e10vk
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
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For the fiscal year ended
December 31, 2008
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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For the transition
period to
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Commission File
No. 001-10362
MGM MIRAGE
(Exact name of Registrant as
specified in its charter)
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DELAWARE
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88-0215232
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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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
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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
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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
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Smaller
reporting
company o
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(Do not check if a smaller
reporting company)
Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the
Act): Yes o No þ
The aggregate market value of the Registrants Common Stock
held by non-affiliates of the Registrant as of June 30,
2008 (based on the closing price on the New York Stock Exchange
Composite Tape on June 30, 2008) was
$4.2 billion. As of March 9, 2009,
276,557,345 shares of Registrants Common Stock,
$.01 par value, were outstanding.
Portions of the Registrants definitive Proxy Statement for
its 2009 Annual Meeting of Stockholders are incorporated by
reference into Part III of this
Form 10-K.
TABLE OF CONTENTS
PART I
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.
Liquidity
and Financial Position
For discussion of our liquidity and financial position, please
see Managements Discussion and Analysis of Financial
Condition and Results of Operations Executive
Overview Liquidity and Financial Position and
Note 2 to the accompanying consolidated financial
statements.
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.
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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. 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, 2008. 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
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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)
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Las Vegas Strip, Nevada
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Bellagio
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3,933
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160,000
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2,320
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151
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MGM Grand Las Vegas(3)
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6,264
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158,000
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2,455
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167
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Mandalay Bay(4)
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4,752
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160,000
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1,962
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117
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The Mirage
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3,044
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118,000
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1,966
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106
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Luxor
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4,405
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100,000
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1,443
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85
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Excalibur
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3,981
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91,000
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1,532
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67
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Treasure Island (TI)(5)
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2,885
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87,000
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1,620
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65
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New York-New York
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2,025
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84,000
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1,724
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70
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Monte Carlo
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3,002
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102,000
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1,556
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63
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Circus Circus Las Vegas(6)
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3,764
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126,000
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1,986
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90
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Subtotal
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38,055
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1,186,000
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18,564
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981
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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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1,091
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35
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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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1,623
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64
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Gold Strike (Jean)
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810
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37,000
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688
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Railroad Pass (Henderson)
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120
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13,000
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332
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5
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Other Operations
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MGM Grand Detroit (Detroit, Michigan)
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400
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196,000
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4,102
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95
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Beau Rivage (Biloxi, Mississippi)
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1,740
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75,000
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2,050
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93
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Gold Strike (Tunica, Mississippi)
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1,133
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50,000
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1,381
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58
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MGM Grand Macau 50% owned (Macau S.A.R.)
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593
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215,000
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829
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376
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Borgata 50% owned (Atlantic City, New Jersey)
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2,771
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160,000
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3,931
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182
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Grand Victoria 50% owned (Elgin, Illinois)
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35,000
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1,144
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30
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Grand Total
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48,904
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2,124,000
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35,735
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1,928
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(1) |
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Includes slot machines, video poker machines and other
electronic gaming devices. |
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(2) |
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Includes blackjack (21), baccarat, craps, roulette
and other table games; does not include poker. |
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(3) |
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Includes 1,220 rooms available for rent as of December 31,
2008 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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In December 2008 we entered into an agreement to sell TI; the
sale is expected to close no later than March 31, 2009. |
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(6) |
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Includes
Slots-A-Fun. |
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. We have made significant
investments in our resorts over the past few years, we do not
expect to reinvest significantly in our resorts in 2009 or 2010.
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
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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.
Capital additions have not had the same impact on profitability
due to the severe downturn in economic conditions in general and
the impact on tourism and travel spending
specifically see Managements Discussion
and Analysis. For instance, we invested in new amenities
and remodeled the standard rooms at Mandalay Bay in 2007, but
operating income did not rise appreciably in 2008. However, we
believe these improvements, and improvements at other resorts
such as Luxor and New York-New York, still increase our relative
market position during times where we and our competitors are
trying to draw from a smaller customer base. In addition, we
believe such investments will allow us to earn an
above market return when economic conditions improve.
We also actively manage 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.
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.
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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 primarily own and operate 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.
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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.
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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 141,000 guestrooms in Las Vegas at
December 31, 2008, up 6% from approximately 133,000 rooms
at December 31, 2007. Las Vegas visitor volume was
37.5 million in 2008, a decrease of 4% from the
39.2 million reported for 2007.
The principal segments of the Las Vegas gaming market are
leisure travel; premium gaming customers; conventions, including
small meetings, trade associations, 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
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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 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. 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. 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 various leadership and management training
programs, are
best-in-class
among our industry peers.
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
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resorts operate with International Game Technologys
EZ-Paytm
cashless gaming system. We believe that this system enhances the
customer experience and increases the revenue potential of our
slot machines.
Technology is an important 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 has enhanced our guest service and improved our yield
management capabilities 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 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.
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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.
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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. We believe there
are reasonable investments for us to make in new initiatives
that will provide returns in excess of the other options, though
the pace and extent of such investments have been impacted by
the current state of credit markets.
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 own 50% of CityCenter, currently under development on a
67-acre site
on the Las Vegas Strip, between Bellagio and Monte Carlo.
Infinity World Development Corp. (Infinity World), a
wholly-owned subsidiary of Dubai World, a Dubai, United Arab
Emirates government decree entity, owns the other 50% of
CityCenter. 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 2.1 million square
feet of residential space in approximately 2,400 luxury
condominium and condominium-hotel units in multiple towers.
CityCenter is expected to open in late 2009, except CityCenter
postponed the opening of The Harmon Hotel & Spa until
late 2010 and cancelled the development of approximately 200
residential units originally planned. We are serving as the
developer of CityCenter and, 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 14 acres in the Marina District near
Renaissance Pointe.
In October 2007, we announced plans for a multi-billion dollar
resort complex on our
72-acre site
in Atlantic City. Since making that announcement, we have made
extensive progress in design and other pre-development
activities. However, current economic conditions, including
limited access to capital markets for projects of this scale,
have caused us to reassess timing for this project. Accordingly,
we have postponed current development activities.
Kerzner/Istithmar
Joint Venture
In September 2007, we 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
7
Boulevard and Sahara Avenue. In September 2008, we and our
partners agreed to defer additional design and pre-construction
activities and amended our joint venture agreement accordingly.
In the event the joint venture partners agree that the resort
will be developed, we will contribute 40 acres of land, at
an agreed value of $20 million per acre, for fifty percent
of the equity in the joint venture. Kerzner International and
Istithmar will contribute cash totaling $600 million, of
which $200 million will be distributed to us, for the other
50% of the equity.
Risks
Associated With Our Growth Strategy
The principal risk factors relating to our growth strategy are:
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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;
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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.
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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 and MGM Grand
at Foxwoods, and the recently announced MGM Grand Abu Dhabi 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 development 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 hired senior
personnel with established backgrounds in the development and
management of international hospitality operations to maximize
the profit potential of Hospitalitys operations. In 2008,
Hospitality announced the formation of MGM MIRAGE Global Gaming
Development, a new subsidiary principally focused on
international gaming expansion.
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
We 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
consulted with MPTN in the development of a new
$700 million casino resort adjacent to the existing
Foxwoods casino resort. The new resort utilizes the MGM
Grand brand name and opened in May 2008. We and MPTN have
also formed a jointly owned company Unity Gaming,
LLC to acquire or develop future gaming and
non-gaming enterprises.
8
China
We have formed a joint venture with the Diaoyutai State
Guesthouse in Beijing, Peoples Republic of China, to
develop luxury non-gaming hotels and resorts globally, initially
targeting prime locations, including Beijing, in the
Peoples Republic of China.
Vietnam
In November 2008, we and Asian Coast Development
Ltd. announced plans to develop MGM Grand Ho
Tram, which is expected to open in 2011. MGM Grand Ho Tram will
anchor a multi-property complex on the Ho Tram Strip in the Ba
Ria Vung Tau Province in southwest Vietnam. MGM Grand Ho Tram
will be owned and financed by Asian Coast Development Ltd. and
we will provide development assistance and operate the five-star
integrated resort upon completion.
Risks
Associated With Our Brand and Management Strategy
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, 2008, we had approximately
46,000 full-time and 15,000 part-time employees. At
that date, we had collective bargaining contracts with unions
covering approximately 30,000 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, not including MGM Grand
Las Vegas. The collective bargaining agreement covering
approximately 4,000 employees at MGM Grand Las Vegas
expired in 2008. We have signed an extension of such agreement
and are currently negotiating a new agreement. 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.
9
Forward-Looking
Statements
(Cautionary Statements Under the Private Securities Litigation
Reform Act of 1995)
This
Form 10-K
and our 2008 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 2008 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.
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, 2009,
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
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James J. Murren
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Chairman, Chief Executive Officer, President and Director
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Robert H. Baldwin
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58
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Chief Design and Construction Officer and Director
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Gary N. Jacobs
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63
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Executive Vice President, General Counsel, Secretary and Director
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Aldo Manzini
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45
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Executive Vice President and Chief Administrative Officer
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Daniel J. DArrigo
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40
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Executive Vice President and Chief Financial Officer
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Robert C. Selwood
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53
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Executive Vice President and Chief Accounting Officer
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Alan Feldman
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50
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Senior Vice President Public Affairs
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Phyllis A. James
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56
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Senior Vice President and Senior Counsel
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Punam Mathur
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48
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Senior Vice President Corporate Diversity and
Community Affairs
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John McManus
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41
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Senior Vice President, Assistant General Counsel and Assistant
Secretary
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Shawn T. Sani
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43
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Senior Vice President Taxes
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Cathryn Santoro
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40
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Senior Vice President and Treasurer
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Mr. Murren has served as Chairman and Chief Executive
Officer of the Company since December 2008 and as President
since December 1999. He has served 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 Glaser, Weil, Fink, Jacobs, & Shapiro, LLP.
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 President Finance of the Company from
February 2005 to August 2007 and as Vice President
Finance 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 President Accounting of the Company from
February 2005 to August 2007 and as Vice President
Accounting of the Company from December 2000 to February 2005.
Mr. Feldman has served as Senior Vice President
Public Affairs of the Company since September 2001. He served as
Vice President Public Affairs of the Company from
June 2000 to September 2001.
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 President
Corporate Diversity and Community Affairs of the Company since
May 2004. She served as Vice President Corporate
Diversity and Community Affairs of the Company from December
2001 to May 2004. She served as Vice President
Community Affairs of the Company from November 2000 to December
2001.
Mr. McManus has served as Senior Vice President, Assistant
General Counsel and Assistant Secretary of the Company since
July 2008. He served as Vice President and General Counsel for
CityCenters residential and retail divisions from January
2006 to July 2008. Prior thereto, he served as General Counsel
or Assistant General Counsel for various of the Companys
operating subsidiaries from May 2001 to January 2006.
Mr. Sani has served as Senior Vice President
Taxes of the Company since July 2005. He served as Vice
President Taxes 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.
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.,
11
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.
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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Our substantial indebtedness and significant financial
commitments could adversely affect our operations and financial
results and impact our ability to satisfy our
obligations. As of December 31, 2008, we had
approximately $13.5 billion of indebtedness. In late
February 2009, we borrowed $842 million under our senior
credit facility, which amount represented after
giving effect to $93 million in outstanding letters of
credit the total amount of unused borrowing capacity
available under our $7.0 billion senior credit facility. In
connection with the waiver and amendment described below, on
March 17, 2009 we repaid $300 million under the senior
credit facility, which amount is not available for reborrowing
without the consent of the lenders. We have no other existing
sources of borrowing availability, except to the extent we pay
down further amounts outstanding under the senior credit
facility.
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As of December 31, 2008, we had approximately
$2.8 billion of financial commitments and estimated capital
expenditures in 2009, excluding commitments under employment,
entertainment and other operational agreements. Furthermore, the
interest rate applicable to our borrowings under the senior
credit facility is based on variable reference rates and our
leverage ratio. Any increase in the interest rates applicable to
our existing or future borrowings would increase the cost of our
indebtedness and reduce the cash flow available to fund our
other liquidity needs. Our substantial indebtedness and
significant financial commitments could have important negative
consequences, including:
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increasing our exposure to general adverse economic and industry
conditions;
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limiting our flexibility in planning for, or reacting to,
changes in our business and industry;
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limiting our ability to borrow additional funds; and
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placing us at a competitive disadvantage compared to other less
leveraged competitors.
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Our senior credit facility contains financial covenants, and
we do not expect to be in compliance with such financial
covenants in 2009. While we were in compliance
with the financial covenants under our senior credit facility at
December 31, 2008, if the recent adverse conditions in the
economy in general and the gaming industry in
particular continue, we believe that we will not be
in compliance with those financial covenants during 2009. In
fact, given these conditions and the recent borrowing under the
senior credit facility, we do not expect to be in compliance
with those financial covenants at March 31, 2009. As a
result, on March 17, 2009 we obtained from the lenders
under the senior credit facility a waiver of the requirement
that we comply with such financial covenants through
May 15, 2009. Additionally, we entered into an amendment of
our senior credit facility which provides for, among other
terms, the following:
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We agreed to repay $300 million of the outstanding
borrowings under the senior credit facility, which amount is not
available for reborrowing without the consent of the lenders;
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We are prohibited from prepaying or repurchasing our outstanding
long-term debt or disposing of material assets; and other
restrictive covenants were added that limit our ability to make
investments and incur indebtedness;
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The interest rate on outstanding borrowings under the senior
credit facility was increased by 100 basis points; and
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Our required equity contributions in CityCenter are limited
through May 15, 2009 such that we can only make
contributions if Infinity World makes its required
contributions; our equity contributions do not exceed specified
amounts (though we believe the limitation is in excess of the
amounts expected to be required through May 15, 2009); and
the CityCenter senior secured credit facility has not been
accelerated.
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Following expiration of the waiver on May 15, 2009, we will
be subject to an event of default related to the expected
noncompliance with financial covenants under the senior credit
facility at March 31, 2009. We intend to work with our
lenders to obtain additional waivers or amendments prior to
May 15, 2009 to address future noncompliance with the
senior credit facility; however, we can provide no assurance
that we will be able to secure such waivers or amendments. The
lenders holding at least a majority of the principal amount
under our senior credit facility could, among other actions,
accelerate the obligation to repay borrowings under our senior
credit facility in such an event of default. As a result of such
event of default, under certain circumstances, cross defaults
could occur under our indentures and the CityCenter
$1.8 billion senior secured credit facility, which could
accelerate the obligation to repay amounts outstanding under
such indentures and the CityCenter credit facility and could
result in termination of the unfunded commitments under the
CityCenter credit facility. If the lenders exercise any or all
such rights, we or CityCenter may determine to seek relief
through a filing under the U.S. Bankruptcy Code.
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There is substantial doubt about our ability to continue as a
going concern. The uncertainties described above
regarding 1) our ability to meet our financial commitments,
and 2) our potential noncompliance with financial covenants
under our senior credit facility, raise a substantial doubt
about our ability to continue as a going concern. The
accompanying consolidated financial statements do not include
any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classifications of liabilities that may result should we be
unable to continue as a going concern. As a result, the report
of our independent registered public accounting firm on our
consolidated financial statements for the year ended
December 31, 2008 contains an explanatory paragraph with
respect to our ability to continue as a going concern. We can
provide no assurance that we will be able to secure a waiver or
amendment related to potential noncompliance under our senior
credit facility or be able to address our 2009 financial
commitments in such a way as to be able to continue as a going
concern.
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Current economic conditions adversely impact our ability to
service or refinance our indebtedness and to make planned
expenditures. Our ability to make payments on,
and to refinance, our indebtedness and to fund planned or
committed capital expenditures and investments in joint
ventures, such as CityCenter, depends on our ability to generate
cash flow in the future and our ability to borrow under our
senior credit facility to the extent of available borrowings. If
adverse regional and national economic conditions persist,
worsen, or fail to improve significantly, we could experience
decreased revenues from our operations attributable to decreases
in consumer spending levels and could fail to generate
sufficient cash to fund our liquidity needs or fail to satisfy
the financial and other restrictive covenants which we are
subject to under our indebtedness. We cannot provide assurance
that our business will generate sufficient cash flow from
operations or that future borrowings will be available to us
under our senior credit facility in an amount sufficient to
enable us to pay our indebtedness or to fund our other liquidity
needs.
