were first put into service before January 1, 2005 was December
4, 2006, while electronic machines put into use on or after January 1, 2005 required
immediate compliance.
Although the complaint does not assert that the plaintiff sustained any actual
damage, the plaintiff seeks on behalf of herself and all similarly situated putative
class members throughout the United States statutory damages of $100 (minimum) to $1,000
(maximum) for each transaction violation, attorneys fees, costs, punitive damages and a
permanent injunction.
By order entered December 3, 2007 the district court denied the Companys motion to
dismiss the complaint in its entirety but granted the motion to strike from the
complaint plaintiffs request for injunctive relief. The Company then filed an answer
to the complaint on December 20, 2007. No discovery has been propounded on the
plaintiff or the Company. On February 11, 2008, the court granted the parties
stipulation to stay this case pending issuance of a decision by the Ninth Circuit Court
of Appeals on review of the order of a California federal district court denying class
certification in a FACTA case.
We believe that plaintiff Ramirezs claims for class certification and other relief
are unjustified, and we will continue to vigorously defend our position in this case.
Other
We and our subsidiaries are also defendants in various other lawsuits, most of
which relate to routine matters incidental to our business. We do not believe that the
outcome of this other pending litigation, considered in the aggregate, will have a
material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of our security holders during the fourth
quarter of 2007.
14
PART II
|
|
|
ITEM 5. |
|
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES |
Common Stock Information
Our common stock is traded on the New York Stock Exchange under the symbol MGM
formerly our stock trading symbol was MGG. The following table sets forth, for the
calendar quarters indicated, the high and low sale prices of our common stock on the New
York Stock Exchange Composite Tape.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
|
High |
|
Low |
|
High |
|
Low |
First quarter |
|
$ |
75.28 |
|
|
$ |
56.40 |
|
|
$ |
43.43 |
|
|
$ |
35.26 |
|
Second quarter |
|
|
87.38 |
|
|
|
61.17 |
|
|
|
46.15 |
|
|
|
38.14 |
|
Third quarter |
|
|
91.15 |
|
|
|
63.33 |
|
|
|
40.92 |
|
|
|
34.20 |
|
Fourth quarter |
|
|
100.50 |
|
|
|
80.50 |
|
|
|
59.51 |
|
|
|
39.82 |
|
There were approximately 3,929 record holders of our common stock as of February
15, 2008.
We have not paid dividends on our common stock in the last two fiscal years. We
intend to retain our earnings to fund the operation of our business, to service and
repay our debt, to make strategic investments in high return growth projects at our
proven resorts, to repurchase shares of common stock and to reserve our capital to raise
our capacity to capture investment opportunities overseas and in emerging domestic
markets. Furthermore, as a holding company with no independent operations, our ability
to pay dividends will depend upon the receipt of dividends and other payments from our
subsidiaries. Our senior credit facility contains financial covenants that could
restrict our ability to pay dividends. Our Board of Directors periodically reviews our
policy with respect to dividends, and any determination to pay dividends in the future
will be at the sole discretion of the Board of Directors.
Share Repurchases
Our share repurchases are only conducted under repurchase programs approved by our
Board of Directors and publicly announced. The following table includes information
about our share repurchases for the quarter ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased |
|
|
Maximum |
|
|
|
Total |
|
|
Average |
|
|
As Part of a |
|
|
Shares Still |
|
|
|
Shares |
|
|
Price Per |
|
|
Publicly-Announced |
|
|
Available for |
|
|
|
Purchased |
|
|
Share |
|
|
Program |
|
|
Repurchase |
|
October 1 October 31, 2007 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
5,500,000 |
(1) |
November 1 November 30, 2007 |
|
|
5,080,000 |
|
|
|
87.92 |
|
|
|
5,080,000 |
|
|
|
420,000 |
(1) |
December 1 December 31, 2007 |
|
|
2,270,000 |
|
|
|
90.48 |
|
|
|
2,270,000 |
|
|
|
18,150,000 |
(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,350,000 |
|
|
|
|
|
|
|
7,350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Shares were repurchased under a July 2004 authorization from the Board
of Directors for the repurchase of up to 20 million shares, with no expiration. |
|
(2) |
|
In December 2007, the Board of Directors approved a new stock
repurchase program authorizing the Company to purchase up to 20 million
shares, with no expiration. |
In
February 2008, we and a wholly-owned subsidiary of Dubai World completed a joint tender offer to purchase 15
million shares of our common stock at a price of $80 per share. We purchased 8.5
million shares at a total purchase price of $680 million.
Equity Compensation Plan Information
The following table includes information about our equity compensation plans at
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
|
|
Number of securities |
|
|
to be issued upon |
|
Weighted average per |
|
remaining available |
|
|
exercise of |
|
share exercise price of |
|
for future issuance |
|
|
outstanding options, |
|
outstanding options, |
|
under equity |
|
|
warrants and rights |
|
warrants and rights |
|
compensation plans |
|
|
(in thousands, except per share data) |
Equity compensation plans approved by security holders |
|
|
26,674 |
|
|
$ |
31.90 |
|
|
|
3,073 |
|
15
|
|
|
ITEM 6. |
|
SELECTED FINANCIAL DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
|
(In thousands, except per share data) |
Net revenues |
|
$ |
7,691,637 |
|
|
$ |
7,175,956 |
|
|
$ |
6,128,843 |
|
|
$ |
4,001,804 |
|
|
$ |
3,657,662 |
|
Operating income |
|
|
2,863,930 |
|
|
|
1,758,248 |
|
|
|
1,330,065 |
|
|
|
932,613 |
|
|
|
684,879 |
|
Income from continuing operations |
|
|
1,400,545 |
|
|
|
635,996 |
|
|
|
435,366 |
|
|
|
345,209 |
|
|
|
226,719 |
|
Net income |
|
|
1,584,419 |
|
|
|
648,264 |
|
|
|
443,256 |
|
|
|
412,332 |
|
|
|
243,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
4.88 |
|
|
$ |
2.25 |
|
|
$ |
1.53 |
|
|
$ |
1.24 |
|
|
$ |
0.76 |
|
Net income per share |
|
|
5.52 |
|
|
|
2.29 |
|
|
|
1.56 |
|
|
|
1.48 |
|
|
|
0.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares |
|
|
286,809 |
|
|
|
283,140 |
|
|
|
284,943 |
|
|
|
279,325 |
|
|
|
297,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
4.70 |
|
|
$ |
2.18 |
|
|
$ |
1.47 |
|
|
$ |
1.19 |
|
|
$ |
0.75 |
|
Net income per share |
|
|
5.31 |
|
|
|
2.22 |
|
|
|
1.50 |
|
|
|
1.43 |
|
|
|
0.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares |
|
|
298,284 |
|
|
|
291,747 |
|
|
|
296,334 |
|
|
|
289,333 |
|
|
|
303,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At year-end |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
22,727,686 |
|
|
$ |
22,146,238 |
|
|
$ |
20,699,420 |
|
|
$ |
11,115,029 |
|
|
$ |
10,811,269 |
|
Total debt, including capital leases |
|
|
11,182,003 |
|
|
|
12,997,927 |
|
|
|
12,358,829 |
|
|
|
5,463,619 |
|
|
|
5,533,462 |
|
Stockholders equity |
|
|
6,060,703 |
|
|
|
3,849,549 |
|
|
|
3,235,072 |
|
|
|
2,771,704 |
|
|
|
2,533,788 |
|
Stockholders equity per share |
|
$ |
20.63 |
|
|
$ |
13.56 |
|
|
$ |
11.35 |
|
|
$ |
9.87 |
|
|
$ |
8.85 |
|
Number of shares outstanding |
|
|
293,769 |
|
|
|
283,909 |
|
|
|
285,070 |
|
|
|
280,740 |
|
|
|
286,192 |
|
|
|
|
|
|
The following events/transactions affect the year-to-year comparability of the selected
financial data presented above: |
Discontinued Operations
|
|
|
In January 2004, we sold the Golden Nugget Las Vegas and the Golden Nugget Laughlin
including substantially all of the assets and liabilities of those resorts (the Golden
Nugget Subsidiaries). |
|
|
|
|
In July 2004, we sold the subsidiaries that owned and operated MGM Grand Australia. |
|
|
|
|
In April 2007, we completed the sale of the Primm Valley Resorts. |
|
|
|
|
In June 2007, we completed the sale of the Colorado Belle and Edgewater resorts in
Laughlin, Nevada (the Laughlin Properties). |
|
|
|
|
The results of the above operations are classified as discontinued operations for all
periods presented. |
Acquisitions
|
|
|
The Mandalay acquisition closed on April 25, 2005. |
Other
|
|
|
Beau Rivage was closed from August 2005 to August 2006 due to Hurricane Katrina. |
|
|
|
|
Beginning January 1, 2006, we began to recognize stock-based compensation in accordance
with Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based
Payment (SFAS 123(R)). For the years ended December 31, 2007 and 2006, incremental
expense, before tax, resulting from the adoption of SFAS 123(R) was $46 million and $70
million, respectively. |
|
|
|
|
During 2007 and 2006, we recognized our share of profits from the sale of condominium
units at The Signature at MGM Grand. We recognized $93 million and $117 million (pre-tax)
of such income in 2007 and 2006, respectively. |
|
|
|
|
During 2007 and 2006, we recognized $284 million and $86 million, respectively, of
pre-tax income for insurance recoveries related to Hurricane Katrina. |
|
|
|
|
During 2007, we recognized a $1.03 billion pre-tax gain on the contribution of
CityCenter to a joint venture. |
16
|
|
|
ITEM 7. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS |
Executive Overview
Current Operations
At December 31, 2007, our operations consisted of 17 wholly-owned casino resorts
and 50% investments in four other casino resorts, including:
|
|
|
|
|
|
|
Las Vegas, Nevada:
|
|
Bellagio, MGM Grand Las Vegas, Mandalay Bay, The
Mirage, Luxor, TI, New York-New York, Excalibur, Monte Carlo, Circus Circus Las
Vegas and Slots-A-Fun. |
|
|
|
|
|
|
|
Other:
|
|
Circus Circus Reno and Silver Legacy (50% owned) in Reno, Nevada; Gold Strike
in Jean, Nevada; Railroad Pass in Henderson, Nevada; MGM Grand Detroit; Beau
Rivage in Biloxi, Mississippi and Gold Strike Tunica in Tunica, Mississippi;
Borgata (50% owned) in Atlantic City, New Jersey; Grand Victoria (50% owned) in
Elgin, Illinois; and MGM Grand Macau (50% owned). |
Other operations include the Shadow Creek golf course in North Las Vegas; two golf
courses south of Primm, Nevada at the California state line; and Fallen Oak golf course
in Saucier, Mississippi.
In April 2007, we closed the sale of the Primm Valley Resorts (Whiskey Petes,
Buffalo Bills and Primm Valley Resort in Primm, Nevada), not including the two golf
courses. In June 2007, we closed the sale of the Laughlin Properties (Colorado Belle and
Edgewater). See Results of Operations Discontinued Operations. In February 2007, we
entered into an agreement to contribute Gold Strike and Nevada Landing (the Jean
Properties) and surrounding land to a joint venture, and we closed Nevada Landing in
March 2007. See Liquidity and Capital Resources Other Factors Affecting Liquidity.
CityCenter Joint Venture Transaction
We and our joint venture partner are developing CityCenter located on a 67-acre
site on the Las Vegas Strip, between Bellagio and Monte Carlo. CityCenter will feature a
4,000-room casino resort designed by world-famous architect Cesar Pelli; two 400-room
non-gaming boutique hotels, one of which will be managed by luxury hotelier Mandarin
Oriental; approximately 425,000 square feet of retail shops, dining and entertainment
venues; and approximately 2.3 million square feet of residential space in approximately
2,700 luxury condominium and condominium-hotel units in multiple towers. CityCenter is
expected to open in late 2009.
In
November 2007, we completed a transaction with Dubai World, a
Dubai, United Arab
Emirates government decree entity, to form a 50/50 joint venture for the CityCenter
development. The joint venture, CityCenter Holdings, LLC (CityCenter), is owned
equally by us and Infinity World Development Corp., a wholly-owned subsidiary of Dubai
World. We contributed the CityCenter assets which the parties valued at $5.4 billion,
subject to certain adjustments. Dubai World contributed cash of $2.96 billion. At the
close of the transaction, we received a cash distribution of $2.47 billion, of which $22
million will be repaid to CityCenter as a result of a post-closing adjustment. The
joint venture retained approximately $492 million to fund near-term construction costs.
We will continue to serve as developer of CityCenter and will receive additional
consideration of up to $100 million if the project is completed on time and actual
development costs, net of residential proceeds, are within specified parameters. Upon
completion of construction, we will manage CityCenter for a fee. We recognized a $1.03
billion pre-tax gain as a result of the transaction.
Key Performance Indicators
We operate primarily in one segment, the operation of casino resorts, which
includes offering gaming, hotel, dining, entertainment, retail and other resort
amenities. Over half of our net revenue is derived from non-gaming activities, a higher
percentage than many of our competitors, as our operating philosophy is to provide a
complete resort experience for our guests, including non-gaming amenities which command
a premium price based on their quality. Our significant convention and meeting
facilities allow us to maximize hotel occupancy and customer volumes during off-peak
times such as mid-week or during traditionally slower leisure travel periods, which also
leads to better labor utilization. We believe that we own several of the premier casino
resorts in the world, and a main focus of our strategy is to continually reinvest in
these resorts to maintain our competitive advantage.
As a resort-based company, our operating results are highly dependent on the volume
of customers at our resorts, which in turn impacts the price we can charge for our hotel
rooms and other amenities. We also generate a significant portion of our operating
income from the high-end gaming customers, which can cause variability in our results.
Key performance indicators related to revenue are:
17
|
|
|
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 win percentage is in the range of 18% to 22% of table
games drop and our normal slots win percentage is in the range of 6.5% to 7.5%
of slots handle; |
|
|
|
Hotel revenue indicators hotel occupancy (volume indicator); average daily
rate (ADR, price indicator); revenue per available room (REVPAR), a summary
measure of hotel results, combining ADR and occupancy rate. |
Most of our revenue is essentially cash-based, through customers wagering with cash
or paying for non-gaming services with cash or credit cards. Our resorts, like many in
the industry, generate significant operating cash flow. Our industry is capital
intensive and we rely heavily on the ability of our resorts to generate operating cash
flow to repay debt financing, fund maintenance capital expenditures and provide excess
cash for future development.
We generate a majority of our net revenues and operating income from our resorts in
Las Vegas, Nevada, which exposes us to certain risks outside of our control, such as
increased competition from new or expanded Las Vegas resorts, and the impact from
expansion of gaming in California. We are also exposed to risks related to tourism and
the general economy, including national and global economic conditions and terrorist
attacks or other global events.
Our results of operations do not tend to be seasonal in nature, though a variety of
factors may affect the results of any interim period, including the timing of major Las
Vegas conventions, the amount and timing of marketing and special events for our
high-end customers, and the level of play during major holidays, including New Year and
Chinese New Year. We market to different customer segments to manage our hotel
occupancy, such as targeting large conventions to ensure mid-week occupancy. Our
results do not depend on key individual customers, though our success in marketing to
customer groups, such as convention customers, or the financial health of customer
segments, such as business travelers or high-end gaming customers from a particular
country or region, can impact our results.
Overall Outlook
We believe that economic conditions in the United States, including the downturn in
the housing market and credit concerns, during the latter half of 2007 and into 2008
have had, and could continue to have, a negative impact on our operating results. The
impact is currently most noticeable at our mid-market resorts, particularly those
outside of Las Vegas. Offsetting these macroeconomic conditions is the continued
expected strength of Las Vegas as a tourist destination. We also believe that we will
continue to benefit from recent and ongoing strategic capital investments at our
resorts. Our Las Vegas Strip resorts require ongoing capital investment to maintain
their competitive advantages. We believe these investments in additional non-gaming
amenities have enhanced our ability to generate increased visitor volume and allow us to
charge premium prices for our amenities. In 2007, we completed many
improvements at our Las Vegas strip resorts, including:
|
|
|
A remodel of approximately 400 of Bellagios suites; a complete remodel of
the approximately 3,200 standard rooms at Mandalay Bay; and a remodel of over 1,000 of the
standard rooms at Excalibur. |
|
|
|
|
Nightclub amenities including The Bank nightclub at Bellagio; Eyecandy sound
lounge and bar at Mandalay Bay; and CatHouse ultra lounge and restaurant and LAX
nightclub, both located at Luxor. |
|
|
|
|
New restaurants and bars such as Diablos Cantina at Monte Carlo; Dicks Last
Resort at Excalibur; and Company American Bistro at Luxor. |
|
|
|
|
Other resort facilities, including a complete upgrade to Mandalay Bays pool
area including adding a casino, restaurant and luxury cabanas and a
significant remodel to the spa and salon at The Mirage. |
These improvements, along with other amenities and improvements projected to open
in 2008, are expected to lead to increased customer volumes in gaming areas,
restaurants, shops, entertainment venues and our other resort amenities. In addition,
the following items are relevant to our overall outlook:
|
|
|
The all-new MGM Grand Detroit hotel and casino complex opened on October 2,
2007. The new casino has approximately 4,400 slot machines, 95 table games, 400
hotel rooms, and a variety of food and beverage offerings. The interim facility
closed on September 30, 2007 and had significantly fewer gaming positions and no
hotel. Based on the increased gaming capacity and extent of resort amenities,
we expect significantly higher revenues at MGM Grand Detroit in 2008. In
addition, now that the permanent casino is open the gaming tax rate decreased,
retroactive to October 2, from 26% to 21%. |
|
|
|
|
We own 50% of MGM Grand Macau, which opened on December 18, 2007. Our share
of income from MGM Grand Macau will positively impact our results for 2008. |
|
|
|
|
In August 2007, we entered a new five-year collective bargaining agreement
covering approximately 21,000 of our Las Vegas Strip employees. This does not
include the collective bargaining agreement covering employees at MGM Grand Las
Vegas, which expires in 2008. The new agreement is retroactive to May 31, 2007
and provides for increases in wages and benefits of approximately 4% annually.
In addition, in October 2007 we entered into a new four-year labor agreement
covering approximately 2,900 employees at MGM Grand Detroit which provides for
average annual increases in wages and benefits of approximately 6%. |
18
Financial Statement Impact of Hurricane Katrina
Beau Rivage closed in late August 2005 due to significant damage sustained as a
result of Hurricane Katrina and re-opened in August 2006. We maintained insurance
covering both property damage and business interruption as a result of the storm. The
deductible under this coverage was approximately $15 million, based on the amount of
damage incurred. Business interruption coverage covered lost profits and other costs
incurred during the construction period and up to six months following the reopening of
the facility.
As of December 31, 2007, we had reached final settlement agreements with our
insurance carriers and received insurance recoveries of $635 million which exceeded the
$265 million of net book value of damaged assets and post-storm costs incurred. All
post-storm costs and expected recoveries have been recorded net within General and
administrative expenses in the accompanying consolidated statements of income, except
for depreciation of non-damaged assets, which is classified as Depreciation and
amortization. During the year ended December 31, 2007, we recognized $284 million of
insurance recoveries in income, of which $217 million was recorded within Property
transactions, net and $67 million was recorded within General and administrative
expense. The remaining $86 million previously recognized in income was recorded within
Property transactions, net in 2006.
Cash received for insurance recoveries are classified as cash flows from investing
activities if the recoveries relate to property damage, and cash flows from operations
if the recoveries relate to business interruption. During 2007, we received $280
million in insurance recoveries, of which $207 million was classified as investing cash
flows and $73 million was classified as operating cash flows. During 2006, we received
$309 million in insurance recoveries, of which $210 million was classified as investing
cash flows and $99 million was classified as operating cash flows. During 2005, we
received $46 million in insurance recoveries, all of which was classified as investing
cash flows.
Results of Operations
Summary Financial Results
The following table summarizes our financial results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
Percentage |
|
|
|
|
2007 |
|
Change |
|
2006 |
|
Change |
|
2005 |
|
|
|
|
|
|
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
7,691,637 |
|
|
|
7 |
% |
|
$ |
7,175,956 |
|
|
|
17 |
% |
|
$ |
6,128,843 |
|
Operating income |
|
|
2,863,930 |
|
|
|
63 |
% |
|
|
1,758,248 |
|
|
|
32 |
% |
|
|
1,330,065 |
|
Income from continuing operations |
|
|
1,400,545 |
|
|
|
120 |
% |
|
|
635,996 |
|
|
|
46 |
% |
|
|
435,366 |
|
Net income |
|
|
1,584,419 |
|
|
|
144 |
% |
|
|
648,264 |
|
|
|
46 |
% |
|
|
443,256 |
|
Diluted income from continuing
operations per share |
|
$ |
4.70 |
|
|
|
116 |
% |
|
$ |
2.18 |
|
|
|
48 |
% |
|
$ |
1.47 |
|
Diluted net income per share |
|
|
5.31 |
|
|
|
140 |
% |
|
|
2.22 |
|
|
|
48 |
% |
|
|
1.50 |
|
References to same-store results in our analysis for 2006 compared to 2005 exclude
the resorts acquired in our April 25, 2005 acquisition of Mandalay Resort Group
(Mandalay), Monte Carlo and Beau Rivage. We owned 50% of Monte Carlo prior to the
Mandalay acquisition. On a consolidated basis, the most important factors and trends
contributing to our performance over the last three years have been:
|
|
|
During the fourth quarter of 2007 we recognized a $1.03 billion gain related
to the contribution of the CityCenter assets to a joint venture. |
|
|
|
|
The addition of Mandalays resorts on April 25, 2005. |
|
|
|
|
Our ongoing capital investments in our resorts, which we believe is allowing
us to market more effectively to visitors, capture a greater share of our
visitors increased travel budgets, and generate premium pricing for our
resorts rooms and other amenities. |
|
|
|
|
The closure of Beau Rivage in August 2005 after Hurricane Katrina and
subsequent reopening in August 2006, and income related to insurance recoveries.
Operating income at Beau Rivage was $321 million, $104 million, and $40 million
in 2007, 2006 and 2005, respectively, which includes income from insurance
recoveries of $284 million in 2007 and $86 million in 2006. |
|
|
|
|
Recognition of our share of profits from the closings of condominium units of
The Signature at MGM Grand, which were complete as of December 31, 2007. The
venture recorded revenue and cost of sales as units closed. In 2007, we
recognized income of approximately $84 million related to our share of the
ventures profits and $8 million of deferred profit on land contributed to the
venture. In 2006, we recognized income of approximately $102 million related to
our share of the ventures profits and $15 million of deferred profit on land
contributed to the venture. These amounts are classified in Income from
unconsolidated affiliates in the accompanying consolidated statements of income. |
|
|
|
|
The adoption of Statement of Financial Accounting Standards No. 123(R),
Share-Based Payment (SFAS 123(R)). We recorded $46 million and $70 million
of additional stock compensation expense in 2007 and 2006, respectively, as a
result of adopting SFAS 123(R). Prior to January 1, 2006, we did not recognize
expense for employee stock options. |
19
Operating Results
The following table includes key information about our operating results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
2007 |
|
|
Change |
|
|
2006 |
|
|
Change |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
7,691,637 |
|
|
|
7 |
% |
|
$ |
7,175,956 |
|
|
|
17 |
% |
|
$ |
6,128,843 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
4,139,147 |
|
|
|
9 |
% |
|
|
3,813,386 |
|
|
|
15 |
% |
|
|
3,316,870 |
|
General and administrative |
|
|
1,140,363 |
|
|
|
6 |
% |
|
|
1,070,942 |
|
|
|
20 |
% |
|
|
889,806 |
|
Corporate expense |
|
|
193,893 |
|
|
|
20 |
% |
|
|
161,507 |
|
|
|
24 |
% |
|
|
130,633 |
|
Preopening and restructuring |
|
|
92,105 |
|
|
|
146 |
% |
|
|
37,397 |
|
|
|
138 |
% |
|
|
15,693 |
|
Property transactions, net |
|
|
(186,313 |
) |
|
NM |
|
|
|
(40,980 |
) |
|
NM |
|
|
|
37,021 |
|
CityCenter gain |
|
|
(1,029,660 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
700,334 |
|
|
|
11 |
% |
|
|
629,627 |
|
|
|
12 |
% |
|
|
560,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,049,869 |
|
|
|
(11 |
%) |
|
|
5,671,879 |
|
|
|
15 |
% |
|
|
4,950,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates |
|
|
222,162 |
|
|
|
(13 |
%) |
|
|
254,171 |
|
|
|
67 |
% |
|
|
151,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
2,863,930 |
|
|
|
63 |
% |
|
$ |
1,758,248 |
|
|
|
32 |
% |
|
$ |
1,330,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in 2007 included a full year of results for Beau Rivage. Excluding
Beau Rivage, net revenues increased 4%, largely due to strength in hotel room rates and
other non-gaming revenues. Operating income increased 63% in 2007 over 2006 and
included the CityCenter gain, higher Hurricane Katrina insurance recoveries income, and
a full year of operations at Beau Rivage. These increases were partially offset by
lower profits recognized from the sale of units at The Signature at MGM Grand and higher
preopening expenses, primarily related to the openings of MGM Grand Macau and MGM Grand
Detroit. Excluding the impact from these items, operating income for 2007 decreased
approximately 5% compared to 2006 mainly related to higher depreciation and amortization
expense related to our continued capital investments and higher corporate expense.
Corporate expense increased 20% in 2007 over 2006. The increase in corporate expense is
partially due to severance costs, costs associated with our CityCenter joint venture
transaction, and development costs associated with our planned MGM Grand Atlantic City
project.
The 2006 and 2005 increase in net revenues resulted primarily from the addition of
Mandalay. Net revenues for 2006 included a full year of operations for Mandalay resorts
and 2005 included approximately 8 months of operations for Mandalay resorts. On a
same-store basis, net revenues increased 5% in 2006. Operating income for 2006
increased 32% over 2005; same store operating income increased 15%, partially due to the
increases in revenues discussed above with continued strong operating margins. In
addition, we recognized income of $102 million from our share of profits from The
Signature at MGM Grand along with a $15 million gain on land contributed to the venture.
Partially offsetting these items was the $70 million of incremental stock-based
compensation expense. Excluding these items, same store operating income increased 10%,
with an operating margin of 22% in 2006 compared to 21% in 2005. Corporate expense
increased 24%, almost entirely due to $30 million of stock-based compensation.
Operating Results Detailed Revenue Information
The following table presents detail of our net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
2007 |
|
|
Change |
|
|
2006 |
|
|
Change |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Casino revenue, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games |
|
$ |
1,228,296 |
|
|
|
(2 |
%) |
|
$ |
1,251,304 |
|
|
|
13 |
% |
|
$ |
1,107,337 |
|
Slots |
|
|
1,897,610 |
|
|
|
7 |
% |
|
|
1,770,176 |
|
|
|
13 |
% |
|
|
1,563,485 |
|
Other |
|
|
113,148 |
|
|
|
4 |
% |
|
|
108,958 |
|
|
|
16 |
% |
|
|
93,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino revenue, net |
|
|
3,239,054 |
|
|
|
3 |
% |
|
|
3,130,438 |
|
|
|
13 |
% |
|
|
2,764,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
|
2,130,542 |
|
|
|
7 |
% |
|
|
1,991,477 |
|
|
|
22 |
% |
|
|
1,634,588 |
|
Food and beverage |
|
|
1,651,655 |
|
|
|
11 |
% |
|
|
1,483,914 |
|
|
|
17 |
% |
|
|
1,271,650 |
|
Entertainment, retail and other |
|
|
1,376,417 |
|
|
|
16 |
% |
|
|
1,190,904 |
|
|
|
17 |
% |
|
|
1,018,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue |
|
|
5,158,614 |
|
|
|
11 |
% |
|
|
4,666,295 |
|
|
|
19 |
% |
|
|
3,925,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,397,668 |
|
|
|
8 |
% |
|
|
7,796,733 |
|
|
|
17 |
% |
|
|
6,689,597 |
|
Less: Promotional allowances |
|
|
(706,031 |
) |
|
|
14 |
% |
|
|
(620,777 |
) |
|
|
11 |
% |
|
|
(560,754 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,691,637 |
|
|
|
7 |
% |
|
$ |
7,175,956 |
|
|
|
17 |
% |
|
$ |
6,128,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Table games revenue decreased 7% in 2007 excluding Beau Rivage, as volumes were
essentially flat. The table games hold percentage was slightly lower in 2007, though in
the normal range for both years. In 2006, table games revenue increased 7% over 2005 on
a same store basis, with strong baccarat volume up 4% and a somewhat higher hold
percentage, but within the normal range in both periods.
Excluding Beau Rivage, slots revenue was flat in 2007. Slots revenue was strong at
many of our Las Vegas Strip Resorts, including Bellagio and MGM Grand Las Vegas each
up 8% and The Mirage and Mandalay Bay each up 5%. These increases in slot revenues
at our high-end Las Vegas Strip resorts were offset by lower revenues at our mid-market
resorts. In 2006, slots revenue increased 3% on a same store basis, as a result of
increases at MGM Grand Las Vegas and TI.
Hotel revenue increased 5% in 2007 excluding Beau Rivage, with a 7% increase in
companywide REVPAR. Strength in demand and room pricing on the Las Vegas Strip led to
a 5% increase in ADR and a slight increase in occupancy percentage to 93%. In 2006,
hotel revenue increased 4% over 2006 on a same-store basis, due to strong room pricing,
leading to a 7% increase in same-store REVPAR.
The increases in food and beverage revenue in 2007 and 2006 are the result of
investments in new restaurants and nightclubs. In particular, in 2007 we opened several
new outlets at Excalibur, Mandalay Bay and Luxor including the LAX nightclub. Also,
we opened several restaurants and the Jet nightclub at The Mirage throughout 2006. The
strength in the business travel segment has also contributed to revenue growth at many
of our high-end restaurants and in catering operations.
Entertainment revenues in 2007 and 2006 benefited from Love, the Beatles-themed
Cirque du Soleil show at The Mirage, which opened July 2006. In addition, in 2007 we
saw improved results in our production shows generally, with higher occupancy at several
shows compared to 2006.
In 2007, we generated 58% of net revenues from non-gaming activities compared to
56% in 2006 and 55% in 2005. We expect this trend to continue in 2008, as we continue
to invest in new non-gaming amenities at our resorts and the MGM Grand Detroit hotel
will be open for a full year.
Operating Results Details of Certain Charges
Stock compensation expense is recorded within the department of the recipient of
the stock compensation award. In periods prior to January 1, 2006, such expense
consisted only of restricted stock amortization and expense associated with stock
options granted to non-employees. Beginning January 1, 2006, stock compensation expense
includes the cost of all stock-based awards to employees under SFAS 123(R). The
following table shows the amount of incremental compensation related to employee
stock-based awards included within each income statement expense caption:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Casino |
|
$ |
11,513 |
|
|
$ |
13,659 |
|
Other operating departments |
|
|
3,180 |
|
|
|
5,319 |
|
General and administrative |
|
|
12,143 |
|
|
|
19,722 |
|
Corporate expense and other |
|
|
19,707 |
|
|
|
30,421 |
|
Discontinued operations |
|
|
(865 |
) |
|
|
1,267 |
|
|
|
|
|
|
|
|
|
|
$ |
45,678 |
|
|
$ |
70,388 |
|
|
|
|
|
|
|
|
Preopening and start-up expenses consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
CityCenter |
|
$ |
24,169 |
|
|
$ |
9,429 |
|
|
$ |
5,173 |
|
MGM Grand Macau |
|
|
36,853 |
|
|
|
5,057 |
|
|
|
1,914 |
|
MGM Grand Detroit |
|
|
26,257 |
|
|
|
3,313 |
|
|
|
503 |
|
The Signature at MGM Grand |
|
|
1,130 |
|
|
|
8,379 |
|
|
|
1,437 |
|
Love at The Mirage |
|
|
|
|
|
|
3,832 |
|
|
|
|
|
Other |
|
|
3,696 |
|
|
|
6,352 |
|
|
|
6,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
92,105 |
|
|
$ |
36,362 |
|
|
$ |
15,752 |
|
|
|
|
|
|
|
|
|
|
|
Preopening and start-up expenses for CityCenter will continue to increase as the
project nears its expected completion in late 2009. However, since we completed the
CityCenter joint venture transaction in November 2007 we will only recognize our 50%
share of these preopening costs in the future. MGM Grand Macau preopening and start-up
expenses relate to our share of that ventures preopening costs. Preopening and
start-up expenses for The Signature at MGM Grand relate to our costs associated with
preparing the towers for rental operations.
21
Property transactions, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Write-downs and impairments |
|
$ |
33,624 |
|
|
$ |
40,865 |
|
|
$ |
28,622 |
|
Demolition costs |
|
|
5,665 |
|
|
|
348 |
|
|
|
5,362 |
|
Insurance recoveries |
|
|
(217,290 |
) |
|
|
(86,016 |
) |
|
|
|
|
Other net losses on asset sales or disposals |
|
|
(8,312 |
) |
|
|
3,823 |
|
|
|
3,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(186,313 |
) |
|
$ |
(40,980 |
) |
|
$ |
37,021 |
|
|
|
|
|
|
|
|
|
|
|
Write-downs and impairments in 2007 included write-offs related to discontinued
construction projects and a write-off of the carrying value of the Nevada Landing
building assets due to its closure in March 2007. The 2007 period also includes
demolition costs primarily related to the Mandalay Bay room remodel.
Write-downs and impairments in 2006 included $22 million related to the write-off
of the tram connecting Bellagio and Monte Carlo, including the stations at both resorts,
in preparation for construction of CityCenter. Other impairments related to assets
being replaced in connection with several capital projects, as well as the $4 million
write-off of Luxors investment in the Hairspray show.
Write-downs and impairments in 2005 related primarily to assets removed from
service in connection with capital projects at several resorts. Demolition costs
related primarily to room remodel activity at MGM Grand Las Vegas and the new showroom
at The Mirage.
Insurance recoveries in 2007 and 2006 related to the insurance recoveries received
related to property damage from Hurricane Katrina in excess of the book value of the
damaged assets and post-storm costs incurred.
Non-operating Results
The following table summarizes information related to interest on our long-term
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended December 31, |
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Total interest incurred |
|
$ |
930,138 |
|
|
$ |
900,661 |
|
|
$ |
685,552 |
|
Interest capitalized |
|
|
(215,951 |
) |
|
|
(122,140 |
) |
|
|
(29,527 |
) |
Interest allocated to discontinued operations |
|
|
(5,844 |
) |
|
|
(18,160 |
) |
|
|
(15,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
708,343 |
|
|
$ |
760,361 |
|
|
$ |
640,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized |
|
$ |
731,618 |
|
|
$ |
778,590 |
|
|
$ |
588,587 |
|
Weighted average total debt balance |
|
$13.0 billion |
|
|
$12.7 billion |
|
|
$10.1 billion |
|
End-of-year ratio of fixed-to-floating debt |
|
|
71/29 |
|
|
|
66/34 |
|
|
|
61/39 |
|
Weighted average interest rate |
|
|
7.1 |
% |
|
|
7.1 |
% |
|
|
6.8 |
% |
Gross interest costs increased in 2007 compared to 2006 due to higher average debt
balances during the year up until the significant reduction in debt in the fourth
quarter resulting from the $2.47 billion received upon the close of the CityCenter joint
venture transaction and the $1.2 billion received from our sale
of common stock to a wholly-owned subsidiary of Dubai
World. Net interest expense decreased due to increased capitalized interest from the
ongoing construction of CityCenter, MGM Grand Detroit, and MGM Grand Macau.
Interest costs increased in 2006 over 2005 due to higher average outstanding debt
resulting from a full year of debt outstanding related to the Mandalay acquisition, incremental
borrowings in 2006 to fund capital investments, and a slightly higher average interest
rate. Capitalized interest increased in 2006 as we continued to capitalize interest on
the CityCenter construction and our investment in MGM Grand Macau. The increase in our
weighted average interest rate was due to slightly higher market rates, which affects
our variable rate debt.
The following table summarizes information related to our income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
|
|
|
|
(In thousands) |
|
|
|
|
Income from continuing operations before income tax |
|
$ |
2,158,428 |
|
|
$ |
977,926 |
|
|
$ |
667,085 |
|
Income tax provision |
|
|
757,883 |
|
|
|
341,930 |
|
|
|
231,719 |
|
Effective income tax rate |
|
|
35.1 |
% |
|
|
35.0 |
% |
|
|
34.7 |
% |
Cash paid for income taxes |
|
$ |
391,042 |
|
|
$ |
369,450 |
|
|
$ |
75,776 |
|
The effective tax rate in 2007 was slightly higher than the statutory rate and the
prior year rate. The 2007 effective tax rate would have been higher except for the
CityCenter gain, which greatly minimized the impact of permanent and other tax items.
Additionally in 2007, a benefit for a deduction related to domestic production
activities, resulting primarily from the CityCenter transaction, was offset by
nondeductible losses from unconsolidated foreign affiliates during the year.
22
The effective income tax rate in 2006 benefited from a reversal of tax reserves
that were no longer required, primarily due to guidance issued by the Internal Revenue
Service related to the deductibility of certain complimentaries. The 2006 rate was
still higher than the 2005 rate, however, as such reversal was less than the one-time
tax benefit recognized in 2005 due to a tax benefit realized from the repatriation of
foreign earnings from Australia as a result of the provisions of the American Jobs
Creation Act of 2004.
Cash paid for income taxes increased only slightly in 2007 over 2006, despite
significantly higher pre-tax income. Since the CityCenter gain was realized in the
fourth quarter of 2007, the associated income taxes will be paid in 2008. Cash paid for
income taxes increased significantly in 2006 due primarily to the payment of taxes on
the gain on Mandalays sale of MotorCity Casino, taxable income associated with the
sales of units at the Signature at MGM Grand, and an increase in pre-tax income
resulting from the Mandalay merger and continued improvements in operating results.
Liquidity and Capital Resources
Cash Flows Summary
Our cash flows consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
994,416 |
|
|
$ |
1,231,952 |
|
|
$ |
1,182,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing cash flows: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(2,917,409 |
) |
|
|
(1,758,795 |
) |
|
|
(719,146 |
) |
Proceeds from contribution of CityCenter |
|
|
2,468,652 |
|
|
|
|
|
|
|
|
|
Acquisition of Mandalay Resort Group, net |
|
|
|
|
|
|
|
|
|
|
(4,420,990 |
) |
Proceeds from disposals of discontinued operations, net |
|
|
578,873 |
|
|
|
|
|
|
|
|
|
Purchase of convertible note |
|
|
(160,000 |
) |
|
|
|
|
|
|
|
|
Hurricane Katrina insurance recoveries |
|
|
207,289 |
|
|
|
209,963 |
|
|
|
46,250 |
|
Investments in unconsolidated affiliates |
|
|
|
|
|
|
(86,000 |
) |
|
|
(183,000 |
) |
Other |
|
|
31,896 |
|
|
|
(7,595 |
) |
|
|
(25,931 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
209,301 |
|
|
|
(1,642,427 |
) |
|
|
(5,302,817 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing cash flows: |
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under bank credit facilities |
|
|
(1,152,300 |
) |
|
|
(393,150 |
) |
|
|
4,725,000 |
|
Issuance of long-term debt |
|
|
750,000 |
|
|
|
1,500,000 |
|
|
|
880,156 |
|
Repayment of long-term debt |
|
|
(1,402,233 |
) |
|
|
(444,500 |
) |
|
|
(1,408,992 |
) |
Issuance of common stock |
|
|
1,192,758 |
|
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise of stock options |
|
|
97,792 |
|
|
|
89,113 |
|
|
|
145,761 |
|
Purchases of common stock |
|
|
(826,765 |
) |
|
|
(246,892 |
) |
|
|
(217,316 |
) |
Other |
|
|
100,211 |
|
|
|
5,453 |
|
|
|
(61,783 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(1,240,537 |
) |
|
|
510,024 |
|
|
|
4,062,826 |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
(36,820 |
) |
|
$ |
99,549 |
|
|
$ |
(57,195 |
) |
|
|
|
|
|
|
|
|
|
|
Cash Flows Operating Activities
Trends in our operating cash flows tend to follow trends in our operating income,
excluding gains and losses from investing activities and net property transactions,
since our business is primarily cash-based. Cash flow from operations decreased 18% in
2007, partially the result of trends in operating income, excluding the CityCenter gain,
Katrina-related income and other similar items. In addition, the Companys net cash
outflows related to CityCenter residential sales construction expenditures and
customer deposits increased by $135 million. Cash flow from operations increased in
2006 over 2005 as a result of higher operating income, offset by higher interest and tax
payments tax payments in particular increased to $369 million in 2006 versus $76
million in 2005.
At December 31, 2007 and 2006, we held cash and cash equivalents of $412 million
and $453 million, respectively. We require a certain amount of cash on hand to operate
our resorts. Beyond our cash on hand, we utilize a company-wide cash management system
to minimize the amount of cash held in banks. Funds are swept from accounts at our
resorts daily into central bank accounts, and excess funds are invested overnight or are
used to repay borrowings under our bank credit facilities.
23
Cash Flows Investing Activities
Capital expenditures consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
Development and expansion projects: |
|
|
|
|
|
|
|
|
|
|
|
|
CityCenter |
|
$ |
962 |
|
|
$ |
520 |
|
|
$ |
79 |
|
MGM Grand Detroit |
|
|
336 |
|
|
|
262 |
|
|
|
90 |
|
Beau Rivage |
|
|
63 |
|
|
|
446 |
|
|
|
44 |
|
Las Vegas Strip land |
|
|
584 |
|
|
|
|
|
|
|
|
|
Capitalized interest on development and expansion projects |
|
|
191 |
|
|
|
101 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,136 |
|
|
|
1,329 |
|
|
|
233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Room remodel projects |
|
|
205 |
|
|
|
39 |
|
|
|
64 |
|
Corporate aircraft |
|
|
102 |
|
|
|
48 |
|
|
|
|
|
Other |
|
|
474 |
|
|
|
343 |
|
|
|
422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
781 |
|
|
|
430 |
|
|
|
486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,917 |
|
|
$ |
1,759 |
|
|
$ |
719 |
|
|
|
|
|
|
|
|
|
|
|
The CityCenter proceeds and Hurricane Katrina insurance recoveries were discussed
earlier in the Executive Overview section. In 2007, we received net proceeds of $579
million from the sale of the Primm Valley Resorts and the Laughlin Properties. Also in
2007, we purchased a $160 million convertible note issued by The M Resort LLC, which is
developing a casino resort on Las Vegas Boulevard, 10 miles south of Bellagio. The note
is convertible, with certain restrictions, into a 50% equity position in The M Resort
LLC. Investments in unconsolidated affiliates in 2006 and 2005 primarily represented
investments in MGM Grand Macau.
Cash Flows Financing Activities
We repaid net debt of $1.8 billion in 2007, including $1.2 billion under our senior
credit facility. In 2007, we issued $750 million of 7.5% senior notes maturing in
2016 and we repaid the following senior and senior subordinated notes at their scheduled
maturity: $710 million of 9.75% senior subordinated notes; $200 million of 6.75% senior
notes; and $492.2 million of 10.25% senior subordinated notes.
In 2007, we received approximately $1.2 billion from the sale of 14.2 million
shares of our common stock to Infinity World Investments, a wholly-owned subsidiary of
Dubai World, at a price of $84 per share. We received $98 million, $89 million and $146
million in proceeds from the exercise of employee stock options in the years ended
December 31, 2007, 2006 and 2005, respectively.
In 2006, we borrowed net debt of $662 million, due to the level of capital
expenditures, share repurchases and investments in unconsolidated affiliates. We repaid
at their scheduled maturity our $200 million 6.45% senior notes and our $245 million
7.25% senior notes, and we issued $1.5 billion of senior notes at various times
throughout the year, with interest rates ranging from 6.75% to 7.625% and maturities
ranging from 2013 to 2017.
Our primary financing activities in 2005 related to the Mandalay acquisition. The
cash purchase price of Mandalay was funded from borrowings under our senior credit
facility. We also issued $875 million of fixed rate debt in various issuances.
In 2005, we repaid at their scheduled maturity two issues of senior notes $176.4
million of 6.625% senior notes and $300 million of 6.95% senior notes and redeemed one
issue of senior notes due in 2008 $200 million of 6.875% senior notes. The redemption
of the 2008 senior notes resulted in a loss on early retirement of debt of $20 million,
which is classified as Other, net in the accompanying consolidated statements of
income. In addition, in the second quarter of 2005 we initiated a tender offer for
several issuances of Mandalays senior notes and senior subordinated notes totaling $1.5
billion. Holders of $155 million of Mandalays senior notes and senior subordinated
notes redeemed their holdings. Holders of Mandalays floating rate convertible senior
debentures with a principal amount of $394 million had the right to redeem the
debentures for $566 million through June 30, 2005. $388 million of principal of the
convertible debentures were tendered for redemption and redeemed for $558 million.
24
Our share repurchases are only conducted under repurchase programs approved by our
Board of Directors and publicly announced. In December 2007, our Board of Directors
approved a 20 million share authorization. At December 31, 2007, we had 18.2 million
shares available for repurchase under the December 2007 authorization. Our share
repurchase activity was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
July 2004 authorization (8 million, 6.5 million,
and 5.5 million shares purchased) |
|
$ |
659,592 |
|
|
$ |
246,892 |
|
|
$ |
217,316 |
|
December 2007 authorization (1.9 million shares purchased) |
|
|
167,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
826,765 |
|
|
$ |
246,892 |
|
|
$ |
217,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average price of shares repurchased |
|
$ |
83.92 |
|
|
$ |
37.98 |
|
|
$ |
39.51 |
|
Principal Debt Arrangements
Our long-term debt consists of publicly held senior and subordinated notes and our
senior credit facility. We pay fixed rates of interest ranging from 5.875% to 9.5% on
the senior and subordinated notes. We pay variable interest based on LIBOR on our
senior credit facility. Our current senior credit facility has a total capacity of $7.0
billion, matures in 2011, and consists of a $4.5 billion revolving credit facility and a
$2.5 billion term loan facility. As of December 31, 2007, we had approximately $3.7
billion of available liquidity under our senior credit facility.
All of our principal debt arrangements are guaranteed by each of our material
subsidiaries, excluding MGM Grand Detroit, LLC and our foreign subsidiaries. MGM Grand
Detroit is a guarantor under the senior credit facility, but only to the extent that MGM
Grand Detroit, LLC borrows under such facilities. At December 31, 2007, the outstanding
amount of borrowings related to MGM Grand Detroit, LLC was $361 million. None of our
assets serve as collateral for our principal debt arrangements.
Other Factors Affecting Liquidity
Taxes on CityCenter gain. In addition to our typical cash tax payments, in
the first quarter of 2008 we will make a federal income tax payment of approximately
$300 million related to the CityCenter gain.
Long-term debt payable in 2008. We repaid $180 million of senior notes at
maturity in February 2008. We have a total of $196 million in senior notes that we
expect to repay at maturity in the third quarter of 2008.
Tender
offer. In February 2008, we and a wholly-owned subsidiary of Dubai World completed a joint
tender offer for 15 million shares of our common stock at a tender price of $80.00 per
share. We purchased 8.5 million shares at a total purchase price of $680 million.
MGM Grand Atlantic City development. In October 2007, we announced plans
for a multi-billion dollar resort complex on our 72-acre site in Atlantic City. The new
resort, MGM Grand Atlantic City, is preliminarily estimated to cost approximately $4.5
to $5.0 billion, not including land and associated costs. The
proposed resort would
include three towers with more than 3,000 total rooms and suites, approximately 5,000
slot machines, 200 table games, 500,000 square-feet of retail, an extensive convention
center, and other typical resort amenities.
Mashantucket Pequot Tribal Nation. We have entered into a series of
agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation
(MPTN), which owns and operates Foxwoods Casino Resort in Ledyard, Connecticut.
Under the strategic alliance, we are consulting with MPTN in the development of a new
$700 million casino resort currently under construction adjacent to the existing
Foxwoods casino resort. The new resort will utilize the MGM Grand brand name and is
scheduled to open in Spring 2008. We have also formed a jointly owned company with MPTN
Unity Gaming, LLC to acquire or develop future gaming and non-gaming enterprises.
We will provide a loan of up to $200 million to finance a portion of MPTNs investment
in joint projects.
Jean Properties. We have entered into an operating agreement to form a
50/50 joint venture with Jeanco Realty Development, LLC. The venture will master plan
and develop a mixed-use community in Jean, Nevada. We will contribute the Gold Strike
and surrounding land to the joint venture. The value of this contribution per the
operating agreement will be $150 million. We expect to receive a distribution of $55
million upon contribution of the assets to the venture, which is subject to the venture
obtaining necessary regulatory and other approvals, and $20 million no later than August
2008.
25
Off Balance Sheet Arrangements
Investments in unconsolidated affiliates. Our off balance sheet
arrangements consist primarily of investments in unconsolidated affiliates, which
currently consist primarily of our investments in CityCenter, Borgata, Grand Victoria,
Silver Legacy and MGM Grand Macau. We have not entered into any transactions with
special purpose entities, nor have we engaged in any derivative transactions. Our unconsolidated affiliate investments allow us
to realize the proportionate benefits of owning a full-scale resort in a manner that
minimizes our initial investment. We have not historically guaranteed financing
obtained by our investees, and there are no other provisions of the venture agreements
which we believe are unusual or subject us to risks to which we would not be subjected
if we had full ownership of the resort.
CityCenter. The estimated net project budget for CityCenter is $8.0
billion, after net residential proceeds of $2.7 billion. The gross project budget
consists of $8.7 billion of construction costs, including capitalized interest, $1.7
billion of land, $0.2 billion of preopening expenses, and $0.1 billion of intangible
assets. The construction costs, land and intangible assets reflect the impact of $1.3
billion of positive valuation adjustments upon the contribution of the CityCenter assets
to the joint venture.
The joint venture expects to spend approximately $2.5 billion in construction costs
in 2008. As of December 31, 2007, the joint venture had
$207 million of cash. In February 2008, MGM MIRAGE and Dubai
World each loaned $100 million to the joint venture to fund
near-term construction costs. The joint venture is currently negotiating with its lenders to obtain
project financing to fund remaining construction spending. The joint venture
anticipates that project financing will include requirements to utilize
the project assets as security for the financing. The other potential source of project
financing is additional contributions from MGM MIRAGE and Dubai World, which require
approval of the joint ventures Board of Directors.
Letters of credit. At December 31, 2007, we had outstanding letters of
credit totaling $85 million, of which $50 million support bonds issued by the Economic
Development Corporation of the City of Detroit. These bonds are recorded as a liability
in our consolidated balance sheets. This obligation was undertaken to secure our right
to develop a permanent casino in Detroit.
Commitments and Contractual Obligations
The following table summarizes our scheduled contractual commitments as of December
31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
Thereafter |
|
|
|
(In millions) |
|
Long-term debt |
|
$ |
378 |
|
|
$ |
1,278 |
|
|
$ |
1,124 |
|
|
$ |
3,763 |
|
|
$ |
551 |
|
|
$ |
4,060 |
|
Estimated interest payments on
long-term debt (1) |
|
|
684 |
|
|
|
674 |
|
|
|
592 |
|
|
|
477 |
|
|
|
306 |
|
|
|
1,029 |
|
Capital leases |
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
Operating leases |
|
|
14 |
|
|
|
9 |
|
|
|
8 |
|
|
|
7 |
|
|
|
6 |
|
|
|
41 |
|
Tax liabilities (2) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities (3) |
|
|
139 |
|
|
|
71 |
|
|
|
21 |
|
|
|
5 |
|
|
|
3 |
|
|
|
22 |
|
Other purchase obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction commitments |
|
|
166 |
|
|
|
2 |
|
|
|
2 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
Employment agreements |
|
|
128 |
|
|
|
78 |
|
|
|
26 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
Entertainment agreements (4) |
|
|
131 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (5) |
|
|
183 |
|
|
|
21 |
|
|
|
16 |
|
|
|
14 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,828 |
|
|
$ |
2,154 |
|
|
$ |
1,791 |
|
|
$ |
4,273 |
|
|
$ |
877 |
|
|
$ |
5,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Estimated interest payments on long-term debt are based on principal amounts
outstanding at December 31, 2007 and forecasted LIBOR rates for our bank credit
facility. |
|
(2) |
|
Approximately $84 million of tax liabilities related to unrecognized tax
benefits are excluded from the table as we cannot reasonably estimate when
examination and other activity related to these amounts will conclude. |
|
(3) |
|
Includes our obligation to support $50 million of bonds issued by the Economic
Development Corporation of the City of Detroit as part of our development agreement
with the City. The bonds mature in 2009. Also includes the estimated payments of
obligations under our deferred compensation and supplemental executive retirement
plans, based on balances as of December 31, 2007 and assumptions of retirement based
on plan provisions. |
|
(4) |
|
Our largest entertainment commitments consist of minimum contractual payments
to Cirque du Soleil, which performs shows at several of our resorts. We are
generally contractually committed for a period of 12 months based on our ability to
exercise certain termination rights; however, we expect these shows to continue for
longer periods. |
|
(5) |
|
The amount for 2008 includes approximately $141 million of open purchase
orders. Other commitments are for various contracts, including corporate aircraft
purchases, maintenance and other service agreements and advertising commitments. |
26
Summary of Expected Sources and Uses of Funds
We plan to fund our contractual obligations and other estimated spending through a
combination of operating cash flow, available borrowings under our senior credit
facility and potential issuances of fixed rate long-term debt. We generated over $1.0
billion in operating cash flow in 2007, which included deductions for interest payments,
tax payments and certain contractually committed payments reflected in the above table,
including operating leases, employment agreements and entertainment agreements.
Critical Accounting Policies and Estimates
Managements discussion and analysis of our results of operations and liquidity and
capital resources are based on our consolidated financial statements. To prepare our
consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America, we must make estimates and assumptions that
affect the amounts reported in the consolidated financial statements. We regularly
evaluate these estimates and assumptions, particularly in areas we consider to be
critical accounting estimates, where changes in the estimates and assumptions could have
a material impact on our results of operations, financial position or cash flows.
Senior management and the Audit Committee of the Board of Directors have reviewed the
disclosures included herein about our critical accounting estimates, and have reviewed
the processes to determine those estimates.