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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 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 has
increased, particularly in California, competition has increased.
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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 is likely
to cause a reduction in visitation to our resorts, which would
adversely affect our operating results.
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For example, the downturn in consumer spending and economic
conditions that existed in 2008, and is expected to continue in
2009, has had a negative impact on our results of operations. In
addition, the weak housing and real estate market
both generally and in Nevada particularly has
negatively impacted CityCenters ability to sell
residential units.
|
|
|
|
|
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.
|
|
|
|
We are a large consumer of electricity and other
energy. Accordingly, increases in energy costs,
such as those experienced in 2007 and 2008, 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.
|
|
|
|
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.
We cannot control the number or frequency of flights into or out
of Las Vegas, but we rely on air traffic for a significant
portion or our visitors. Reductions in flights by major
airlines, such as those implemented in 2008 as a result of
higher fuel prices and lower demand, can impact the number of
visitors to our resorts. 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
also affect the number of customers who visit our facilities.
|
|
|
|
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. These events 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.
|
14
|
|
|
|
|
Our City Center joint venture involves significant
risks. The development and ultimate operation of
CityCenter is subject to unique risk given the scope of the
development and financing requirements placed on us and our
partner, Infinity World. If we or our partner are unable to meet
our funding requirements or if City Centers
$1.8 billion senior secured credit facility is
terminated for instance, due to cross defaults at
the partner level then this could cause the
development of CityCenter to be delayed or suspended
indefinitely. Such an event could have adverse financial
consequences to us.
|
|
|
|
Our joint venture in Macau S.A.R. involves significant
risks. The operation of MGM Grand Macau, 50%
owned by us, is 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.
|
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, such as foreign economy, adverse
tax consequences, and inability to adequately enforce our
rights. These may also include regulatory and political risks,
such as foreign government regulations, general geopolitical
risks such as political and economic instability, hostilities
with neighboring counties, and changes in diplomatic and trade
relationships.
|
|
|
|
|
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.
|
|
|
|
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. Please see the further discussion in
Item 3. Legal Proceedings.
|
|
|
|
Tracinda Corporation beneficially owned approximately 54% of
our outstanding common stock as of December 31,
2008. 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.
|
|
|
|
A significant portion of our labor force is covered by
collective bargaining agreements. Approximately
30,000 of our 61,000 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. The collective bargaining
agreement covering approximately 4,000 employees at MGM
Grand Las Vegas expired in 2008. We have signed an extension of
such agreement and are currently negotiating a new agreement.
|
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
None.
15
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.
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
Name and Location
|
|
Acres
|
|
Notes
|
|
Las Vegas, Nevada operations:
|
|
|
|
|
|
|
Bellagio
|
|
|
76
|
|
|
Two acres of the site are subject to two ground leases that
expire (giving effect to our renewal options) in 2019 and 2073.
|
MGM Grand Las Vegas
|
|
|
102
|
|
|
|
Mandalay Bay
|
|
|
100
|
|
|
|
The Mirage
|
|
|
102
|
|
|
Site is shared with TI. Approximately 21 acres will be
transferred upon the close of the TI sale.
|
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.
|
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 2066.
|
Fallen Oak Golf Course,
|
|
|
|
|
|
|
Saucier, Mississippi
|
|
|
508
|
|
|
|
Gold Strike, Tunica, Mississippi
|
|
|
24
|
|
|
|
Other land:
|
|
|
|
|
|
|
CityCenter Support Services
|
|
|
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.
|
North Las Vegas, Nevada
|
|
|
66
|
|
|
Located adjacent to Shadow Creek.
|
Henderson, Nevada
|
|
|
47
|
|
|
Adjacent to Railroad Pass.
|
Jean, Nevada
|
|
|
116
|
|
|
Located adjacent to, and across I-15 from, Gold Strike.
|
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
|
|
|
152
|
|
|
Approximately 19 acres are leased to Borgata including nine
acres under a short-term lease. Of the remaining land,
approximately 74 acres are suitable for development.
|
16
The land underlying New York-New York, along with substantially
all the assets of that resort, serve as collateral for our
13% Senior Secured Notes due 2013 issued in 2008.
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, 2008,
$741 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, 2008, approximately $818 million was
outstanding under the bank credit facility. At December 31,
2008, MGM Grand Paradise Limited obtained a waiver of its
financial covenants 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, 2008, $160 million
of principal of the 10.125% mortgage notes were outstanding.
CityCenter occupies approximately 67 acres of land between
Bellagio and Monte Carlo. The site is used as collateral for
CityCenters bank credit facility. As of December 31,
2008, there is $1.0 billion outstanding under the
CityCenter bank credit facility, though such borrowings are held
as restricted cash by the venture.
All of the borrowings by our unconsolidated affiliates described
above are non-recourse to MGM MIRAGE. Other than as described
above, none of our other assets serve as collateral.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
Mandalay
Bay Ticket Processing Fee Litigation
On July 14, 2008, the Company was served with a putative
class action lawsuit filed in Los Angeles Superior Court in
California (Jeff Feld v. Mandalay Corp. d/b/a Mandalay
Bay Resort & Casino). The action purports to be
brought pursuant to Californias Consumer Legal Remedies
Act on behalf of all California residents who during the
previous six years purchased event tickets from our subsidiary,
paid a separate processing fee in addition to the ticket price,
and did not receive or received inaccurate notice of the
processing fee when they purchased the ticket. The plaintiff
alleges that our subsidiary advertised event tickets at a
specified price and then charged purchasers undisclosed
additional fees, specifically a $5 processing fee, and that the
foregoing was unlawful, a breach of contract, an unfair business
practice, and a violation of Californias Civil Code and
Business & Professions Code. The plaintiff was seeking
unspecified monetary damages including restitution, injunctive
relief, attorneys fees and costs. In February 2009,
Mandalay Bay reached a satisfactory settlement with the
individual plaintiff in this action. The settlement and
dismissal of the action against Mandalay Bay and the Company are
subject to court approval. No class has been certified 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 2008.
17
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
First quarter
|
|
$
|
84.92
|
|
|
$
|
57.26
|
|
|
$
|
75.28
|
|
|
$
|
56.40
|
|
Second quarter
|
|
|
62.90
|
|
|
|
33.00
|
|
|
|
87.38
|
|
|
|
61.17
|
|
Third quarter
|
|
|
38.49
|
|
|
|
21.65
|
|
|
|
91.15
|
|
|
|
63.33
|
|
Fourth quarter
|
|
|
27.70
|
|
|
|
8.00
|
|
|
|
100.50
|
|
|
|
80.50
|
|
There were approximately 4,198 record holders of our common
stock as of March 9, 2009.
We have not paid dividends on our common stock in the last two
fiscal years. 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.
Furthermore, 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. We did not repurchase shares of our common stock
during the quarter ended December 31, 2008. The maximum
number of shares available for repurchase under our May 2008
repurchase program was 20 million as of December 31,
2008.
Equity
Compensation Plan Information
The following table includes information about our equity
compensation plans at December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
26,264
|
|
|
$
|
26.98
|
|
|
|
17,648
|
|
18
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share data)
|
|
|
Net revenues
|
|
$
|
7,208,767
|
|
|
$
|
7,691,637
|
|
|
$
|
7,175,956
|
|
|
$
|
6,128,843
|
|
|
$
|
4,001,804
|
|
Operating income (loss)
|
|
|
(129,603
|
)
|
|
|
2,863,930
|
|
|
|
1,758,248
|
|
|
|
1,330,065
|
|
|
|
932,613
|
|
Income (loss) from continuing operations
|
|
|
(855,286
|
)
|
|
|
1,400,545
|
|
|
|
635,996
|
|
|
|
435,366
|
|
|
|
345,209
|
|
Net income (loss)
|
|
|
(855,286
|
)
|
|
|
1,584,419
|
|
|
|
648,264
|
|
|
|
443,256
|
|
|
|
412,332
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(3.06
|
)
|
|
$
|
4.88
|
|
|
$
|
2.25
|
|
|
$
|
1.53
|
|
|
$
|
1.24
|
|
Net income (loss) per share
|
|
|
(3.06
|
)
|
|
|
5.52
|
|
|
|
2.29
|
|
|
|
1.56
|
|
|
|
1.48
|
|
Weighted average number of shares
|
|
|
279,815
|
|
|
|
286,809
|
|
|
|
283,140
|
|
|
|
284,943
|
|
|
|
279,325
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(3.06
|
)
|
|
$
|
4.70
|
|
|
$
|
2.18
|
|
|
$
|
1.47
|
|
|
$
|
1.19
|
|
Net income (loss) per share
|
|
|
(3.06
|
)
|
|
|
5.31
|
|
|
|
2.22
|
|
|
|
1.50
|
|
|
|
1.43
|
|
Weighted average number of shares
|
|
|
279,815
|
|
|
|
298,284
|
|
|
|
291,747
|
|
|
|
296,334
|
|
|
|
289,333
|
|
At year-end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
23,274,716
|
|
|
$
|
22,727,686
|
|
|
$
|
22,146,238
|
|
|
$
|
20,699,420
|
|
|
$
|
11,115,029
|
|
Total debt, including capital leases
|
|
|
13,470,618
|
|
|
|
11,182,003
|
|
|
|
12,997,927
|
|
|
|
12,358,829
|
|
|
|
5,463,619
|
|
Stockholders equity
|
|
|
3,974,361
|
|
|
|
6,060,703
|
|
|
|
3,849,549
|
|
|
|
3,235,072
|
|
|
|
2,771,704
|
|
Stockholders equity per share
|
|
$
|
14.37
|
|
|
$
|
20.63
|
|
|
$
|
13.56
|
|
|
$
|
11.35
|
|
|
$
|
9.87
|
|
Number of shares outstanding
|
|
|
276,507
|
|
|
|
293,769
|
|
|
|
283,909
|
|
|
|
285,070
|
|
|
|
280,740
|
|
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 sold the Primm Valley Resorts.
|
|
|
In June 2007, we sold 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, 2008, 2007 and 2006,
incremental expense, before tax, resulting from the adoption of
SFAS 123(R) was $36 million, $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.
|
|
|
During 2008, we recognized $19 million of pre-tax income
for insurance recoveries related to the Monte Carlo fire.
|
|
|
In the fourth quarter of 2008, we recognized a $1.2 billion
non-cash impairment charge related to goodwill and
indefinite-lived intangible assets recognized in the Mandalay
acquisition.
|
19
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Executive
Overview
Liquidity
and Financial Position
We have significant indebtedness and significant financial
commitments in 2009. As of December 31, 2008, we had
approximately $13.5 billion of total long-term debt. In
late February 2009, we borrowed $842 million under our
senior credit facility, which amount represented
after giving effect to $93 million in outstanding letters
of credit the total amount of unused borrowing
capacity available under our $7.0 billion senior credit
facility In connection with the waiver and amendment described
below, on March 17, 2009 we repaid $300 million under
the senior credit facility, which amount is not available for
reborrowing without the consent of the lenders. We have no other
existing sources of borrowing availability, except to the extent
we pay down further amounts outstanding under the senior credit
facility.
In addition to commitments under employment, entertainment and
other operational agreements, our financial commitments and
estimated capital expenditures in 2009, as of December 31,
2008, totaled approximately $2.8 billion see
Liquidity and Capital Resources Commitments
and Contractual Obligations and consisted of:
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Contractual maturities of long-term debt totaling approximately
$1.0 billion;
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Interest payments on long-term debt, estimated at
$0.8 billion;
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CityCenter required equity contributions of approximately
$0.7 billion;
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Other commitments of approximately $0.3 billion, including
$0.2 billion of estimated capital expenditures;
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To fund our anticipated 2009 financial commitments, we have the
following sources of funds in 2009:
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Available borrowings under our senior credit facility of
$1.2 billion as of December 31, 2008;
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Expected proceeds in 2009 from the sale of TI of approximately
$0.6 billion;
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Operating cash flow: Our current expectations for
2009 indicate that operating cash flow will be lower than in
2008. In 2008, we generated approximately $1.8 billion of
cash flow from operations before deducting a) cash paid for
interest, which commitments are included in the list above, and
b) the tax payment on the 2007 CityCenter transaction.
|
We are uncertain as to whether the sources listed above will be
sufficient to fund our 2009 financial commitments and we cannot
provide any assurances that we will be able to raise additional
capital to fund our anticipated expenditures in 2009 if the
sources listed above are not adequate.
While we were in compliance with the financial covenants under
our senior credit facility at December 31, 2008, if the
recent adverse conditions in the economy in general
and the gaming industry in particular continue, we
believe that we will not be in compliance with those financial
covenants during 2009. In fact, given these conditions and the
recent borrowing under the senior credit facility, we do not
believe we will be in compliance with those financial covenants
at March 31, 2009. As a result, on March 17, 2009 we
obtained from the lenders under the senior credit facility a
waiver of the requirement that we comply with such financial
covenants through May 15, 2009. Additionally, we entered
into an amendment of our senior credit facility which provides
for, among other terms, the following:
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We agreed to repay $300 million of the outstanding
borrowings under the senior credit facility, which amount is not
available for reborrowing without the consent of the lenders;
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We are prohibited from prepaying or repurchasing our outstanding
long-term debt or disposing of material assets; and other
restrictive covenants were added that limit our ability to make
investments and incur indebtedness;
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The interest rate on outstanding borrowings under the senior
credit facility was increased by 100 basis points; and
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Our required equity contributions in CityCenter are limited
through May 15, 2009 such that we can only make
contributions if Infinity World makes its required
contributions; our equity contributions do not exceed
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20
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specified amounts (though we believe the limitation is in excess
of the amounts expected to be required through May 15,
2009); and the CityCenter senior secured credit facility has not
been accelerated.
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Following expiration of the waiver on May 15, 2009, we will
be subject to an event of default related to the expected
noncompliance with financial covenants under the senior credit
facility at March 31, 2009. Under the terms of the senior
credit facility, noncompliance with financial covenants is an
event of default, under which the lenders (with a vote of more
than 50% of the lenders) may exercise any or all of the
following remedies:
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Terminate their commitments to fund additional borrowings;
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Require cash collateral for outstanding letters of credit;
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Demand immediate repayment of all outstanding borrowings under
the senior credit facility: and
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Decline to release subsidiary guarantees which would impact our
ability to execute asset dispositions.
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In addition, there are provisions in certain of the indentures
governing our senior and senior subordinated notes under which
a) the event of default under the senior secured credit
facility, or b) the remedies under an event of default
under the senior credit facility, would cause an event of
default under the relevant senior and senior subordinated notes,
which would also allow holders of our senior and senior
subordinated notes to demand immediate repayment and decline to
release subsidiary guarantees. Also, under the terms of the
CityCenter senior secured credit facility, if an event of
default has occurred under our borrowings and a) such event
of default is certified to in writing by the relevant lenders,
and b) such default allows the relevant lenders to demand
immediate repayment, then an event of default has occurred
relative to the CityCenter senior secured credit facility. Under
such event of default, one of the remedies is the termination of
the CityCenter senior secured credit facility. If the lenders
exercise any or all such rights, we or CityCenter may determine
to seek relief through a filing under the U.S. Bankruptcy
Code.
The conditions and events described above raise a substantial
doubt about our ability to continue as a going concern. The
accompanying consolidated financial statements do not include
any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classifications of liabilities that may result should we be
unable to continue as a going concern.
We intend to work with the lenders to obtain additional waivers
or amendments prior to May 15, 2009 to address future
noncompliance with our senior credit facility; however, we can
provide no assurance that we will be able to secure such waivers
or amendments.
We have also retained the services of outside advisors to assist
us in instituting and implementing any required programs to
accomplish managements objectives. We are evaluating the
possibility of a) disposing of certain assets,
b) raising additional debt
and/or
equity capital, and c) modifying or extending our long-term
debt. However, there can be no assurance that we will be
successful in achieving our objectives.
Current
Operations
At December 31, 2008, our operations consisted of 17
wholly-owned casino resorts and 50% investments in four other
casino resorts, including:
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Las Vegas, Nevada:
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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.