Allowance for Doubtful Casino Accounts Receivable
Marker play represents a significant portion of the table games volume at Bellagio,
MGM Grand Las Vegas, Mandalay Bay and The Mirage. Our other facilities do not emphasize
marker play to the same extent, although we offer markers to customers at those casinos
as well.
We maintain strict controls over the issuance of markers and aggressively pursue
collection from those customers who fail to pay their marker balances timely. These
collection efforts are similar to those used by most large corporations when dealing
with overdue customer accounts, including the mailing of statements and delinquency
notices, personal contacts, the use of outside collection agencies and civil litigation.
Markers are generally legally enforceable instruments in the United States. At
December 31, 2007 and 2006, approximately 47% and 48%, respectively, of our casino
accounts receivable was owed by customers from the United States. Markers are not
legally enforceable instruments in some foreign countries, but the United States assets
of foreign customers may be reached to satisfy judgments entered in the United States.
At December 31, 2007 and 2006, approximately 38% and 37%, respectively, of our casino
accounts receivable was owed by customers from the Far East.
We maintain an allowance, or reserve, for doubtful casino accounts at all of our
operating casino resorts. The provision for doubtful accounts, an operating expense,
increases the allowance for doubtful accounts. We regularly evaluate the allowance for
doubtful casino accounts. At resorts where marker play is not significant, the
allowance is generally established by applying standard reserve percentages to aged
account balances. At resorts where marker play is significant, we apply standard
reserve percentages to aged account balances under a specified dollar amount and
specifically analyze the collectibility of each account with a balance over the
specified dollar amount, based on the age of the account, the customers financial
condition, collection history and any other known information. We also monitor regional
and global economic conditions and forecasts to determine if reserve levels are
adequate.
The collectibility of unpaid markers is affected by a number of factors, including
changes in currency exchange rates and economic conditions in the customers home
countries. Because individual customer account balances can be significant, the
allowance and the provision can change significantly between periods, as information
about a certain customer becomes known or as changes in a regions economy occur.
The following table shows key statistics related to our casino receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2007 |
|
2006 |
|
2005 |
|
|
(In thousands) |
Casino accounts receivable |
|
$ |
266,059 |
|
|
$ |
248,044 |
|
|
$ |
221,873 |
|
Allowance for doubtful casino accounts receivable |
|
|
76,718 |
|
|
|
83,327 |
|
|
|
68,768 |
|
Allowance as a percentage of casino accounts receivable |
|
|
29 |
% |
|
|
34 |
% |
|
|
31 |
% |
Median age of casino accounts receivable |
|
28 days |
|
46 days |
|
39 days |
Percentage of casino accounts outstanding over 180 days |
|
|
18 |
% |
|
|
21 |
% |
|
|
19 |
% |
The allowance for doubtful accounts as a percentage of casino accounts receivable
has decreased in the current year due to a decrease in aging of accounts. At December
31, 2007, a 100 basis-point change in the allowance for doubtful accounts as a
percentage of casino accounts receivable would change net income by $2.7 million, or
less than $0.01 per share.
27
Fixed asset capitalization and depreciation policies
Property and equipment are stated at cost. For the majority of our property and
equipment, cost has been determined based on estimated fair values in connection with
the April 2005 Mandalay acquisition and the May 2000 Mirage Resorts acquisition.
Maintenance and repairs that neither materially add to the value of the property nor
appreciably prolong its life are charged to expense as incurred. Depreciation and
amortization are provided on a straight-line basis over the estimated useful lives of
the assets. We account for construction projects in accordance with Statement of
Financial Accounting Standards No. 67, Accounting for Costs and Initial Rental
Operations of Real Estate Projects. When we construct assets, we capitalize direct
costs of the project, including fees paid to architects and contractors, property taxes,
and certain costs of our design and construction subsidiaries.
We must make estimates and assumptions when accounting for capital expenditures.
Whether an expenditure is considered a maintenance expense or a capital asset is a
matter of judgment. When constructing or purchasing assets, we must determine whether
existing assets are being replaced or otherwise impaired, which also may be a matter of
judgment. Our depreciation expense is highly dependent on the assumptions we make about
our assets estimated useful lives. We determine the estimated useful lives based on
our experience with similar assets, engineering studies, and our estimate of the usage
of the asset. Whenever events or circumstances occur which change the estimated useful
life of an asset, we account for the change prospectively.
In accordance with Statement of Financial Accounting Standards No. 34,
Capitalization of Interest Cost (SFAS 34), interest cost associated with major
development and construction projects is capitalized as part of the cost of the project.
Interest is typically capitalized on amounts expended on the project using the
weighted-average cost of our outstanding borrowings, since we typically do not borrow
funds directly related to a development project. Capitalization of interest starts when
construction activities, as defined in SFAS 34, begin and ceases when construction is
substantially complete or development activity is suspended for more than a brief
period.
Impairment of Long-lived Assets
We evaluate our property and equipment and other long-lived assets for impairment
in accordance with Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. For assets to be disposed of, we
recognize the asset at the lower of carrying value or fair market value less costs of
disposal, as estimated based on comparable asset sales, offers received, or a discounted
cash flow model. For assets to be held and used, we review for impairment whenever
indicators of impairment exist. We then compare 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 to be disposed
of or assets to be held and used, are recorded as operating expenses.
There are several estimates, assumptions and decisions in measuring impairments of
long-lived assets. First, management must determine the usage of the asset. To the
extent management decides that an asset will be sold, it is more likely that an
impairment may be recognized. Assets must be tested at the lowest level for which
identifiable cash flows exist. This means that some assets must be grouped, and
management has some discretion in the grouping of assets. Future cash flow estimates
are, by their nature, subjective and actual results may differ materially from our
estimates.
On a quarterly basis, we review our major long-lived assets to determine if events
have occurred or circumstances exist that indicate a potential impairment. We estimate
future cash flows using our internal budgets. When appropriate, we discount future cash
flows using our weighted-average cost of capital, developed using a standard capital
asset pricing model.
See Results of Operations for discussion of write-downs and impairments recorded
in 2007, 2006 and 2005. In 2006, we entered into agreements to sell Primm Valley
Resorts and Laughlin Properties. The fair value less costs to sell exceeded the
carrying value, therefore no impairment was indicated. Other than the above items, we
are not aware of events or circumstances through December 31, 2007 that would cause us
to review any material long-lived assets for impairment.
Income taxes
We account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 requires the
recognition of deferred tax assets, net of applicable reserves, related to net operating
loss carryforwards and certain temporary differences. The standard requires recognition
of a future tax benefit to the extent that realization of such benefit is more likely
than not. Otherwise, a valuation allowance is applied. Except for certain New Jersey
state net operating losses, certain other New Jersey state deferred tax assets, a
foreign tax credit carryforward and certain foreign deferred tax assets, we believe that
it is more likely than not that our deferred tax assets are fully realizable because of
the future reversal of existing taxable temporary differences and future projected
taxable income.
28
Our income tax returns are subject to examination by the Internal Revenue Service
(IRS) and other tax authorities. While positions taken in tax returns are sometimes
subject to uncertainty in the tax laws, we do not take such positions unless we have
substantial authority to do so under the Internal Revenue Code and applicable
regulations. We may take positions on our tax returns based on substantial authority
that are not ultimately accepted by the IRS.
Effective January 1, 2007, we adopted Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes an Interpretation
of FASB Statement No. 109 (FIN 48). FIN 48 requires that tax positions be assessed
using a two-step process. A tax position is recognized if it meets a more likely than
not threshold, and is measured at the largest amount of benefit that is greater than 50
percent likely of being realized. As required by the standard, we review uncertain tax
positions at each balance sheet date. Liabilities we record as a result of this
analysis are recorded separately from any current or deferred income tax accounts, and
are classified as current (Other accrued liabilities) or long-term (Other long-term
liabilities) based on the time until expected payment. Additionally, we recognize
accrued interest and penalties related to unrecognized tax benefits in income tax
expense, a policy that did not change as a result of the adoption of FIN 48.
We file income tax returns in the U.S. federal jurisdiction, various state and
local jurisdictions, and foreign jurisdictions, although the taxes paid in foreign
jurisdictions are not material. We are no longer subject to examination of our U.S.
federal income tax returns filed for years ended prior to 2003. While the IRS
examination of the 2001 and 2002 tax years closed during the first quarter of 2007, the
statute of limitations for assessing tax for such years has been extended in order for
us to complete the appeals process for issues that were not agreed upon at the closure
of the examination. It is reasonably possible that this appeal may be settled in the
next 12 months. The IRS is currently examining our federal income tax returns for the
2003 and 2004 tax years. Tax returns for subsequent years are also subject to
examination.
We are no longer subject to examination of our various state and local tax returns
filed for years ended prior to 2003. During 2007, the City of Detroit initiated an
examination of a Mandalay Resort Group subsidiary return for the pre-acquisition year
ended April 25, 2005. Also during 2007, the state of Mississippi initiated an
examination of returns filed by subsidiaries of MGM MIRAGE and Mandalay Resort Group for
the 2004 through 2006 tax years. This audit was settled during the first quarter of
2008, with no material impact to us. No other state or local income tax returns are
under examination.
Stock-based Compensation
We account for stock-based compensation in accordance with SFAS 123(R). We measure
fair value of share-based awards using the Black-Scholes model. There are several
management assumptions required to determine the inputs into the Black-Scholes model.
Our volatility and expected term assumptions can significantly impact the fair value of
stock-based awards. The extent of the impact will depend, in part, on the extent of
stock-based awards in any given year. In 2007, we granted 2.6 million stock
appreciation rights with a total fair value of $68 million. In 2006, we granted 1.9
million stock options and stock appreciation rights with a total fair value of $28
million.
For 2007 awards, a 10% change in the volatility assumption (32% for 2007; for
sensitivity analysis, volatility was assumed to be 29% and 35%) would have resulted in a
$4.6 million, or 7%, change in fair value. A 10% change in the expected term assumption
(4.1 years for 2007; for sensitivity analysis, expected term was assumed to be 3.7 years
and 4.5 years) would have resulted in a $3.8 million, or 6%, change in fair value.
These changes in fair value would have been recognized over the five-year vesting period
of such awards. It should be noted that a change in the expected term would cause other
changes, since the risk-free rate and volatility assumptions are specific to the term;
we did not attempt to adjust those assumptions in performing the sensitivity analysis
above.
Business Combinations
We account for business combinations in accordance with Statement of Financial
Accounting Standards No. 141, Accounting for Business Combinations (SFAS 141) and
Statement of Financial Accounting Standards No. 142, Accounting for Goodwill and Other
Intangible Assets, and related interpretations. SFAS 141 requires that we record the
net assets of acquired businesses at fair value, and we must make estimates and
assumptions to determine the fair value of these acquired assets and assumed
liabilities.
The determination of the fair value of acquired assets and assumed liabilities in
the Mandalay acquisition required us to make certain fair value estimates, primarily
related to land, property and equipment and intangible assets. These estimates require
significant judgment and include a variety of assumptions in determining the fair value
of acquired assets and assumed liabilities, including market data, estimated future cash
flows, growth rates, current replacement cost for similar capacity for certain fixed
assets, market rate assumptions for contractual obligations and settlement plans for
contingencies and liabilities.
29
Recently Issued Accounting Standards
Accounting for Business Combinations and Non-Controlling Interests
In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141 (R), Business Combinations, (SFAS 141R) and SFAS No. 160 Non-controlling
interests in Consolidated Financial Statements an amendment of ARB No. 51, (SFAS
160). These standards amend the requirements for accounting for business combinations,
including the recognition and measurement of additional assets and liabilities at their
fair value, expensing of acquisition-related costs which are currently capitalizable
under existing rules, treatment of adjustments to deferred taxes and liabilities
subsequent to the measure period, and the measurement of non-controlling interest,
previously commonly referred to as minority interests, at fair value. SFAS 141R also
includes additional disclosure requirements with respect to the methodologies and
techniques used to determine the fair value of assets and liabilities recognized in a
business combination. SFAS 141R and SFAS 160 apply prospectively to fiscal years
beginning on or after December 15, 2008, except for the treatment of deferred tax
adjustments which apply to deferred taxes recognized in previous business combinations.
These standards will become effective for us on January 1, 2009. We are currently
evaluating the effect, if any, the adoption of SFAS 141R and SFAS 160 will have on our
consolidated financial statements.
Impact of Buy-Sell Clauses on Sales of Real Estate
In December 2007, the Emerging Issues Task Force (EITF) of the FASB ratified its
consensus on EITF No. 07-6 Accounting for the Sale of Real Estate Subject to the
Requirements of FASB Statement No. 66, Accounting for Sales of Real Estate, When the
Agreement Includes a Buy-Sell Clause. The EITF reached consensus that a buy-sell
clause, in and of itself, does not constitute a prohibited form of continuing
involvement that would preclude partial sale-recognition under Statement 66. This EITF
is effective for fiscal years beginning after December 15, 2007, or for us January 1,
2008. The adoption of EITF No. 07-6 did not have a material impact on our consolidated
financial statements.
Fair Value and Fair Value Option
In February 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS 159). SFAS 159 permits the measure of certain
financial instruments and certain other items at fair value and establishes presentation
and disclosure requirements to help financial statement users to understand these
measurements and their impact on earnings. This statement is effective for us beginning
in January 1, 2008. The adoption of SFAS 159 did not have a material impact on our
consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements (SFAS
157), SFAS 157 establishes a framework for measuring fair value under generally
accepted accounting principles and expands fair value disclosures. This statement will
be effective for us beginning January 1, 2008 for financial assets and liabilities and
beginning January 1, 2009 for certain non-financial assets and liabilities. The
adoption of SFAS 157 did not have a material impact on our consolidated financial
statements.
Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and
prices, such as interest rates, foreign currency exchange rates and commodity prices.
Our primary exposure to market risk is interest rate risk associated with our long-term
debt. We attempt to limit our exposure to interest rate risk by managing the mix of our
long-term fixed rate borrowings and short-term borrowings under our bank credit
facilities.
As of December 31, 2007, long-term fixed rate borrowings represented approximately
71% of our total borrowings. Based on December 31, 2007 debt levels, an assumed 100
basis-point change in LIBOR would cause our annual interest cost to change by
approximately $3 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We incorporate by reference the information appearing under Market Risk in Item 7
of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and Notes to Consolidated Financial
Statements, including the Independent Registered Public Accounting Firms Report
thereon, referred to in Item 15(a)(1) of this Form 10-K, are included at pages 42 to 68
of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
30
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our Chief Executive Officer (principal executive officer) and Chief Financial
Officer (principal financial officer) have concluded that the design and operation of
our disclosure controls and procedures are effective as of December 31, 2007. This
conclusion is based on an evaluation conducted under the supervision and with the
participation of Company management. Disclosure controls and procedures are those
controls and procedures which ensure that information required to be disclosed in this
filing is accumulated and communicated to management and is recorded, processed,
summarized and reported in a timely manner and in accordance with Securities and
Exchange Commission rules and regulations.
Managements Annual Report on Internal Control Over Financial Reporting
Managements Annual Report on Internal Control Over Financial Reporting, referred
to in Item 15(a)(1) of this Form 10-K, is included at page 40 of this Form 10-K.
Attestation Report of the Independent Registered Public Accounting Firm
The Independent Registered Public Accounting Firms Attestation Report on
our internal control over financial reporting referred to in
Item 15(a)(1) of this Form 10-K, is included at page 41 of this Form 10-K.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2007, there were no changes in our internal
control over financial reporting that materially affected, or are reasonably likely to
affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We incorporate by reference the information appearing under Executive Officers of
the Registrant in Item 1 of this Form 10-K and under Election of Directors and
Corporate Governance in our definitive Proxy Statement for our 2008 Annual Meeting of
Stockholders, which we expect to file with the Securities and Exchange Commission on or
about April 14, 2008 (the Proxy Statement).
ITEM 11. EXECUTIVE COMPENSATION
We incorporate by reference the information appearing under Executive and Director
Compensation and Other Information and Corporate Governance Compensation Committee
Interlocks and Insider Participation, and Compensation Committee Report in the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
We incorporate by reference the information appearing under Equity Compensation
Plan Information in Item 5 of this Form 10-K, and under Principal Stockholders and
Election of Directors in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We incorporate by reference the information appearing under Transactions with
Related Persons and Corporate Governance in the Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
We incorporate by reference the information appearing under Selection of
Independent Registered Public Accounting Firm in the Proxy Statement.
31
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1). Financial Statements.
Included in Part II of this Report:
Managements Annual Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Consolidated Balance Sheets December 31, 2007 and 2006
Years Ended December 31, 2007, 2006 and 2005
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders Equity
Notes to Consolidated Financial Statements
(a)(2). Financial Statement Schedule.
Years Ended December 31, 2007, 2006 and 2005
Schedule II Valuation and Qualifying Accounts
We have omitted schedules other than the one listed above because they are not
required or are not applicable, or the required information is shown in the financial
statements or notes to the financial statements.
(a)(3). Exhibits.
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
3(1)
|
|
Certificate of Incorporation of the Company, as amended
through 1997 (incorporated by reference to Exhibit 3(1) to Registration
Statement No. 33-3305 and to Exhibit 3(a) to the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 1997). |
|
|
|
3(2)
|
|
Certificate of Amendment to Certificate of Incorporation
of the Company, dated January 7, 2000, relating to an increase in the
authorized shares of common stock (incorporated by reference to Exhibit
3(2) to the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 (the 1999 10-K)). |
|
|
|
3(3)
|
|
Certificate of Amendment to Certificate of Incorporation
of the Company, dated January 7, 2000, relating to a 2-for-1 stock split
(incorporated by reference to Exhibit 3(3) to the 1999 10-K). |
|
|
|
3(4)
|
|
Certificate of Amendment to Certificate of Incorporation
of the Company, dated August 1, 2000, relating to a change in name of the
Company (incorporated by reference to Exhibit 3(i).4 to the Companys
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2000 (the September 2000 10-Q)). |
|
|
|
3(5)
|
|
Certificate of Amendment to Certificate of Incorporation
of the Company, dated June 3, 2003, relating to compliance with
provisions of the New Jersey Casino Control Act relating to holders of
Company securities (incorporated by reference to Exhibit 3.1 to the
Companys Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2003 (the June 2003 10-Q)). |
|
|
|
3(6)
|
|
Certificate of Amendment to Certificate of Incorporation
of the Company, dated May 3, 2005, relating to an increase in the
authorized shares of common stock (incorporated by reference to Exhibit
3.10 to Amendment No. 1 to the Companys Form 8-A filed with the
Commission on May 11, 2005). |
|
|
|
3(7)
|
|
Amended and Restated Bylaws of the Company, effective
December 4, 2007 (incorporated by reference to Exhibit 3 to the Companys
Current Report on Form 8-K dated December 4, 2007). |
|
|
|
4(1)
|
|
Indenture dated July 21, 1993, by and between Mandalay
and First Interstate Bank of Nevada, N.A., as Trustee with respect to
$150 million aggregate principal amount of 7.625% Senior Subordinated
Debentures due 2013 (incorporated by reference to Exhibit 4(a) to
Mandalays Current Report on Form 8-K dated July 21, 1993). |
32
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
4(2)
|
|
Indenture, dated February 1, 1996, by and between
Mandalay and First Interstate Bank of Nevada, N.A., as Trustee (the
Mandalay February 1996 Indenture) (incorporated by reference to Exhibit
4(b) to Mandalays Current Report on Form 8-K dated January 29, 1996 (the
Mandalay January 1996 8-K)). |
|
|
|
4(3)
|
|
Supplemental Indenture, dated as of November 15, 1996, by
and between Mandalay and Wells Fargo Bank (Colorado), N.A., (successor to
First Interstate Bank of Nevada, N.A.), as Trustee, to the Mandalay
February 1996 Indenture, with respect to $150 million aggregate principal
amount of 6.70% Senior Notes due 2096 (incorporated by reference to
Exhibit 4(c) to Mandalays Quarterly Report on Form 10-Q for the fiscal
quarter ended October 31, 1996 (the Mandalay October 1996 10-Q)). |
|
|
|
4(4)
|
|
6.70% Senior Notes due February 15, 2096 in the principal
amount of $150,000,000 (incorporated by reference to Exhibit 4(d) to the
Mandalay October 1996 10-Q). |
|
|
|
4(5)
|
|
Indenture, dated November 15, 1996, by and between
Mandalay and Wells Fargo Bank (Colorado), N.A., as Trustee (the Mandalay
November 1996 Indenture) (incorporated by reference to Exhibit 4(e) to
the Mandalay October 1996 10-Q). |
|
|
|
4(6)
|
|
Supplemental Indenture, dated as of November 15, 1996, to
the Mandalay November 1996 Indenture, with respect to $150 million
aggregate principal amount of 7.0% Senior Notes due 2036 (incorporated by
reference to the Mandalay October 1996 10-Q). |
|
|
|
4(7)
|
|
7.0% Senior Notes due February 15, 2036, in the
principal amount of $150,000,000 (incorporated by reference to Exhibit
4(g) to the Mandalay October 1996 10-Q). |
|
|
|
4(8)
|
|
Indenture, dated as of August 1, 1997, between MRI and
First Security Bank, National Association, as trustee (the MRI 1997
Indenture) (incorporated by reference to Exhibit 4.1 to the Quarterly
Report on Form 10-Q of MRI for the fiscal quarter ended June 30, 1997
(the MRI June 1997 10-Q)). |
|
|
|
4(9)
|
|
Supplemental Indenture, dated as of August 1, 1997, to
the MRI 1997 Indenture, with respect to $100 million aggregate principal
amount of 7.25% Debentures due 2017 (incorporated by reference to Exhibit
4.2 to the MRI June 1997 10-Q). |
|
|
|
4(10)
|
|
Second Supplemental Indenture, dated as of October 10,
2000, to the MRI 1997 Indenture (incorporated by reference to Exhibit
4(14) to the 2000 10-K). |
|
|
|
4(11)
|
|
Indenture, dated as of February 4, 1998, between MRI and
PNC Bank, National Association, as trustee (the MRI 1998 Indenture)
(incorporated by reference to Exhibit 4(e) to the Annual Report on Form
10-K of MRI for the fiscal year ended December 31, 1997 (the MRI 1997
10-K)). |
|
|
|
4(12)
|
|
Supplemental Indenture, dated as of February 4, 1998, to
the MRI 1998 Indenture, with respect to $200 million aggregate principal
amount of 6.75% Notes due 2008 (incorporated by reference to Exhibit 4(f)
to the MRI 1997 10-K). |
|
|
|
4(13)
|
|
Second Supplemental Indenture, dated as of October 10,
2000, to the MRI 1998 Indenture (incorporated by reference to Exhibit
4(15) to the 2000 10-K). |
|
|
|
4(14)
|
|
Indenture dated as of August 16, 2000 by and between
Mandalay and The Bank of New York, with respect to $200 million aggregate
principal amount of 9.5% Senior Notes due 2008 (incorporated by reference
to Exhibit 4.1 to Mandalays Form S-4 Registration Statement No.
333-44838). |
|
|
|
4(15)
|
|
Indenture, dated as of September 15, 2000, among the
Company, as issuer, the Subsidiary Guarantors parties thereto, as
guarantors, and U.S. Trust Company, National Association, as trustee,
with respect to $850 million aggregate principal amount of 8.5% Senior
Notes due 2010 (incorporated by reference to Exhibit 4 to the Companys
Amended Current Report on Form 8-K/A dated September 12, 2000). |
|
|
|
4(16)
|
|
First Supplemental Indenture, dated as of September 15,
2000, among the Company, Bellagio Merger Sub, LLC and U.S. Trust Company,
National Association, as trustee (incorporated by reference to Exhibit
4(11) to the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 (the 2000 10-K)). |
33
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
4(17)
|
|
Second Supplemental Indenture, dated as of December 31,
2000, among the Company, MGM Grand Hotel & Casino Merger Sub, LLC and
U.S. Trust Company, National Association, as trustee (incorporated by
reference to Exhibit 4(17) to the 2000 10-K). |
|
|
|
4(18)
|
|
Indenture, dated as of January 23, 2001, among the
Company, as issuer, the Subsidiary Guarantors parties thereto, as
guarantors, and United States Trust Company of New York, as trustee, with
respect to $400 million aggregate principal amount of 8.375% Senior
Subordinated Notes due 2011 (incorporated by reference to Exhibit 4 to
the Companys Current Report on Form 8-K dated January 18, 2001). |
|
|
|
4(19)
|
|
Indenture dated as of December 20, 2001 by and among
Mandalay and The Bank of New York, with respect to $300 million aggregate
principal amount of 9.375% Senior Subordinated Notes due 2010
(incorporated by reference to Exhibit 4.1 to Mandalays Form S-4
Registration Statement No. 333-82936). |
|
|
|
4(20)
|
|
Indenture dated as of March 21, 2003 by and among
Mandalay and The Bank of New York with respect to $400 million aggregate
principal amount of Floating Rate Convertible Senior Debentures due 2033
(incorporated by reference to Exhibit 4.44 to Mandalays Annual Report on
Form 10-K for the fiscal year ended January 31, 2003). |
|
|
|
4(21)
|
|
First Supplemental Indenture dated as of July 26, 2004,
relating to Mandalays Floating Rate Senior Convertible Debentures due
2033 (incorporated by reference to Exhibit 4 to Mandalays Current Report
on Form 8-K dated July 26, 2004). |
|
|
|
4(22)
|
|
Indenture, dated as of July 31, 2003, by and between
Mandalay and The Bank of New York with respect to $250 million aggregate
principal amount of 6.5% Senior Notes due 2009 (incorporated by reference
to Exhibit 4.1 to Mandalays Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 2003). |
|
|
|
4(23)
|
|
Indenture, dated as of September 17, 2003, among the
Company, as issuer, the Subsidiary Guarantors parties thereto, as
guarantors, and U.S. Bank National Association, as trustee, with respect
to $1,050 million 6% Senior Notes due 2009 (incorporated by reference to
Exhibit 4.1 to the Companys Current Report on Form 8-K dated September
11, 2003). |
|
|
|
4(24)
|
|
Indenture, dated as of November 25, 2003, by and between
Mandalay and The Bank of New York with respect to $250 million aggregate
principal amount of 6.375% Senior Notes due 2011 (incorporated by
reference to Exhibit 4.1 to Mandalays Quarterly Report on Form 10-Q for
the fiscal quarter ended October 31, 2003). |
|
|
|
4(25)
|
|
Indenture dated as of February 27, 2004, among the
Company, as issuer, the Subsidiary Guarantors, as guarantors, and U.S.