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Other:
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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).
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Other operations include the Shadow Creek golf course in North
Las Vegas; the Primm Valley Golf Club at the California state
line; and Fallen Oak golf course in Saucier, Mississippi. In
December 2008, we entered into an agreement to sell TI for
$775 million; the sale is expected to close by
June 30, 2009.
21
We own 50% of CityCenter, currently under development on a
67-acre site
on the Las Vegas Strip, between Bellagio and Monte Carlo.
Infinity World Development Corp. (Infinity World), a
wholly-owned subsidiary of Dubai World, a Dubai, United Arab
Emirates government decree entity, owns the other 50% of
CityCenter. 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 2.1 million square
feet of residential space in approximately 2,400 luxury
condominium and condominium-hotel units in multiple towers.
CityCenter is expected to open in late 2009, except CityCenter
postponed the opening of The Harmon Hotel & Spa until
late 2010 and cancelled the development of approximately 200
residential units originally planned. We are serving as the
developer of CityCenter and, upon completion of construction, we
will manage CityCenter for a fee.
Key
Performance Indicators
Our primary business is 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 above
market prices 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 have
continually reinvested in our 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:
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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;
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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.
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Most of our revenue is essentially cash-based, through customers
wagering with cash or paying for non-gaming services with cash
or credit cards. Our resorts, 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.
22
Impact of
Current Economic Conditions and Credit Markets on Results of
Operations
The current state of the United States economy has negatively
impacted our results of operations during 2008 and we expect
these impacts to continue in 2009. The decrease in liquidity in
the credit markets which began in late 2007 and accelerated in
late 2008 has significantly impacted our Company.
We believe recent economic conditions and our customers
inability to access near-term credit has led to a shift in
spending from discretionary items to fundamental costs like
housing, as witnessed in broader indications of consumer
behavior such as the declining sales trends in automobile and
other retail sales and other discretionary spending in sectors
like restaurants. We believe these factors have impacted our
customers willingness to plan vacations and conventions
and their level of spending while at our resorts. Other
conditions currently or recently present in the economic
environment are conditions which tend to negatively impact our
results, such as:
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Weak housing market and significant declines in housing prices
and related home equity;
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Higher oil and gas prices which impact travel costs;
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Weaknesses in employment and increases in unemployment;
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Decreases in air capacity to Las Vegas; and
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Decreases in equity market value, which impacted many of our
customers.
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See Goodwill Impairment and Operating
Results Detailed Revenue Information for
specific impacts of these conditions on our results of
operations. Beyond the impact on our operating results, these
factors have led to a significant decrease in equity market
value in general and in our market capitalization specifically.
Given the uncertainty in the economy and the unprecedented
nature of the situation with the financial and credit markets,
forecasting future results has become very difficult. In
addition, leading indicators such as forward room bookings are
difficult to assess, as our booking window has shortened
significantly due to consumer uncertainty. Businesses and
consumers appear to have altered their spending patterns which
may lead to further decreases in visitor volumes and customer
spending including convention and conference customers
cancelling or postponing their events.
Because of these economic conditions, we have increasingly
focused on managing costs. For example, we have reduced our
salaried management positions; we did not pay discretionary
bonuses in 2008 due to not meeting our internal profit targets;
we suspended Company contributions to certain nonqualified
deferred compensation plans; and we have been managing staffing
levels across all our resorts. For the full year of 2008, the
average number of full-time equivalents at our resorts decreased
7%. We continue to review costs at the corporate and operating
levels to identify further opportunities for cost reductions.
Additionally, our results of operations are impacted by
decisions we make related to our capital allocation, our access
to capital, and our cost of capital; all of which are impacted
by the uncertain state of the global economy and the continued
instability in the capital markets. For example:
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We postponed development on MGM Grand Atlantic City and our
joint venture with Kerzner and Istithmar for a Las Vegas Strip
project;
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We have significantly reduced our estimated capital expenditures
for 2009;
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We entered into an agreement in December 2008 to sell TI for
$775 million;
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The ability of CityCenter to obtain project financing was
negatively impacted by credit market conditions, leading to a
longer process than anticipated, with more funding from the
venture partners required than anticipated;
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In connection with the September 2008 amendment to our bank
credit facility to increase the maximum leverage covenant, we
will incur higher interest costs;
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Our recent senior secured notes offering was completed at a
higher interest rate than our existing fixed-rate indebtedness;
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As discussed above, in February 2009, we borrowed
$842 million, the remaining amount of available funds
(other than outstanding letters of credit) under our senior
credit facility, which will increase our interest costs;
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23
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In February 2009, all of the major credit rating
agencies Moodys, Standard & Poors,
and Fitch downgraded the rating on our long-term
debt and in March 2009, Moodys downgraded our rating
again. These rating downgrades may make it more difficult to
obtain debt financing or may increase the cost of our future
debt financing; and
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Based on our current financial situation, we may be required to
alter our working capital management practices to, for instance,
post cash collateral for purchases or pay vendors on different
terms than we have in the past.
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Goodwill
Impairment
With respect to our goodwill and indefinite-lived intangible
assets, we performed our annual test during the fourth quarter
of 2008. As a result of this analysis, we recognized a non-cash
impairment charge of $1.18 billion related to goodwill and
certain indefinite-lived intangible assets in the fourth
quarter. The impairment charge relates solely to the goodwill
and other indefinite-lived intangible assets recognized in the
2005 acquisition of Mandalay Resort Group, and represents
substantially all of the goodwill recognized at the time of the
Mandalay acquisition and a minor portion of the value of trade
names related to the Mandalay resorts. The impairment charge
resulted from factors impacted by current economic conditions,
including: 1) lower market valuation multiples for gaming
assets; 2) higher discount rates resulting from turmoil in
the credit and equity markets; and 3) current cash flow
forecasts for the Mandalay resorts.
Other
Items Affecting Future Operating Results
Our Las Vegas Strip resorts require ongoing capital investment
to maintain their competitive advantages. We believe the
investments we have made in the past several years in additional
non-gaming amenities relative to our competitors enhances our
ability to maintain visitor volume and allows us to charge
higher prices for our amenities relative to our competitors. In
2008, we completed many improvements at our Las Vegas strip
resorts, including:
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A remodel of approximately 2,700 standard rooms at The Mirage,
approximately 2,700 standard rooms at TI, approximately 1,100
rooms at Gold Strike Tunica, and approximately 900 rooms at
Excalibur.
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A new Cirque du Soleil production show, Believe featuring
Criss Angel, at Luxor.
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New restaurants and bars such as BLT Burger at The Mirage,
RokVegas at New York-New York, Brand Steakhouse at Monte Carlo,
and Yellowtail at Bellagio.
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A complete re-design and refurbishment of the casino floor at
New York-New York.
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In addition, the following items are relevant to our overall
outlook:
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In August 2007, we entered into a new five-year collective
bargaining agreement covering approximately 21,000 of our Las
Vegas Strip employees. The new agreement provides for increases
in wages and benefits of approximately 4% annually. This does
not include the collective bargaining agreement covering
employees at MGM Grand Las Vegas, which expired in 2008. A new
agreement for MGM Grand Las Vegas is currently being negotiated.
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%.
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We expect to recognize a substantial gain from the sale of TI
during 2009.
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Financial
Statement Impact of Hurricane Katrina and the Monte Carlo
Fire
We maintain insurance covering both property damage and business
interruption relating to catastrophic events, such as Hurricane
Katrina affecting Beau Rivage in August 2005 and the rooftop
fire at Monte Carlo in January 2008. Business interruption
coverage covered lost profits and other costs incurred during
the construction period and up to six months following the
reopening 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-event costs are recognized as income
in the period received or committed based on our estimate of the
total claim for property damage (recorded as Property
transactions, net) and business interruption (recorded as
a reduction of General and administrative expenses)
compared to the recoveries received at that time. All post-event
costs and expected recoveries are recorded net within
General and administrative expenses, except for
depreciation of non-damaged assets, which is classified as
Depreciation and amortization.
24
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. We classify insurance
recoveries as being related to property damage until the full
amount of damaged assets and demolition costs are recovered, and
classify additional recoveries up to the amount of post-event
costs incurred as being related to business interruption.
Insurance recoveries beyond that amount are classified as
operating or investing cash flows based on our estimated
allocation of the total claim.
Hurricane Katrina. By 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. 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.
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 related to Hurricane Katrina, of which
$210 million was classified as investing cash flows and
$99 million was classified as operating cash flows.
Monte Carlo. As of December 31, 2008, we
had received $50 million of proceeds from our insurance
carriers related to the Monte Carlo fire and recognized
$19 million of insurance recoveries in income, of which
$10 million was recorded within Property
transactions, net and $9 million was recorded within
General and administrative expenses. Also, in 2008,
we recorded a write-down of $4 million related to the net
book value of damaged assets, demolition costs of
$7 million, and operating costs of $21 million related
to the fire.
Results
of Operations
Summary
Financial Results
The following table summarizes our financial results:
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Year Ended December 31,
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Percentage
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Percentage
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2008
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Change
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2007
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Change
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2006
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(In thousands, except per share data)
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Net revenues
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$
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7,208,767
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(6)%
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$
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7,691,637
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7%
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$
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7,175,956
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Operating expenses:
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Casino and hotel operations
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4,034,374
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0%
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4,027,558
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8%
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3,715,057
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General and administrative
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1,278,501
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2%
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1,251,952
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7%
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1,169,271
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Corporate expense
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109,279
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(44)%
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193,893
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20%
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161,507
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Preopening and restructuring
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23,502
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(74)%
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92,105
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146%
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37,397
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Property transactions, net
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1,210,749
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NM
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(186,313
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)
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NM
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(40,980
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)
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CityCenter gain
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NM
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(1,029,660
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)
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NM
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Depreciation and amortization
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778,236
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11%
|
|
|
700,334
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11%
|
|
|
629,627
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|
|
|
|
|
|
|
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|
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|
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7,434,641
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47%
|
|
|
5,049,869
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(11)%
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|
|
5,671,879
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Income from unconsolidated affiliates
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96,271
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(57)%
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|
|
222,162
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(13)%
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|
|
254,171
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|
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|
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|
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Operating income (loss)
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$
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(129,603
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)
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(104)%
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|
$
|
2,863,930
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63%
|
|
$
|
1,758,248
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|
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|
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|
|
|
|
|
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Income (loss) from continuing operations
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$
|
(855,286
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)
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(161)%
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$
|
1,400,545
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|
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120%
|
|
$
|
635,996
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|
Net income (loss)
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|
|
(855,286
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)
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(154)%
|
|
|
1,584,419
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144%
|
|
|
648,264
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Diluted income (loss) from continuing operations per share
|
|
$
|
(3.06
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)
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(165)%
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|
$
|
4.70
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|
|
116%
|
|
$
|
2.18
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|
Diluted net income (loss) per share
|
|
|
(3.06
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)
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|
(158)%
|
|
|
5.31
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|
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139%
|
|
|
2.22
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25
On a consolidated basis, the most significant events and trends
contributing to our performance over the last three years have
been:
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The economic factors discussed in Impact of Current
Economic Conditions and Credit Markets on Results of
Operations.
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The rooftop fire at Monte Carlo in January 2008, which caused
the closure of the resort for several weeks and reduced the
number of rooms available at Monte Carlo for the remainder of
2008.
|
|
|
|
Recognition of a $1.2 billion impairment charge in the
fourth quarter of 2008 related to goodwill and indefinite-lived
intangible assets recognized in the Mandalay acquisition in
2005. This non-cash charge is recorded in Property
transactions, net in the accompanying consolidated
statement of operations.
|
|
|
|
Recognition of a $1.03 billion gain in 2007 related to the
contribution of the CityCenter assets to a joint venture.
|
|
|
|
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
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
operations.
|
|
|
|
Recognition of an $88 million pre-tax gain on the
repurchase of certain of our outstanding senior notes and
redemption of our 7% debentures in the fourth quarter of
2008, which was recorded within Other, net in the
accompanying consolidated statement of operations.
|
Net revenues decreased 6% in 2008 compared to 2007 due to the
market conditions described above. On a comparable basis,
operating income decreased 30% in 2008 compared to 2007,
excluding the goodwill and indefinite-lived intangible
impairment charge, the CityCenter gain, insurance recoveries,
property transactions, preopening and
start-up
expenses, and profits from The Signature. Our operating margin
decreased to 15% from 22% in the prior year on a comparable
basis. The 44% decrease in corporate expense in 2008 was mainly
attributable to cost reduction efforts implemented throughout
the year, including the elimination of annual bonuses due to not
meeting internal profit targets. Also, corporate expense in the
prior year included severance costs, costs associated with our
CityCenter joint venture transaction, and development costs
associated with our planned MGM Grand Atlantic City project.
Depreciation and amortization expense increased 11% in 2008 on
top of an 11% increase in 2007 due to the significant capital
investments in our resorts over the past few years.
Excluding Beau Rivage, net revenues in 2007 increased 4% over
2006, largely due to strength in hotel room rates and other
non-gaming revenues. Operating income in 2007 compared to 2006
decreased 5% on a comparable basis, excluding the CityCenter
gain, Hurricane Katrina insurance recoveries, operations at Beau
Rivage, profits from The Signature at MGM Grand, preopening and
start-up
expenses, and property transactions. The decrease in operating
income in 2007 on a comparable basis mainly related to higher
depreciation and amortization expense and higher corporate
expense.
26
Operating
Results Detailed Revenue Information
The following table presents detail of our net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
Percentage
|
|
|
|
|
|
2008
|
|
|
Change
|
|
2007
|
|
|
Change
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Casino revenue, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games
|
|
$
|
1,078,897
|
|
|
(12)%
|
|
$
|
1,228,296
|
|
|
(2)%
|
|
$
|
1,251,304
|
|
Slots
|
|
|
1,795,226
|
|
|
(5)%
|
|
|
1,897,610
|
|
|
7%
|
|
|
1,770,176
|
|
Other
|
|
|
101,557
|
|
|
(10)%
|
|
|
113,148
|
|
|
4%
|
|
|
108,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino revenue, net
|
|
|
2,975,680
|
|
|
(8)%
|
|
|
3,239,054
|
|
|
3%
|
|
|
3,130,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
|
1,907,093
|
|
|
(10)%
|
|
|
2,130,542
|
|
|
7%
|
|
|
1,991,477
|
|
Food and beverage
|
|
|
1,582,367
|
|
|
(4)%
|
|
|
1,651,655
|
|
|
11%
|
|
|
1,483,914
|
|
Entertainment, retail and other
|
|
|
1,419,055
|
|
|
3%
|
|
|
1,376,417
|
|
|
16%
|
|
|
1,190,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue
|
|
|
4,908,515
|
|
|
(5)%
|
|
|
5,158,614
|
|
|
11%
|
|
|
4,666,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,884,195
|
|
|
(6)%
|
|
|
8,397,668
|
|
|
8%
|
|
|
7,796,733
|
|
Less: Promotional allowances
|
|
|
(675,428
|
)
|
|
(4)%
|
|
|
(706,031
|
)
|
|
14%
|
|
|
(620,777
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,208,767
|
|
|
(6)%
|
|
$
|
7,691,637
|
|
|
7%
|
|
$
|
7,175,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games revenue decreased 12% in 2008 mainly due to a
decrease in volumes. The table games hold percentage was near
the mid-point of the range for both years. In 2007, table games
revenue decreased 7% excluding Beau Rivage, with volumes
essentially flat and a slightly lower hold percentage in 2007.
Volume decreases mainly at our Las Vegas Strip resorts in 2008
led to a 5% decrease in slots revenue. Slots revenue at Bellagio
and Mandalay Bay decreased 4% while the majority of our other
Las Vegas Strip resorts experienced year-over-year decreases in
the low double digits. Slots revenue increased 7% at MGM Grand
Detroit and 5% at Gold Strike Tunica. In 2007, slots revenue was
flat, excluding Beau Rivage. Slots revenue was strong in 2007 at
many of our Las Vegas Strip Resorts, including Bellagio and MGM
Grand Las Vegas each up 8% over 2006 and
The Mirage and Mandalay Bay each up 5% over 2006.