Bank National Association, as trustee, with respect to $525 million
5.875% Senior Notes due 2014 (incorporated by reference to Exhibit 4.1 to
the Companys Current Report on Form 8-K, dated February 27, 2004). |
|
|
|
4(26)
|
|
Indenture dated as of August 25, 2004, among the
Company, as issuer, certain subsidiaries of the Company, as guarantors,
and U.S. Bank National Association, as trustee, with respect to $550
million 6.75% Senior Notes due 2012 (incorporated by reference to Exhibit
4.1 to the Companys Current Report on Form 8-K dated August 25, 2004). |
|
|
|
4(27)
|
|
Indenture, dated June 20, 2005, among MGM MIRAGE,
certain subsidiaries of MGM MIRAGE, and U.S. Bank National Association,
with respect to $500 million aggregate principal amount of 6.625% Senior
Notes due 2015 (incorporated by reference to Exhibit 99.1 to the
Companys Current Report on Form 8-K dated June 20, 2005). |
|
|
|
4(28)
|
|
Supplemental Indenture, dated September 9, 2005, among
MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank National
Association, with respect to $375 million aggregate principal amount of
6.625% Senior Notes due 2015 (incorporated by reference to Exhibit 4.1 to
the Companys Current Report on Form 8-K dated September 9, 2005). |
|
|
|
4(29)
|
|
Indenture, dated April 5, 2006, among MGM MIRAGE,
certain subsidiaries of MGM MIRAGE, and U.S. Bank National Association,
with respect to $500 million aggregate principal amount of 6.75% Senior
Notes due 2013 and $250 million original principal amount of 6.875%
Senior Notes due 2016 (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated April 5, 2006 (the April 2006
8-K)). |
34
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
4(30)
|
|
Registration Rights Agreement, dated April 5, 2006,
among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and certain initial
purchases parties thereto (incorporated by reference to Exhibit 4.2 to
the April 2006 8-K). |
|
|
|
4(31)
|
|
Indenture dated as of December 21, 2006, among MGM
MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank National
Association (incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K dated December 21, 2006 (the December 2006
8-K)). |
|
|
|
4(32)
|
|
Supplemental Indenture dated as of December 21, 2006, by
and among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank
National Association, with respect to $750 million aggregate principal
amount of 7.625% Senior Notes due 2017 (incorporated by reference to
Exhibit 4.2 to the December 2006 8-K). |
|
|
|
4(33)
|
|
Second Supplemental Indenture dated as of May 17, 2007
among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank
National Association, with respect to $750 million aggregate principal
amount of 7.5% Senior Notes due 2016 (incorporated by reference to
Exhibit 4.2 to the Companys Current Report on Form 8-K dated May 17,
2007). |
|
|
|
10.1(1)
|
|
Guarantee, dated as of May 31, 2000, by certain subsidiaries of the
Company, in favor of The Chase Manhattan Bank, as successor in interest
to PNC Bank, National Association, as trustee for the benefit of the
holders of Notes pursuant to the Indenture referred to therein
(incorporated by reference to Exhibit 10.4 to the May 2000 8-K). |
|
|
|
10.1(2)
|
|
Schedule setting forth material details of the Guarantee, dated as of
May 31, 2000, by certain subsidiaries of the Company, in favor of U.S.
Trust Company, National Association (formerly known as U.S. Trust Company
of California, N.A.), as trustee for the benefit of the holders of Notes
pursuant to the Indenture referred to therein (incorporated by reference
to Exhibit 10.5 to the May 2000 8-K). |
|
|
|
10.1(3)
|
|
Schedule setting forth material details of the Guarantee (Mirage
Resorts, Incorporated 6.75% Notes Due February 1, 2008), dated as of May
31, 2000, by the Company and certain of its subsidiaries, in favor of The
Chase Manhattan Bank, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.7 to the May 2000 8-K). |
|
|
|
10.1(4)
|
|
Schedule setting forth material details of the Guarantee (Mirage
Resorts, Incorporated 6.75% Notes Due August 1, 2007 and 7.25% Debentures
Due August 1, 2017), dated as of May 31, 2000, by the Company and certain
of its subsidiaries, in favor of First Security Bank, National
Association, as trustee for the benefit of the holders of the Notes
pursuant to the Indenture referred to therein (incorporated by reference
to Exhibit 10.8 to the May 2000 8-K). |
|
|
|
10.1(5)
|
|
Instrument of Joinder, dated as of May 31, 2000, by MRI and certain of
its wholly owned subsidiaries, in favor of the beneficiaries of the
Guarantees referred to therein (incorporated by reference to Exhibit 10.9
to the May 2000 8-K). |
|
|
|
10.1(6)
|
|
Guarantee (MGM MIRAGE 8.5% Senior Notes due 2010), dated as of April
25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of
New York N.A., as successor to U.S. Trust Company, National Association,
for the benefit of the holders of the Notes pursuant to the Indenture
referred to therein (incorporated by reference to Exhibit 10.7 to the
September 2005 10-Q). |
|
|
|
10.1(7)
|
|
Guarantee (Mandalay Resort Group 7.625% Senior Subordinated Notes due
2013), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE,
in favor of The Bank of New York, as trustee for the benefit of the
holders of the Notes pursuant to the Indenture referred to therein
(incorporated by reference to Exhibit 10.9 to the September 2005 10-Q). |
|
|
|
10.1(8)
|
|
Guarantee (MGM MIRAGE 8.375% Senior Subordinated Notes due 2011),
dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in
favor of The Bank of New York N.A., successor to the United States Trust
Company of New York, as trustee for the benefit of holders of the Notes
pursuant to the Indenture referred to therein (incorporated by reference
to Exhibit 10.11 to the September 2005 10-Q). |
|
|
|
10.1(9)
|
|
Guarantee (MGM MIRAGE 6.0% Senior Notes due 2009), dated as of April
25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of U.S. Bank
National Association, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.12 to the September 2005 10-Q). |
35
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.1(10)
|
|
Guarantee (MGM MIRAGE 6.0% Senior Notes due 2009 (Exchange Notes)),
dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in
favor of U.S. Bank National Association, as trustee for the benefit of
the holders of the Notes pursuant to the Indenture referred to therein
(incorporated by reference to Exhibit 10.13 to the September 2005
10-Q). |
|
|
|
10.1(11)
|
|
Guarantee (MGM MIRAGE 5.875% Senior Notes due 2014), dated as of
April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of U.S.
Bank National Association, as trustee for the benefit of the holders of
the Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.14 to the September 2005 10-Q). |
|
|
|
10.1(12)
|
|
Guarantee (MGM MIRAGE 5.875% Senior Notes due 2014 (Exchange Notes)),
dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in
favor of U.S. Bank National Association, as trustee for the benefit of
the holders of the Notes pursuant to the Indenture referred to therein
(incorporated by reference to Exhibit 10.15 to the September 2005 10-Q). |
|
|
|
10.1(13)
|
|
Guarantee (MGM MIRAGE 6.75% Senior Notes due 2012), dated as of April
25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of U.S. Bank
National Association, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.16 to the September 2005 10-Q). |
|
|
|
10.1(14)
|
|
Guarantee (Mirage Resorts, Incorporated 6.75% Senior Notes due 2007
and 7.25% Debentures due 2017), dated as of April 25, 2005, by certain
subsidiaries of MGM MIRAGE, in favor of Wells Fargo Bank Northwest,
National Association, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.17 to the September 2005 10-Q). |
|
|
|
10.1(15)
|
|
Guarantee (Mirage Resorts, Incorporated 6.75% Senior Notes due 2008),
dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in
favor of JPMorgan Chase Bank, N.A., successor in interest to PNC Bank,
National Association, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.18 to the September 2005 10-Q). |
|
|
|
10.1(16)
|
|
Guarantee (Mandalay Resort Group 9.375% Senior Subordinated Notes due
2010), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE,
in favor of The Bank of New York, as trustee for the benefit of the
holders of the Notes pursuant to the Indenture referred to therein
(incorporated by reference to Exhibit 10.20 to the September 2005 10-Q). |
|
|
|
10.1(17)
|
|
Guarantee (Mandalay Resort Group 6.70% Senior Notes due 2096), dated
as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of
The Bank of New York, as successor in interest to First Interstate Bank
of Nevada, N.A., as trustee for the benefit of the holders of the Notes
pursuant to the Indenture referred to therein (incorporated by reference
to Exhibit 10.21 to the September 2005 10-Q). |
|
|
|
10.1(18)
|
|
Guarantee (Mandalay Resort Group 7.0% Senior Notes due 2036), dated
as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of
The Bank of New York, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.22 to the September 2005 10-Q). |
|
|
|
10.1(19)
|
|
Guarantee (Mandalay Resort Group 9.5% Senior Notes due 2008), dated
as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of
The Bank of New York, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.23 to the September 2005 10-Q). |
|
|
|
10.1(20)
|
|
Guarantee (Mandalay Resort Group Floating Rate Convertible Senior
Debentures due 2033), dated as of April 25, 2005, by certain subsidiaries
of MGM MIRAGE, in favor of The Bank of New York, as trustee for the
benefit of the holders of the Notes pursuant to the Indenture referred to
therein (incorporated by reference to Exhibit 10.24 to the September 2005
10-Q). |
|
|
|
10.1(21)
|
|
Guarantee (Mandalay Resort Group 6.5% Senior Notes due 2009), dated
as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of
The Bank of New York, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.25 to the September 2005 10-Q). |
|
|
|
10.1(22)
|
|
Guarantee (Mandalay Resort Group 6.375% Senior Notes due 2011), dated
as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of
The Bank of New York, as trustee for the benefit of the holders of the
Notes pursuant to the Indenture referred to therein (incorporated by
reference to Exhibit 10.26 to the September 2005 10-Q). |
36
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.1(23)
|
|
Fifth Amended and Restated Loan Agreement dated as of October 3,
2006, by and among MGM MIRAGE, as borrower; MGM Grand Detroit, LLC, as
co-borrower; the Lenders and Co-Documentation Agents named therein; Bank
of America, N.A., as Administrative Agent; the Royal Bank of Scotland
PLC, as Syndication Agent; Bank of America Securities LLC and The Royal
Bank of Scotland PLC, as Joint Lead Arrangers; and Bank of America
Securities LLC, The Royal Bank of Scotland PLC, J.P. Morgan Securities
Inc., Citibank North America, Inc. and Deutsche Bank Securities Inc. as
Joint Book Managers (incorporated by reference to Exhibit 10 to the
Companys Current Report on Form 8-K dated October 3, 2006). |
|
|
|
10.1(24)
|
|
Guaranty Agreement, dated July 19, 2006, by MGM MIRAGE in favor of
Bank of America, N.A., as Administrative Agent for the benefit of the
Lenders from time to time party to a Construction Loan Agreement with the
Borrower, Turnberry/MGM Grand Tower C, LLC. |
|
|
|
10.2(1)
|
|
Lease, dated August 3, 1977, by and between B&D Properties, Inc., as
lessor, and Mandalay, as lessee; Amendment of Lease, dated May 6, 1983
(incorporated by reference to Exhibit 10(h) to Mandalays Registration
Statement (No. 2-85794) on Form S-1). |
|
|
|
10.2(2)
|
|
Lease by and between Robert Lewis Uccelli, guardian, as lessor, and
Nevada Greens, a limited partnership, William N. Pennington, as trustee,
and William G. Bennett, as trustee, and related Assignment of Lease
(incorporated by reference to Exhibit 10(p) to Mandalays Registration
Statement (No. 33-4475) on Form S-1). |
|
|
|
10.2(3)
|
|
Public Trust Tidelands Lease, dated February 4, 1999, between the
State of Mississippi and Beau Rivage Resorts, Inc. (without exhibits)
(incorporated by reference to Exhibit 10.73 to the Annual Report on Form
10-K of MRI for the fiscal year ended December 31, 1999). |
|
|
|
*10.3(1)
|
|
Nonqualified Stock Option Plan (incorporated by reference to Exhibit 10(1) to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 1996). |
|
|
|
*10.3(2)
|
|
1997 Nonqualified Stock Option Plan, Amended and Restated February 2, 2004 (incorporated by reference to Exhibit 10.1
of the June 2004 10-Q). |
|
|
|
*10.3(3)
|
|
Amendment to the MGM MIRAGE 1997 Nonqualified Stock Option Plan (incorporated by reference to Exhibit 10 to the
Companys Current Report on Form 8-K dated July 9, 2007). |
|
|
|
*10.3(4)
|
|
MGM MIRAGE 2005 Omnibus Incentive Plan (incorporated by reference to Exhibit 10 to the Companys Registration
Statement on Form S-8 filed May 12, 2005). |
|
|
|
*10.3(5)
|
|
Amended and Restated Annual Performance-Based Incentive Plan for Executive Officers, giving effect to amendment
approved by the Companys shareholders on May 9, 2006 (incorporated by reference to Appendix A to the Companys 2006
Proxy Statement). |
|
|
|
*10.3(6)
|
|
Non-Qualified Deferred Compensation Plan, dated as of January 1, 2001 (incorporated by reference to Exhibit 10.3(12)
to the 2000 10-K). |
|
|
|
*10.3(7)
|
|
Supplemental Executive Retirement Plan, dated as of January 1, 2001 (incorporated by reference to Exhibit 10.3(13) to
the 2000 10-K). |
|
|
|
*10.3(8)
|
|
Deferred Compensation Plan II, dated as of December 30, 2004 (incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K dated January 10, 2005 (the January 2005 8-K). |
|
|
|
*10.3(9)
|
|
Supplemental Executive Retirement Plan II, dated as of December 30, 2004 (incorporated by reference to Exhibit 10.1
to the January 2005 8-K). |
|
|
|
*10.3(10)
|
|
Amendment to Deferred Compensation Plan II, dated as of December 21, 2005 (incorporated by reference to Exhibit
10.3(9) to the 2005 10-K). |
|
|
|
*10.3(11)
|
|
Amendment No. 1 to the Deferred Compensation Plan II, dated as of July 10, 2007. |
|
|
|
*10.3(12)
|
|
Amendment No. 1 to the Supplemental Executive Retirement Plan II, dated as of July 10, 2007. |
|
|
|
*10.3(13)
|
|
Amendment No. 2 to the Deferred Compensation Plan II, dated as of October 15, 2007. |
37
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
*10.3(14)
|
|
Amendment No. 2 to the Supplemental Executive Retirement Plan II, dated as of October 15, 2007. |
|
|
|
*10.3(15)
|
|
Employment Agreement, dated September 16, 2005, between the Company and J. Terrence Lanni (incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K dated September 16, 2005 (the September 16, 2005 8-K)). |
|
|
|
*10.3(16)
|
|
Employment Agreement, dated September 16, 2005, between the Company and Robert H. Baldwin (incorporated by reference
to Exhibit 10.2 to the September 16, 2005 8-K). |
|
|
|
*10.3(17)
|
|
Employment Agreement, dated September 16, 2005, between the Company and John Redmond (incorporated by reference to
Exhibit 10.3 to the September 16, 2005 8-K). |
|
|
|
*10.3(18)
|
|
Employment Agreement, dated September 16, 2005, between the Company and James J. Murren (incorporated by reference to
Exhibit 10.4 to the September 16, 2005 8-K). |
|
|
|
*10.3(19)
|
|
Employment Agreement, dated September 16, 2005, between the Company and Gary N. Jacobs (incorporated by reference to
Exhibit 10.5 to the September 16, 2005 8-K). |
|
|
|
*10.3(20)
|
|
Employment Agreement, dated March 1, 2007, between the Company and Aldo Manzini. |
|
|
|
*10.3(21)
|
|
Letter Agreement dated June 19, 2007, between the Company and Aldo Manzini. |
|
|
|
*10.3(22)
|
|
Employment Agreement, dated December 3, 2007, between the Company and Dan DArrigo (incorporated by reference to
Exhibit 10 to the Companys Current Report on Form 8-K dated December 3, 2007). |
|
|
|
10.4(1)
|
|
Second Amended and Restated Joint Venture Agreement of Marina District
Development Company, dated as of August 31, 2000, between MAC, CORP. and
Boyd Atlantic City, Inc. (without exhibits) (incorporated by reference to
Exhibit 10.2 to the September 2000 10-Q). |
|
|
|
10.4(2)
|
|
Contribution and Adoption Agreement, dated as of December 13, 2000,
among Marina District Development Holding Co., LLC, MAC, CORP. and Boyd
Atlantic City, Inc. (incorporated by reference to Exhibit 10.4(15) to the
2000 10-K). |
|
|
|
10.4(3)
|
|
Amended and Restated Agreement of Joint Venture of Circus and Eldorado
Joint Venture by and between Eldorado Limited Liability Company and
Galleon, Inc. (incorporated by reference to Exhibit 3.3 to the Form S-4
Registration Statement of Circus and Eldorado Joint Venture and Silver
Legacy Capital Corp.Commission File No. 333-87202). |
|
|
|
10.4(4)
|
|
Amended and Restated Joint Venture Agreement, dated as of June 25,
2002, between Nevada Landing Partnership and RBG, L.P. (incorporated by
reference to Exhibit 10.1 to Mandalays Quarterly Report on Form 10-Q for
the fiscal quarter ended July 31, 2004.) |
|
|
|
10.4(5)
|
|
Amendment No.1 to Amended and Restated Joint Venture Agreement, dated
as of April 25, 2005, by and among Nevada Landing Partnership, an
Illinois general partnership, and RBG, L.P., an Illinois limited
partnership (incorporated by reference to Exhibit 10.4(5) to the 2005
10-K). |
|
|
|
10.4(6)
|
|
Amended and Restated Subscription and Shareholders Agreement, dated
June 19, 2004, among Pansy Ho, Grand Paradise Macau Limited, MGMM Macau,
Ltd., MGM MIRAGE Macau, Ltd., MGM MIRAGE and MGM Grand Paradise Limited
(formerly N.V. Limited) (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated April 19, 2005). |
|
|
|
10.4(7)
|
|
Amendment Agreement to the Subscription and Shareholders Agreement,
dated January 20, 2007, among Pansy Ho, Grand Paradise Macau Limited,
MGMM Macau, Ltd., MGM MIRAGE Macau, Ltd., MGM MIRAGE and MGM Grand
Paradise Limited (formerly N.V. Limited). |
|
|
|
10.4(8)
|
|
Loan Agreement with the M Resort LLC dated April 24, 2007
(incorporated by reference to Exhibit 10 to the Companys Current Report
on Form 8-K dated April 24, 2007). |
|
|
|
10.4(9)
|
|
Limited Liability Company Agreement of CityCenter Holdings, LLC, dated
August 21, 2007 (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated August 21, 2007 (the August
2007 8-K)). |
38
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.4(10)
|
|
Amendment No 1, dated November 15, 2007, to the Limited Liability
Company Agreement of CityCenter Holdings, LLC, dated August 21, 2007
(incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K dated November 15, 2007). |
|
|
|
10.4(11)
|
|
Amendment No 2, dated December 31, 2007, to the Limited Liability
Company Agreement of CityCenter Holdings, LLC, dated August 21, 2007
(incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K dated December 31, 2007). |
|
|
|
10.4(12)
|
|
Limited Liability Company Operating Agreement of IKM JV, LLC, dated
September 10, 2007 (incorporated by reference to Exhibit 10 to the
Companys Current Report on Form 8-K dated September 10, 2007). |
|
|
|
10.5(1)
|
|
Revised Development Agreement among the City of Detroit, The Economic
Development Corporation of the City of Detroit and MGM Grand Detroit, LLC
(incorporated by reference to Exhibit 10.10 to the June 2002 10-Q). |
|
|
|
10.5(2)
|
|
Revised Development Agreement effective August 2, 2002, by and among
the City of Detroit, The Economic Development Corporation of the City of
Detroit and Detroit Entertainment, L.L.C. (incorporated by reference to
Exhibit 10.61 of Mandalays Annual Report on Form 10-K for the year ended
January 31, 2005). |
|
|
|
10.6(1)
|
|
Purchase Agreement dated October 13, 2006, by and among Mandalay Resort
Group, as seller, Edgewater Hotel Corporation, Colorado Belle Corporation,
and Aces High Management, LLC, as purchaser (incorporated by reference to
the Companys Current Report on Form 8-K dated October 13, 2006). |
|
|
|
10.6(2)
|
|
Purchase Agreement dated October 31, 2006, by and among New York-New
York Hotel & Casino, LLC, as seller, PRMA Land Development Company, The
Primadonna Company LLC, and Herbst Gaming Inc., as purchaser (incorporated
by reference to the Companys Current Report on Form 8-K dated October 31,
2006). |
|
|
|
10.6(3)
|
|
Operating Agreement of Jeanco, LLC, dated February 9, 2007,
(incorporated by reference to Exhibit 10 to the Companys Current Report
on Form 8-K dated February 9, 2007). |
|
|
|
10.6(4)
|
|
Company Stock Purchase and Support Agreement, dated August 21, 2007, by
and between MGM MIRAGE and Infinity World Investments, LLC (incorporated
by reference to Exhibit 10.2 to the August 2007 8-K). |
|
|
|
10.6(5)
|
|
Amendment No. 1, dated October 17, 2007, to the Company Stock Purchase
and Support Agreement by and between MGM MIRAGE and Infinity World
Investments, LLC (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated October 17, 2007). |
|
|
|
21
|
|
List of subsidiaries of the Company. |
|
|
|
23
|
|
Consent of Deloitte & Touche LLP. |
|
|
|
31.1
|
|
Certification of Chief Executive Officer of Periodic
Report Pursuant to Rule 13a 14(a) and Rule 15d 14(a). |
|
|
|
31.2
|
|
Certification of Chief Financial Officer of Periodic
Report Pursuant to Rule 13a 14(a) and Rule 15d 14(a). |
|
|
|
**32.1
|
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350. |
|
|
|
**32.2
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. |
|
|
|
99.1
| |
Description of our Operating Resorts. |
|
|
|
99.2
|
|
Description of Regulation and Licensing. |
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
|
** |
|
Exhibits 32.1 and 32.2 shall not be deemed filed with the Securities and Exchange
Commission, nor shall they be deemed incorporated by reference in any filing with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 or the
Securities Act of 1933, whether made before or after the date hereof and irrespective of
any general incorporation language in any filings. |
39
MANAGEMENTS ANNUAL REPORT
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Managements Responsibilities
Management is responsible for establishing and maintaining adequate internal
control over financial reporting for MGM MIRAGE and subsidiaries (the Company).
Objective of Internal Control Over Financial Reporting
In establishing adequate internal control over financial reporting, management has
developed and maintained a system of internal control, policies and procedures designed
to provide reasonable assurance that information contained in the accompanying
consolidated financial statements and other information presented in this annual report
is reliable, does not contain any untrue statement of a material fact or omit to state a
material fact, and fairly presents in all material respects the financial condition,
results of operations and cash flows of the Company as of and for the periods presented
in this annual report. Significant elements of the Companys internal control over
financial reporting include, for example:
|
|
Hiring skilled accounting personnel and training them appropriately; |
|
|
|
Written accounting policies; |
|
|
|
Written documentation of accounting systems and procedures; |
|
|
|
Segregation of incompatible duties; |
|
|
|
Internal audit function to monitor the effectiveness of the system of internal
control; |
|
|
|
Oversight by an independent Audit Committee of the Board of Directors. |
Managements Evaluation
Management has evaluated the Companys internal control over financial reporting
using the criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on its
evaluation as of December 31, 2007, management believes that the Companys internal
control over financial reporting is effective in achieving the objectives described
above.
Report of Independent Registered Public Accounting Firm
Deloitte & Touche LLP audited the Companys consolidated financial statements as of
and for the period ended December 31, 2007 and issued their report thereon, which is
included in this annual report. Deloitte & Touche LLP has also issued an attestation
report on the effectiveness of the Companys internal control over financial reporting
and such report is also included in this annual report.
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of MGM MIRAGE
We have audited the internal control over financial reporting of MGM MIRAGE and
subsidiaries (the Company) as of December 31, 2007, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting. Our responsibility
is to express an opinion on the effectiveness
of the Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed by, or
under the supervision of, the companys principal executive and principal financial
officers, or persons performing similar functions, and effected by the companys board
of directors, management, and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of controls,
material misstatements due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the
controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31,
2007, based on the criteria
established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial statements and
financial statement schedule as of and for the year ended
December 31, 2007, of the
Company and our report dated February 29, 2008, expressed an unqualified opinion on those
financial statements and financial statement schedule and included an explanatory
paragraph regarding the adoption of Statement of Financial Accounting Standards No.
123(R), Share-Based Payment, and the adoption of Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109 .
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 29, 2008
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of MGM MIRAGE
We have audited the accompanying consolidated balance sheets of MGM MIRAGE and
subsidiaries (the Company) as of December 31, 2007 and 2006, and the related
consolidated statements of income, stockholders equity, and cash flows for each of the
three years in the period ended December 31, 2007. Our audits also included the
financial statement schedule of Valuation and Qualifying Accounts included in Item
15(a)(2). These financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express an opinion
on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of MGM MIRAGE and subsidiaries as of December
31, 2007 and 2006, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2007, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in Note 15 to the consolidated financial statements, on January 1,
2006, the Company adopted the provisions of Statement of Financial Accounting Standards
No. 123(R), Share-Based Payment. Also, as discussed in Note 12 to the consolidated
financial statements, on January 1, 2007, the Company adopted the provisions of
Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty
in Income Taxes an interpretation of FASB Statement No. 109.
We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Companys internal control over
financial reporting as of December 31, 2007, based on the criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 29, 2008
expressed an unqualified opinion on the Companys internal control over financial
reporting.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 29, 2008
42
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
412,390 |
|
|
$ |
452,944 |
|
Accounts receivable, net |
|
|
412,345 |
|
|
|
362,921 |
|
Inventories |
|
|
126,116 |
|
|
|
118,459 |
|
Income tax receivable |
|
|
|
|
|
|
18,619 |
|
Deferred income taxes |
|
|
63,453 |
|
|
|
68,046 |
|
Prepaid expenses and other |
|
|
105,412 |
|
|
|
124,414 |
|
Assets held for sale |
|
|
55,670 |
|
|
|
369,348 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,175,386 |
|
|
|
1,514,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate under development |
|
|
|
|
|
|
188,433 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
16,823,704 |
|
|
|
17,241,860 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Investments in unconsolidated affiliates |
|
|
2,482,727 |
|
|
|
1,092,257 |
|
Goodwill |
|
|
1,262,922 |
|
|
|
1,300,747 |
|
Other intangible assets, net |
|
|
359,770 |
|
|
|
367,200 |
|
Deposits and other assets, net |
|
|
623,177 |
|
|
|
440,990 |
|
|
|
|
|
|
|
|
Total other assets |
|
|
4,728,596 |
|
|
|
3,201,194 |
|
|
|
|
|
|
|
|
|
|
$ |
22,727,686 |
|
|
$ |
22,146,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
219,556 |
|
|
$ |
182,154 |
|
Construction payable |
|
|
76,524 |
|
|
|
234,486 |
|
Income taxes payable |
|
|
284,075 |
|
|
|
|
|
Accrued interest on long-term debt |
|
|
211,228 |
|
|
|
232,957 |
|
Other accrued liabilities |
|
|
929,424 |
|
|
|
958,244 |
|
Liabilities related to assets held for sale |
|
|
3,880 |
|
|
|
40,259 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,724,687 |
|
|
|
1,648,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
3,416,660 |
|
|
|
3,441,157 |
|
Long-term debt |
|
|
11,175,229 |
|
|
|
12,994,869 |
|
Other long-term obligations |
|
|
350,407 |
|
|
|
212,563 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
Common stock, $.01 par value: authorized 600,000,000 shares;
issued 368,395,926 and 362,886,027 shares; outstanding
293,768,899 and 283,909,000 shares |
|
|
3,684 |
|
|
|
3,629 |
|
Capital in excess of par value |
|
|
3,951,162 |
|
|
|
2,806,636 |
|
Treasury stock, at cost (74,627,027 and 78,977,027 shares) |
|
|
(2,115,107 |
) |
|
|
(1,597,120 |
) |
Retained earnings |
|
|
4,220,408 |
|
|
|
2,635,989 |
|
Accumulated other comprehensive income |
|
|
556 |
|
|
|
415 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
6,060,703 |
|
|
|
3,849,549 |
|
|
|
|
|
|
|
|
|
|
$ |
22,727,686 |
|
|
$ |
22,146,238 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
43
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Casino |
|
$ |
3,239,054 |
|
|
$ |
3,130,438 |
|
|
$ |
2,764,546 |
|
Rooms |
|
|
2,130,542 |
|
|
|
1,991,477 |
|
|
|
1,634,588 |
|
Food and beverage |
|
|
1,651,655 |
|
|
|
1,483,914 |
|
|
|
1,271,650 |
|
Entertainment |
|
|
560,909 |
|
|
|
459,540 |
|
|
|
426,175 |
|
Retail |
|
|
296,148 |
|
|
|
278,695 |
|
|
|
253,214 |
|
Other |
|
|
519,360 |
|
|
|
452,669 |
|
|
|
339,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,397,668 |
|
|
|
7,796,733 |
|
|
|
6,689,597 |
|
Less: Promotional allowances |
|
|
(706,031 |
) |
|
|
(620,777 |
) |
|
|
(560,754 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
7,691,637 |
|
|
|
7,175,956 |
|
|
|
6,128,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Casino |
|
|
1,677,884 |
|
|
|
1,612,992 |
|
|
|
1,422,472 |
|
Rooms |
|
|
570,191 |
|
|
|
539,442 |
|
|
|
454,082 |
|
Food and beverage |
|
|
984,279 |
|
|
|
902,278 |
|
|
|
782,372 |
|
Entertainment |
|
|
399,106 |
|
|
|
333,619 |
|
|
|
305,799 |
|
Retail |
|
|
190,137 |
|
|
|
179,929 |
|
|
|
164,189 |
|
Other |
|
|
317,550 |
|
|
|
245,126 |
|
|
|
187,956 |
|
General and administrative |
|
|
1,140,363 |
|
|
|
1,070,942 |
|
|
|
889,806 |
|
Corporate expense |
|
|
193,893 |
|
|
|
161,507 |
|
|
|
130,633 |
|
Preopening and start-up expenses |
|
|
92,105 |
|
|
|
36,362 |
|
|
|
15,752 |
|
Restructuring costs (credit) |
|
|
|
|
|
|
1,035 |
|
|
|
(59 |
) |
Property transactions, net |
|
|
(186,313 |
) |
|
|
(40,980 |
) |
|
|
37,021 |
|
Gain on CityCenter transaction |
|
|
(1,029,660 |
) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
700,334 |
|
|
|
629,627 |
|
|
|
560,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,049,869 |
|
|
|
5,671,879 |
|
|
|
4,950,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates |
|
|
222,162 |
|
|
|
254,171 |
|
|
|
151,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
2,863,930 |
|
|
|
1,758,248 |
|
|
|
1,330,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
17,210 |
|
|
|
11,192 |
|
|
|
12,037 |
|
Interest expense, net |
|
|
(708,343 |
) |
|
|
(760,361 |
) |
|
|
(640,758 |
) |
Non-operating items from unconsolidated affiliates |
|
|
(18,805 |
) |
|
|
(16,063 |
) |
|
|
(15,825 |
) |
Other, net |
|
|
4,436 |
|
|
|
(15,090 |
) |
|
|
(18,434 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(705,502 |
) |
|
|
(780,322 |
) |
|
|
(662,980 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
2,158,428 |
|
|
|
977,926 |
|
|
|
667,085 |
|
Provision for income taxes |
|
|
(757,883 |
) |
|
|
(341,930 |
) |
|
|
(231,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
1,400,545 |
|
|
|
635,996 |
|
|
|
435,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
10,461 |
|
|
|
18,473 |
|
|
|
11,815 |
|
Gain on disposal of discontinued operations |
|
|
265,813 |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
(92,400 |
) |
|
|
(6,205 |
) |
|
|
(3,925 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
183,874 |
|
|
|
12,268 |
|
|
|
7,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,584,419 |
|
|
$ |
648,264 |
|
|
$ |
443,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
4.88 |
|
|
$ |
2.25 |
|
|
$ |
1.53 |
|
Discontinued operations |
|
|
0.64 |
|
|
|
0.04 |
|
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
Net income per share |
|
$ |
5.52 |
|
|
$ |
2.29 |
|
|
$ |
1.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
4.70 |
|
|
$ |
2.18 |
|
|
$ |
1.47 |
|
Discontinued operations |
|
|
0.61 |
|
|
|
0.04 |
|
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
Net income per share |
|
$ |
5.31 |
|
|
$ |
2.22 |
|
|
$ |
1.50 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
44
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,584,419 |
|
|
$ |
648,264 |
|
|
$ |
443,256 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
700,334 |
|
|
|
653,919 |
|
|
|
588,102 |
|
Amortization of debt discounts, premiums and issuance costs |
|
|
4,298 |
|
|
|
(3,096 |
) |
|
|
5,791 |
|
Provision for doubtful accounts |
|
|
32,910 |
|
|
|
47,950 |
|
|
|
25,846 |
|
Stock-based compensation |
|
|
45,678 |
|
|
|
73,626 |
|
|
|
7,323 |
|
Property transactions, net |
|
|
(186,313 |
) |
|
|
(41,135 |
) |
|
|
36,880 |
|
Loss on early retirements of debt |
|
|
|
|
|
|
|
|
|
|
18,139 |
|
Gain on CityCenter transaction |
|
|
(1,029,660 |
) |
|
|
|
|
|
|
|
|
Gain on disposal of discontinued operations |
|
|
(265,813 |
) |
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates |
|
|
(162,217 |
) |
|
|
(229,295 |
) |
|
|
(134,132 |
) |
Distributions from unconsolidated affiliates |
|
|
211,062 |
|
|
|
212,477 |
|
|
|
89,857 |
|
Deferred income taxes |
|
|
32,813 |
|
|
|
59,764 |
|
|
|
51,759 |
|
Tax benefit from stock option exercises |
|
|
|
|
|
|
|
|
|
|
94,083 |
|
Changes in current assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(82,666 |
) |
|
|
(65,467 |
) |
|
|
(68,159 |
) |
Inventories |
|
|
(8,511 |
) |
|
|
(10,431 |
) |
|
|
(7,017 |
) |
Income taxes receivable and payable |
|
|
315,877 |
|
|
|
(129,929 |
) |
|
|
8,058 |
|
Prepaid expenses and other |
|
|
10,937 |
|
|
|
(21,921 |
) |
|
|
10,830 |
|
Accounts payable and accrued liabilities |
|
|
32,720 |
|
|
|
111,559 |
|
|
|
75,404 |
|
Real estate under development |
|
|
(458,165 |
) |
|
|
(89,724 |
) |
|
|
|
|
Residential sales deposits, net |
|
|
247,046 |
|
|
|
13,970 |
|
|
|
|
|
Hurricane Katrina insurance recoveries |
|
|
72,711 |
|
|
|
98,786 |
|
|
|
|
|
Change in Hurricane Katrina insurance receivable |
|
|
(5,962 |
) |
|
|
(46,581 |
) |
|
|
(46,275 |
) |
Other |
|
|
(97,082 |
) |
|
|
(50,784 |
) |
|
|
(16,949 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
994,416 |
|
|
|
1,231,952 |
|
|
|
1,182,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(2,917,409 |
) |
|
|
(1,758,795 |
) |
|
|
(719,146 |
) |
Proceeds from contribution of CityCenter |
|
|
2,468,652 |
|
|
|
|
|
|
|
|
|
Acquisition of Mandalay Resort Group, net of cash acquired |
|
|
|
|
|
|
|
|
|
|
(4,420,990 |
) |
Proceeds from disposals of discontinued operations, net |
|
|
578,873 |
|
|
|
|
|
|
|
|
|
Purchase of convertible note |
|
|
(160,000 |
) |
|
|
|
|
|
|
|
|
Hurricane Katrina insurance recoveries |
|
|
207,289 |
|
|
|
209,963 |
|
|
|
46,250 |
|
Dispositions of property and equipment |
|
|
47,571 |
|
|
|
11,375 |
|
|
|
7,828 |
|
Investments in unconsolidated affiliates |
|
|
|
|
|
|
(86,000 |
) |
|
|
(183,000 |
) |
Other |
|
|
(15,675 |
) |
|
|
(18,970 |
) |
|
|
(33,759 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
209,301 |
|
|
|
(1,642,427 |
) |
|
|
(5,302,817 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under bank credit
facilities maturities of 90 days or less |
|
|
(402,300 |
) |
|
|
756,850 |
|
|
|
325,000 |
|
Borrowings under bank credit facilities maturities
longer than 90 days |
|
|
6,750,000 |
|
|
|
7,000,000 |
|
|
|
4,400,000 |
|
Repayments under bank credit facilities maturities
longer than 90 days |
|
|
(7,500,000 |
) |
|
|
(8,150,000 |
) |
|
|
|
|
Issuance of long-term debt |
|
|
750,000 |
|
|
|
1,500,000 |
|
|
|
880,156 |
|
Repayment of long-term debt |
|
|
(1,402,233 |
) |
|
|
(444,500 |
) |
|
|
(1,408,992 |
) |
Debt issuance costs |
|
|
(5,983 |
) |
|
|
(28,383 |
) |
|
|
(50,331 |
) |
Issuance of common stock |
|
|
1,192,758 |
|
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise of stock options |
|
|
97,792 |
|
|
|
89,113 |
|
|
|
145,761 |
|
Purchases of common stock |
|
|
(826,765 |
) |
|
|
(246,892 |
) |
|
|
(217,316 |
) |
Excess tax benefits from stock-based compensation |
|
|
102,479 |
|
|
|
47,330 |
|
|
|
|
|
Other |
|
|
3,715 |
|
|
|
(13,494 |
) |
|
|
(11,452 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(1,240,537 |
) |
|
|
510,024 |
|
|
|
4,062,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) for the year |
|
|
(36,820 |
) |
|
|
99,549 |
|
|
|
(57,195 |
) |
Cash related to assets held for sale |
|
|
(3,734 |
) |
|
|
(24,538 |
) |
|
|
|
|
Balance, beginning of year |
|
|
452,944 |
|
|
|
377,933 |
|
|
|
435,128 |
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
412,390 |
|
|
$ |
452,944 |
|
|
$ |
377,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures |
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized |
|
$ |
731,618 |
|
|
$ |
778,590 |
|
|
$ |
588,587 |
|
State, federal and foreign income taxes paid, net of refunds |
|
|
391,042 |
|
|
|
369,450 |
|
|
|
75,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of net assets contributed to joint venture |
|
$ |
2,773,612 |
|
|
$ |
|
|
|
$ |
|
|
Increase in construction payable |
|
|
127,993 |
|
|
|
125,258 |
|
|
|
40,803 |
|
The accompanying notes are an integral part of these consolidated financial statements.
45
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands)
For the Years Ended December 31, 2007, 2006 and 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
|
|
Common Stock |
|
|
Capital in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive |
|
|
Total |
|
|
|
Shares |
|
|
Par |
|
|
Excess of |
|
|
Deferred |
|
|
Treasury |
|
|
Retained |
|
|
Income |
|
|
Stockholders |
|
|
|
Outstanding |
|
|
Value |
|
|
Par Value |
|
|
Compensation |
|
|
Stock |
|
|
Earnings |
|
|
(Loss) |
|
|
Equity |
|
Balances, January 1, 2005 |
|
|
280,740 |
|
|
$ |
3,472 |
|
|
$ |
2,346,329 |
|
|
$ |
(10,878 |
) |
|
$ |
(1,110,551 |
) |
|
$ |
1,544,499 |
|
|
$ |
(1,167 |
) |
|
$ |
2,771,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
443,256 |
|
|
|
|
|
|
|
443,256 |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,631 |
) |
|
|
(1,631 |
) |
Other comprehensive income from
unconsolidated affiliate, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,997 |
|
|
|
1,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
443,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,323 |
|
Tax benefit from stock-based
compensation |
|
|
|
|
|
|
|
|
|
|
92,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,690 |
|
Cancellation of restricted stock |
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
|
422 |
|
|
|
(422 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon
exercise of stock options |
|
|
10,115 |
|
|
|
101 |
|
|
|
145,690 |
|
|
|
|
|
|
|
|
|
|
|
(30 |
) |
|
|
|
|
|
|
145,761 |
|
Purchases of treasury stock |
|
|
(5,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(217,316 |
) |
|
|
|
|
|
|
|
|
|
|
(217,316 |
) |
Restricted shares turned in for
tax withholding |
|
|
(261 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,105 |
) |
|
|
|
|
|
|
|
|
|
|
(10,105 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
1,878 |
|
|
|
(485 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2005 |
|
|
285,070 |
|
|
|
3,573 |
|
|
|
2,586,587 |
|
|
|
(3,618 |
) |
|
|
(1,338,394 |
) |
|
|
1,987,725 |
|
|
|
(801 |
) |
|
|
3,235,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
648,264 |
|
|
|
|
|
|
|
648,264 |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,213 |
|
|
|
1,213 |
|
Other comprehensive income from
unconsolidated affiliate, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
71,186 |
|
|
|
3,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,424 |
|
Tax benefit from stock-based
compensation |
|
|
|
|
|
|
|
|
|
|
60,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,033 |
|
Cancellation of restricted stock |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon
exercise of stock options |
|
|
5,623 |
|
|
|
56 |
|
|
|
89,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,113 |
|
Purchases of treasury stock |
|
|
(6,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(246,892 |
) |
|
|
|
|
|
|
|
|
|
|
(246,892 |
) |
Restricted shares turned in for
tax withholding |
|
|
(280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,764 |
) |
|
|
|
|
|
|
|
|
|
|
(11,764 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
(227 |
) |
|
|
310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2006 |
|
|
283,909 |
|
|
|
3,629 |
|
|
|
2,806,636 |
|
|
|
|
|
|
|
(1,597,120 |
) |
|
|
2,635,989 |
|
|
|
415 |
|
|
|
3,849,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,584,419 |
|
|
|
|
|
|
|
1,584,419 |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
583 |
|
|
|
583 |
|
Other comprehensive loss from
unconsolidated affiliate, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(442 |
) |
|
|
(442 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,584,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
47,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,267 |
|
Tax benefit from stock-based
compensation |
|
|
|
|
|
|
|
|
|
|
115,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,439 |
|
Issuance of common stock |
|
|
14,200 |
|
|
|
|
|
|
|
883,980 |
|
|
|
|
|
|
|
308,778 |
|
|
|
|
|
|
|
|
|
|
|
1,192,758 |
|
Issuance of common stock upon
exercise of stock options and
stock appreciation rights |
|
|
5,510 |
|
|
|
55 |
|
|
|
96,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,746 |
|
Purchases of treasury stock |
|
|
(9,850 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(826,765 |
) |
|
|
|
|
|
|
|
|
|
|
(826,765 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
1,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2007 |
|
|
293,769 |
|
|
$ |
3,684 |
|
|
$ |
3,951,162 |
|
|
$ |
|
|
|
$ |
(2,115,107 |
) |
|
$ |
4,220,408 |
|
|
$ |
556 |
|
|
$ |
6,060,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
46
MGM MIRAGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION
MGM MIRAGE (the Company) is a Delaware corporation, incorporated on January 29,
1986. As of December 31, 2007, approximately 52% of the outstanding shares of the
Companys common stock were owned by Tracinda Corporation, a Nevada corporation wholly
owned by Kirk Kerkorian. MGM MIRAGE acts largely as a holding company and, through
wholly-owned subsidiaries, owns and/or operates casino resorts. On April 25, 2005, the
Company completed its merger with Mandalay Resort Group (Mandalay) see Note 3.
The Company owns and operates the following casino resorts in Las Vegas, Nevada:
Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, Treasure Island (TI),
New York-New York, Excalibur, Monte Carlo, Circus Circus Las Vegas and Slots-A-Fun.
Operations at MGM Grand Las Vegas include management of The Signature at MGM Grand Las
Vegas, a condominium-hotel consisting of three towers. Other Nevada operations include
Circus Circus Reno, Gold Strike in Jean, and Railroad Pass in Henderson. The Company
has a 50% investment in Silver Legacy in Reno, which is adjacent to Circus Circus Reno.
The Company also owns Shadow Creek, an exclusive world-class golf course located
approximately ten miles north of its Las Vegas Strip resorts, and Primm Valley Golf Club
at the California/Nevada state line.
In April 2007, the Company completed the sale of Buffalo Bills, Primm Valley, and
Whiskey Petes casino resorts (the Primm Valley Resorts), not including the Primm
Valley Golf Club, with net proceeds to the Company of approximately $398 million. In
June 2007, the Company completed the sale of the Colorado Belle and Edgewater in
Laughlin (the Laughlin Properties), with net proceeds to the Company of approximately
$199 million. In February 2007, the Company entered into an agreement to contribute
Gold Strike, Nevada Landing and surrounding land (the Jean Properties) to a joint
venture. The joint ventures purpose is to develop a mixed-use community on the site.
See Note 4 for further discussion of these transactions.
The Company is a 50% owner of CityCenter, a mixed-use development on the Las Vegas
Strip, between Bellagio and Monte Carlo. CityCenter will feature a 4,000-room casino
resort designed by world-famous architect Cesar Pelli; two 400-room non-gaming boutique
hotels, one of which will be managed by luxury hotelier Mandarin Oriental; approximately
425,000 square feet of retail shops, dining and entertainment venues; and approximately
2.3 million square feet of residential space in approximately 2,700 luxury condominium
and condominium-hotel units in multiple towers. The estimated net project budget for
CityCenter is $8.0 billion, after net residential proceeds of $2.7 billion. The gross
project budget consists of $8.7 billion of construction costs, including capitalized
interest, $1.7 billion of land, $0.2 billion of preopening expenses, and $0.1 billion of
intangible assets. The construction costs, land and intangible assets reflect the
impact of $1.3 billion of positive valuation adjustments upon the contribution of the
CityCenter assets to the joint venture. The Company owned 100% of CityCenter until
November 15, 2007; see Note 5 for discussion of the CityCenter joint venture
transaction.
The Company and its local partners own and operate MGM Grand Detroit, which
recently opened a new permanent hotel and casino complex in downtown Detroit, Michigan.
The interim facility closed on September 30, 2007 and the new casino resort opened on
October 2, 2007. The Company also owns and operates two resorts in Mississippi Beau
Rivage in Biloxi and Gold Strike Tunica. Beau Rivage reopened in August 2006, after
having been closed due to damage sustained as a result of Hurricane Katrina in August
2005.
The Company has 50% interests in three resorts outside of Nevada Grand Victoria,
Borgata and MGM Grand Macau (through its 50% ownership of MGM Grand Paradise Limited).
Grand Victoria is a riverboat in Elgin, Illinois an affiliate of Hyatt Gaming owns the
other 50% of Grand Victoria and also operates the resort. Borgata is a casino resort
located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd
Gaming Corporation owns the other 50% of Borgata and also operates the resort.
The Company owns additional land adjacent to Borgata, a portion of which consists
of common roads, landscaping and master plan improvements, a portion of which is being
utilized for an expansion of Borgata, and a portion of which is planned for a
wholly-owned development, MGM Grand Atlantic City, preliminarily estimated to cost
approximately $4.5 $5.0 billion excluding land and associated costs. The proposed
resort would include three towers with more than 3,000 rooms and suites, approximately
5,000 slot machines, 200 table games, 500,000 square-feet of retail, an extensive
convention center, and other typical resort amenities.
MGM Grand Macau is a casino resort that opened on December 18, 2007. Pansy Ho
Chiu-King owns the other 50% of MGM Grand Paradise Limited. Construction of MGM Grand
Macau is expected to cost approximately $880 million, excluding preopening, land rights
and license costs. Preopening and start-up expenses were approximately $110 million.
The land rights cost approximately $60 million. The subconcession agreement, which
allows MGM Grand Paradise Limited to operate casinos in Macau, cost $200 million.
47
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Principles of consolidation. The consolidated financial statements include the
accounts of the Company and its subsidiaries. Investments in unconsolidated affiliates
which are 50% or less owned and do not meet the consolidation criteria of Financial
Accounting Standards Board Interpretation No. 46(R) (as amended), Consolidation of
Variable Interest Entities an Interpretation of ARB No. 51 (FIN 46(R)), are
accounted for under the equity method. All significant intercompany balances and
transactions have been eliminated in consolidation. The Companys operations are
primarily in one segment operation of casino resorts. Other operations, and foreign
operations, are not material.
Managements use of estimates. The consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United
States of America. Those principles require the Companys management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Financial statement impact of Hurricane Katrina. The Company maintained insurance
for both property damage and business interruption covering wind and flood damage
sustained at Beau Rivage. Business interruption coverage covered lost profits and other
costs incurred during the construction period and up to six months following the
re-opening of the facility. Non-refundable insurance recoveries received in excess of
the net book value of damaged assets, clean-up and demolition costs, and post-storm
costs have been recognized as income in the period received or committed based on the
Companys estimate of the total claim for property damage and business interruption
compared to the recoveries received at that time.
As of December 31, 2007, the Company had reached final settlement agreements with
its insurance carriers and received insurance recoveries of $635 million, which exceeded
the $265 million net book value of damaged assets and post-storm costs incurred. All
post-storm costs and expected recoveries have been recorded net within General and
administrative expenses in the accompanying consolidated statements of income, except
for depreciation of non-damaged assets, which is classified as Depreciation and
amortization. During the year ended December 31, 2007, the Company recognized $284
million of insurance recoveries in income, of which $217 million was recorded within
Property transactions, net and $67 million related to the business interruption
portion of the Companys claim was recorded within General and administrative
expenses. The remaining $86 million previously recognized in income was recorded
within Property transactions, net in 2006.
Insurance recoveries are classified in the statement of cash flows based on the
coverage to which they relate. Recoveries related to business interruption are
classified as operating cash flows and recoveries related to property damage are
classified as investing cash flows. However, the Companys insurance policy includes
undifferentiated coverage for both property damage and business interruption.
Therefore, the Company classified insurance recoveries as being related to property
damage until the full $160 million of damaged assets and demolition costs were recovered
and classified additional recoveries up to the amount of the post-storm costs incurred
as being related to business interruption. Insurance recoveries beyond that amount have
been classified as operating or investing cash flows based on the Companys estimated
allocation of the total claim. During the years ended December 31, 2007, 2006 and 2005,
insurance recoveries of $73 million, $99 million and $0, respectively, have been
classified as operating cash flows and recoveries of $207 million, $210 million and $46
million, respectively, have been classified as investing cash flows.
Cash and cash equivalents. Cash and cash equivalents include investments and
interest bearing instruments with maturities of three months or less at the date of
acquisition. Such investments are carried at cost which approximates market value.
Book overdraft balances resulting from the Companys cash management program are
recorded as accounts payable or construction payable, as applicable.
Accounts receivable and credit risk. Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of casino
accounts receivable. The Company issues markers to approved casino customers following
background checks and investigations of creditworthiness. At December 31, 2007, a
substantial portion of the Companys receivables were due from customers residing in
foreign countries. Business or economic conditions or other significant events in these
countries could affect the collectibility of such receivables.
Trade receivables, including casino and hotel receivables, are typically
non-interest bearing and are initially recorded at cost. Accounts are written off when
management deems the account to be uncollectible. Recoveries of accounts previously
written off are recorded when received. An estimated allowance for doubtful accounts is
maintained to reduce the Companys receivables to their carrying amount, which
approximates fair value. The allowance is estimated based on specific review of
customer accounts as well as historical collection experience and current economic and
business conditions. Management believes that as of December 31, 2007, no significant
concentrations of credit risk existed for which an allowance had not already been
recorded.
48
Inventories. Inventories consist of food and beverage, retail merchandise and
operating supplies, and are stated at the lower of cost or market. Cost is determined
primarily by the average cost method for food and beverage and supplies and the retail
inventory or specific identification methods for retail merchandise.
Real estate under development. Real estate under development at December 31, 2006
represented capitalized costs of wholly-owned real estate projects to be sold, which
consisted entirely of condominium and condominium-hotel developments at CityCenter.
Subsequent to the contribution of CityCenter to a joint venture See Note 5 the
Company no longer has real estate under development.
Property and equipment. Property and equipment are stated at cost. Gains or
losses on dispositions of property and equipment are included in the determination of
income. Maintenance costs are expensed as incurred. Property and equipment are
generally depreciated over the following estimated useful lives on a straight-line
basis:
|
|
|
|
|
Buildings and improvements |
|
|
30 to 45 years |
|
Land improvements |
|
|
10 to 20 years |
|
Furniture and fixtures |
|
|
3 to 10 years |
|
Equipment |
|
|
3 to 20 years |
|
We evaluate our property and equipment and other long-lived assets for impairment
in accordance with the Financial Accounting Standards Boards Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. For assets to be disposed of, we recognize the asset to be sold at the lower
of carrying value or fair value less costs of disposal. Fair value for assets to be
disposed of is estimated based on comparable asset sales, offers received, or a
discounted cash flow model.
For assets to be held and used, we review fixed assets for impairment whenever
indicators of impairment exist. If an indicator of impairment exists, we compare 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 measured based on fair value compared to carrying value,
with fair value typically based on a discounted cash flow model. If an asset is still
under development, future cash flows include remaining construction costs. For a
discussion of recognized impairment losses, see Note 17.
Capitalized interest. The interest cost associated with major development and
construction projects is capitalized and included in the cost of the project. When no
debt is incurred specifically for a project, interest is capitalized on amounts expended
on the project using the weighted-average cost of the Companys outstanding borrowings.
Capitalization of interest ceases when the project is substantially complete or
development activity is suspended for more than a brief period.
Investment in The M Resort LLC convertible note. In June 2007, the Company
purchased a $160 million convertible note issued by The M Resort LLC, which is
developing a casino resort on Las Vegas Boulevard, 10 miles south of Bellagio. The
convertible note matures in June 2015, contains certain optional and mandatory
redemption provisions, and is convertible into a 50% equity interest in The M Resort LLC
beginning in December 2008. The convertible note earns interest at 6% which may be paid
in cash or accrued in kind for the first five years; thereafter interest must be paid
in cash. There are no scheduled principal payments before maturity.
The convertible note is accounted for as a hybrid financial instrument consisting
of a host debt instrument and an embedded call option on The M Resort LLCs equity. The
debt component is accounted for separately as an available-for-sale marketable security,
with changes in value recorded in other comprehensive income. The call option is
treated as a derivative with changes in value recorded in earnings. The initial value
of the call option was $0 and the initial value of the debt was $155 million, with the
discount accreted to earnings over the term of the note. The entire carrying value of
the convertible note is included in Deposits and other assets, net in the accompanying
consolidated balance sheets, as the security is not marketable.