Hotel revenue decreased 10% in 2008 due to decreased occupancy
and lower average room rates leading to a 10% decrease in
REVPAR. Average room rates decreased 7% at our Las Vegas Strip
resorts with a decrease in occupancy from 96% to 93%. In 2007,
hotel revenue increased 5% excluding Beau Rivage, with a 7%
increase in company-wide REVPAR. Strength in demand and room
pricing in 2007 on the Las Vegas Strip led to a 5% increase in
ADR.
Food and beverage, entertainment, and retail revenues in 2008
were all impacted by lower customer spending and decreased
occupancy at our resorts. In 2007, increases in food and
beverage revenue were a result of investments in new restaurants
and nightclubs. In 2008, entertainment revenues benefited from
the addition of Believe at Luxor. In 2007, entertainment
revenues benefited from Love, the Beatles-themed Cirque
du Soleil show at The Mirage, which opened July 2006. Other
revenues from continuing operations in 2008 increased 18% mainly
due to reimbursed cost from CityCenter recognized as other
revenue with corresponding amounts recognized as other expense.
Operating
Results Details of Certain Charges
Stock compensation expense is recorded within the department of
the recipient of the stock compensation award. The following
table shows the amount of compensation expense related to
employee stock-based awards:
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Casino
|
|
$
|
10,828
|
|
|
$
|
11,513
|
|
|
$
|
13,659
|
|
Other operating departments
|
|
|
3,344
|
|
|
|
3,180
|
|
|
|
5,319
|
|
General and administrative
|
|
|
9,485
|
|
|
|
12,143
|
|
|
|
20,937
|
|
Corporate expense and other
|
|
|
12,620
|
|
|
|
19,707
|
|
|
|
32,444
|
|
Discontinued operations
|
|
|
|
|
|
|
(865
|
)
|
|
|
1,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,277
|
|
|
$
|
45,678
|
|
|
$
|
73,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preopening and
start-up
expenses consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
CityCenter
|
|
$
|
17,270
|
|
|
$
|
24,169
|
|
|
$
|
9,429
|
|
MGM Grand Macau
|
|
|
|
|
|
|
36,853
|
|
|
|
5,057
|
|
MGM Grand Detroit
|
|
|
135
|
|
|
|
26,257
|
|
|
|
3,313
|
|
The Signature at MGM Grand
|
|
|
|
|
|
|
1,130
|
|
|
|
8,379
|
|
Other
|
|
|
5,654
|
|
|
|
3,696
|
|
|
|
10,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,059
|
|
|
$
|
92,105
|
|
|
$
|
36,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preopening and
start-up
expenses for CityCenter will continue to increase as the project
nears its expected completion in late 2009. Subsequent to the
CityCenter joint venture transaction in November 2007 we only
recognize our 50% share of these preopening costs. MGM Grand
Macau preopening and
start-up
expenses in 2007 and 2006 related to our share of that
ventures preopening costs.
Property transactions, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Goodwill and other indefinite-lived intangible assets impairment
charge
|
|
$
|
1,179,788
|
|
|
$
|
|
|
|
$
|
|
|
Other write-downs and impairments
|
|
|
52,170
|
|
|
|
33,624
|
|
|
|
40,865
|
|
Demolition costs
|
|
|
9,160
|
|
|
|
5,665
|
|
|
|
348
|
|
Insurance recoveries
|
|
|
(9,639
|
)
|
|
|
(217,290
|
)
|
|
|
(86,016
|
)
|
Other net (gains) losses on asset sales or disposals
|
|
|
(20,730
|
)
|
|
|
(8,312
|
)
|
|
|
3,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,210,749
|
|
|
$
|
(186,313
|
)
|
|
$
|
(40,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See discussion of goodwill and other indefinite-lived intangible
assets impairment charge and insurance recoveries in the
Executive overview section. Other write-downs and
impairments in 2008 included $30 million related to land
and building assets of Primm Valley Golf Club. The 2008 period
also includes demolition costs associated with various room
remodel projects and a gain on the sale of an aircraft of
$25 million. Insurance recoveries relate to the Monte Carlo
fire in 2008 and Hurricane Katrina in 2007 and 2006. See further
discussion in Executive Overview section.
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.
28
Non-operating
Results
The following table summarizes information related to interest
on our long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Total interest incurred
|
|
$
|
773,662
|
|
|
$
|
930,138
|
|
|
$
|
900,661
|
|
Interest capitalized
|
|
|
(164,376
|
)
|
|
|
(215,951
|
)
|
|
|
(122,140
|
)
|
Interest allocated to discontinued operations
|
|
|
|
|
|
|
(5,844
|
)
|
|
|
(18,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
609,286
|
|
|
$
|
708,343
|
|
|
$
|
760,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized
|
|
$
|
622,297
|
|
|
$
|
731,618
|
|
|
$
|
778,590
|
|
Weighted average total debt balance
|
|
$
|
12.8 billion
|
|
|
$
|
13.0 billion
|
|
|
$
|
12.7 billion
|
|
End-of-year ratio of fixed-to-floating debt
|
|
|
58/42
|
|
|
|
71/29
|
|
|
|
66/34
|
|
Weighted average interest rate
|
|
|
6.0%
|
|
|
|
7.1%
|
|
|
|
7.1%
|
|
In 2008, gross interest costs decreased compared to 2007 mainly
due to lower interest rates on our variable rate borrowings.
Capitalized interest decreased in 2008 due to less capitalized
interest related to CityCenter and cessation of capitalized
interest related to our investment in MGM Grand Macau upon
opening in November 2007. The amounts presented above exclude
non-cash gross interest and corresponding capitalized interest
related to our CityCenter delayed equity
contribution see Note 8 to the accompanying
consolidated financial statements for further discussion.
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 Infinity World
Investments, a wholly-owned subsidiary of Dubai World. Higher
capitalized interest in 2007 resulted from the ongoing
construction of CityCenter, MGM Grand Detroit, and MGM Grand
Macau.
The following table summarizes information related to our income
taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Income (loss) from continuing operations before income tax
|
|
$
|
(668,988
|
)
|
|
$
|
2,158,428
|
|
|
$
|
977,926
|
|
Income tax provision
|
|
|
186,298
|
|
|
|
757,883
|
|
|
|
341,930
|
|
Effective income tax rate
|
|
|
NM
|
|
|
|
35.1%
|
|
|
|
35.0%
|
|
Cash paid for income taxes
|
|
$
|
437,874
|
|
|
$
|
391,042
|
|
|
$
|
369,450
|
|
The write-down of goodwill in 2008, which is treated as a
permanently non-deductible item in our federal income tax
provision, caused us to incur a provision for income tax expense
even though our pre-tax result was a loss for the year.
Excluding the impact of the goodwill write-down, the effective
tax rate from continuing operations for 2008 was 37.3%. This is
higher than the 2007 rate due to the impact of the CityCenter
transaction on the 2007 rate, which greatly minimized the impact
of permanent and other tax items, and due to the deduction taken
in 2007 for domestic production activities resulting primarily
from the CityCenter transaction. 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.
Cash taxes were paid in 2008 despite the pre-tax operating loss
due to the non-deductible goodwill write-down and cash taxes
paid on the CityCenter gain in 2008. Since the CityCenter gain
was realized in the fourth quarter of 2007, the associated
income taxes were paid in 2008. Absent the cash taxes paid on
the CityCenter gain, cash taxes were approximately
$250 million less in 2008 than in 2007. In addition, cash
taxes for 2007 were only slightly higher than 2006 despite
significantly higher pre-tax income due to the deferral of taxes
on the CityCenter gain into 2008.
29
Liquidity
and Capital Resources
Cash
Flows Summary
Our cash flows consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Net cash provided by operating activities
|
|
$
|
753,032
|
|
|
$
|
994,416
|
|
|
$
|
1,231,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(781,754
|
)
|
|
|
(2,917,409
|
)
|
|
|
(1,758,795
|
)
|
Proceeds from contribution of CityCenter
|
|
|
|
|
|
|
2,468,652
|
|
|
|
|
|
Proceeds from disposals of discontinued operations, net
|
|
|
|
|
|
|
578,873
|
|
|
|
|
|
Purchase of convertible note
|
|
|
|
|
|
|
(160,000
|
)
|
|
|
|
|
Investments in and advances to unconsolidated affiliates
|
|
|
(1,279,462
|
)
|
|
|
(31,420
|
)
|
|
|
(103,288
|
)
|
Property damage insurance recoveries
|
|
|
21,109
|
|
|
|
207,289
|
|
|
|
209,963
|
|
Other
|
|
|
58,667
|
|
|
|
63,316
|
|
|
|
9,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(1,981,440
|
)
|
|
|
209,301
|
|
|
|
(1,642,427
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under bank credit facilities
|
|
|
2,480,450
|
|
|
|
(1,152,300
|
)
|
|
|
(393,150
|
)
|
Issuance of long-term debt
|
|
|
698,490
|
|
|
|
750,000
|
|
|
|
1,500,000
|
|
Repayment of long-term debt
|
|
|
(789,146
|
)
|
|
|
(1,402,233
|
)
|
|
|
(444,500
|
)
|
Issuance of common stock
|
|
|
|
|
|
|
1,192,758
|
|
|
|
|
|
Issuance of common stock upon exercise of stock awards
|
|
|
14,116
|
|
|
|
97,792
|
|
|
|
89,113
|
|
Purchases of common stock
|
|
|
(1,240,857
|
)
|
|
|
(826,765
|
)
|
|
|
(246,892
|
)
|
Other
|
|
|
(40,971
|
)
|
|
|
100,211
|
|
|
|
5,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,122,082
|
|
|
|
(1,240,537
|
)
|
|
|
510,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(106,326
|
)
|
|
$
|
(36,820
|
)
|
|
$
|
99,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 26% in
2008 partially due to a decrease in operating income. The 2008
period also included a significant tax payment, approximately
$300 million, relating to the 2007 CityCenter transaction.
Cash flow from operations decreased 19% in 2007 over 2006, due
in part to an additional $135 million of net cash outflows
related to real estate under development expenditures partially
offset by residential sales deposits when CityCenter was wholly
owned.
At December 31, 2008 and 2007, we held cash and cash
equivalents of $296 million and $416 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.
30
Cash
Flows Investing Activities
Capital expenditures consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions)
|
|
|
Development and expansion projects:
|
|
|
|
|
|
|
|
|
|
|
|
|
CityCenter
|
|
$
|
58
|
|
|
$
|
962
|
|
|
$
|
520
|
|
MGM Grand Detroit
|
|
|
19
|
|
|
|
336
|
|
|
|
262
|
|
Beau Rivage
|
|
|
|
|
|
|
63
|
|
|
|
446
|
|
Las Vegas Strip land
|
|
|
|
|
|
|
584
|
|
|
|
|
|
MGM Grand Atlantic City
|
|
|
24
|
|
|
|
|
|
|
|
|
|
Capitalized interest on development and expansion projects
|
|
|
43
|
|
|
|
191
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
2,136
|
|
|
|
1,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
Room remodel projects
|
|
|
230
|
|
|
|
205
|
|
|
|
39
|
|
Corporate aircraft
|
|
|
|
|
|
|
102
|
|
|
|
48
|
|
Other
|
|
|
408
|
|
|
|
474
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
638
|
|
|
|
781
|
|
|
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
782
|
|
|
$
|
2,917
|
|
|
$
|
1,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2008, we and Dubai World each made loans to CityCenter of
$500 million and equity contributions of $653 million.
The insurance recoveries classified as investing cash flows
relate to Monte Carlo in 2008 and Hurricane Katrina in 2007 and
2006 as 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 primarily represented
investments in MGM Grand Macau.
Cash
Flows Financing Activities
We borrowed net debt of $2.4 billion in 2008, including
$2.5 billion under our senior credit facility. Also in
2008, we issued $750 million of 13% senior secured
notes due 2013 at a discount to yield 15%. The senior secured
notes require that upon consummation of an asset sale, such as
the proposed sale of TI, we either a) reinvest the net
after-tax proceeds, which can include committed capital
expenditures; or b) make an offer to repurchase a
corresponding amount of senior secured notes at par plus accrued
interest. We repaid the following senior and senior subordinated
notes at maturity during 2008:
|
|
|
|
|
$180.4 million of 6.75% senior notes; and
|
|
|
|
$196.2 million of 9.5% senior notes.
|
In October 2008, our Board of Directors authorized the purchase
of up to $500 million of our public debt securities. In
2008, we repurchased $345 million of principal amounts of
our outstanding senior notes at a purchase price of
$263 million in open market repurchases as follows:
|
|
|
|
|
$230 million of our 6% senior notes due 2009;
|
|
|
|
$43 million of our 8.5% senior notes due 2010;
|
|
|
|
$3.7 million of our 6.375% senior notes due 2011;
|
|
|
|
$5.4 million of our 6.75% senior notes due 2012;
|
|
|
|
$15.8 million of our 6.75% senior notes due 2013;
|
|
|
|
$16.1 million of our 5.875% senior notes due 2014;
|
31
|
|
|
|
|
$7.1 million of our 6.875% senior notes due 2016;
|
|
|
|
$17.3 million of our 7.5% senior notes due
2016; and
|
|
|
|
$7 million of our 7.625% senior notes due 2017.
|
Also in the fourth quarter of 2008, we redeemed at par
$149.4 million of the principal amount of our
7% debentures due 2036 pursuant to a one-time put option by
the holders of such debentures.
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 at a price of $84 per share. We received
$14 million, $98 million and $89 million in
proceeds from the exercise of employee stock options in the
years ended December 31, 2008, 2007 and 2006, 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 share repurchases are only conducted under repurchase
programs approved by our Board of Directors and publicly
announced. In May 2008, our Board of Directors approved a
20 million share authorization which is still fully
available at December 31, 2008. Our share repurchase
activity was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
July 2004 authorization (8 million and 6.5 million
shares purchased)
|
|
$
|
|
|
|
$
|
659,592
|
|
|
$
|
246,892
|
|
December 2007 authorization (18.1 million and
1.9 million shares purchased)
|
|
|
1,240,856
|
|
|
|
167,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,240,856
|
|
|
$
|
826,765
|
|
|
$
|
246,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average price of shares repurchased
|
|
$
|
68.36
|
|
|
$
|
83.92
|
|
|
$
|
37.98
|
|
Principal
Debt Arrangements
Our long-term debt consists of publicly held senior, senior
secured, and senior subordinated notes and our senior credit
facility. We pay fixed rates of interest ranging from 5.875% to
13% on the senior, senior secured, and subordinated notes. We
pay variable interest based on LIBOR or a base rate 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,
2008, we had approximately $1.2 billion of available
liquidity under our senior credit facility. After giving effect
to our February 2009 borrowing, we have borrowed the entire
amount of available borrowings under the 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, 2008, the outstanding amount of borrowings
related to MGM Grand Detroit, LLC was $404 million.
Substantially all of the assets of New York-New York serve as
collateral for the 13% senior secured notes issued in 2008;
otherwise, none of our assets serve as collateral for our
principal debt arrangements.
32
Other
Factors Affecting Liquidity
Amendment to senior credit facility. In
September 2008, we amended our senior credit facility to
increase the maximum total leverage ratio (debt to EBITDA, as
defined) to 7.5:1.0 beginning with the fiscal quarter ending
December 31, 2008, which will remain in effect through
December 31, 2009, with step downs thereafter. The
amendment modified drawn and undrawn pricing levels as well as
revised certain definitions and limitations on secured
indebtedness. Our drawn pricing levels over LIBOR remain
unchanged when the maximum total leverage ratio is less than
5.0:1. When the maximum total leverage ratio exceeds that level,
the drawn pricing levels over LIBOR range from 1.25% to 2.00%.
Request to borrow remaining available funds under the senior
credit facility. In February 2009, we submitted a
borrowing request for $842 million, the remaining amount of
available funds (other than outstanding letters of credit) under
our senior credit facility. The borrowing request was fully
funded as of February 26, 2009. For further discussion of
this event and its impact on our liquidity and financial
position, see Executive Overview Liquidity and
Financial Position.