Goodwill and other intangible assets. Goodwill represents the excess of purchase
price over fair market value of net assets acquired in business combinations. Goodwill
and indefinite-lived intangible assets must be reviewed for impairment at least annually
and between annual test dates in certain circumstances. The Company performs its annual
impairment test for goodwill and indefinite-lived intangible assets in the fourth
quarter of each fiscal year. No impairments were indicated as a result of the annual
impairment reviews for goodwill and indefinite-lived intangible assets in 2007, 2006 or
2005.
Revenue recognition and promotional allowances. Casino revenue is the aggregate
net difference between gaming wins and losses, with liabilities recognized for funds
deposited by customers before gaming play occurs (casino front money) and for chips in
the customers possession (outstanding chip liability). Hotel, food and beverage,
entertainment and other operating revenues are recognized as services are performed.
Advance deposits on rooms and advance ticket sales are recorded as accrued liabilities
until services are provided to the customer.
49
Gaming revenues are recognized net of certain sales incentives, including discounts
and points earned in point-loyalty programs. The retail value of accommodations, food
and beverage, and other services furnished to guests without charge is included in gross
revenue and then deducted as promotional allowances. The estimated cost of providing
such promotional allowances is primarily included in casino expenses as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Rooms |
|
$ |
96,183 |
|
|
$ |
91,799 |
|
|
$ |
74,022 |
|
Food and beverage |
|
|
303,900 |
|
|
|
296,866 |
|
|
|
229,892 |
|
Other |
|
|
33,457 |
|
|
|
34,439 |
|
|
|
31,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
433,540 |
|
|
$ |
423,104 |
|
|
$ |
335,647 |
|
|
|
|
|
|
|
|
|
|
|
Reimbursed expenses. The Company recognizes costs reimbursed pursuant to
management services as revenue in the period it incurs the costs. Reimbursed costs in
2007 related solely to the Companys management of CityCenter and totaled $5 million,
classified as other revenue and other operating expenses in the accompanying
consolidated statements of income.
Point-loyalty programs. The Companys primary point-loyalty program, in operation
at its major resorts, is Players Club. In Players Club, customers earn points based on
their slots play, which can be redeemed for cash or free play at any of the Companys
participating resorts. The Company records a liability based on the points earned times
the redemption value and records a corresponding reduction in casino revenue. The
expiration of unused points results in a reduction of the liability. Customers overall
level of table games and slots play is also tracked and used by management in awarding
discretionary complimentaries free rooms, food and beverage and other services for
which no accrual is recorded. Other loyalty programs at the Companys resorts generally
operate in a similar manner, though they generally are available only to customers at
the individual resorts. At December 31, 2007 and 2006, the total company-wide liability
for point-loyalty programs was $56 million and $47 million, respectively, including
amounts classified as liabilities related to assets held for sale.
Advertising. The Company expenses advertising costs the first time the advertising
takes place. Advertising expense of continuing operations, which is generally included
in general and administrative expenses, was $141 million, $119 million and $98 million
for 2007, 2006 and 2005, respectively.
Corporate expense. Corporate expense represents unallocated payroll and aircraft
costs, professional fees and various other expenses not directly related to the
Companys casino resort operations. In addition, corporate expense includes the costs
associated with the Companys evaluation and pursuit of new business opportunities,
which are expensed as incurred until development of a specific project has become
probable.
Preopening and start-up expenses. The Company accounts for costs incurred during
the preopening and start-up phases of operations in accordance with the American
Institute of Certified Public Accountants (AICPA) Statement of Position 98-5,
Reporting on the Costs of Start-up Activities. Preopening and start-up costs,
including organizational costs, are expensed as incurred. Costs classified as
preopening and start-up expenses include payroll, outside services, advertising, and
other expenses related to new or start-up operations and new customer initiatives.
Property transactions, net. The Company classifies transactions related to
long-lived assets such as write-downs and impairments, demolition costs, and normal
gains and losses on the sale of fixed assets as Property transactions, net in the
accompanying consolidated statements of income. See Note 17 for a detailed discussion
of these amounts.
Income per share of common stock. The weighted-average number of common and common
equivalent shares used in the calculation of basic and diluted earnings per share
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Weighted-average common shares outstanding
used in the calculation of basic earnings per share |
|
|
286,809 |
|
|
|
283,140 |
|
|
|
284,943 |
|
Potential dilution from stock options, stock appreciation
rights and restricted stock |
|
|
11,475 |
|
|
|
8,607 |
|
|
|
11,391 |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common and common equivalent
shares used in the calculation of
diluted earnings per share |
|
|
298,284 |
|
|
|
291,747 |
|
|
|
296,334 |
|
|
|
|
|
|
|
|
|
|
|
Currency translation. The Company accounts for currency translation in accordance
with Statement of Financial Accounting Standards No. 52, Foreign Currency Translation.
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.
50
Comprehensive income. Comprehensive income includes net income and all other
non-stockholder changes in equity, or other comprehensive income. Elements of the
Companys other comprehensive income are reported in the accompanying consolidated
statements of stockholders equity, and the cumulative balance of these elements
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Other comprehensive income (loss) from
unconsolidated affiliates |
|
$ |
(305 |
) |
|
$ |
137 |
|
Foreign currency translation adjustments |
|
|
861 |
|
|
|
278 |
|
|
|
|
|
|
|
|
|
|
$ |
556 |
|
|
$ |
415 |
|
|
|
|
|
|
|
|
Reclassifications. The consolidated financial statements for prior years reflect
certain reclassifications, which have no effect on previously reported net income, to
conform to the current year presentation.
Recently Issued Accounting Standards. The following accounting standards were
issued in 2007 but will impact the Company in future periods.
Accounting for Business Combinations and Non-Controlling Interests. In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141
(R), Business Combinations, (SFAS 141R) and SFAS No. 160 Non-controlling interests
in Consolidated Financial Statements an amendment of ARB No. 51, (SFAS 160). These
standards amend the requirements for accounting for business combinations, including the
recognition and measurement of additional assets and liabilities at their fair value,
expensing of acquisition-related costs which are currently capitalizable under existing
rules, treatment of adjustments to deferred taxes and liabilities subsequent to the
measure period, and the measurement of non-controlling interest, previously commonly
referred to as minority interests, at fair value. SFAS 141R also includes additional
disclosure requirements with respect to the methodologies and techniques used to
determine the fair value of assets and liabilities recognized in a business combination.
SFAS 141R and SFAS 160 apply prospectively to fiscal years beginning on or after
December 15, 2008, except for the treatment of deferred tax adjustments which apply to
deferred taxes recognized in previous business combinations. These standards will
become effective for the Company on January 1, 2009. The Company is currently
evaluating the effect, if any, the adoption of SFAS 141R and SFAS 160 will have on its
consolidated financial statements.
Impact of Buy-Sell Clauses on Sales of Real Estate. In December 2007, the
Emerging Issues Task Force (EITF) of the FASB ratified its consensus on EITF No. 07-6
Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement
No. 66, Accounting for Sales of Real Estate, When the Agreement Includes a Buy-Sell
Clause. The EITF reached consensus that a buy-sell clause, in and of itself, does not
constitute a prohibited form of continuing involvement that would preclude partial
sale-recognition under Statement 66. This EITF is effective for fiscal years beginning
after December 15, 2007, or for the Company on January 1, 2008. The adoption of EITF No.
07-6 did not have a material impact on the Companys consolidated financial statements.
Fair Value and Fair Value Option. In February 2007, the FASB issued SFAS
No. 159 The Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159). SFAS 159 permits the measure of certain financial instruments and certain
other items at fair value and establishes presentation and disclosure requirements to
help financial statement users to understand these measurements and their impact on
earnings. This statement is effective for the Company beginning in January 1, 2008. The
adoption of SFAS 159 did not have a material impact on the Companys consolidated
financial statements.
In
September 2006, the FASB issued SFAS No. 157 Fair Value Measurements (SFAS
157). SFAS 157 establishes a framework for measuring fair value under generally
accepted accounting principles and expands fair value disclosures. This statement will
be effective for the Company beginning January 1, 2008 for financial assets and
liabilities and beginning January 1, 2009 for certain non-financial assets and
liabilities. The adoption of SFAS 157 did not have a material impact on the Companys
consolidated financial statements.
NOTE 3 ACQUISITION
On April 25, 2005, the Company closed its merger with Mandalay under which the
Company acquired 100% of the outstanding common stock of Mandalay for $71 in cash for
each share of Mandalays common stock. The total acquisition cost was $7.3 billion,
including the fair value of debt assumed, transaction costs, and the net proceeds from
disposal of Mandalay assets.
51
The operating results for Mandalay are included in the accompanying consolidated
statements of income from the date of the acquisition. The following unaudited pro
forma consolidated financial information for the Company has been prepared assuming the
Mandalay acquisition had occurred on January 1, 2005.
|
|
|
|
|
Year Ended December 31, |
|
2005 |
|
|
(In thousands, except |
|
|
per share amounts) |
Net revenues |
|
$ |
6,977,609 |
|
Operating income |
|
|
1,488,013 |
|
Income from continuing operations |
|
|
454,365 |
|
Net income |
|
|
465,539 |
|
Basic earnings per share: |
|
|
|
|
Income from continuing operations |
|
$ |
1.59 |
|
Net income |
|
|
1.63 |
|
Diluted earnings per share: |
|
|
|
|
Income from continuing operations |
|
$ |
1.53 |
|
Net income |
|
|
1.57 |
|
NOTE 4 DISCONTINUED OPERATIONS
The sale of the Primm Valley Resorts in April 2007 resulted in a pre-tax gain of
$202 million and the sale of the Laughlin Properties in June 2007 resulted in a pre-tax
gain of $64 million.
The assets and liabilities of the Jean Properties have not been contributed to the
planned joint venture and therefore are classified as held for sale at December 31,
2007. The assets and liabilities of Primm Valley Resorts and the Laughlin Properties
were classified as held for sale at December 31, 2006 in the accompanying consolidated
balance sheets. Nevada Landing closed in March 2007 and the carrying value of its
building assets were written-off. These amounts are included in Property transactions,
net in the accompanying consolidated statements of income for the twelve month period
ended December 31, 2007.
The following table summarizes the assets held for sale and liabilities related to
assets held for sale in the accompanying consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Cash |
|
$ |
3,734 |
|
|
$ |
24,538 |
|
Accounts receivable, net |
|
|
587 |
|
|
|
3,203 |
|
Inventories |
|
|
825 |
|
|
|
3,196 |
|
Prepaid expenses and other |
|
|
952 |
|
|
|
8,141 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
6,098 |
|
|
|
39,078 |
|
Property and equipment, net |
|
|
47,194 |
|
|
|
316,332 |
|
Goodwill |
|
|
|
|
|
|
5,000 |
|
Other assets, net |
|
|
2,378 |
|
|
|
8,938 |
|
|
|
|
|
|
|
|
Total assets |
|
|
55,670 |
|
|
|
369,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
938 |
|
|
|
6,622 |
|
Other current liabilities |
|
|
2,942 |
|
|
|
29,142 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,880 |
|
|
|
35,764 |
|
Other long-term obligations |
|
|
|
|
|
|
4,495 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,880 |
|
|
|
40,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
$ |
51,790 |
|
|
$ |
329,089 |
|
|
|
|
|
|
|
|
The results of the Laughlin Properties and Primm Valley Resorts are classified as
discontinued operations in the accompanying consolidated statements of income for all
periods presented. Due to our continuing involvement in the Jean Properties, the
results of these operations have not been classified as discontinued operations in the
accompanying consolidated statements of income. The cash flows of discontinued
operations are included with the cash flows of continuing operations in the accompanying
consolidated statements of cash flows.
Other information related to discontinued operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended December 31, |
|
2007 |
|
2006 |
|
2005 |
|
|
|
|
|
|
(In thousands) |
|
|
|
|
Net revenues of discontinued operations |
|
$ |
128,619 |
|
|
$ |
412,032 |
|
|
$ |
353,125 |
|
Interest allocated to discontinued operations
(based on the ratio of net assets of discontinued
operations to total consolidated net assets and debt) |
|
|
5,844 |
|
|
|
18,160 |
|
|
|
15,267 |
|
52
NOTE 5 CITYCENTER TRANSACTION
In
August 2007, the Company and Dubai World, a Dubai, United Arab Emirates government
decree entity, agreed to form a 50/50 joint venture for the CityCenter development. The
joint venture, CityCenter Holdings, LLC, is owned equally by the Company and Infinity
World Development Corp., a wholly-owned subsidiary of Dubai World. On November 15, 2007
the Company contributed the CityCenter assets which the parties valued at $5.4 billion,
subject to certain adjustments. Dubai World contributed $2.96 billion in cash. At the
close of the transaction, the Company received a cash distribution of $2.47 billion, of
which $22 million will be repaid to CityCenter as a result of a post-closing adjustment.
The joint venture retained approximately $492 million to fund near-term construction
costs. The Company will continue to serve as developer of CityCenter and will receive
additional consideration of up to $100 million if the project is completed on time and
actual development costs, net of residential proceeds, are within specified parameters.
Upon completion of construction, the Company will manage CityCenter for a fee.
The initial contribution of the CityCenter assets has been accounted for as a
partial sale of real estate. As a partial sale, profit can be recognized when a seller
retains an equity interest in the assets, but only to the extent of the outside equity
interests, and only if the following criteria are met: 1) the buyer is independent of
the seller; 2) collection of the sales price is reasonably assured; and 3) the seller
will not be required to support the operations of the property to an extent greater than
its proportionate retained interest.
The transaction meets criteria 1 and 3, despite the Companys equity interest and
ongoing management of the project, because the Company does not control the venture and
the management and other agreements between the Company and CityCenter have been
assessed as being fair market value contracts. In addition, the Company assessed
whether it had a prohibited form of continuing involvement based on the presence of
certain contingent repurchase options, including an option to purchase Dubai Worlds
interest if Dubai World is denied required gaming approvals. The Company assessed the
probability of such contingency as remote and, therefore, determined that a prohibited
form of continuing involvement does not exist.
As described above, the Company did not receive the entire amount of the sales
price, as a portion remained in the venture to fund near-term construction costs. The
Company expects that the permanent financing for CityCenter will require such funds to
remain in the venture and not be distributed; therefore, the Company believes that
portion of the gain does not meet criteria 2 above and has been deferred. The Company
recorded a gain of $1.03 billion based on the following (in millions):
|
|
|
|
|
Cash received: |
|
|
|
|
Initial distribution |
|
$ |
2,468 |
|
Post-closing adjustment |
|
|
(22 |
) |
|
|
|
|
Net cash received |
|
|
2,446 |
|
Less: 50% of carrying value of assets contributed |
|
|
(1,387 |
) |
Less: Liabilities resulting from the transaction |
|
|
(29 |
) |
|
|
|
|
|
|
$ |
1,030 |
|
|
|
|
|
The Company is accounting for its ongoing investment in CityCenter using the equity
method, consistent with its other investments in unconsolidated affiliates. The Company
assessed whether CityCenter should be consolidated under the provisions of FIN 46(R) and
determined that CityCenter is not a variable interest entity, based on the following: 1)
CityCenter does not meet the scope exceptions in FIN 46(R); 2) the equity at risk in
CityCenter is sufficient, based on qualitative assessments; 3) the equity holders of
CityCenter (the Company and Dubai World) have the ability to control CityCenter and the
right/obligation to receive/absorb expected returns/losses of CityCenter; and 4) while
the Companys 50% voting rights in CityCenter may not be proportionate to its
rights/obligations to receive/absorb expected returns/losses given the fact that the
Company manages CityCenter, substantially all of the activities of CityCenter do not
involve and are not conducted on behalf of the Company.
NOTE 6 ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Casino |
|
$ |
266,059 |
|
|
$ |
248,044 |
|
Hotel |
|
|
181,545 |
|
|
|
175,770 |
|
Other |
|
|
50,579 |
|
|
|
29,131 |
|
|
|
|
|
|
|
|
|
|
|
498,183 |
|
|
|
452,945 |
|
Less: Allowance for doubtful accounts |
|
|
(85,838 |
) |
|
|
(90,024 |
) |
|
|
|
|
|
|
|
|
|
$ |
412,345 |
|
|
$ |
362,921 |
|
|
|
|
|
|
|
|
53
NOTE 7 PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Land |
|
$ |
7,692,737 |
|
|
$ |
7,905,430 |
|
Buildings, building improvements and land improvements |
|
|
8,713,703 |
|
|
|
7,869,972 |
|
Furniture, fixtures and equipment |
|
|
3,229,416 |
|
|
|
2,954,921 |
|
Construction in progress |
|
|
552,667 |
|
|
|
1,306,770 |
|
|
|
|
|
|
|
|
|
|
|
20,188,523 |
|
|
|
20,037,093 |
|
Less: Accumulated depreciation and amortization |
|
|
(3,364,819 |
) |
|
|
(2,795,233 |
) |
|
|
|
|
|
|
|
|
|
$ |
16,823,704 |
|
|
$ |
17,241,860 |
|
|
|
|
|
|
|
|
NOTE 8 INVESTMENTS IN 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 Companys
share of the investees earnings and losses, as well as capital contributions to and
distributions from these companies. Investments in unconsolidated affiliates consisted
of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
CityCenter Holdings, LLC CityCenter (50%) |
|
$ |
1,421,480 |
|
|
$ |
|
|
Marina District Development Company Borgata (50%) |
|
|
453,277 |
|
|
|
454,354 |
|
Elgin Riverboat Resort-Riverboat Casino Grand Victoria (50%) |
|
|
297,328 |
|
|
|
300,151 |
|
MGM Grand Paradise Limited Macau (50%) |
|
|
258,298 |
|
|
|
285,038 |
|
Circus and Eldorado Joint Venture Silver Legacy (50%) |
|
|
35,152 |
|
|
|
31,258 |
|
Turnberry/MGM Grand Towers The Signature at
MGM Grand (50%) |
|
|
5,651 |
|
|
|
11,661 |
|
Other |
|
|
11,541 |
|
|
|
9,795 |
|
|
|
|
|
|
|
|
|
|
$ |
2,482,727 |
|
|
$ |
1,092,257 |
|
|
|
|
|
|
|
|
As of December 31, 2007, The Signature at MGM Grand had completed the sales of all
units and had essentially ceased operations. During the fourth quarter of 2007, the
Company purchased the remaining 88 units in Towers B and C from the joint venture for
$39 million. These units have been recorded as property, plant and equipment in the
accompaying consolidated balance sheets.
The Company recognized the following related to its share of profit from
condominium sales, based on when sales were closed.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended December 31, |
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Income from joint venture |
|
$ |
83,728 |
|
|
$ |
102,785 |
|
|
$ |
|
|
Gain on land previously deferred |
|
|
8,003 |
|
|
|
14,524 |
|
|
|
|
|
Other income (loss) |
|
|
776 |
|
|
|
(108 |
) |
|
|
(2,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
92,507 |
|
|
$ |
117,201 |
|
|
$ |
(2,777 |
) |
|
|
|
|
|
|
|
|
|
|
Differences between the Companys venture-level equity and investment balances are as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Venture-level equity |
|
$ |
2,976,271 |
|
|
$ |
698,587 |
|
Fair value adjustments to investments acquired in business combinations |
|
|
321,814 |
|
|
|
321,814 |
|
Adjustment to CityCenter equity upon contribution of net assets by MGM MIRAGE |
|
|
(662,492 |
) |
|
|
|
|
Capitalized interest |
|
|
99,055 |
|
|
|
68,806 |
|
Other adjustments |
|
|
(251,921 |
) |
|
|
3,050 |
|
|
|
|
|
|
|
|
|
|
$ |
2,482,727 |
|
|
$ |
1,092,257 |
|
|
|
|
|
|
|
|
The fair value adjustments related to business combinations include a $90 million
increase for Borgata, related to land; a $267 million increase for Grand Victoria,
related to indefinite-lived gaming license rights; and a $35 million reduction for
Silver Legacy, related to long-term assets and long-term debt. The adjustments for
Borgata and Grand Victoria are not being amortized; the adjustments for Silver Legacy
are being amortized based on the useful lives of the related assets and liabilities.
The adjustment to CityCenter equity reflects the fact that the net assets (and
corresponding equity) contributed by MGM MIRAGE were recorded at a partial step-up in
value, while the investment is on a historical cost basis. Other adjustments includes
the deferred gain on the CityCenter transaction. A portion of the CityCenter-related
amounts will be amortized, based on amounts assigned to depreciable assets, or recorded
upon the sales of condominium units. The remainder will not be amortized, based on
amounts assigned to land and indefinite-lived intangible assets.
54
The Company recorded its share of the results of operations of the unconsolidated
affiliates as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Income from unconsolidated affiliates |
|
$ |
222,162 |
|
|
$ |
254,171 |
|
|
$ |
151,871 |
|
Preopening and start-up expenses |
|
|
(41,140 |
) |
|
|
(8,813 |
) |
|
|
(1,914 |
) |
Non-operating items from unconsolidated affiliates |
|
|
(18,805 |
) |
|
|
(16,063 |
) |
|
|
(15,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
162,217 |
|
|
$ |
229,295 |
|
|
$ |
134,132 |
|
|
|
|
|
|
|
|
|
|
|
Summarized balance sheet information of the unconsolidated affiliates is as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2007 |
|
2006 |
|
|
(In thousands) |
Current assets |
|
$ |
678,217 |
|
|
$ |
281,766 |
|
Property and other assets, net |
|
|
7,803,128 |
|
|
|
2,227,570 |
|
Current liabilities |
|
|
839,667 |
|
|
|
248,931 |
|
Long-term debt and other liabilities |
|
|
1,896,670 |
|
|
|
1,009,565 |
|
Equity |
|
|
5,745,008 |
|
|
|
1,250,840 |
|
Summarized results of operations of the unconsolidated affiliates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Net revenues |
|
$ |
1,885,595 |
|
|
$ |
2,020,523 |
|
|
$ |
1,243,465 |
|
Operating expenses, except preopening expenses |
|
|
(1,450,854 |
) |
|
|
(1,536,253 |
) |
|
|
(938,972 |
) |
Preopening and start-up expenses |
|
|
(79,596 |
) |
|
|
(12,285 |
) |
|
|
(1,352 |
) |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
355,145 |
|
|
|
471,985 |
|
|
|
303,141 |
|
Interest expense |
|
|
(48,500 |
) |
|
|
(37,898 |
) |
|
|
(35,034 |
) |
Other non-operating income |
|
|
6,082 |
|
|
|
2,462 |
|
|
|
1,435 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
312,727 |
|
|
$ |
436,549 |
|
|
$ |
269,542 |
|
|
|
|
|
|
|
|
|
|
|
Summarized balance sheet information of the CityCenter joint venture is as follows:
|
|
|
|
|
|
|
December 31, |
|
|
2007 |
Current assets |
|
$ |
217,415 |
|
Property and other assets, net |
|
|
4,973,887 |
|
Current liabilities |
|
|
337,598 |
|
Other liabilities |
|
|
286,952 |
|
Equity |
|
|
4,566,752 |
|
Summarized
income statement information of the CityCenter joint venture is as follows:
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
Net revenues |
|
$ |
|
|
Operating expenses, except preopening expenses |
|
|
(3,842 |
) |
Preopening and start-up expenses |
|
|
(5,258 |
) |
|
|
|
|
Operating loss |
|
|
(9,100 |
) |
Interest income |
|
|
1,913 |
|
|
|
|
|
Net loss |
|
$ |
(7,187 |
) |
|
|
|
|
NOTE 9 GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Goodwill: |
|
|
|
|
|
|
|
|
Mandalay acquisition (2005) |
|
$ |
1,214,297 |
|
|
$ |
1,216,990 |
|
Mirage Resorts acquisition (2000) |
|
|
47,186 |
|
|
|
76,342 |
|
Other |
|
|
1,439 |
|
|
|
7,415 |
|
|
|
|
|
|
|
|
|
|
$ |
1,262,922 |
|
|
$ |
1,300,747 |
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
Detroit development rights |
|
$ |
98,098 |
|
|
$ |
100,056 |
|
Trademarks, license rights and other |
|
|
245,146 |
|
|
|
247,346 |
|
|
|
|
|
|
|
|
|
|
|
343,244 |
|
|
|
347,402 |
|
Other intangible assets, net |
|
|
16,526 |
|
|
|
19,798 |
|
|
|
|
|
|
|
|
|
|
$ |
359,770 |
|
|
$ |
367,200 |
|
|
|
|
|
|
|
|
55
Goodwill related to the Mandalay acquisition was primarily assigned to Mandalay
Bay, Luxor, Excalibur and Gold Strike Tunica. Goodwill related to the Mirage Resorts
acquisition was assigned to Bellagio, The Mirage and TI. Changes in the recorded
balances of goodwill are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Balance, beginning of period |
|
$ |
1,300,747 |
|
|
$ |
1,314,561 |
|
Resolution of Mirage Resorts acquisition tax reserves |
|
|
(29,156 |
) |
|
|
|
|
Finalization of the Mandalay purchase price allocation |
|
|
(2,693 |
) |
|
|
(8,814 |
) |
Other |
|
|
(5,976 |
) |
|
|
(5,000 |
) |
|
|
|
|
|
|
|
Balance, end of the period |
|
$ |
1,262,922 |
|
|
$ |
1,300,747 |
|
|
|
|
|
|
|
|
The Companys indefinite-lived intangible assets consist primarily of development
rights in Detroit and trademarks. The Companys finitelived intangible assets consist
primarily of customer lists amortized over five years, lease acquisition costs amortized
over the life of the related leases, and certain license rights amortized over their
contractual life.