Long-term debt payable in 2009. We have
$226 million of principal of senior notes due in July 2009
and $820 million of principal of senior notes due in
October 2009.
Sale of TI. In December 2008, we entered into
a purchase agreement pursuant to which we have agreed to sell TI
to Ruffin Acquisition, LLC (Ruffin Acquisition) for
a purchase price of $775 million. The purchase price is to
be paid at closing as follows: $500 million in cash and
$275 million in secured notes bearing interest at 10%, with
$100 million payable not later than 175 days after
closing and $175 million payable not later than
24 months after closing. The notes, to be issued by Ruffin
Acquisition, will be secured by the assets of TI and will be
senior to any other financing. In March 2009, we entered into an
amendment to the purchase agreement which a) extends the
maturity of the $175 million note to 36 months, and
b) offers Ruffin Acquisition a $20 million discount on
the purchase price effected through a reduction in principal of
the notes if they are paid in full by April 30, 2009. The
transaction is subject to customary closing conditions contained
in the purchase agreement, including receipt of all gaming and
other regulatory approvals. In addition, the ability of Ruffin
Acquisition to obtain financing is not a closing condition. We
anticipate that the transaction will be completed by
March 31, 2009, and we expect to report a substantial gain
on the sale. Under the terms of our 13% senior secured
notes, within 360 days of the receipt of the proceeds from
the TI sale we must either invest such proceeds in qualifying
investments, which includes capital expenditures, or offer to
repurchase the senior notes at par.
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. Since making that announcement, we have made
extensive progress in design and other pre-development
activities. However, current economic conditions, including
limited access to capital markets for projects of this scale
have caused us to reassess timing for this project. Accordingly,
we have postponed current development activities.
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 Mashantucket, Connecticut. Under the strategic
alliance, a new casino resort owned and operated by MPTN located
adjacent to the existing Foxwoods casino resort carries the
MGM Grand brand name. The resort opened in May 2008.
We are receiving a brand licensing and consulting fee in
connection with this agreement. We have also formed a jointly
owned company with MPTN Unity Gaming,
LLC to acquire or develop future gaming and
non-gaming enterprises. Under certain circumstances, we 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, we 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. In
September 2008, we and our partners agreed to defer additional
design and pre-construction activities and amended the joint
venture agreement accordingly. In the event the joint venture
partners agree that the resort will be developed, we will
contribute 40 acres of land, valued at $20 million per
acre, for fifty percent of the equity in the joint venture.
Kerzner International and Istithmar will contribute cash
totaling $600 million, of which $200 million will be
distributed to us, for the other 50% of the equity.
33
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. In October 2008, CityCenter closed
on a $1.8 billion senior secured bank credit facility. The
credit facility can be increased up to $3 billion and
consists of a $250 million revolver with the remaining
amount being in the form of term loans. The credit facility
matures in April 2013 and is secured by substantially all of the
assets of CityCenter. The credit facility is initially priced at
LIBOR plus 3.75% through the construction period.
Through December 31, 2008, we and Infinity World had each
made loans of $925 million to CityCenter, which are
subordinate to the credit facility. During the fourth quarter of
2008, $425 million of each partners loan funding was
converted to equity and each partner provided equity
contributions of $228 million. Under the terms of the
credit facility, we and Infinity World were each required to
fund future construction costs through equity commitments of up
to $731 million as of December 31, 2008, which
requirement would be reduced by future qualifying financing
obtained by CityCenter. Subsequent to December 31, 2008,
each partner made an additional $237 million of required
equity contributions. The proceeds from the subordinated loans
and equity contributions will be used to fund construction costs
prior to accessing borrowings under the credit facility.
In conjunction with the CityCenter credit facility, we and
Infinity World have entered into partial completion guarantees
on a several basis. The partial completion guarantees provide
for additional funding of construction costs in the event such
funding is necessary to complete the project, up to a maximum
amount of $600 million each.
Letters of credit. At December 31, 2008,
we had outstanding letters of credit totaling $92 million,
of which $50 million support bonds issued by the Economic
Development Corporation of the City of Detroit and maturing in
2009. 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
obligations as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
|
(In millions)
|
|
|
Long-term debt
|
|
$
|
1,048
|
|
|
$
|
1,081
|
|
|
$
|
6,240
|
|
|
$
|
545
|
|
|
$
|
1,384
|
|
|
$
|
3,216
|
|
Estimated interest payments on long-term debt(1)
|
|
|
783
|
|
|
|
666
|
|
|
|
653
|
|
|
|
409
|
|
|
|
302
|
|
|
|
520
|
|
Capital leases
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
14
|
|
|
|
11
|
|
|
|
9
|
|
|
|
8
|
|
|
|
6
|
|
|
|
44
|
|
Tax liabilities(2)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities(3)
|
|
|
77
|
|
|
|
18
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
6
|
|
CityCenter funding commitments(4)
|
|
|
731
|
|
|
|
319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other purchase obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction commitments
|
|
|
54
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment agreements
|
|
|
113
|
|
|
|
65
|
|
|
|
21
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Entertainment agreements(5)
|
|
|
127
|
|
|
|
26
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other(6)
|
|
|
86
|
|
|
|
16
|
|
|
|
15
|
|
|
|
9
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,036
|
|
|
$
|
2,207
|
|
|
$
|
6,946
|
|
|
$
|
976
|
|
|
$
|
1,693
|
|
|
$
|
3,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Estimated interest payments on long-term debt are based on
principal amounts outstanding at December 31, 2008 and
forecasted LIBOR rates for our bank credit facility. |
34
|
|
|
(2) |
|
Approximately $118 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. |
|
(4) |
|
As of December 31, 2008 we were committed to fund equity
contributions of $731 million to CityCenter during 2009. In
addition, we are committed to fund up to $600 million under
a partial completion guarantee. Based on current forecasted
expenditures we estimate that we will be required to fund
$319 million for such guarantee during 2010, excluding the
benefit of proceeds to be received from residential closing. |
|
(5) |
|
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. |
|
(6) |
|
The amount for 2009 includes approximately $58 million of
open purchase orders. Other commitments are for various
contracts, including advertising, maintenance and other service
agreements. |
See Executive Overview Liquidity and Financial
Position for discussion of the impacts of the above
contractual obligations on our liquidity and financial position.
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, 2008 and
2007, approximately 52% and 47%, 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, 2008 and 2007, approximately
34% and 38%, 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.
35
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Casino accounts receivable
|
|
$
|
243,600
|
|
|
$
|
266,059
|
|
|
$
|
248,044
|
|
Allowance for doubtful casino accounts receivable
|
|
|
92,278
|
|
|
|
76,718
|
|
|
|
83,327
|
|
Allowance as a percentage of casino accounts receivable
|
|
|
38%
|
|
|
|
29%
|
|
|
|
34%
|
|
Median age of casino accounts receivable
|
|
|
36 days
|
|
|
|
28 days
|
|
|
|
46 days
|
|
Percentage of casino accounts outstanding over 180 days
|
|
|
21%
|
|
|
|
18%
|
|
|
|
21%
|
|
The allowance for doubtful accounts as a percentage of casino
accounts receivable has increased in the current year due to an
increase in aging of accounts. At December 31, 2008, a 100
basis-point change in the allowance for doubtful accounts as a
percentage of casino accounts receivable would change net income
by $2 million, or less than $0.01 per share.
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, Goodwill and Indefinite-lived Intangible
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
36
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.
We review goodwill and indefinite-lived intangible assets for
impairment in accordance with Statement of Financial Accounting
Standards No. 142, 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. We perform our
annual impairment test for goodwill and indefinite-lived
intangible assets in the fourth quarter of each fiscal year.
Goodwill for relevant reporting units is tested for impairment
using a discounted cash flow analysis based on our budgeted
future results discounted using our weighted average cost of
capital and market indicators of terminal year capitalization
rates. Indefinite-lived intangible assets consist primarily of
license rights, which are tested for impairment using a
discounted cash flow approach, and trademarks; which are tested
for impairment using the relief-from-royalty method. See
Note 3 and Note 9 to the accompanying consolidated
financial statements for further discussion related to goodwill
and indefinite-lived intangible assets.
There are several estimates inherent in evaluating these assets
for impairment. In particular, future cash flow estimates are,
by their nature, subjective and actual results may differ
materially from our estimates. In addition, the determination of
capitalization rates and the discount rates used in the goodwill
impairment test are highly judgmental and dependent in large
part on expectations of future market conditions.
See Results of Operations for discussion of
write-downs and impairments of long-lived assets recorded in
2008, 2007 and 2006. 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. See Goodwill Impairment
for discussion of impairment of goodwill recorded in 2008. Other
than the above items, we are not aware of events or
circumstances through December 31, 2008 that would cause us
to review any material long-lived assets, goodwill or
indefinite-lived intangible 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.
Our income tax returns are subject to examination by the
Internal Revenue Service (IRS) and other tax
authorities. Positions taken in tax returns are sometimes
subject to uncertainty in the tax laws and may not ultimately be
accepted by the IRS or other tax authorities.
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
37
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. As of December 31, 2008, we were 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 appeal
issues related to a land sale transaction that were not agreed
upon at the closure of the examination. The appeals discussions
continue, and the Company has requested to enter into appeals
mediation procedures with the IRS. Consequently, we believe that
it is reasonably possible to settle these issues within the next
twelve months. The IRS is currently examining our federal income
tax returns for the 2003 and 2004 tax years and one of our
subsidiaries for the 2004 through 2006 tax years. Tax returns
for subsequent years are also subject to examination. In
addition, during the first quarter of 2009, the IRS initiated an
examination of the federal income tax return of Mandalay Resort
Group for the pre-acquisition year ended April 25, 2005.
The statute of limitations for assessing tax for the Mandalay
Resort Group federal income tax return for the year ended
January 31, 2005 has been extended but such return is not
currently under examination by the IRS.
As of December 31, 2008, we are no longer subject to
examination for our various state and local tax returns filed
for years ended prior to 2003. A Mandalay Resort Group
subsidiary return for the pre-acquisition year ended
April 25, 2005 is under examination by the City of Detroit.
During the first quarter of 2008, the state of Mississippi
settled an examination of returns filed by subsidiaries of MGM
MIRAGE and Mandalay Resort Group for the 2004 through 2006 tax
years. This settlement resulted in a payment of additional taxes
and interest of less than $1 million. No other state or
local income tax returns are currently under exam.
Stock-based
Compensation
We account for stock-based compensation in accordance with SFAS
123(R). For stock options and stock appreciation rights
(SARs) we measure fair value using the Black-Scholes
model. For restricted stock units, compensation expense is
calculated based on the fair market value of our stock on the
date of grant. 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 options and SARs. The extent of
the impact will depend, in part, on the extent of awards in any
given year. In 2008, we granted 4.9 million SARs with a
total fair value of $72 million. In 2007, we granted
2.6 million SARs with a total fair value of
$68 million. In 2006, we granted 1.9 million stock
options and SARs with a total fair value of $28 million.
For 2008 awards, a 10% change in the volatility assumption (50%
for 2008; for sensitivity analysis, volatility was assumed to be
45% and 55%) would have resulted in a $5.5 million, or 8%,
change in fair value. A 10% change in the expected term
assumption (4.6 years for 2008; for sensitivity analysis,
expected term was assumed to be 4.1 years and
5.1 years) would have resulted in a $3.3 million, or
5%, 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.
38
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 measurement period, and the
measurement of non-controlling interests, 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 became effective for us
on January 1, 2009. We do not believe the adoption of
SFAS 141R and SFAS 160 will have a material impact on
our consolidated financial statements.
Transfers
of Financial Assets and Interests in Variable Entities
In December 2008, the FASB issued FSP
FAS 140-4
and FIN 46(R)-8 Disclosures by Public Entities
(Enterprises) About Transfers of Financial Assets and Interests
in Variable Interest Entities. The FSP enhances
disclosures required by FIN 46(R) to include a discussion
of significant judgments made in determining whether a variable
interest entity (VIE) should be consolidated, as
well as the nature of the risks and how its involvement with a
VIE affects the financial position of the entity. The FSP is
effective for us for the fiscal year ended December 31,
2008. The adoption of the FSP did not have a material impact on
our consolidated financial statements.
Equity
Method Investment Accounting Considerations
In November 2008, the Emerging Issues Task Force
(EITF) of the FASB ratified its consensus on EITF
No. 08-6).
The EITF reached a consensus on the following four issues
addressed: a) the initial carrying value of an equity
method investment is determined in accordance with
SFAS 141(R); b) equity method investors should not
separately test an investees underlying assets for
impairment, but rather recognize other than temporary
impairments of an equity method investment in accordance with
APB Opinion 18; c) exceptions to recognizing gains from an
investees issuance of shares in earnings in accordance
with the SECs Staff Accounting Bulletin 51 were
removed to achieve consistency with SFAS 160; and
d) the guidance in APB Opinion 18 to account for a change
in the investors accounting from the equity method to the
cost method should still be applied.
EITF 08-6
became effective for us on January 1, 2009. We do not
believe the adoption of
EITF 08-6
will 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, 2008, long-term fixed rate borrowings
represented approximately 58% of our total borrowings. Based on
December 31, 2008 debt levels, an assumed 100 basis-point
change in LIBOR would cause our annual interest cost to change
by approximately $57 million.
39
|
|
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 52 to 88 of this
Form 10-K.
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
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,
2008. This conclusion is based on an evaluation conducted under
the supervision and participation of the principal executive
officer and principal financial officer along with 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 50 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 51 of this Form
10-K.
Changes
in Internal Control Over Financial Reporting
During the quarter ended December 31, 2008, 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.
40
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 2009
Annual Meeting of Stockholders, which we expect to file with the
Securities and Exchange Commission on or about April 3,
2009 (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.
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, 2008
and 2007
Years Ended December 31, 2008, 2007 and 2006
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders Equity
Notes to Consolidated Financial Statements
(a)(2). Financial Statement Schedule.
Years Ended December 31, 2008, 2007 and 2006
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.