NOTE 10 OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Payroll and related |
|
$ |
302,707 |
|
|
$ |
304,924 |
|
Advance deposits and ticket sales |
|
|
137,771 |
|
|
|
163,121 |
|
Casino outstanding chip liability |
|
|
105,126 |
|
|
|
89,574 |
|
Casino front money deposits |
|
|
71,069 |
|
|
|
71,918 |
|
Other gaming related accruals |
|
|
89,131 |
|
|
|
76,739 |
|
Taxes, other than income taxes |
|
|
72,528 |
|
|
|
66,827 |
|
Other |
|
|
151,092 |
|
|
|
185,141 |
|
|
|
|
|
|
|
|
|
|
$ |
929,424 |
|
|
$ |
958,244 |
|
|
|
|
|
|
|
|
NOTE 11 LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Senior credit facility |
|
$ |
3,229,550 |
|
|
$ |
4,381,850 |
|
$710 million 9.75% senior subordinated notes, due 2007, net |
|
|
|
|
|
|
709,477 |
|
$200 million 6.75% senior notes, due 2007, net |
|
|
|
|
|
|
197,279 |
|
$492.2 million 10.25% senior subordinated notes, due 2007, net |
|
|
|
|
|
|
505,704 |
|
$180.4 million 6.75% senior notes, due 2008, net |
|
|
180,085 |
|
|
|
175,951 |
|
$196.2 million 9.5% senior notes, due 2008, net |
|
|
200,203 |
|
|
|
206,733 |
|
$226.3 million 6.5% senior notes, due 2009, net |
|
|
227,356 |
|
|
|
227,955 |
|
$1.05 billion 6% senior notes, due 2009, net |
|
|
1,052,577 |
|
|
|
1,053,942 |
|
$297.6 million 9.375% senior subordinated notes, due 2010, net |
|
|
312,807 |
|
|
|
319,277 |
|
$825 million 8.5% senior notes, due 2010, net |
|
|
823,689 |
|
|
|
823,197 |
|
$400 million 8.375% senior subordinated notes, due 2011 |
|
|
400,000 |
|
|
|
400,000 |
|
$132.4 million 6.375% senior notes, due 2011, net |
|
|
133,320 |
|
|
|
133,529 |
|
$550 million 6.75% senior notes, due 2012 |
|
|
550,000 |
|
|
|
550,000 |
|
$150 million 7.625% senior subordinated debentures, due 2013, net |
|
|
154,679 |
|
|
|
155,351 |
|
$500 million 6.75% senior notes due 2013 |
|
|
500,000 |
|
|
|
500,000 |
|
$525 million 5.875% senior notes, due 2014, net |
|
|
523,089 |
|
|
|
522,839 |
|
$875 million 6.625% senior notes, due 2015, net |
|
|
879,173 |
|
|
|
879,592 |
|
$250 million 6.875% senior notes due 2016 |
|
|
250,000 |
|
|
|
250,000 |
|
$750 million 7.5% senior notes due 2016 |
|
|
750,000 |
|
|
|
|
|
$100 million 7.25% senior debentures, due 2017, net |
|
|
84,499 |
|
|
|
83,556 |
|
$750 million 7.625% senior notes due 2017 |
|
|
750,000 |
|
|
|
750,000 |
|
Floating rate convertible senior debentures due 2033 |
|
|
8,472 |
|
|
|
8,472 |
|
$150 million 7% debentures due 2036, net |
|
|
155,835 |
|
|
|
155,900 |
|
$4.3 million 6.7% debentures, due 2096 |
|
|
4,265 |
|
|
|
4,265 |
|
Other notes |
|
|
5,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,175,229 |
|
|
|
12,994,869 |
|
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,175,229 |
|
|
$ |
12,994,869 |
|
|
|
|
|
|
|
|
Amounts due within one year of the balance sheet date are classified as long-term
in the accompanying consolidated balance sheets because the Company has both the intent
and ability to repay these amounts with available borrowings under the senior credit
facility.
56
Interest expense, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended December 31, |
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
(In thousands) |
|
|
|
|
|
Total interest incurred |
|
$ |
930,138 |
|
|
$ |
900,661 |
|
|
$ |
685,552 |
|
Interest capitalized |
|
|
(215,951 |
) |
|
|
(122,140 |
) |
|
|
(29,527 |
) |
Interest allocated to discontinued operations |
|
|
(5,844 |
) |
|
|
(18,160 |
) |
|
|
(15,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
708,343 |
|
|
$ |
760,361 |
|
|
$ |
640,758 |
|
|
|
|
|
|
|
|
|
|
|
The senior credit facility has a total capacity of $7 billion and matures in 2011.
The Company has the ability to solicit additional lender commitments to increase the
capacity to $8 billion. The components of the senior credit facility include a term
loan facility of $2.5 billion and a revolving credit facility of $4.5 billion. At
December 31, 2007, the Company had approximately $3.7 billion of available borrowing
capacity under the senior credit facility.
In
May 2007, the Company issued $750 million of 7.5% senior notes due 2016. In
June 2007, the Company repaid the $710 million of 9.75% senior subordinated notes at
maturity. In August 2007, the Company repaid the $200 million of 6.75% senior notes and
the $492.2 million of 10.25% senior subordinated notes at maturity using borrowings
under the senior credit facility.
In February 2006, the Company repaid the $200 million 6.45% senior notes at their
maturity. In October 2006, the Company repaid the $244.5 million 7.25% senior notes at
their maturity. The Company repaid both issuances of senior notes with borrowings under
the senior credit facility. In April 2006, the Company issued $500 million of 6.75%
senior notes due 2013 and $250 million of 6.875% senior notes due 2016. In December
2006, the Company issued $750 million of 7.625% senior notes due 2017. The proceeds of
the April 2006 and December 2006 issuances were used to repay outstanding borrowings
under the senior credit facility.
In February 2005, the Company redeemed all of its outstanding 6.875% senior notes
due February 2008 at the present value of future interest payments plus accrued interest
at the date of redemption. The Company recorded a loss on retirement of debt of $20
million in the first quarter of 2005, classified as Other, net in the accompanying
consolidated statements of income.
In December 2004, the Companys Board of Directors authorized the purchase of up to
$100 million of the Companys public debt securities. This authorization remains
available as of December 31, 2007.
The Company and each of its material subsidiaries, excluding MGM Grand Detroit, LLC
and the Companys foreign subsidiaries, are directly liable for or unconditionally
guarantee the senior credit facility, senior notes, senior debentures, and senior
subordinated notes. MGM Grand Detroit, LLC is a guarantor under the senior credit
facility, but only to the extent that MGM Grand Detroit, LLC borrows under such
facilities. At December 31, 2007, the outstanding amount of borrowings related to MGM
Grand Detroit, LLC was $361 million. See Note 19 for consolidating condensed financial
information of the subsidiary guarantors and non-guarantors. None of the Companys
assets serve as collateral for its senior credit facility, senior notes, or other
long-term debt.
The Companys long-term debt obligations contain customary covenants requiring the
Company to maintain certain financial ratios. At December 31, 2007, the Company was
required to maintain a maximum leverage ratio (debt to EBITDA, as defined) of 6.5:1 and
a minimum coverage ratio (EBITDA to interest charges, as defined) of 2.0:1. As of
December 31, 2007, the Companys leverage and interest coverage ratios were 3.0:1 and
4.0:1, respectively.
Maturities of the Companys long-term debt as of December 31, 2007 are as follows:
|
|
|
|
|
Years ending December 31, |
|
(In thousands) |
|
2008 |
|
$ |
377,998 |
|
2009 |
|
|
1,277,665 |
|
2010 |
|
|
1,123,891 |
|
2011 |
|
|
3,763,245 |
|
2012 |
|
|
551,335 |
|
Thereafter |
|
|
4,060,169 |
|
|
|
|
|
|
|
|
11,154,303 |
|
Debt premiums and discounts, net |
|
|
20,926 |
|
|
|
|
|
|
|
$ |
11,175,229 |
|
|
|
|
|
The estimated fair value of the Companys long-term debt at December 31, 2007 was
approximately $10.9 billion, versus its book value of $11.2 billion. At December 31,
2006, the estimated fair value of the Companys long-term debt was approximately $13
billion, consistent with its book value. The estimated fair value of the Companys debt
securities was based on quoted market prices on or about December 31, 2007 and 2006.
57
NOTE 12 INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109
requires the recognition of deferred income tax assets, net of applicable reserves,
related to net operating loss carryforwards and certain temporary differences. The
standard requires recognition of a future tax benefit to the extent that realization of
such benefit is more likely than not. Otherwise, a valuation allowance is applied.
The income tax provision attributable to continuing operations and discontinued
operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
Continuing operations |
|
$ |
757,883 |
|
|
$ |
341,930 |
|
|
$ |
231,719 |
|
Discontinued operations |
|
|
92,400 |
|
|
|
6,205 |
|
|
|
3,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
850,283 |
|
|
$ |
348,135 |
|
|
$ |
235,644 |
|
|
|
|
|
|
|
|
|
|
|
The income tax provision attributable to income from continuing operations before
income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Currentfederal |
|
$ |
729,249 |
|
|
$ |
328,068 |
|
|
$ |
218,901 |
|
Deferredfederal |
|
|
16,921 |
|
|
|
8,152 |
|
|
|
4,164 |
|
Other noncurrentfederal |
|
|
6,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for federal income taxes |
|
|
752,496 |
|
|
|
336,220 |
|
|
|
223,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currentstate |
|
|
2,493 |
|
|
|
3,920 |
|
|
|
5,252 |
|
Deferredstate |
|
|
728 |
|
|
|
1,432 |
|
|
|
6,811 |
|
Other noncurrentstate |
|
|
2,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for state income taxes |
|
|
5,387 |
|
|
|
5,352 |
|
|
|
12,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currentforeign |
|
|
|
|
|
|
(72 |
) |
|
|
(2,979 |
) |
Deferredforeign |
|
|
|
|
|
|
430 |
|
|
|
(430 |
) |
|
|
|
|
|
|
|
|
|
|
Provision for foreign income taxes |
|
|
|
|
|
|
358 |
|
|
|
(3,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
757,883 |
|
|
$ |
341,930 |
|
|
$ |
231,719 |
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the federal income tax statutory rate and the Companys effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2007 |
|
2006 |
|
2005 |
Federal income tax statutory rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
State income tax (net of federal benefit) |
|
|
0.1 |
|
|
|
0.4 |
|
|
|
1.2 |
|
Reversal of reserves for prior tax years |
|
|
(0.2 |
) |
|
|
(0.8 |
) |
|
|
|
|
Losses of unconsolidated foreign affiliates |
|
|
2.0 |
|
|
|
|
|
|
|
|
|
Domestic Production Activity deduction |
|
|
(1.8 |
) |
|
|
|
|
|
|
|
|
Foreign earnings repatriation benefit of
American Job Creation Act of 2004 |
|
|
|
|
|
|
|
|
|
|
(1.5 |
) |
Tax credits |
|
|
(0.3 |
) |
|
|
(0.6 |
) |
|
|
(1.3 |
) |
Permanent and other items |
|
|
0.3 |
|
|
|
1.0 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35.1 |
% |
|
|
35.0 |
% |
|
|
34.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The major tax-effected components of the Companys net deferred tax liability are as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Deferred tax assetsfederal and state |
|
|
|
|
|
|
|
|
Bad debt reserve |
|
$ |
39,880 |
|
|
$ |
35,454 |
|
Deferred compensation |
|
|
48,439 |
|
|
|
39,039 |
|
Net operating loss carryforward |
|
|
1,054 |
|
|
|
5,705 |
|
Preopening and start-up costs |
|
|
4,278 |
|
|
|
5,006 |
|
Accruals, reserves and other |
|
|
68,614 |
|
|
|
34,316 |
|
Long-term debt |
|
|
|
|
|
|
6,338 |
|
Stock-based compensation |
|
|
45,442 |
|
|
|
23,662 |
|
Tax credits |
|
|
2,491 |
|
|
|
2,491 |
|
|
|
|
|
|
|
|
|
|
|
210,198 |
|
|
|
152,011 |
|
Less: Valuation allowance |
|
|
(4,047 |
) |
|
|
(8,308 |
) |
|
|
|
|
|
|
|
|
|
$ |
206,151 |
|
|
$ |
143,703 |
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
Deferred tax liabilitiesfederal and state |
|
|
|
|
|
|
|
|
Property and equipment |
|
$ |
(3,444,406 |
) |
|
$ |
(3,385,984 |
) |
Long-term debt |
|
|
(1,479 |
) |
|
|
|
|
Investments in unconsolidated affiliates |
|
|
(10,735 |
) |
|
|
(31,839 |
) |
Intangibles |
|
|
(102,738 |
) |
|
|
(98,991 |
) |
|
|
|
|
|
|
|
|
|
|
(3,559,358 |
) |
|
|
(3,516,814 |
) |
|
|
|
|
|
|
|
Deferred taxesforeign |
|
|
2,214 |
|
|
|
2,144 |
|
Less: Valuation allowance |
|
|
(2,214 |
) |
|
|
(2,144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability |
|
$ |
(3,353,207 |
) |
|
$ |
(3,373,111 |
) |
|
|
|
|
|
|
|
For federal income tax purposes, the Company has a foreign tax credit carryforward
of $2 million that will expire in 2015 if not utilized.
For state income tax purposes, the Company has a New Jersey net operating loss
carryforward of $18 million, which equates to a deferred tax asset of $1 million, after
federal tax effect, and before valuation allowance. The New Jersey net operating loss
carryforwards began to expire in 2005.
At December 31, 2007, there is a $2 million valuation allowance provided on certain
New Jersey state net operating loss carryforwards and other New Jersey state deferred
tax assets, a valuation allowance of $2 million on the foreign tax credit, and a $2
million valuation allowance related to certain foreign deferred tax assets because
management believes these assets do not meet the more likely than not criteria for
recognition under SFAS 109. Management believes all other deferred tax assets are more
likely than not to be realized because of the future reversal of existing taxable
temporary differences and expected future taxable income. Accordingly, there are no
other valuation allowances provided at December 31, 2007.
Effective January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes an Interpretation
of FASB Statement No. 109 (FIN 48). FIN 48 requires that tax positions be assessed
using a two-step process. A tax position is recognized if it meets a more likely than
not threshold, and is measured at the largest amount of benefit that is greater than 50
percent likely of being realized. Uncertain tax positions must be reviewed at each
balance sheet date. Liabilities recorded as a result of this analysis must generally be
recorded separately from any current or deferred income tax accounts, and at December
31, 2007, the Company has classified $3 million as current (Other accrued liabilities)
and $84 million as long-term (Other long-term liabilities) in the accompanying
consolidated balance sheets, based on the time until expected payment. A cumulative
effect adjustment to retained earnings was not required as a result of the
implementation of FIN 48.
A reconciliation of the beginning and ending amounts of gross unrecognized tax
benefits is as follows (in thousands):
|
|
|
|
|
Gross unrecognized tax benefits at January 1, 2007 |
|
$ |
105,139 |
|
Gross increases Prior period tax positions |
|
|
14,423 |
|
Gross decreases Prior period tax positions |
|
|
(47,690 |
) |
Gross increases Current period tax positions |
|
|
13,220 |
|
Settlements with taxing authorities |
|
|
(7,162 |
) |
Lapse in statutes of limitations |
|
|
(602 |
) |
|
|
|
|
Gross unrecognized tax benefits at December 31, 2007 |
|
$ |
77,328 |
|
|
|
|
|
The total amount of net unrecognized tax benefits that, if recognized, would affect
the effective tax rate is $24 million.
The Company recognizes accrued interest and penalties related to unrecognized tax
benefits in income tax expense. This policy did not change as a result of the adoption
of FIN 48. The Company had $11 million and $5 million in interest related to
unrecognized tax benefits accrued as of December 31, 2007 and December 31, 2006,
respectively. No amounts were accrued for penalties as of either date. Income tax
expense for the year ended December 31, 2007 includes interest related to unrecognized
tax benefits of $7 million. For the years prior to adoption of FIN 48, income tax
expense included amounts accrued for interest expense of $2 million and $1 million for
the years ended December 31, 2006 and December 31, 2005, respectively.
59
The Company files income tax returns in the U.S. federal jurisdiction, various
state and local jurisdictions, and foreign jurisdictions, although the taxes paid in
foreign jurisdictions are not material. As of December 31, 2007, the Company was no
longer subject to examination of its U.S. federal income tax returns filed for years
ended prior to 2003. While the IRS examination of the 2001 and 2002 tax years closed
during the first quarter of 2007, the statute of limitations for assessing tax for such
years has been extended in order for the Company to complete the appeals process for
issues that were not agreed upon at the closure of the examination. It is reasonably
possible that this appeal may be settled in the next twelve months. The IRS is
currently examining the Companys federal income tax returns for the 2003 and 2004 tax
years. Tax returns for subsequent years are also subject to examination.
As of December 31, 2007, the Company was no longer subject to examination of its
various state and local tax returns filed for years ended prior to 2003. During 2007,
the City of Detroit initiated an examination of a Mandalay Resort Group subsidiary
return for the pre-acquisition year ended April 25, 2005. Also during 2007, the state
of Mississippi initiated an examination of returns filed by subsidiaries of MGM MIRAGE
and Mandalay Resort Group for the 2004 through 2006 tax years. This audit was settled
during the first quarter of 2008. No other state or local income tax returns are under
examination.
Due to the potential resolution of the appeals process for the IRS examination of
the 2001 and 2002 tax years, the expiration of various statutes of limitation, and the
settlement of the Mississippi state income tax examination in the first quarter of 2008,
it is reasonably possible that the Companys amount of unrecognized tax benefits may
decrease within the next twelve months by a range of $0 to $8 million.
NOTE 13 COMMITMENTS AND CONTINGENCIES
Leases. The Company leases real estate and various equipment under operating and,
to a lesser extent, capital lease arrangements. Certain real estate leases provide for
escalation of rent based upon a specified price index and/or based upon periodic
appraisals.
At December 31, 2007, the Company was obligated under non-cancelable operating
leases and capital leases to make future minimum lease payments as follows:
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
Capital |
|
|
|
Leases |
|
|
Leases |
|
|
|
(In thousands) |
|
Years ending December 31, |
|
|
|
|
|
|
|
|
2008 |
|
|
14,190 |
|
|
|
1,814 |
|
2009 |
|
|
9,498 |
|
|
|
1,637 |
|
2010 |
|
|
7,843 |
|
|
|
1,607 |
|
2011 |
|
|
7,021 |
|
|
|
1,401 |
|
2012 |
|
|
5,983 |
|
|
|
981 |
|
Thereafter |
|
|
40,756 |
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments |
|
$ |
85,291 |
|
|
|
7,440 |
|
|
|
|
|
|
|
|
|
Less: Amounts representing interest |
|
|
|
|
|
|
(666 |
) |
|
|
|
|
|
|
|
|
Total obligations under capital leases |
|
|
|
|
|
|
6,774 |
|
Less: Amounts due within one year |
|
|
|
|
|
|
(1,492 |
) |
|
|
|
|
|
|
|
|
Amounts due after one year |
|
|
|
|
|
$ |
5,282 |
|
|
|
|
|
|
|
|
|
The current and long-term obligations under capital leases are included in Other
accrued liabilities and Other long-term obligations, respectively, in the
accompanying consolidated balance sheets. Rental expense for operating leases,
including rental expense of discontinued operations, was $36 million for each of the
years ended December 31, 2007 and 2006, and $33 million for the year ended December 31,
2005.
CityCenter. As described in Note 1, the net project budget for CityCenter is $8.0
billion. The joint venture expects to spend approximately $2.5 billion in construction
costs in 2008. As of December 31, 2007, the joint venture had $207 million of cash.
In February 2008, MGM MIRAGE and Dubai World each loaned $100 million
to the joint venture to fund near-term construction costs. The joint venture is currently negotiating with its lenders to obtain
project financing to fund remaining construction spending. The joint venture
anticipates that project financing will include requirements to utilize
the project assets as security for the financing. The other potential source of project
financing is additional contributions from MGM MIRAGE and Dubai World, which require
approval of the joint ventures Board of Directors.
60
Mashantucket Pequot Tribal Nation. The Company entered into a series of agreements
to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (MPTN),
which owns and operates Foxwoods Casino Resort in Ledyard, Connecticut. The Company and
MPTN have formed a jointly owned company Unity Gaming, LLC to acquire or develop
future gaming and non-gaming enterprises. The Company will provide a loan of up to $200
million to finance a portion of MPTNs investment in joint projects.
Kerzner/Istithmar Joint Venture. In September 2007, the Company entered into a
definitive agreement with Kerzner International and Istithmar forming a joint
venture to develop a multi-billion dollar integrated resort to be located on the
southwest corner of Las Vegas Boulevard and Sahara Avenue. The Company will contribute
40 acres of land, which is being valued at $20 million per acre, for fifty percent of
the equity in the joint venture. Kerzner International and Istithmar will
contribute cash totaling $600 million, and each will obtain twenty-five percent of the equity in the joint
venture.
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 Companys 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 December 31, 2007, the Company had provided $85 million of total letters of
credit, including $50 million to support bonds issued by the Economic Development
Corporation of the City of Detroit, which are recorded as a liability of the Company.
Litigation. The Company is a party to various legal proceedings, most of which
relate to routine matters incidental to its business. Management does not believe that
the outcome of such proceedings will have a material adverse effect on the Companys
financial position or results of operations.
NOTE 14 STOCKHOLDERS EQUITY
Stock split. In May 2005, the Company completed a 2-for-1 stock split effected in
the form of a 100% stock dividend. All share and per share data in the accompanying
financial statements and notes thereto have been restated for all periods presented to
reflect the 100% stock dividend.
Stock sale. On October 18, 2007, the Company completed the sale of 14.2 million
shares of common stock to Infinity World Investments, a wholly-owned subsidiary of Dubai
World, at a price of $84 per share for total proceeds of approximately $1.2 billion.
These shares were previously held by the Company as treasury stock. Proceeds from the
sale were used to reduce amounts outstanding under the senior credit facility.
Stock repurchases. Share repurchases are only conducted under repurchase programs
approved by the Board of Directors and publicly announced. Share repurchase activity
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
July 2004 authorization (8 million, 6.5 million and 5.5 million shares purchased) |
|
$ |
659,592 |
|
|
$ |
246,892 |
|
|
$ |
217,316 |
|
December 2007 authorization (1.9 million shares purchased) |
|
|
167,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
826,765 |
|
|
$ |
246,892 |
|
|
$ |
217,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average price of shares repurchased |
|
$ |
83.92 |
|
|
$ |
37.98 |
|
|
$ |
39.51 |
|
At December 31, 2007, the Company had 18.2 million shares available for repurchase
under the December 2007 authorization.
NOTE 15 STOCK-BASED COMPENSATION
Information about the Companys share-based awards. The Company adopted an omnibus
incentive plan in 2005 which allows for the granting of stock options, stock appreciation
rights (SARs), restricted stock, and other stock-based awards to eligible directors,
officers and employees. The plans are administered by the Compensation and Stock Option
Committee (the Committee) of the Board of Directors. Salaried officers, directors and
other key employees of the Company and its subsidiaries are eligible to receive awards.
The Committee has discretion under the omnibus plan regarding which type of awards to
grant, the vesting and service requirements, exercise price and other conditions, in all
cases subject to certain limits, including:
|
|
|
The omnibus plan allowed for the issuance of up to 20 million shares or
share-based awards; |
|
|
|
|
For stock options and stock appreciation rights, the exercise price of the
award must equal the fair market value of the stock on the date of grant and the
maximum term of such an award is ten years. |
61
To date, the Committee has only awarded stock options and SARs under the omnibus
plan. The Companys practice has been to issue new shares upon the exercise of stock
options. Under the Companys previous plans, the Committee had issued stock options and
restricted stock. Stock options and SARs granted under all plans generally have either
7-year or 10-year terms, and in most cases are exercisable in either four or five equal
annual installments. Restrictions on restricted shares granted under a previous plan
lapsed 50% on the third anniversary date after the grant and 50% on the fourth
anniversary date after the grant.
As of December 31, 2007, the aggregate number of share-based awards available for
grant under the omnibus plan was 3.1 million. A summary of activity under the Companys
share-based payment plans for the year ended December 31, 2007 is presented below:
Stock options and stock appreciation rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
Aggregate |
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Exercise |
|
|
Contractual |
|
|
Value |
|
|
|
(000s) |
|
|
Price |
|
|
Term |
|
|
($000s) |
|
Outstanding at January 1, 2007 |
|
|
30,532 |
|
|
$ |
25.37 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
2,640 |
|
|
|
79.12 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(5,565 |
) |
|
|
18.21 |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(933 |
) |
|
|
34.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007 |
|
|
26,674 |
|
|
|
31.90 |
|
|
|
4.8 |
|
|
$ |
1,402,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2007 |
|
|
25,969 |
|
|
|
31.70 |
|
|
|
4.8 |
|
|
$ |
1,370,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2007 |
|
|
11,357 |
|
|
|
21.83 |
|
|
|
4.4 |
|
|
$ |
708,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007, there was a total of $103 million of unamortized
compensation related to stock options and SARs, which cost is expected to be recognized
over a weighted-average period of 2.3 years. The following table includes additional
information related to stock options and SARs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2007 |
|
2006 |
|
2005 |
|
|
|
|
|
|
(In thousands) |
|
|
|
|
Intrinsic value of stock options and SARs exercised |
|
$ |
339,154 |
|
|
$ |
166,257 |
|
|
$ |
255,663 |
|
Income tax benefit from stock options and SARs exercised |
|
|
114,641 |
|
|
|
56,351 |
|
|
|
89,337 |
|
Proceeds from stock option exercises |
|
|
97,792 |
|
|
|
89,113 |
|
|
|
145,761 |
|
Recognition of compensation cost. The Company adopted Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)) on
January 1, 2006 using the modified prospective method. The Company recognizes the fair
value of awards granted under the Companys omnibus plan in the income statement based
on the fair value of these awards measured at the date of grant using the Black-Scholes
model. For awards granted prior to adoption, the unamortized expense is being recognized
on an accelerated basis, since this was the method used for disclosure purposes prior to
the adoption of SFAS 123(R). For awards granted after adoption, such expense is being
recognized on a straight-line basis over the vesting period of the awards. Forfeitures
are estimated at the time of grant, with such estimate updated periodically and with
actual forfeitures recognized currently to the extent they differ from the estimate. The
following table shows information about compensation cost recognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Compensation cost: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and stock appreciation rights |
|
$ |
47,267 |
|
|
$ |
71,386 |
|
|
$ |
139 |
|
Restricted stock |
|
|
|
|
|
|
3,038 |
|
|
|
7,184 |
|
|
|
|
|
|
|
|
|
|
|
Total compensation cost |
|
|
47,267 |
|
|
|
74,424 |
|
|
|
7,323 |
|
Less: Compensation cost capitalized |
|
|
(1,589 |
) |
|
|
(798 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation cost recognized as expense |
|
|
45,678 |
|
|
|
73,626 |
|
|
|
7,323 |
|
Less: Related tax benefit |
|
|
(15,734 |
) |
|
|
(24,901 |
) |
|
|
(1,204 |
) |
|
|
|
|
|
|
|
|
|
|
Compensation expense, net of tax benefit |
|
$ |
29,944 |
|
|
$ |
48,725 |
|
|
$ |
6,119 |
|
|
|
|
|
|
|
|
|
|
|
Compensation cost for stock options and SARs was based on the fair value of each
award, measured by applying the Black-Scholes model on the date of grant, using the
following weighted-average assumptions (assumptions in 2005 were used to compute the pro
forma compensation for disclosure purposes only):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2007 |
|
2006 |
|
2005 |
Expected volatility |
|
|
32 |
% |
|
|
33 |
% |
|
|
37 |
% |
Expected term |
|
4.1years |
|
4.1years |
|
4.3years |
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Risk-free interest rate |
|
|
4.4 |
% |
|
|
4.9 |
% |
|
|
3.8 |
% |
Forfeiture rate |
|
|
4.6 |
% |
|
|
4.6 |
% |
|
|
0 |
% |
Weighted-average fair value of options granted |
|
$ |
25.93 |
|
|
$ |
14.50 |
|
|
$ |
12.73 |
|
62
Expected volatility is based in part on historical volatility and in part on implied
volatility based on traded options on the Companys 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 US Treasury instruments with maturities matching the relevant expected term of the
award.
Pro forma disclosures. Had the Company accounted for these plans during 2005 under
the fair value method allowed by SFAS 123, the Companys net income and earnings per
share would have been reduced to recognize the fair value of employee stock options, as
follows:
|
|
|
|
|
Year Ended December 31, |
|
2005 |
|
|
|
(In thousands) |
|
Net income |
|
|
|
|
As reported |
|
$ |
443,256 |
|
Incremental stock-based compensation under
SFAS 123, net of tax benefit |
|
|
(47,934 |
) |
|
|
|
|
Pro forma |
|
$ |
395,322 |
|
|
|
|
|
Basic earnings per share |
|
|
|
|
As reported |
|
$ |
1.56 |
|
|
|
|
|
Pro forma |
|
$ |
1.39 |
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
As reported |
|
$ |
1.50 |
|
|
|
|
|
Pro forma |
|
$ |
1.33 |
|
|
|
|
|
NOTE 16 EMPLOYEE BENEFIT PLANS
Employees of the Company who are members of various unions are covered by
union-sponsored, collectively bargained, multi-employer health and welfare and defined
benefit pension plans. The Company recorded an expense of $194 million in 2007, $189
million in 2006 and $161 million in 2005 under such plans. The plans sponsors have not
provided sufficient information to permit the Company to determine its share of unfunded
vested benefits, if any.