41
(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).
|
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)).
|
42
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
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 Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2000 (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)
|
|
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(13)
|
|
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(14)
|
|
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 2000
10-K).
|
4(15)
|
|
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(16)
|
|
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(17)
|
|
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(18)
|
|
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(19)
|
|
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(20)
|
|
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(21)
|
|
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(22)
|
|
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(23)
|
|
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).
|
43
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
4(24)
|
|
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(25)
|
|
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(26)
|
|
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(27)
|
|
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)).
|
4(28)
|
|
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(29)
|
|
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(30)
|
|
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(31)
|
|
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).
|
4(32)
|
|
Indenture dated as of November 14, 2008, 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 November 20, 2008).
|
4(33)
|
|
Security Agreement, dated as of November 14, 2008, between
New York-New York Hotel & Casino, LLC, and U.S. Bank
National Association (incorporated by reference to
Exhibit 4.2 to the Companys Current Report on
Form 8-K
dated November 20, 2008).
|
4(34)
|
|
Pledge Agreement, Dated as of November 14, 2008, among MGM
MIRAGE, New PRMA Las Vegas Inc., and U.S. Bank National
Association (incorporated by reference to Exhibit 4.3 to
the Companys Current Report on
Form 8-K
dated November 20, 2008).
|
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).
|
44
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
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).
|
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 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).
|
45
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
10.1(15)
|
|
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(16)
|
|
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(17)
|
|
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(18)
|
|
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(19)
|
|
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(20)
|
|
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).
|
10.1(21)
|
|
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(22)
|
|
Amendment No. 1 to the 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 6, 2008).
|
10.1(23)
|
|
Sponsor Contribution Agreement, dated October 31, 2008, by
and among MGM MIRAGE, as sponsor, CityCenter Holdings, LLC, as
borrower, and Bank of America, N.A., as Collateral Agent
(incorporated by reference to Exhibit 10 to the
Companys Current Report on
Form 8-K
dated November 6, 2008).
|
10.1(24)
|
|
Sponsor Completion Guarantee, dated October 31, 2008, by
and among MGM MIRAGE, as completion guarantor, CityCenter
Holdings, LLC, as borrower, and Bank of America, N.A., as
Collateral Agent (incorporated by reference to Exhibit 10
to the Companys Current Report on
Form 8-K
dated November 6, 2008).
|
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).
|
46
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
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)
|
|
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(7)
|
|
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(8)
|
|
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(9)
|
|
Amendment No. 1 to the Deferred Compensation Plan II, dated
as of July 10, 2007 (incorporated by reference to
Exhibit 10.3(11) to the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 (the
2007 10-K)).
|
*10.3(10)
|
|
Amendment No. 1 to the Supplemental Executive Retirement
Plan II, dated as of July 10, 2007 (incorporated by
reference to Exhibit 10.3(12) to the 2007
10-K).
|
*10.3(11)
|
|
Amendment No. 2 to the Deferred Compensation Plan II, dated
as of October 15, 2007 (incorporated by reference to
Exhibit 10.3(13) to the 2007
10-K).
|
*10.3(12)
|
|
Amendment No. 2 to the Supplemental Executive Retirement
Plan II, dated as of October 15, 2007 (incorporated by
reference to Exhibit 10.3(14) to the 2007
10-K).
|
*10.3(13)
|
|
Amendment No. 3 to the Deferred Compensation Plan II, dated
as of November 4, 2008 (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on
Form 8-K
dated November 7, 2008).
|
*10.3(14)
|
|
Amendment No. 3 to the Supplemental Executive Retirement
Plan II, dated as of November 4, 2008 (incorporated by
reference to Exhibit 10.1 to the Companys Current
Report on
Form 8-K
dated November 7, 2008).
|
*10.3(15)
|
|
MGM MIRAGE Freestanding Stock Appreciation Right Agreement.
|
*10.3(16)
|
|
MGM MIRAGE Restricted Stock Units Agreement (performance
vesting).
|
*10.3(17)
|
|
MGM MIRAGE Restricted Stock Units Agreement (time vesting).
|
*10.3(18)
|
|
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(19)
|
|
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(20)
|
|
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).
|
47
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
*10.3(21)
|
|
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(22)
|
|
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(23)
|
|
Employment Agreement, dated March 1, 2007, between the
Company and Aldo Manzini (incorporated by reference to
Exhibit 10.3(20) to the 2007 10-K).
|
*10.3(24)
|
|
Letter Agreement dated June 19, 2007, between the Company
and Aldo Manzini (incorporated by reference to
Exhibit 10.3(21) to the 2007 10-K).
|
*10.3(25)
|
|
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).
|
*10.3(26)
|
|
Amendment No. 1 to Employment Agreement, dated
December 31, 2008, between MGM MIRAGE and James J. Murren
(incorporated by reference to Exhibit 4.1 to the
Companys Current Report on
Form 8-K
dated January 7, 2009).
|
*10.3(27)
|
|
Amendment No. 1 to Employment Agreement, dated
December 31, 2008, between MGM MIRAGE and Robert H. Baldwin
(incorporated by reference to Exhibit 4.1 to the
Companys Current Report on
Form 8-K
dated January 7, 2009)
|
*10.3(28)
|
|
Amendment No. 1 to Employment Agreement, dated
December 31, 2008, between MGM MIRAGE and Gary N. Jacobs
(incorporated by reference to Exhibit 4.1 to the
Companys Current Report on
Form 8-K
dated January 7, 2009).
|
*10.3(29)
|
|
Amendment No. 1 to Employment Agreement, dated
December 31, 2008, between MGM MIRAGE and Daniel J.
DArrigo (incorporated by reference to Exhibit 4.1 to
the Companys Current Report on
Form 8-K
dated January 7, 2009).
|
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) (incorporated by reference to Exhibit 10.4(7) to
the 2007 10-K).
|
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).
|
48
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
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)).
|
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)
|
|
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(2)
|
|
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).
|
10.6(3)
|
|
Purchase Agreement dated December 13, 2008, by and among
The Mirage Casino-Hotel, as seller, and Ruffin Acquisition, LLC,
as purchaser (incorporated by reference to the Companys
Amendment No. 1 to Current Report on
Form 8-K/A
dated January 9, 2009).
|
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. |
49
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 Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Based on its evaluation as of December 31,
2008, 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 year ended
December 31, 2008 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.
50
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, 2008, based on criteria established in
Internal Control Integrated 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, included in the accompanying
Managements Annual Report on 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, 2008, based on the criteria established in
Internal Control Integrated 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, 2008.
Our report dated March 17, 2009 expressed an unqualified
opinion on those financial statements and financial statement
schedule and included (a) an explanatory paragraph
expressing substantial doubt about the Companys ability to
continue as a going concern; and (b) an explanatory
paragraph regarding 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
March 17, 2009
51
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, 2008 and 2007, and the related consolidated
statements of operations, stockholders equity, and cash
flows for each of the three years in the period ended
December 31, 2008. 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, 2008 and 2007,
and the results of their operations and their cash flows for
each of the three years in the period ended December 31,
2008, 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.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the consolidated
financial statements, the Company believes it will not be in
compliance with the financial covenants under its senior credit
facility during 2009 and there is uncertainty regarding the
Companys ability to fulfill its financial commitments as
they become due. These conditions raise substantial doubt about
the Companys ability to continue as a going concern.
Managements plans concerning these matters are also
discussed in Note 2 to the consolidated financial
statements. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
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, 2008, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 17, 2009 expressed an
unqualified opinion on the Companys internal control over
financial reporting.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
March 17, 2009
52
MGM
MIRAGE AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(In
thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
295,644
|
|
|
$
|
416,124
|
|
Accounts receivable, net
|
|
|
303,416
|
|
|
|
412,933
|
|
Inventories
|
|
|
111,505
|
|
|
|
126,941
|
|
Income tax receivable
|
|
|
64,685
|
|
|
|
|
|
Deferred income taxes
|
|
|
63,153
|
|
|
|
63,453
|
|
Prepaid expenses and other
|
|
|
155,652
|
|
|
|
106,364
|
|
Assets held for sale
|
|
|
538,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,533,030
|
|
|
|
1,125,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
16,289,154
|
|
|
|
16,870,898
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated affiliates
|
|
|
4,642,865
|
|
|
|
2,482,727
|
|
Goodwill
|
|
|
86,353
|
|
|
|
1,262,922
|
|
Other intangible assets, net
|
|
|
347,209
|
|
|
|
362,098
|
|
Deposits and other assets, net
|
|
|
376,105
|
|
|
|
623,226
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
5,452,532
|
|
|
|
4,730,973
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,274,716
|
|
|
$
|
22,727,686
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
142,693
|
|
|
$
|
220,495
|
|
Construction payable
|
|
|
45,103
|
|
|
|
76,524
|
|
Income taxes payable
|
|
|
|
|
|
|
284,075
|
|
Current portion of long-term debt
|
|
|
1,047,614
|
|
|
|
|
|
Accrued interest on long-term debt
|
|
|
187,597
|
|
|
|
211,228
|
|
Other accrued liabilities
|
|
|
1,549,296
|
|
|
|
932,365
|
|
Liabilities related to assets held for sale
|
|
|
30,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,002,576
|
|
|
|
1,724,687
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
3,441,198
|
|
|
|
3,416,660
|
|
Long-term debt
|
|
|
12,416,552
|
|
|
|
11,175,229
|
|
Other long-term obligations
|
|
|
440,029
|
|
|
|
350,407
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 13)
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value: authorized
600,000,000 shares; issued 369,283,995 and
368,395,926 shares; outstanding 276,506,968 and
293,768,899 shares
|
|
|
3,693
|
|
|
|
3,684
|
|
Capital in excess of par value
|
|
|
4,018,410
|
|
|
|
3,951,162
|
|
Treasury stock, at cost (92,777,027 and 74,627,027 shares)
|
|
|
(3,355,963
|
)
|
|
|
(2,115,107
|
)
|
Retained earnings
|
|
|
3,365,122
|
|
|
|
4,220,408
|
|
Accumulated other comprehensive income (loss)
|
|
|
(56,901
|
)
|
|
|
556
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
3,974,361
|
|
|
|
6,060,703
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,274,716
|
|
|
$
|
22,727,686
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
53
MGM
MIRAGE AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
2,975,680
|
|
|
$
|
3,239,054
|
|
|
$
|
3,130,438
|
|
Rooms
|
|
|
1,907,093
|
|
|
|
2,130,542
|
|
|
|
1,991,477
|
|
Food and beverage
|
|
|
1,582,367
|
|
|
|
1,651,655
|
|
|
|
1,483,914
|
|
Entertainment
|
|
|
546,310
|
|
|
|
560,909
|
|
|
|
459,540
|
|
Retail
|
|
|
261,053
|
|
|
|
296,148
|
|
|
|
278,695
|
|
Other
|
|
|
611,692
|
|
|
|
519,360
|
|
|
|
452,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,884,195
|
|
|
|
8,397,668
|
|
|
|
7,796,733
|
|
Less: Promotional allowances
|
|
|
(675,428
|
)
|
|
|
(706,031
|
)
|
|
|
(620,777
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,208,767
|
|
|
|
7,691,637
|
|
|
|
7,175,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
1,618,914
|
|
|
|
1,646,883
|
|
|
|
1,586,448
|
|
Rooms
|
|
|
533,559
|
|
|
|
542,289
|
|
|
|
513,522
|
|
Food and beverage
|
|
|
930,716
|
|
|
|
947,475
|
|
|
|
870,683
|
|
Entertainment
|
|
|
384,822
|
|
|
|
395,611
|
|
|
|
330,439
|
|
Retail
|
|
|
168,859
|
|
|
|
187,386
|
|
|
|
177,479
|
|
Other
|
|
|
397,504
|
|
|
|
307,914
|
|
|
|
236,486
|
|
General and administrative
|
|
|
1,278,501
|
|
|
|
1,251,952
|
|
|
|
1,169,271
|
|
Corporate expense
|
|
|
109,279
|
|
|
|
193,893
|
|
|
|
161,507
|
|
Preopening and
start-up
expenses
|
|
|
23,059
|
|
|
|
92,105
|
|
|
|
36,362
|
|
Restructuring costs
|
|
|
443
|
|
|
|
|
|
|
|
1,035
|
|
Property transactions, net
|
|
|
1,210,749
|
|
|
|
(186,313
|
)
|
|
|
(40,980
|
)
|
Gain on CityCenter transaction
|
|
|
|
|
|
|
(1,029,660
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
778,236
|
|
|
|
700,334
|
|
|
|
629,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,434,641
|
|
|
|
5,049,869
|
|
|
|
5,671,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates
|
|
|
96,271
|
|
|
|
222,162
|
|
|
|
254,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(129,603
|
)
|
|
|
2,863,930
|
|
|
|
1,758,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
16,520
|
|
|
|
17,210
|
|
|
|
11,192
|
|
Interest expense, net
|
|
|
(609,286
|
)
|
|
|
(708,343
|
)
|
|
|
(760,361
|
)
|
Non-operating items from unconsolidated affiliates
|
|
|
(34,559
|
)
|
|
|
(18,805
|
)
|
|
|
(16,063
|
)
|
Other, net
|
|
|
87,940
|
|
|
|
4,436
|
|
|
|
(15,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(539,385
|
)
|
|
|
(705,502
|
)
|
|
|
(780,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income
taxes
|
|
|
(668,988
|
)
|
|
|
2,158,428
|
|
|
|
977,926
|
|
Provision for income taxes
|
|
|
(186,298
|
)
|
|
|
(757,883
|
)
|
|
|
(341,930
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(855,286
|
)
|
|
|
1,400,545
|
|
|
|
635,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
|
|
10,461
|
|
|
|
18,473
|
|
Gain on disposal of discontinued operations
|
|
|
|
|
|
|
265,813
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
(92,400
|
)
|
|
|
(6,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183,874
|
|
|
|
12,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(855,286
|
)
|
|
$
|
1,584,419
|
|
|
$
|
648,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(3.06
|
)
|
|
$
|
4.88
|
|
|
$
|
2.25
|
|
Discontinued operations
|
|
|
|
|
|
|
0.64
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
$
|
(3.06
|
)
|
|
$
|
5.52
|
|
|
$
|
2.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(3.06
|
)
|
|
$
|
4.70
|
|
|
$
|
2.18
|
|
Discontinued operations
|
|
|
|
|
|
|
0.61
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
$
|
(3.06
|
)
|
|
$
|
5.31
|
|
|
$
|
2.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
54
MGM
MIRAGE AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(855,286
|
)
|
|
$
|
1,584,419
|
|
|
$
|
648,264
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
778,236
|
|
|
|
700,334
|
|
|
|
653,919
|
|
Amortization of debt discounts, premiums and issuance costs
|
|
|
10,620
|
|
|
|
4,298
|
|
|
|
(3,096
|
)
|
Provision for doubtful accounts
|
|
|
80,293
|
|
|
|
32,910
|
|
|
|
47,950
|
|
Stock-based compensation
|
|
|
36,277
|
|
|
|
45,678
|
|
|
|
73,626
|
|
Business interruption insurance lost profits
|
|
|
(9,146
|
)
|
|
|
(66,748
|
)
|
|
|
|
|
Business interruption insurance cost recovery
|
|
|
(27,883
|
)
|
|
|
(5,962
|
)
|
|
|
(46,581
|
)
|
Property transactions, net
|
|
|
1,210,749
|
|
|
|
(186,313
|
)
|
|
|
(41,135
|
)
|
Gain on early retirements of long-term debt
|
|
|
(87,457
|
)
|
|
|
|
|
|
|
|
|
Gain on CityCenter transaction
|
|
|
|
|
|
|
(1,029,660
|
)
|
|
|
|
|
Gain on disposal of discontinued operations
|
|
|
|
|
|
|
(265,813
|
)
|
|
|
|
|
Income from unconsolidated affiliates
|
|
|
(40,752
|
)
|
|
|
(162,217
|
)
|
|
|
(229,295
|
)
|
Distributions from unconsolidated affiliates
|
|
|
70,546
|
|
|
|
211,062
|
|
|
|
212,477
|
|
Deferred income taxes
|
|
|
79,516
|
|
|
|
32,813
|
|
|
|
59,764
|
|
Changes in current assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
20,500
|
|
|
|
(82,666
|
)
|
|
|
(65,467
|
)
|
Inventories
|
|
|
12,366
|
|
|
|
(8,511
|
)
|
|
|
(10,431
|
)
|
Income taxes receivable and payable
|
|
|
(346,878
|
)
|
|
|
315,877
|
|
|
|
(129,929
|
)
|
Prepaid expenses and other
|
|
|
14,983
|
|
|
|
10,937
|
|
|
|
(21,921
|
)
|
Accounts payable and accrued liabilities
|
|
|
(187,858
|
)
|
|
|
32,720
|
|
|
|
111,559
|
|
Real estate under development
|
|
|
|
|
|
|
(458,165
|
)
|
|
|
(89,724
|
)
|
Residential sales deposits
|
|
|
|
|
|
|
247,046
|
|
|
|
13,970
|
|
Business interruption insurance recoveries
|
|
|
28,891
|
|
|
|
72,711
|
|
|
|
98,786
|
|
Other
|
|
|
(34,685
|
)
|
|
|
(30,334
|
)
|
|
|
(50,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
753,032
|
|
|
|
994,416
|
|
|
|
1,231,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net of construction payable
|
|
|
(781,754
|
)
|
|
|
(2,917,409
|
)
|
|
|
(1,758,795
|
)
|
Proceeds from contribution of CityCenter
|
|
|
|
|
|
|
2,468,652
|
|
|
|
|
|
Proceeds from disposals of discontinued operations, net
|
|
|
|
|
|
|
578,873
|
|
|
|
|
|
Purchase of convertible note
|
|
|
|
|
|
|
(160,000
|
)
|
|
|
|
|
Investments in and advances to unconsolidated affiliates
|
|
|
(1,279,462
|
)
|
|
|
(31,420
|
)
|
|
|
(103,288
|
)
|
Property damage insurance recoveries
|
|
|
21,109
|
|
|
|
207,289
|
|
|
|
209,963
|
|
Dispositions of property and equipment
|
|
|
85,968
|
|
|
|
47,571
|
|
|
|
11,375
|
|
Other
|
|
|
(27,301
|
)
|
|
|
15,745
|
|
|
|
(1,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(1,981,440
|
)
|
|
|
209,301
|
|
|
|
(1,642,427
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under bank credit
facilities maturities of 90 days or less
|
|
|
2,760,450
|
|
|
|
(402,300
|
)
|
|
|
756,850
|
|
Borrowings under bank credit facilities maturities
longer than 90 days
|
|
|
8,170,000
|
|
|
|
6,750,000
|
|
|
|
7,000,000
|
|
Repayments under bank credit facilities maturities
longer than 90 days
|
|
|
(8,450,000
|
)
|
|
|
(7,500,000
|
)
|
|
|
(8,150,000
|
)
|
Issuance of long-term debt
|
|
|
698,490
|
|
|
|
750,000
|
|
|
|
1,500,000
|
|
Retirement of senior notes
|
|
|
(789,146
|
)
|
|
|
(1,402,233
|
)
|
|
|
(444,500
|
)
|
Debt issuance costs
|
|
|
(48,700
|
)
|
|
|
(5,983
|
)
|
|
|
(28,383
|
)
|
Issuance of common stock
|
|
|
|
|
|
|
1,192,758
|
|
|
|
|
|
Issuance of common stock upon exercise of stock awards
|
|
|
14,116
|
|
|
|
97,792
|
|
|
|
89,113
|
|
Purchases of common stock
|
|
|
(1,240,856
|
)
|
|
|
(826,765
|
)
|
|
|
(246,892
|
)
|
Excess tax benefits from stock-based compensation
|
|
|
9,509
|
|
|
|
102,479
|
|
|
|
47,330
|
|
Other
|
|
|
(1,781
|
)
|
|
|
3,715
|
|
|
|
(13,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
1,122,082
|
|
|
|
(1,240,537
|
)
|
|
|
510,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) for the year
|
|
|
(106,326
|
)
|
|
|
(36,820
|
)
|
|
|
99,549
|
|
Cash related to assets held for sale
|
|
|
(14,154
|
)
|
|
|
|
|
|
|
(24,538
|
)
|
Balance, beginning of year
|
|
|
416,124
|
|
|
|
452,944
|
|
|
|
377,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
295,644
|
|
|
$
|
416,124
|
|
|
$
|
452,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized
|
|
$
|
622,297
|
|
|
$
|
731,618
|
|
|
$
|
778,590
|
|
State, federal and foreign income taxes paid, net of refunds
|
|
|
437,874
|
|
|
|
391,042
|
|
|
|
369,450
|
|
Non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of net assets contributed to joint venture
|
|
$
|
|
|
|
$
|
2,773,612
|
|
|
$
|
|
|
CityCenter partial completion guarantee and delayed equity
contributions
|
|
|
1,111,837
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
55
MGM
MIRAGE AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY
(In
thousands)
For the
Years Ended December 31, 2008, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2006
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
48,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,063
|
|
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
|
|
|
|
|
|
|
|
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2007
|
|
|
293,769
|
|
|
|
3,684
|
|
|
|
3,951,162
|
|
|
|
|
|
|
|
(2,115,107
|
)
|
|
|
4,220,408
|
|
|
|
556
|
|
|
|
6,060,703
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(855,286
|
)
|
|
|
|
|
|
|
(855,286
|
)
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,190
|
)
|
|
|
(3,190
|
)
|
Valuation adjustment to M Resort convertible note, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54,267
|
)
|
|
|
(54,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(912,743
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
42,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,418
|
|
Tax benefit from stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
10,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,494
|
|
Issuance of common stock upon exercise of stock options and
stock appreciation rights
|
|
|
888
|
|
|
|
9
|
|
|
|
14,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,116
|
|
Purchases of treasury stock
|
|
|
(18,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,240,856
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,240,856
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2008
|
|
|
276,507
|
|
|
$
|
3,693
|
|
|
$
|
4,018,410
|
|
|
$
|
|
|
|
$
|
(3,355,963
|
)
|
|
$
|
3,365,122
|
|
|
$
|
(56,901
|
)
|
|
$
|
3,974,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
56
MGM
MIRAGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MGM MIRAGE (the Company) is a Delaware corporation,
incorporated on January 29, 1986. As of December 31,
2008, approximately 54% of the outstanding shares of the
Companys common stock were owned by Tracinda Corporation,
a Nevada corporation wholly owned by Kirk Kerkorian. As a
result, Tracinda Corporation has the ability to elect the
Companys entire Board of Directors and determine the
outcome of other matters submitted to the Companys
stockholders, such as the approval of significant transactions.
MGM MIRAGE acts largely as a holding company and, through
wholly-owned subsidiaries, owns
and/or
operates casino resorts.
The Company owns and operates the following casino resorts in
Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, Mandalay Bay,
The Mirage, Luxor, Treasure Island (TI), New
York-New York, Excalibur, Monte Carlo, Circus Circus Las Vegas
and
Slots-A-Fun.
Operations at MGM Grand Las Vegas include management of The
Signature at MGM Grand Las Vegas, a condominium-hotel consisting
of 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 December 2008, the Company entered into an agreement to sell
TI for $775 million; the sale is expected to close by
March 31, 2009. 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.
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 2.1 million square
feet of residential space in approximately 2,400 luxury
condominium and condominium-hotel units in multiple towers.
CityCenter is expected to open in late 2009, except CityCenter
postponed the opening of The Harmon Hotel & Spa until
late 2010 and cancelled the development of approximately 200
residential units originally planned. The other 50% of
CityCenter is owned by Infinity World Development Corp.
(Infinity World), a wholly-owned subsidiary of Dubai
World, a Dubai, United Arab Emirates government decree entity.
The Company is managing the development of CityCenter and, upon
completion of construction, will manage the operations of
CityCenter for a fee. Construction costs for the major
components of CityCenter are covered by guaranteed maximum price
contracts (GMPs) totaling $6.9 billion, which
have been fully executed. Including the cancellation of The
Harmon residential component, the Company anticipates total cost
savings of approximately $0.5 billion which would reduce
the $6.9 billion in GMP construction costs. In addition, by
postponing The Harmon Hotel & Spa by one year the
Company expects to defer $0.2 billion of construction costs
necessary to complete the interior fit out. Additional budgeted
cash expenditures include $1.8 billion of construction
costs not included in the GMPs, $0.2 billion of preopening
costs, and $0.3 billion of financing costs.
The Company and its local partners own and operate MGM Grand
Detroit in Detroit, Michigan. The resorts 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 MGM Grand Macau, Grand Victoria and Borgata.
MGM Grand Macau is a casino resort that opened on
December 18, 2007. Pansy Ho Chiu-King owns the
57
other 50% of MGM Grand Macau. 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. The Company
has made extensive progress in design and other pre-development
activities. However, current economic conditions and the impact
of the credit market environment have caused the Company to
reassess timing for this project. Accordingly, the Company has
postponed additional development activities. The Company has
also postponed further design and pre-construction activities
for its planned North Las Vegas Strip project with Kerzner
International and Istithmar see Note 13 for
further discussion.
NOTE 2
LIQUIDITY AND FINANCIAL POSITION
The Company has significant indebtedness and significant
financial commitments in 2009. As of December 31, 2008, the
Company had approximately $13.5 billion of total long-term
debt. In late February 2009, the Company borrowed
$842 million under the senior credit facility, which amount
represented after giving effect to $93 million
in outstanding letters of credit the total amount of
unused borrowing capacity available under its $7.0 billion
senior credit facility. In connection with the waiver and
amendment described below, on March 17, 2009 the Company
repaid $300 million under the senior credit facility, which
amount is not available for reborrowing without the consent of
the lenders. The Company has no other existing sources of
borrowing availability, except to the extent it pays down
further amounts outstanding under the senior credit facility.
In addition to commitments under employment, entertainment and
other operational agreements, the Companys financial
commitments and estimated capital expenditures in 2009, as of
December 31, 2008, totaled approximately $2.8 billion
and consisted of:
|
|
|
|
|
Contractual maturities of long-term debt totaling approximately
$1.0 billion;
|
|
|
|
Interest payments on long-term debt, estimated at
$0.8 billion;
|
|
|
|
CityCenter required equity contributions of approximately
$0.7 billion;
|
|
|
|
Other commitments of approximately $0.3 billion, including
$0.2 billion of estimated capital expenditures;
|
To fund its anticipated 2009 financial commitments, the Company
has the following sources of funds in 2009:
|
|
|
|
|
Available borrowings under its senior credit facility of
$1.2 billion as of December 31, 2008;
|
|
|
|
Expected proceeds in 2009 from the sale of TI of approximately
$0.6 billion;
|
|
|
|
Operating cash flow: The Companys current expectations for
2009 indicate that operating cash flow will be lower than in
2008. In 2008, the Company generated approximately
$1.8 billion of cash flow from operations before deducting
a) cash paid for interest, which commitments are included
in the list above, and b) the tax payment on the 2007
CityCenter transaction.
|
The Company is uncertain as to whether the sources listed above
will be sufficient to fund our 2009 financial commitments and
cannot provide any assurances that it will be able to raise
additional capital to fund its anticipated expenditures in 2009
if the sources listed above are not adequate.
While the Company was in compliance with the financial covenants
under its senior credit facility at December 31, 2008, if
the recent adverse conditions in the economy in
general and the gaming industry in
particular continue, the Company believes that it
will not be in compliance with those financial covenants during
2009. In fact, given these conditions and the recent borrowing
under the senior credit facility, the Company does not believe
it will be in compliance with those financial covenants at
March 31, 2009. As a result, on March 17, 2009 the
Company obtained from the lenders under the senior credit
facility a waiver of the requirement that the Company comply
with such financial covenants through May 15, 2009.
Additionally, the Company entered into an amendment of its
senior credit facility which provides for, among other terms,
the following:
|
|
|
|
|
The Company agreed to repay $300 million of the outstanding
borrowings under the senior credit facility, which amount is not
available for reborrowing without the consent of the lenders;
|
58
|
|
|
|
|
The Company is prohibited from prepaying or repurchasing its
outstanding long-term debt or disposing of material assets; and
other restrictive covenants were added that limit the
Companys ability to make investments and incur
indebtedness;
|
|
|
|
The interest rate on outstanding borrowings under the senior
credit facility was increased by 100 basis points; and
|
|
|
|
The Companys required equity contributions in CityCenter
are limited through May 15, 2009 such that it can only make
contributions if Infinity World makes its required
contributions; the Companys equity contributions do not
exceed specified amounts (though the Company believes the
limitation is in excess of the amounts expected to be required
through May 15, 2009); and the CityCenter senior secured
credit facility has not been accelerated.
|
Following expiration of the waiver on May 15, 2009, the
Company will be subject to an event of default related to the
expected noncompliance with financial covenants under the senior
credit facility at March 31, 2009. Under the terms of the
senior credit facility, noncompliance with such financial
covenants is an event of default, under which the lenders (with
a vote of more than 50% of the lenders) may exercise any or all
of the following remedies:
|
|
|
|
|
Terminate their commitments to fund additional borrowings;
|
|
|
|
Require cash collateral for outstanding letters of credit;
|
|
|
|
Demand immediate repayment of all outstanding borrowings under
the senior credit facility.
|
|
|
|
Decline to release subsidiary guarantees, which would impact the
Companys ability to execute asset dispositions.
|
In addition, there are provisions in certain of the
Companys indentures governing its senior and senior
subordinated notes under which a) the event of default
under the senior secured credit facility, or b) the
remedies under an event of default under the senior credit
facility, would cause an event of default under the relevant
senior and senior subordinated notes, which would allow holders
of the Companys senior and senior subordinated notes to
demand immediate repayment and decline to release subsidiary
guarantees. Also, under the terms of the CityCenter senior
secured credit facility, if an event of default has occurred
under the Companys borrowings and a) such event of
default is certified to in writing by the relevant lenders, and
b) such default allows the relevant lenders to demand
immediate repayment, then an event of default has occurred
relative to the CityCenter senior secured credit facility. Under
such event of default, one of the remedies is the termination of
the CityCenter senior secured credit facility. If the lenders
exercise any or all such rights, the Company or CityCenter may
determine to seek relief through a filing under the
U.S. Bankruptcy Code.
The conditions and events described above raise a substantial
doubt about the Companys ability to continue as a going
concern. The accompanying consolidated financial statements do
not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result
should the Company be unable to continue as a going concern.
Managements plans in regard to these matters are described
below.
The Company intends to work with its lenders to obtain
additional waivers or amendments prior to May 15, 2009 to
address future noncompliance with the senior credit facility;
however, the Company can provide no assurance that it will be
able to secure such waivers or amendments.
The Company has also retained the services of outside advisors
to assist the Company in instituting and implementing any
required programs to accomplish managements objectives.
The Company is evaluating the possibility of a) disposing
of certain assets, b) raising additional debt
and/or
equity capital, and c) modifying or extending its long-term
debt. However, there can be no assurance that the Company will
be successful in achieving its objectives.
|
|
NOTE 3
|
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
59
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 and Monte
Carlo fire. The Company maintains insurance for
both property damage and business interruption relating to
catastrophic events, such as Hurricane Katrina affecting Beau
Rivage in August 2005 and the rooftop fire at Monte Carlo in
January 2008. Business interruption coverage covers lost profits
and other costs incurred during the closure period and up to six
months following re-opening.
Non-refundable insurance recoveries received in excess of the
net book value of damaged assets,
clean-up and
demolition costs, and post-event costs are recognized as income
in the period received or committed based on the Companys
estimate of the total claim for property damage (recorded as
Property transactions, net) and business
interruption (recorded as a reduction of General and
administrative expenses) compared to the recoveries
received at that time. All post-event costs and expected
recoveries are recorded net within General and
administrative expenses, except for depreciation of
non-damaged assets, which is classified as Depreciation
and amortization.
Insurance recoveries are classified in the statement of cash
flows based on the coverage to which they relate. Recoveries
related to business interruption are classified as operating
cash flows and recoveries related to property damage are
classified as investing cash flows. However, the Companys
insurance policy includes undifferentiated coverage for both
property damage and business interruption. Therefore, the
Company classifies insurance recoveries as being related to
property damage until the full amount of damaged assets and
demolition costs are recovered, and classifies additional
recoveries up to the amount of post-event costs incurred as
being related to business interruption. Insurance recoveries
beyond that amount are classified as operating or investing cash
flows based on the Companys estimated allocation of the
total claim.
The following table shows the net pre-tax impact on the
statements of operations for insurance recoveries from Hurricane
Katrina and the Monte Carlo fire:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Reduction of general and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hurricane Katrina
|
|
$
|
|
|
|
$
|
66,748
|
|
|
$
|
|
|
Monte Carlo fire
|
|
|
9,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,146
|
|
|
$
|
66,748
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction of property transactions, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hurricane Katrina
|
|
$
|
|
|
|
$
|
217,290
|
|
|
$
|
86,016
|
|
Monte Carlo fire
|
|
|
9,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,639
|
|
|
$
|
217,290
|
|
|
$
|
86,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the cash flow statement impact of
insurance proceeds from Hurricane Katrina and the Monte Carlo
fire:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hurricane Katrina
|
|
$
|
|
|
|
$
|
72,711
|
|
|
$
|
98,786
|
|
Monte Carlo fire
|
|
|
28,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,891
|
|
|
$
|
72,711
|
|
|
$
|
98,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hurricane Katrina
|
|
$
|
|
|
|
$
|
207,289
|
|
|
$
|
209,963
|
|
Monte Carlo fire
|
|
|
21,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,109
|
|
|
$
|
207,289
|
|
|
$
|
209,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
Hurricane Katrina. The Company reached final
settlement agreements with its insurance carriers related to
Hurricane Katrina in late 2007. In total, the Company received
insurance recoveries of $635 million, which exceeded the
$265 million net book value of damaged assets and
post-storm costs incurred. The Company recognized the
$370 million of excess insurance recoveries in income in
2007 and 2008.
Monte Carlo fire. As of December 31,
2008, the Company received $50 million of proceeds from its
insurance carriers related to the Monte Carlo fire. Through
December 31, 2008, the Company recorded a write-down of
$4 million related to the net book value of damaged assets,
demolition costs of $7 million, and operating costs of
$21 million. As of December 31, 2008, the Company had
a receivable of approximately $1 million from its insurance
carriers.