The Company is self-insured for most health care benefits for its non-union
employees. The liability for claims filed and estimates of claims incurred but not
reported $25 million and $24 million at December 31, 2007 and 2006, respectively
is included in Other accrued liabilities in the accompanying consolidated balance
sheets.
The Company has retirement savings plans under Section 401(k) of the Internal
Revenue Code for eligible employees. The plans allow employees to defer, within
prescribed limits, up to 30% of their income on a pre-tax basis through contributions to
the plans. The Company matches, within prescribed limits, a portion of eligible
employees contributions. In the case of certain union employees, the Company
contributions to the plan are based on hours worked. The Company recorded charges for
401(k) contributions of $27 million in 2007, $27 million in 2006 and $19 million in
2005.
The Company maintains a nonqualified deferred retirement plan for certain key
employees. The plan allows participants to defer, on a pre-tax basis, a portion of their
salary and bonus and accumulate tax deferred earnings, plus investment earnings on the
deferred balances, as a retirement fund. Participants receive a Company match of up to
4% of salary, net of any Company match received under the Companys 401(k) plan. All
employee deferrals vest immediately. The Company matching contributions vest ratably
over a three-year period. The Company recorded charges for matching contributions of $1
million in 2007, and $2 million in 2006 and 2005.
The Company implemented a supplemental executive retirement plan (SERP) for
certain key employees effective January 1, 2001. The SERP is a nonqualified plan under
which the Company makes quarterly contributions which are intended to provide a
retirement benefit that is a fixed percentage of a participants estimated final
five-year average annual salary, up to a maximum of 65%. Company contributions and
investment earnings on the contributions are tax-deferred and accumulate as a retirement
fund. Employees do not make contributions under this plan. A portion of the Company
contributions and investment earnings thereon vests after three years of SERP
participation and the remaining portion vests after both five years of SERP
participation and 10 years of continuous service. The Company recorded expense under
this plan of $7 million in 2007, $7 million in 2006 and $6 million in 2005.
63
NOTE 17 PROPERTY TRANSACTIONS, NET
Property transactions, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Write-downs and impairments |
|
$ |
33,624 |
|
|
$ |
40,865 |
|
|
$ |
28,622 |
|
Demolition costs |
|
|
5,665 |
|
|
|
348 |
|
|
|
5,362 |
|
Insurance recoveries |
|
|
(217,290 |
) |
|
|
(86,016 |
) |
|
|
|
|
Other net losses on asset sales or disposals |
|
|
(8,312 |
) |
|
|
3,823 |
|
|
|
3,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(186,313 |
) |
|
$ |
(40,980 |
) |
|
$ |
37,021 |
|
|
|
|
|
|
|
|
|
|
|
Write-downs and impairments in 2007 included write-offs related to discontinued
construction projects and a write-off of the carrying value of the building assets of
Nevada Landing which closed in March 2007. The 2007 periods also include demolition
costs related to ongoing projects at the Companys resorts.
Write-downs and impairments in 2006 included $22 million related to the write-off
of the tram connecting Bellagio and Monte Carlo, including the stations at both resorts,
in preparation for construction of CityCenter. Other impairments related to assets
being replaced in connection with several smaller capital projects, primarily at MGM
Grand Las Vegas, Mandalay Bay and The Mirage, as well as the $4 million write-off of
Luxors investment in the Hairspray show.
Write-downs and impairments in 2005 related primarily to assets removed from
service in connection with new capital projects at several resorts, including Bellagio,
TI, The Mirage and Mandalay Bay. The amount of the impairments was based on the net
book value of the disposed assets. Demolition costs related primarily to room remodel
activity at MGM Grand Las Vegas and the new showroom at The Mirage.
Insurance recoveries in 2007 and 2006 related to insurance recoveries received
related to property damage from Hurricane Katrina in excess of the book value of the
damaged assets and post-storm costs incurred.
NOTE 18 RELATED PARTY TRANSACTIONS
The Company and CityCenter have entered into agreements whereby the Company will be
responsible for oversight and management of the design, planning, development and
construction of CityCenter and will manage the operations of CityCenter once complete.
The Company will be reimbursed for certain costs in performing the development services
and will receive additional consideration of up to $100 million if the project is
completed on time and actual development costs, net of residential proceeds, are within
specified parameters. Upon completion of construction, the Company will manage
CityCenter for a fee.
During the period from inception of the joint venture to December 31, 2007, the
Company incurred $5 million of costs reimbursable by the joint venture, primarily
employee compensation and certain allocated costs. As of December 31, 2007, CityCenter
owes the Company $9 million for unreimbursed development services costs, which includes
liabilities assumed at the close of the transaction. Also as of December 31, 2007, the
Company owes CityCenter $22 million related to a post-closing adjustment to the
agreed-upon value of CityCenter.
Borgata leases 10 acres from the Company on a long-term basis for use in its
current operations and for its expansion, and nine acres from the Company on a
short-term basis for surface parking. Total payments received from Borgata under these
lease agreements were $6 million in each of the years ended December 31, 2007 and 2006,
and $4 million in the year ended December 31, 2005.
The Company pays legal fees to a firm affiliated with the Companys general
counsel. Payments to the firm totaled $11 million, $8 million, and $13 million for the
years ended December 31, 2007, 2006, and 2005, respectively. At December 31, 2007, the
Company owed the firm $3 million.
The Company has occasionally chartered aircraft from its majority shareholder,
Tracinda, and pays Tracinda at market rates. No payments were made to Tracinda in 2007.
Payments to Tracinda for the use of its aircraft totaled $2 million for the year ended
December 31, 2006. Amounts in 2005 were not material.
Members
of the Companys Board of Directors, senior management, and
Tracinda signed contracts
in 2006 and 2007 for the purchase of condominium units at CityCenter,
at prices consistent with prices charged to unrelated third parties,
when CityCenter was a
wholly-owned development. The Company collected $6 million of deposits related to such
purchases in 2007; amounts collected in 2006 were not material.
Prior to the Mandalay merger the Company made payments to Monte Carlo for lost
business as a result of closing the tram between Bellagio and Monte Carlo in preparation
for the Bellagio expansion. These payments totaled $1 million in 2005.
64
NOTE 19 CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The Companys subsidiaries (excluding MGM Grand Detroit, LLC and certain minor
subsidiaries) have fully and unconditionally guaranteed, on a joint and several basis,
payment of the senior credit facility, and the senior and senior subordinated notes of
the Company and its subsidiaries. Separate condensed financial statement information
for the subsidiary guarantors and non-guarantors as of December 31, 2007 and 2006 and
for the years ended December 31, 2007, 2006 and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
81,379 |
|
|
$ |
1,033,407 |
|
|
$ |
60,600 |
|
|
$ |
|
|
|
$ |
1,175,386 |
|
Property and equipment, net |
|
|
|
|
|
|
16,044,642 |
|
|
|
791,034 |
|
|
|
(11,972 |
) |
|
|
16,823,704 |
|
Investments in subsidiaries |
|
|
19,169,892 |
|
|
|
484,047 |
|
|
|
|
|
|
|
(19,653,939 |
) |
|
|
|
|
Investments in unconsolidated affiliates |
|
|
|
|
|
|
2,224,429 |
|
|
|
258,298 |
|
|
|
|
|
|
|
2,482,727 |
|
Other non-current assets |
|
|
244,857 |
|
|
|
1,890,308 |
|
|
|
110,704 |
|
|
|
|
|
|
|
2,245,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,496,128 |
|
|
$ |
21,676,833 |
|
|
$ |
1,220,636 |
|
|
$ |
(19,665,911 |
) |
|
$ |
22,727,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
459,968 |
|
|
$ |
1,217,506 |
|
|
$ |
47,213 |
|
|
$ |
|
|
|
$ |
1,724,687 |
|
Intercompany accounts |
|
|
125,094 |
|
|
|
(396,080 |
) |
|
|
270,986 |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
3,416,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,416,660 |
|
Long-term debt |
|
|
9,347,527 |
|
|
|
1,467,152 |
|
|
|
360,550 |
|
|
|
|
|
|
|
11,175,229 |
|
Other long-term obligations |
|
|
86,176 |
|
|
|
209,554 |
|
|
|
54,677 |
|
|
|
|
|
|
|
350,407 |
|
Stockholders equity |
|
|
6,060,703 |
|
|
|
19,178,701 |
|
|
|
487,210 |
|
|
|
(19,665,911 |
) |
|
|
6,060,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,496,128 |
|
|
$ |
21,676,833 |
|
|
$ |
1,220,636 |
|
|
$ |
(19,665,911 |
) |
|
$ |
22,727,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2007 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Statement of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
|
|
|
$ |
7,204,278 |
|
|
$ |
487,359 |
|
|
$ |
|
|
|
$ |
7,691,637 |
|
Equity in subsidiaries earnings |
|
|
2,982,008 |
|
|
|
34,814 |
|
|
|
|
|
|
|
(3,016,822 |
) |
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
14,514 |
|
|
|
3,850,182 |
|
|
|
274,451 |
|
|
|
|
|
|
|
4,139,147 |
|
General and administrative |
|
|
11,455 |
|
|
|
1,055,644 |
|
|
|
73,264 |
|
|
|
|
|
|
|
1,140,363 |
|
Corporate expense |
|
|
35,534 |
|
|
|
158,359 |
|
|
|
|
|
|
|
|
|
|
|
193,893 |
|
Preopening and start-up expenses |
|
|
731 |
|
|
|
28,264 |
|
|
|
63,110 |
|
|
|
|
|
|
|
92,105 |
|
Property transactions, net |
|
|
|
|
|
|
(186,313 |
) |
|
|
|
|
|
|
|
|
|
|
(186,313 |
) |
Gain on CityCenter transaction |
|
|
|
|
|
|
(1,029,660 |
) |
|
|
|
|
|
|
|
|
|
|
(1,029,660 |
) |
Depreciation and amortization |
|
|
1,497 |
|
|
|
667,015 |
|
|
|
31,822 |
|
|
|
|
|
|
|
700,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,731 |
|
|
|
4,543,491 |
|
|
|
442,647 |
|
|
|
|
|
|
|
5,049,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates |
|
|
|
|
|
|
222,162 |
|
|
|
|
|
|
|
|
|
|
|
222,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
2,918,277 |
|
|
|
2,917,763 |
|
|
|
44,712 |
|
|
|
(3,016,822 |
) |
|
|
2,863,930 |
|
Interest income (expense), net |
|
|
(599,178 |
) |
|
|
(86,473 |
) |
|
|
(5,482 |
) |
|
|
|
|
|
|
(691,133 |
) |
Other, net |
|
|
575 |
|
|
|
(14,890 |
) |
|
|
(54 |
) |
|
|
|
|
|
|
(14,369 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before
income taxes |
|
|
2,319,674 |
|
|
|
2,816,400 |
|
|
|
39,176 |
|
|
|
(3,016,822 |
) |
|
|
2,158,428 |
|
Provision for income taxes |
|
|
(731,456 |
) |
|
|
(22,065 |
) |
|
|
(4,362 |
) |
|
|
|
|
|
|
(757,883 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
1,588,218 |
|
|
|
2,794,335 |
|
|
|
34,814 |
|
|
|
(3,016,822 |
) |
|
|
1,400,545 |
|
Discontinued operations |
|
|
(3,799 |
) |
|
|
187,673 |
|
|
|
|
|
|
|
|
|
|
|
183,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,584,419 |
|
|
$ |
2,982,008 |
|
|
$ |
34,814 |
|
|
$ |
(3,016,822 |
) |
|
$ |
1,584,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
(1,098,889 |
) |
|
$ |
2,008,888 |
|
|
$ |
84,417 |
|
|
$ |
|
|
|
$ |
994,416 |
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
621,727 |
|
|
|
(407,745 |
) |
|
|
(4,681 |
) |
|
|
209,301 |
|
Net cash provided by (used in) financing activities |
|
|
1,108,286 |
|
|
|
(2,675,119 |
) |
|
|
321,615 |
|
|
|
4,681 |
|
|
|
(1,240,537 |
) |
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
95,361 |
|
|
$ |
1,369,711 |
|
|
$ |
49,679 |
|
|
$ |
|
|
|
$ |
1,514,751 |
|
Real estate under development |
|
|
|
|
|
|
188,433 |
|
|
|
|
|
|
|
|
|
|
|
188,433 |
|
Property and equipment, net |
|
|
|
|
|
|
16,797,263 |
|
|
|
456,569 |
|
|
|
(11,972 |
) |
|
|
17,241,860 |
|
Investments in subsidiaries |
|
|
16,563,917 |
|
|
|
300,560 |
|
|
|
|
|
|
|
(16,864,477 |
) |
|
|
|
|
Investments in unconsolidated affiliates |
|
|
|
|
|
|
792,106 |
|
|
|
300,151 |
|
|
|
|
|
|
|
1,092,257 |
|
Other non-current assets |
|
|
94,188 |
|
|
|
1,911,362 |
|
|
|
103,387 |
|
|
|
|
|
|
|
2,108,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
16,753,466 |
|
|
$ |
21,359,435 |
|
|
$ |
909,786 |
|
|
$ |
(16,876,449 |
) |
|
$ |
22,146,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
227,743 |
|
|
$ |
1,364,472 |
|
|
$ |
55,885 |
|
|
$ |
|
|
|
$ |
1,648,100 |
|
Intercompany accounts |
|
|
(1,478,207 |
) |
|
|
1,339,654 |
|
|
|
138,553 |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
3,441,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,441,157 |
|
Long-term debt |
|
|
10,712,047 |
|
|
|
2,173,972 |
|
|
|
108,850 |
|
|
|
|
|
|
|
12,994,869 |
|
Other long-term obligations |
|
|
1,177 |
|
|
|
161,458 |
|
|
|
49,928 |
|
|
|
|
|
|
|
212,563 |
|
Stockholders equity |
|
|
3,849,549 |
|
|
|
16,319,879 |
|
|
|
556,570 |
|
|
|
(16,876,449 |
) |
|
|
3,849,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
16,753,466 |
|
|
$ |
21,359,435 |
|
|
$ |
909,786 |
|
|
$ |
(16,876,449 |
) |
|
$ |
22,146,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2006 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Statement of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
|
|
|
$ |
6,714,659 |
|
|
$ |
461,297 |
|
|
$ |
|
|
|
$ |
7,175,956 |
|
Equity in subsidiaries earnings |
|
|
1,777,144 |
|
|
|
167,262 |
|
|
|
|
|
|
|
(1,944,406 |
) |
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
19,251 |
|
|
|
3,543,026 |
|
|
|
251,109 |
|
|
|
|
|
|
|
3,813,386 |
|
General and administrative |
|
|
20,713 |
|
|
|
993,732 |
|
|
|
56,497 |
|
|
|
|
|
|
|
1,070,942 |
|
Corporate expense |
|
|
40,151 |
|
|
|
121,356 |
|
|
|
|
|
|
|
|
|
|
|
161,507 |
|
Preopening and start-up expenses |
|
|
523 |
|
|
|
32,526 |
|
|
|
3,313 |
|
|
|
|
|
|
|
36,362 |
|
Restructuring costs |
|
|
|
|
|
|
1,035 |
|
|
|
|
|
|
|
|
|
|
|
1,035 |
|
Property transactions, net |
|
|
10,872 |
|
|
|
(51,853 |
) |
|
|
1 |
|
|
|
|
|
|
|
(40,980 |
) |
Depreciation and amortization |
|
|
2,398 |
|
|
|
611,045 |
|
|
|
16,184 |
|
|
|
|
|
|
|
629,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,908 |
|
|
|
5,250,867 |
|
|
|
327,104 |
|
|
|
|
|
|
|
5,671,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates |
|
|
|
|
|
|
218,063 |
|
|
|
36,108 |
|
|
|
|
|
|
|
254,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
1,683,236 |
|
|
|
1,849,117 |
|
|
|
170,301 |
|
|
|
(1,944,406 |
) |
|
|
1,758,248 |
|
Interest
income (expense), net |
|
|
(708,902 |
) |
|
|
(40,407 |
) |
|
|
140 |
|
|
|
|
|
|
|
(749,169 |
) |
Other, net |
|
|
(1,978 |
) |
|
|
(29,962 |
) |
|
|
787 |
|
|
|
|
|
|
|
(31,153 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before
income taxes |
|
|
972,356 |
|
|
|
1,778,748 |
|
|
|
171,228 |
|
|
|
(1,944,406 |
) |
|
|
977,926 |
|
Provision for income taxes |
|
|
(312,288 |
) |
|
|
(25,676 |
) |
|
|
(3,966 |
) |
|
|
|
|
|
|
(341,930 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
660,068 |
|
|
|
1,753,072 |
|
|
|
167,262 |
|
|
|
(1,944,406 |
) |
|
|
635,996 |
|
Discontinued operations |
|
|
(11,804 |
) |
|
|
24,072 |
|
|
|
|
|
|
|
|
|
|
|
12,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
648,264 |
|
|
$ |
1,777,144 |
|
|
$ |
167,262 |
|
|
$ |
(1,944,406 |
) |
|
$ |
648,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
(896,346 |
) |
|
$ |
1,974,375 |
|
|
$ |
153,923 |
|
|
$ |
|
|
|
$ |
1,231,952 |
|
Net cash provided by (used in) investing activities |
|
|
5,300 |
|
|
|
(1,359,878 |
) |
|
|
(283,241 |
) |
|
|
(4,608 |
) |
|
|
(1,642,427 |
) |
Net cash provided by (used in) financing activities |
|
|
874,485 |
|
|
|
(503,801 |
) |
|
|
134,732 |
|
|
|
4,608 |
|
|
|
510,024 |
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2005 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Statement of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
|
|
|
$ |
5,687,750 |
|
|
$ |
441,093 |
|
|
$ |
|
|
|
$ |
6,128,843 |
|
Equity in subsidiaries earnings |
|
|
1,228,651 |
|
|
|
152,107 |
|
|
|
|
|
|
|
(1,380,758 |
) |
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
|
|
|
|
3,082,987 |
|
|
|
233,883 |
|
|
|
|
|
|
|
3,316,870 |
|
General and administrative |
|
|
|
|
|
|
834,166 |
|
|
|
55,640 |
|
|
|
|
|
|
|
889,806 |
|
Corporate expense |
|
|
13,797 |
|
|
|
116,836 |
|
|
|
|
|
|
|
|
|
|
|
130,633 |
|
Preopening and start-up expenses |
|
|
|
|
|
|
15,249 |
|
|
|
503 |
|
|
|
|
|
|
|
15,752 |
|
Restructuring costs (credit) |
|
|
|
|
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
(59 |
) |
Property transactions, net |
|
|
|
|
|
|
36,587 |
|
|
|
434 |
|
|
|
|
|
|
|
37,021 |
|
Depreciation and amortization |
|
|
2,390 |
|
|
|
531,586 |
|
|
|
26,650 |
|
|
|
|
|
|
|
560,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,187 |
|
|
|
4,617,352 |
|
|
|
317,110 |
|
|
|
|
|
|
|
4,950,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates |
|
|
|
|
|
|
120,330 |
|
|
|
31,541 |
|
|
|
|
|
|
|
151,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
1,212,464 |
|
|
|
1,342,835 |
|
|
|
155,524 |
|
|
|
(1,380,758 |
) |
|
|
1,330,065 |
|
Interest
income (expense), net |
|
|
(517,617 |
) |
|
|
(112,506 |
) |
|
|
1,402 |
|
|
|
|
|
|
|
(628,721 |
) |
Other, net |
|
|
(14,293 |
) |
|
|
(20,005 |
) |
|
|
39 |
|
|
|
|
|
|
|
(34,259 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
680,554 |
|
|
|
1,210,324 |
|
|
|
156,965 |
|
|
|
(1,380,758 |
) |
|
|
667,085 |
|
Provision for income taxes |
|
|
(227,374 |
) |
|
|
|
|
|
|
(4,345 |
) |
|
|
|
|
|
|
(231,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
453,180 |
|
|
|
1,210,324 |
|
|
|
152,620 |
|
|
|
(1,380,758 |
) |
|
|
435,366 |
|
Discontinued operations |
|
|
(9,924 |
) |
|
|
17,814 |
|
|
|
|
|
|
|
|
|
|
|
7,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
443,256 |
|
|
$ |
1,228,138 |
|
|
$ |
152,620 |
|
|
$ |
(1,380,758 |
) |
|
$ |
443,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
(449,590 |
) |
|
$ |
1,471,372 |
|
|
$ |
161,014 |
|
|
$ |
|
|
|
$ |
1,182,796 |
|
Net cash provided by (used in) investing activities |
|
|
(4,587,820 |
) |
|
|
(618,007 |
) |
|
|
(93,687 |
) |
|
|
(3,303 |
) |
|
|
(5,302,817 |
) |
Net cash provided by (used in) financing activities |
|
|
5,043,152 |
|
|
|
(732,145 |
) |
|
|
(251,484 |
) |
|
|
3,303 |
|
|
|
4,062,826 |
|
67
NOTE 20 SELECTED QUARTERLY FINANCIAL RESULTS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
Total |
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
1,929,435 |
|
|
$ |
1,936,416 |
|
|
$ |
1,897,070 |
|
|
$ |
1,928,716 |
|
|
$ |
7,691,637 |
|
Operating income |
|
|
445,133 |
|
|
|
468,973 |
|
|
|
464,613 |
|
|
|
1,485,211 |
|
|
|
2,863,930 |
|
Income from continuing operations |
|
|
163,010 |
|
|
|
182,898 |
|
|
|
183,863 |
|
|
|
870,774 |
|
|
|
1,400,545 |
|
Net income |
|
|
168,173 |
|
|
|
360,172 |
|
|
|
183,863 |
|
|
|
872,211 |
|
|
|
1,584,419 |
|
Basic income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.57 |
|
|
$ |
0.64 |
|
|
$ |
0.65 |
|
|
$ |
2.96 |
|
|
$ |
4.88 |
|
Net income |
|
|
0.59 |
|
|
|
1.27 |
|
|
|
0.65 |
|
|
|
2.96 |
|
|
|
5.52 |
|
Diluted income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.55 |
|
|
$ |
0.62 |
|
|
$ |
0.62 |
|
|
$ |
2.85 |
|
|
$ |
4.70 |
|
Net income |
|
|
0.57 |
|
|
|
1.22 |
|
|
|
0.62 |
|
|
|
2.85 |
|
|
|
5.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
1,774,368 |
|
|
$ |
1,760,508 |
|
|
$ |
1,795,042 |
|
|
$ |
1,846,038 |
|
|
$ |
7,175,956 |
|
Operating income |
|
|
413,353 |
|
|
|
417,422 |
|
|
|
419,397 |
|
|
|
508,076 |
|
|
|
1,758,248 |
|
Income from continuing operations |
|
|
139,762 |
|
|
|
143,341 |
|
|
|
153,765 |
|
|
|
199,128 |
|
|
|
635,996 |
|
Net income |
|
|
144,037 |
|
|
|
146,394 |
|
|
|
156,262 |
|
|
|
201,571 |
|
|
|
648,264 |
|
Basic income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.49 |
|
|
$ |
0.50 |
|
|
$ |
0.55 |
|
|
$ |
0.70 |
|
|
$ |
2.25 |
|
Net income |
|
|
0.51 |
|
|
|
0.51 |
|
|
|
0.55 |
|
|
|
0.71 |
|
|
|
2.29 |
|
Diluted income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.48 |
|
|
$ |
0.49 |
|
|
$ |
0.53 |
|
|
$ |
0.68 |
|
|
$ |
2.18 |
|
Net income |
|
|
0.49 |
|
|
|
0.50 |
|
|
|
0.54 |
|
|
|
0.69 |
|
|
|
2.22 |
|
Because income per share amounts are calculated using the weighted average number
of common and dilutive common equivalent shares outstanding during each quarter, the sum
of the per share amounts for the four quarters may not equal the total income per share
amounts for the year.
As discussed in Note 5, the Company recorded a $1.03 billion pre-tax gain on the
contribution of the CityCenter assets to a joint venture. The gain was recorded in the
fourth quarter of 2007, and resulted in a $2.23 impact on fourth quarter 2007 diluted
earnings per share and a $2.28 impact on full year 2007 diluted earnings per share.
As discussed in Note 1, Beau Rivage closed in August 2005 due to damage sustained
from Hurricane Katrina and re-opened one year later. During 2007, we recorded pre-tax
income from insurance recoveries of $284 million with an annual impact on diluted earnings
per share of $0.62. We recorded $135 million in the third quarter of 2007 and $149
million in the fourth quarter of 2007, with corresponding impacts on diluted earnings per
share of $0.30 and $0.32, respectively. In the fourth quarter of 2006, we recorded
pre-tax income from insurance recoveries of $86 million, with an impact on diluted
earnings per share of $0.19 for both the fourth quarter and full year of 2006.
NOTE 21 SUBSEQUENT EVENTS
Tender
offer. In February 2008, the Company and a wholly-owned
subsidiary of Dubai World completed a joint
tender offer to purchase 15 million shares of Company common stock at a price of $80 per
share. The Company purchased 8.5 million shares at a total purchase price of $680
million.
Monte Carlo fire. On January 25, 2008, a roof-top fire broke out at the Monte Carlo
causing the closing of the resort. The Monte Carlo reopened on February 15, 2008 with
approximately 1,200 rooms and has opened, or will soon open, an additional 1,200 rooms.
The remaining approximately 600 rooms in Monte Carlos normal 3,000 room inventory will
remain out of service while undergoing more extensive redesign. The Company maintains
property damage and business interruption insurance coverage, with a property damage
deductible of $1 million and business interruption deductible equivalent to a 24-hour
period of lost profit. The Company is currently evaluating the financial statement impact
of the fire.
68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MGM MIRAGE
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ J. Terrence Lanni
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Terrence Lanni, Chairman and Chief Executive Officer |
|
|
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Daniel J. DArrigo |
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. DArrigo, Executive Vice President and Chief Financial Officer |
|
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Robert C. Selwood |
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert C. Selwood, Executive Vice President and Chief Accounting Officer |
|
|
|
|
|
|
(Principal Accounting Officer) |
|
|
Dated: February 29, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
|
Chairman and Chief Executive Officer
|
|
February 29, 2008 |
J. Terrence Lanni
|
|
and Chairman of the Board |
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
President, Chief Operating Officer
|
|
February 29, 2008 |
James J. Murren
|
|
and Director |
|
|
|
|
|
|
|
|
|
Chief Construction and
|
|
February 29, 2008 |
Robert H. Baldwin
|
|
Design Officer and Director |
|
|
|
|
|
|
|
|
|
Executive Vice President, General
|
|
February 29, 2008 |
Gary N. Jacobs
|
|
Counsel, Secretary and Director |
|
|
69