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, construction payable, or other accrued
liabilities, 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, 2008, 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, 2008, no significant
concentrations of credit risk existed for which an allowance had
not already been recorded.
Real estate under development. Until November
2007, the Company 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.
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.
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
|
|
The Company evaluates its 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, the Company recognizes the asset to be
sold at the lower of carrying value or estimated 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, the Company reviews fixed assets
for impairment whenever indicators of impairment exist. If an
indicator of impairment exists, the Company compares the
estimated future cash flows of the asset, on an undiscounted
basis, to the carrying value of the asset. If the undiscounted
cash flows exceed the carrying
61
value, no impairment is indicated. If the undiscounted cash
flows do not exceed the carrying value, then an impairment is
measured based on estimated 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.
During the third quarter of 2008, the Company concluded that the
Primm Valley Golf Club (PVGC) should be reviewed for
impairment due to its recent operating losses and the
Companys expectation that such operating losses will
continue. The estimated future undiscounted cash flows of PVGC
do not exceed its carrying value. The Company determined the
estimated fair value of PVGC to be approximately
$14 million based on the comparable sales approach. The
carrying value of PVGC exceeds its estimated fair value and as a
result, the Company recorded an impairment charge of
$30 million which is included in Property
transactions, net in the accompanying consolidated
statements of operations for the year ended December 31,
2008. 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 fair value of the call option was $0
at December 31, 2008 and 2007. The entire carrying value of
the convertible note is included in Deposits and other
assets, net in the accompanying consolidated balance
sheets.
Investments in and advances to unconsolidated
affiliates. The Company has investments in
unconsolidated affiliates accounted for under the equity method.
Under the equity method, carrying value is adjusted for the
Companys share of the investees earnings and losses,
as well as capital contributions to and distributions from these
companies.
The Company evaluates its investments in unconsolidated
affiliates for impairment when events or changes in
circumstances indicate that the carrying value of such
investment may have experienced an other-than-temporary decline
in value. If such conditions exist, the Company compares the
estimated fair value of the investment to its carrying value to
determine if an impairment is indicated and determines whether
such impairment is other-than-temporary based on its assessment
of all relevant factors. Estimated fair value is determined
using a discounted cash flow analysis based on estimated future
results of the investee and market indicators of terminal year
capitalization rates.
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 tests in the fourth quarter of each fiscal year. No
impairments were indicated as a result of the annual impairment
review for goodwill and indefinite-lived intangible assets in
2007 and 2006. See Note 9 for results of our 2008 annual
impairment tests.
Goodwill for relevant reporting units is tested for impairment
using a discounted cash flow analysis based on the estimated
future results of the Companys reporting units discounted
using the Companys weighted average
62
cost of capital and market indicators of terminal year
capitalization rates. The implied fair value of a reporting
units goodwill is compared to the carrying value of that
goodwill. The implied fair value of goodwill is determined by
allocating the fair value of the reporting unit to its assets
and liabilities and the amount remaining, if any, is the implied
fair value of goodwill. If the implied fair value of the
goodwill is less than its carrying value then it must be written
down to its implied fair value. License rights are tested for
impairment using a discounted cash flow approach, and trademarks
are tested for impairment using the relief-from-royalty method.
If the fair value of an indefinite-lived intangible asset is
less than its carrying amount, an impairment loss must be
recognized equal to the difference.
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.
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Rooms
|
|
$
|
91,292
|
|
|
$
|
96,183
|
|
|
$
|
91,799
|
|
Food and beverage
|
|
|
288,522
|
|
|
|
303,900
|
|
|
|
296,866
|
|
Other
|
|
|
30,742
|
|
|
|
33,457
|
|
|
|
34,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
410,556
|
|
|
$
|
433,540
|
|
|
$
|
423,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursed expenses. The Company recognizes
costs reimbursed pursuant to management services as revenue in
the period it incurs the costs. Reimbursed costs related mainly
to the Companys management of CityCenter and totaled
$47 million for 2008 and $5 million for 2007, and are
classified as other revenue and other operating expenses in the
accompanying consolidated statements of operations.
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, 2008 and 2007, the
total company-wide liability for point-loyalty programs was
$52 million and $56 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 $122 million,
$141 million and $119 million for 2008, 2007 and 2006,
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
63
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 operations. 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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Weighted-average common shares outstanding used in the
calculation of basic earnings per share
|
|
|
279,815
|
|
|
|
286,809
|
|
|
|
283,140
|
|
Potential dilution from stock options, stock appreciation rights
and restricted stock
|
|
|
|
|
|
|
11,475
|
|
|
|
8,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common and common equivalent shares used in the
calculation of diluted earnings per share
|
|
|
279,815
|
|
|
|
298,284
|
|
|
|
291,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had a loss from continuing operations in 2008.
Therefore, approximately 26 million shares underlying
outstanding stock-based awards were excluded from the
computation of diluted earnings per share because inclusion
would be anti-dilutive. In 2007 and 2006, shares underlying
outstanding stock-based awards excluded from the diluted share
calculation were not material.
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.
Comprehensive income. Comprehensive income
includes net income (loss) 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,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Other comprehensive income (loss) from unconsolidated affiliates
|
|
$
|
|
|
|
$
|
(305
|
)
|
Valuation adjustment to M Resort convertible note, net of taxes
|
|
|
(54,267
|
)
|
|
|
|
|
Currency translation adjustments
|
|
|
(2,634
|
)
|
|
|
861
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(56,901
|
)
|
|
$
|
556
|
|
|
|
|
|
|
|
|
|
|
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. Substantially all of
the prior year reclassifications relate to the classification of
meals provided free to employees as a General and
administrative expense, while in past periods the cost of
these meals was charged to each operating department. The total
amount reclassified to general and administrative expenses for
the years ending 2007 and 2006 was $112 million and
$98 million, respectively.
Fair value measurement. The Company adopted
Statement of Financial Accounting Standards No. 157,
Fair Value Measurements (SFAS 157)
for financial assets and liabilities on January 1, 2008.
SFAS 157 establishes a framework for measuring the fair
value of financial assets and liabilities and requires certain
disclosures about fair value. The framework utilizes a fair
value hierarchy consisting of the following:
Level 1 inputs, which are observable inputs for
identical assets, such as quoted prices in an active market;
Level 2 inputs,
64
which are observable inputs for similar assets; and
Level 3 inputs, which are unobservable inputs.
The Companys only significant assets and liabilities
affected by the adoption of SFAS 157 are:
|
|
|
|
1)
|
Marketable securities held in connection with the Companys
deferred compensation and supplemental executive retirement
plans, and the plans corresponding liabilities. As of
December 31, 2008, the assets and liabilities related to
these plans each totaled $68 million, measured entirely
using Level 1 inputs.
|
|
|
2)
|
The Companys investment in The M Resort LLC convertible
note and embedded call option. The fair value of the convertible
note was measured using Level 2 inputs. The
fair value of the embedded call option was measured using
Level 3 inputs, consisting primarily of
estimates of future cash flows. See Comprehensive
income in Note 3 for valuation adjustment recognized
during 2008.
|
|
|
3)
|
The partial completion guarantee provided in connection with the
CityCenter credit facility, discussed in Note 13, which
fair value was measured using Level 3 inputs,
consisting of budgeted and historical construction costs.
|
Recently Issued Accounting Standards. The
following accounting standards were issued in 2007 and 2008 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 measurement period, and the
measurement of non-controlling interests, 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 became effective for the
Company on January 1, 2009. The Company does not believe
the adoption of SFAS 141R and SFAS 160 will have a
material impact on its consolidated financial statements.
Transfers of Financial Assets and Interests in Variable
Interest Entities. In December 2008, the FASB
issued FSP
FAS 140-4
and FIN 46(R)-8 Disclosures by Public Entities
(Enterprises) About Transfers of Financial Assets and Interests
in Variable Interest Entities. The FSP amends
SFAS 140 and FIN 46(R) to enhance the disclosures
required by the standards. The FSP enhances disclosures required
by FIN 46(R) to include a discussion of significant
judgments made in determining whether a variable interest entity
(VIE) should be consolidated, as well as the nature
of the risks and how an entitys involvement with a VIE
effects the financial position of the entity. The FSP is
effective for the Company for the fiscal year ended
December 31, 2008. The adoption of the FSP did not have a
material impact on the Companys consolidated financial
statements.
Equity Method Investment Accounting
Considerations. In November 2008, the Emerging
Issues Task Force (EITF) of the FASB ratified its
consensus on EITF
No. 08-6
Equity Method Investment Accounting Considerations
(EITF 08-6).
The EITF reached a consensus on the following four issues
addressed: a) the initial carrying value of an equity
method investment is determined in accordance with
SFAS 141(R); b) equity method investors should not
separately test an investees underlying assets for
impairment, but rather recognize other than temporary
impairments of an equity method investment in accordance with
APB Opinion 18; c) exceptions to recognizing gains from an
investees issuance of shares in earnings in accordance
with the SECs Staff Accounting Bulletin 51 were
removed to achieve consistency with SFAS 160; and
d) the guidance in APB Opinion 18 to account for a change
in the investors accounting from the equity method to the
cost method should still be applied.
EITF 08-6
is effective for the Company on January 1, 2009. The
Company does not believe the adoption of
EITF 08-6
will have a material impact on its consolidated financial
statements.
65
|
|
NOTE 4
|
ASSETS
HELD FOR SALE AND DISCONTINUED OPERATIONS
|
The asset and liabilities of TI are classified as held for sale
as of December 31, 2008. However, the results of its
operations have not been classified as discontinued operations
because the Company expects to continue to receive significant
cash flows from customer migration.
The following table summarizes the assets held for sale and
liabilities related to assets held for sale in the accompanying
consolidated balance sheets:
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
14,154
|
|
Accounts receivable, net
|
|
|
9,962
|
|
Inventories
|
|
|
3,069
|
|
Prepaid expenses and other
|
|
|
3,459
|
|
|
|
|
|
|
Total current assets
|
|
|
30,644
|
|
Property and equipment, net
|
|
|
494,807
|
|
Goodwill
|
|
|
7,781
|
|
Other assets, net
|
|
|
5,743
|
|
|
|
|
|
|
Total assets
|
|
|
538,975
|
|
|
|
|
|
|
Accounts payable
|
|
|
4,162
|
|
Other current liabilities
|
|
|
26,111
|
|
|
|
|
|
|
Total current liabilities
|
|
|
30,273
|
|
Other long-term obligations
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
30,273
|
|
|
|
|
|
|
Net assets
|
|
$
|
508,702
|
|
|
|
|
|
|
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 results of the Laughlin Properties and
Primm Valley Resorts are classified as discontinued operations
in the accompanying consolidated statements of operations for
the years ended 2007 and 2006. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Net revenues of discontinued operations
|
|
$
|
|
|
|
$
|
128,619
|
|
|
$
|
412,032
|
|
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
|
|
|
|
NOTE 5
|
CITYCENTER
TRANSACTION
|
In August 2007, the Company and Dubai World 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. In November 2007 the Company contributed the
CityCenter assets which the parties valued at $5.4 billion,
subject to certain adjustments. Infinity 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 was repaid in 2008 to CityCenter as a
result of a post-closing adjustment. The Company will continue
to serve as developer of CityCenter and, upon completion of
construction, will manage CityCenter for a fee.
The initial contribution of the CityCenter assets was 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;
66
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 met 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 Infinity
Worlds interest if Infinity World or 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. 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 Infinity 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,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Casino
|
|
$
|
243,600
|
|
|
$
|
266,059
|
|
Hotel
|
|
|
112,985
|
|
|
|
181,983
|
|
Other
|
|
|
46,437
|
|
|
|
50,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
403,022
|
|
|
|
498,857
|
|
Less: Allowance for doubtful accounts
|
|
|
(99,606
|
)
|
|
|
(85,924
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
303,416
|
|
|
$
|
412,933
|
|
|
|
|
|
|
|
|
|
|
67
|
|
NOTE 7
|
PROPERTY
AND EQUIPMENT, NET
|
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
7,449,254
|
|
|
$
|
7,728,488
|
|
Buildings, building improvements and land improvements
|
|
|
8,806,135
|
|
|
|
8,724,339
|
|
Furniture, fixtures and equipment
|
|
|
3,435,886
|
|
|
|
3,231,725
|
|
Construction in progress
|
|
|
407,440
|
|
|
|
552,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,098,715
|
|
|
|
20,237,219
|
|
Less: Accumulated depreciation and amortization
|
|
|
(3,809,561
|
)
|
|
|
(3,366,321
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,289,154
|
|
|
$
|
16,870,898
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 8
|
INVESTMENTS
IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
|
. Investments in and advances to unconsolidated affiliates
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
CityCenter Holdings, LLC CityCenter (50)%
|
|
$
|
3,581,188
|
|
|
$
|
1,421,480
|
|
Marina District Development Company Borgata (50)%
|
|
|
474,171
|
|
|
|
453,277
|
|
Elgin Riverboat Resort-Riverboat Casino Grand
Victoria (50)%
|
|
|
296,746
|
|
|
|
297,328
|
|
MGM Grand Paradise Limited Macau (50)%
|
|
|
252,060
|
|
|
|
258,298
|
|
Circus and Eldorado Joint Venture Silver Legacy (50)%
|
|
|
27,912
|
|
|
|
35,152
|
|
Turnberry/MGM Grand Towers The Signature at MGM
Grand (50)%
|
|
|
3,309
|
|
|
|
5,651
|
|
Other
|
|
|
7,479
|
|
|
|
11,541
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,642,865
|
|
|
$
|
2,482,727
|
|
|
|
|
|
|
|
|
|
|
Through December 31, 2008, the Company and Infinity World
had each made loans of $925 million to CityCenter, which
are subordinate to the credit facility, to fund construction
costs. During the fourth quarter of 2008, $425 million of
each partners loan funding was converted to equity and
each partner provided additional equity contributions of
$228 million. Under the terms of the credit facility
described below, the Company and Infinity World were each
required to make additional equity commitments of up to
$731 million as of December 31, 2008, which
requirement would be reduced by future qualifying financing
obtained by CityCenter. During the fourth quarter of 2008, the
Company recorded a liability equal to the present value of the
required future equity contributions, classified as Other
accrued liabilities in the accompanying consolidated
balance sheet, and a corresponding increase to its investment
balance. Subsequent to December 31, 2008, each partner made
additional contributions of $237 million each.
In October 2008, CityCenter closed on a $1.8 billion senior
secured bank credit facility. The credit facility requires the
Company and Infinity World to provide subordinated loans and
equity contributions which will be used to fund construction
costs prior to amounts being drawn under the credit facility. In
conjunction with the CityCenter credit facility, the Company and
Infinity World have entered into partial completion guarantees
on a several basis see Note 13.
During the year ended December 31, 2008 and 2007, the
Company incurred $46 million and $5 million,
respectively, of costs reimbursable by CityCenter, which was
comprised primarily of employee compensation, residential sales
costs, and certain allocated costs. Such costs are recorded as
Other operating expenses, and the reimbursement of
such costs is recorded as Other revenue in the
accompanying consolidated statements of operations.
68
During 2007, sales of units at The Signature at MGM Grand were
completed and the joint venture essentially ceased sales
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 accompanying
consolidated balance sheets.
The Company recognized the following related to its share of
profit from condominium sales, based on when sales were closed
in 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Income from joint venture
|
|
$
|
|
|
|
$
|
83,728
|
|
|
$
|
102,785
|
|
Gain on land previously deferred
|
|
|
|
|
|
|
8,003
|
|
|
|
14,524
|
|
Other income (loss)
|
|
|
|
|
|
|
776
|
|
|
|
(108
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
92,507
|
|
|
$
|
117,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys investment in unconsolidated affiliates does
not equal the venture-level equity due to various basis
differences. Basis differences related to depreciable assets are
being amortized based on the useful lives of the related assets
and liabilities and basis differences related to non-depreciable
assets are not being amortized. Differences between the
Companys venture-level equity and investment balances are
as follows: