UNITED STATESSECURITIESSTATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMForm 10-K
(Mark One)
   
(Mark One)
þ
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 2006
OR
  For the fiscal year ended December 31, 2008
OR
o
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period          to          
For the transition periodto
Commission FileNo. 0-16760001-10362
MGM MIRAGE
(Exact name of Registrant as specified in its charter)
   
DELAWARE
 88-0215232
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
incorporation or organization)
Identification Number)
3600 Las Vegas Boulevard South — Las Vegas, Nevada 89109
(Address of principal executive office) (Zip Code)
(702) 693-7120
(702) 693-7120
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
   
  Name of each exchange
Title of each class on which registered
Common Stock, $.01 Par Value
 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
 
 
Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yesþ     Noo
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yeso     Noþ
 
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:  Yesþ     Noo
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to thisForm 10-K:oþ
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See definitionthe definitions of “large accelerated filer,” “accelerated filer” and “large accelerated filer”“smaller reporting company” inRule 12b-2 of the Exchange Act (check one):
Large accelerated filerþ       Accelerated filero       Non-accelerated filerþAccelerated filer oNon-accelerated filer oSmaller reporting company o
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the Registrant is a shell company (as defined inRule 12b-2 of the Act):  Yeso     Noþ
 
The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant as of June 30, 20062008 (based on the closing price on the New York Stock Exchange Composite Tape on June 30, 2006)2008) was $5.1$4.2 billion. As of February 23, 2007, 284,165,655March 9, 2009, 276,557,345 shares of Registrant’s Common Stock, $.01 par value, were outstanding.
 
Portions of the Registrant’s definitive Proxy Statement for its 20072009 Annual Meeting of Stockholders are incorporated by reference into Part III of thisForm 10-K.
 

TABLE OF CONTENTS

PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESSCHEDULES.
NOTE 1 -- ORGANIZATION
NOTE 2 -- LIQUIDITY AND FINANCIAL POSITION
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
NOTE 4 -- ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
NOTE 5 -- CITYCENTER TRANSACTION
NOTE 6 -- ACCOUNTS RECEIVABLE, NET
NOTE 7 -- PROPERTY AND EQUIPMENT, NET
NOTE 8 -- INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
NOTE 9 -- GOODWILL AND OTHER INTANGIBLE ASSETS
NOTE 10 -- OTHER ACCRUED LIABILITIES
NOTE 11 -- LONG-TERM DEBT
NOTE 12 -- INCOME TAXES
SIGNATURESEX-10.3(15)
INDEX TO EXHIBITSEX-10.3(16)
EX-10.1(28)
EX-10.4(7)EX-10.3(17)
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-99EX-99.1
EX-99.2

PART I
ITEM 1.BUSINESS
MGM MIRAGE is referred to as the “Company” or the “Registrant,” and together with our subsidiaries may also be referred to as “we,” “us” or “our.”
OverviewLiquidity and Financial Position
 
For discussion of our liquidity and financial position, please see “Management’s 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 largestworld’s leading development companies with significant gaming companiesand resort operations. We believe the resorts we own, manage, and invest in the world and owns what we believe to beare among the world’s finest collection of casino resorts. Our strategy is predicated on creating resorts of memorable character, treating our employees well and providing superior service for our guests. 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. The Company grew significantly
Our strategy is based on developing and maintaining competitive advantages in 2000the following areas:
• Developing and maintaining a strong portfolio of resorts;
• Operating our resorts to ensure excellent customer service and maximize revenue and profit;
• Executing a sustainable growth strategy;
• Leveraging our brand and management assets.
Resort Portfolio
We execute our strategy through a portfolio approach, seeking to ensure that we own, invest in and manage resorts in each market segment that are superior to our competitors’ resorts. We also seek to own and invest in superior real estate assets, with a blend of developing these assets on our own, partnering with others, and strategically buying and selling real estate.
Our approach to resort ownership and investment is based on operating the acquisitionpremier 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 Mirage Resorts, Incorporatedour resorts are located in Nevada. In addition, we target markets with growth potential. We also believe there is growth potential in investing in and in 2005 withmanaging non-gaming resorts. See the acquisition of Mandalay Resort Group (“Mandalay”).“Sustainable Growth” and “Leveraging Our Brand and Management Assets” sections for further details on these initiatives.

Our Operating Casino Resorts
 
We have provided below certain information about our casino resorts as of December 31, 2006.2008. Except as otherwise indicated, we wholly own and operate the resorts shown below.
                                
   Approximate     Number of
 Approximate
     
 Number of
Guestrooms		 Casino
Square		   Gaming Guestrooms
 Casino Square
   Gaming
 
Name and Location and Suites Footage Slots (1) Tables(2) and Suites Footage Slots(1) Tables(2) 
Las Vegas Strip, Nevada
                 
Bellagio 3,933 155,000 2,365 144   3,933   160,000   2,320   151 
MGM Grand Las Vegas (3) 5,803 156,000 2,611 174 
Mandalay Bay (4) 4,756 157,000 2,010 120 
MGM Grand Las Vegas(3)  6,264   158,000   2,455   167 
Mandalay Bay(4)  4,752   160,000   1,962   117 
The Mirage 3,044 118,000 2,063 111   3,044   118,000   1,966   106 
Luxor 4,404 100,000 1,589 89   4,405   100,000   1,443   85 
Treasure Island (“TI”) 2,885 87,000 1,726 68 
Excalibur  3,981   91,000   1,532   67 
Treasure Island (“TI”)(5)  2,885   87,000   1,620   65 
New York-New York 2,024 84,000 1,850 75   2,025   84,000   1,724   70 
Excalibur 3,990 90,000 1,887 73 
Monte Carlo 3,002 102,000 1,612 74   3,002   102,000   1,556   63 
Circus Circus Las Vegas (5) 3,764 133,000 2,350 92 
Circus Circus Las Vegas(6)  3,764   126,000   1,986   90 
                  
Subtotal 37,605 1,182,000 20,063 1,020   38,055   1,186,000   18,564   981 
                  
Other Nevada
                 
Primm Valley Resorts(Primm)(6)
 2,642 137,000 2,816 93 
Circus Circus Reno(Reno)
 1,572 69,000 1,246 47   1,572   70,000   1,091   35 
Silver Legacy - 50% owned(Reno)
 1,710 87,000 1,677 68 
Gold Strike (Jean) (7)
 811 37,000 740 10 
Nevada Landing (Jean) (7)
 303 36,000 727 10 
Laughlin Properties(Laughlin)(8)
 2,524 102,000 2,199 72 
Silver Legacy — 50% owned(Reno)
  1,710   87,000   1,623   64 
Gold Strike(Jean)
  810   37,000   688   9 
Railroad Pass(Henderson)
 120 13,000 330 6   120   13,000   332   5 
Other Domestic Operations
 
 
Other Operations
                
MGM Grand Detroit(Detroit, Michigan)
 N/A 75,000 2,840 72   400   196,000   4,102   95 
Beau Rivage(Biloxi, Mississippi)(9)
 1,740 72,000 2,048 93 
Beau Rivage(Biloxi, Mississippi)
  1,740   75,000   2,050   93 
Gold Strike(Tunica, Mississippi)
 1,131 50,000 1,271 56   1,133   50,000   1,381   58 
Borgata - 50% owned(Atlantic City, New Jersey)
 1,971 137,000 4,068 178 
Grand Victoria - 50% owned(Elgin, Illinois)
 N/A 34,000 1,111 36 
         
MGM Grand Macau — 50% owned(Macau S.A.R.)
  593   215,000   829   376 
Borgata — 50% owned(Atlantic City, New Jersey)
  2,771   160,000   3,931   182 
Grand Victoria — 50% owned(Elgin, Illinois)
  —   35,000   1,144   30 
          
Grand Total 52,129 2,031,000 41,136 1,761   48,904   2,124,000   35,735   1,928 
                  
 
(1)Includes slot machines, video poker machines and other electronic gaming devices.
 
(2)Includes blackjack (“21”), baccarat, craps, roulette and other table games; does not include poker.
 
(3)Includes 7591,220 rooms available for rent in Tower 1 and Tower 2as of December 31, 2008 at The Signature at MGM Grand. Tower 1 was completed in 2006 with a total of 576 units. Tower 2 was completed in late 2006 but is still in the closing process, and has 576 units. Tower 3 will be completed in 2007, with 576 units.
 
(4)Includes the Four Seasons Hotel with 424 guest rooms and THEhotel with 1,117 suites.
 
(5)Includes Slots-a-Fun.
(6)Includes Primm Valley, Buffalo Bill’s and Whiskey Pete’s, along with the Primm Center gas station and convenience store. In October 2006,December 2008 we entered into an agreement to sell TI; the Primm Valley Resorts.sale is expected to close no later than March 31, 2009.
 
(7)(6)Gold Strike and Nevada Landing will be contributed to a joint venture that will develop a mixed-use community in Jean, Nevada. Nevada Landing is expected to close in April 2007.
(8)Includes Colorado Belle and Edgewater. In October 2006, we entered into an agreement to sell the Laughlin Properties.
(9)Beau Rivage reopened in August 2006 after having been closed for one year due to Hurricane Katrina.Slots-A-Fun.

 
More detailed information about each of our operating resorts can be found in Exhibit 99.1 to this Annual Report onForm 10-K, which Exhibit is incorporated herein by reference.
BellagioInvesting in Existing Resorts
 Bellagio is widely recognized as one of
We believe that ensuring our resorts are the premier destination 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 world. Located atpast. We have made significant investments in our resorts over the heart of the Las Vegas Strip, Bellagio has earned the prestigious Five Diamond award from the American Automobile Association (“AAA”) for the last six years. The resort is richly decorated, including a conservatory filled with unique botanical displays that change with the seasons. At the front of Bellagio is an eight-acre lake featuring over 1,000 fountains that come alive at regular intervalspast few years, we do not expect to reinvest significantly in a choreographed ballet of water, music and lights. Bellagio features 200,000 square feet of convention space for the discerning group planner. For both business and leisure customers, Bellagio’s restaurants offer the finest choices, including Five Diamond award winners Picasso and Le Cirque. Entertainment options includeO, produced and performed by Cirque du Soleil, the Light nightclub, and several other bars and lounges. Leisure travelers can also enjoy Bellagio’s expansive pool, world-class spa and Gallery of Fine Arts.our resorts in 2009 or 2010.
 MGM Grand Las Vegas
For instance, between 2003 and 2006 we invested a significant amount of capital at MGM Grand Las Vegas, located onwith additions such asKÁ, the corner of the Las Vegas Strip and Tropicana Avenue, is one of the largest casino resorts in the world, and is the largest to receive the AAA’s Four Diamond award. The resort’s guest rooms feature unique themes, including: West Wing, an area offering boutique-style rooms; Skylofts, ultra-suites on the 29th floor featuring the ultimate in personal service and recently awarded a Five Diamond rating by AAA; and the exclusive Mansion for premium gaming customers. MGM Grand Las Vegas features an extensive array of restaurants, including two new restaurants by renowned chef Joël Robuchon, an AAA Five Diamond rating recipient, Craftsteak, NOBHILL, SeaBlue, Pearl, Shibuya and Fiamma Trattoria. Other amenities include the Studio 54 nightclub, Tabu, the Ultra Lounge, Teatro, numerous retail shopping outlets, a 380,000 square foot state-of-the-art conference center, and an extensive pool and spa complex.
     MGM Grand Las Vegas features the spectacularacclaimed showKÀ, by Cirque du Soleil, performed in a custom-designed theatre seating almost 2,000 guests. The MGM Grand Garden is a special events center with a seating capacity of over 16,000 that provides a venue for premier concerts, as well as championship boxingSoleil; the Skylofts and other special events.
     The Signature at MGM Grand is a condominium-hotel development that will ultimately feature three 576-unit towers. We own a 50% interest in the entity developing The Signature at MGM Grand and once each tower is complete, we manage the tower as a hotel for owners electing to rent their units. Tower 1 was completed in 2006, and unit sales closed and hotel occupancy commenced in mid-2006. Tower 2 is complete and the majority of unit sales are closed; hotel occupancy had commenced on a portion of the units at December 31, 2006. Tower 3 will be completed in 2007.
Mandalay Bay
     Mandalay Bay is the first major resort on the Las Vegas Strip to greet visitors arriving by automobile from southern California. This AAA Four Diamond, South Seas-themed resort features numerous restaurants, such as Charlie Palmer’s Aureole, Wolfgang Puck’s Trattoria Del Lupo, China Grill, Hubert Keller’s Fleur de Lys, and Border Grill. Mandalay Bay offers multiple entertainment venues that include a 12,000-seat special events arena, a 1,760-seat showroom featuring the Broadway hitMamma Mia!, the House of Blues, and the Rumjungle restaurant and nightclub. In addition, Mandalay Bay features the Shark Reef, exhibiting sharks and rare sea predators. Mandalay Bay has an extensive pool and beach area, including a wave pool and Moorea, a European-style “ultra” beach, as well as a 30,000 square-foot spa.
     Included within Mandalay Bay is a Four Seasons Hotel with its own lobby, restaurants and pool and spa, providing visitors with a luxury AAA Five-Diamond-rated hospitality experience. THEhotel is an all-suite hotel tower within the Mandalay Bay complex. THEhotel includes its own spa and fitness center, a lounge andWest Wing room enhancements; two restaurants, including Mix Las Vegas, created by famed chef Alain Ducasse and located on the top floor of THEhotel.
     The Mandalay Bay Conference Center is a convention and meeting complex adjacent to Mandalay Bay. The complex includes more than one million square feet of exhibit space. Including the Conference Center and Mandalay Bay’s other convention areas, Mandalay Bay offers almost two million gross square feet of conference and exhibit space. Connecting Mandalay Bay to Luxor is Mandalay Place, a retail center that includes approximately 90,000 square feet of retail space and approximately 40 boutique stores and restaurants, including stores by Nike Golf and Urban Outfitters,highly acclaimed restaurants by celebrity chefs Pierro Selvaggio, Hubert KellerJoël Robuchon; and Rick Moonen,new poker and the burlesque nightclub Forty Deuce.race and sports areas. That resort


2

The Mirage
earned $290 million of operating income in 2007, a dramatic increase from the $127 million earned in 2002. Similarly, we transformed The Mirage, is a luxurious, tropically-themed resort located on a site sharedmany market observers credit with TI atchanging the centerface of the Las Vegas Strip. The Mirage is recognized by AAA as a Four Diamond resort. The exteriorWe felt strongly about the allure of the resort, is landscaped with palm trees, abundant foliage and more than four acres of lagoons and other water features centered around a 54-foot volcano which erupts every evening at regular intervals, with flamesbut also believed that spectacularly illuminate the front of the resort. Inside the front entrance is an atrium with a tropical garden and additional water features capped by a 100-foot-high glass dome, designed to replicate the sights, sounds and fragrances of the South Seas. Located at the rear of the hotel, adjacent to the swimming pool area, is a dolphin habitat featuring Atlantic bottlenose dolphins andThe Secret Garden of Siegfried & Roy, an attraction that allows guests to view the beautiful exotic animals of Siegfried & Roy, the world-famous illusionists.
     The Mirage features a wide array of restaurants, including Kokomos, Japonais, Fin, Stack, Cravings, and Carnegie Deli. Several of these restaurants have been recently opened or renovated. Entertainmentcustomers need fresh, updated experiences. Therefore, we invested significant capital at The Mirage is highlighted byLove, the newest show from Cirque du Soleilbetween 2004 and based on the works of the Beatles. The Mirage also features Danny Gans, the renowned singer/impersonator, and headline entertainment. Nightlife options at The Mirage include Jet,2006, adding several new restaurants; a 16,000 square-footcategory-defining nightclub,Jet; upgraded high-limit gaming areas; and the Beatles-themed lounge Revolution. The Mirage also has numerous retail shopping outlets and 170,000 square feet of convention space, including the 90,000-square foot Mirage Events Center.
LuxorLove
     Luxor is an Egyptian-themed hotel and casino complex situated between Mandalay Bay and Excalibur, which are all connected by a tram. Luxor offers 20,000 square feet of convention space, a 20,000-square-foot spa, and food and entertainment venues on three different levels beneath a soaring hotel atrium. Above the pyramid’s casino, the property offers a special format motion base ride and an IMAX 2D/3D theater. Luxor’s other public areas include restaurants, several cocktail lounges and a variety of specialty shops. The Luxor features headline entertainment, a show by the comedian Carrot Top, and the adult dance revueFantasy.
Treasure Island (“TI”)
     TI is a Caribbean-themed resort located next to The Mirage and also holds the AAA Four Diamond rating. TI and The Mirage are connected by a monorail and a pedestrian bridge links TI to the Fashion Show Mall. TI features several restaurants, including Social House, Isla Mexican Kitchen, Kahunaville and Canter’s Deli. Bars and lounges at TI include Mist and Tangerine, which features indoor/outdoor space with views of the Las Vegas Strip and nightly burlesque entertainment. The showroom at TI featuresMystère, produced and performed by Cirque du Soleil. The SirensMirage earned $108 million of TI Show is performedoperating 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 “Management’s Discussion and Analysis.” For instance, we invested in new amenities and remodeled the standard rooms at the frontMandalay 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 the resort, providing a significant presence to visitorsland holdings. We own approximately 700 acres of land on the Las Vegas Strip, and beckoning visitors into TI.with a meaningful portion of those acres undeveloped or considered by us to be under-developed.
 
New York-New YorkRisks Associated with Our Portfolio Strategy
 New York-New York is located at the corner of the Las Vegas Strip and Tropicana Avenue. Pedestrian bridges link New York-New York with both MGM Grand Las Vegas and Excalibur.
The architecture at New York-New York replicates many of New York City’s landmark buildings and icons, including the Statue of Liberty, the Empire State Building, Central Park, the Brooklyn Bridge and a Coney Island-style roller coaster. The casino features highly themed interiors includingPark Avenuewith retail shops, aCentral Parksetting in the central casino area, andLittle Italywith its traditional food court set inside a typical residential neighborhood. New York-New York also features several restaurants and numerous bars and lounges, including nationally recognized Coyote Ugly and ESPNZone and Nine Fine Irishmen, an authentic Irish Pub. New York-New York also featuresZumanityby Cirque du Soleil.
Excalibur
     Excalibur is a castle-themed hotel and casino complex situated immediately north of Luxor at the corner of the Las Vegas Strip and Tropicana Avenue. Excalibur’s public areas include a Renaissance fair, a medieval village, an amphitheater with a seating capacity of nearly 1,000 where mock jousting tournaments and costume drama are presented nightly, two dynamic motion theaters, various artisans’ booths and medieval games of skill. In addition, Excalibur has a buffet restaurant, several themed restaurants, as well as several snack bars, cocktail lounges and a variety of specialty shops. The property also features a 13,000-square-foot spa. Excalibur, Luxor and Mandalay are connected by a tram, allowing guestsprincipal risk factors relating to travel easily among these resorts.

3

Monte Carlo
     Monte Carlo is located on the Las Vegas Strip adjacent to New York-New York. Monte Carlo was recently awarded its first Four Diamond rating by AAA. Monte Carlo has a palatial style reminiscent of the Belle Époque, the French Victorian architecture of the late 19th century. The resort has amenities such as fine dining at Andre’s, a brew pub featuring live entertainment, a health spa, a beauty salon, and a 1,200-seat theatre featuring the world-renowned magician Lance Burton.
Circus Circus Las Vegas
     Circus Circus Las Vegas is a circus-themed hotel and casino complex situated on the north end of the Las Vegas Strip. From a “Big Top” above the casino, Circus Circus Las Vegas offers its guests a variety of circus acts performed daily, free of charge. A mezzanine area overlooking the casino has a circus midway with carnival-style games and an arcade that offers a variety of amusements and electronic games. Specialty restaurants, a buffet, a coffee shop, snack bars, several cocktail bars and a variety of specialty shops are also available to guests. The Adventuredome, covering approximately five acres, offers theme park entertainment that includes thrills rides for adults and children, themed carnival-style midway games, an arcade, food kiosks and souvenir shops, all in a climate-controlled setting under a giant space-frame dome.
Primm Valley Resorts
     The Primm Valley Resorts consist of three hotel-casinos on both sides of Interstate 15 at the California/Nevada state line in Primm, Nevada, approximately 40 miles south of Las Vegas. Buffalo Bill’s Resort & Casino, Primm Valley Resort & Casino, Whiskey Pete’s Hotel & Casino and three gas stations including the Primm Center (collectively, the “Primm Valley Resorts”) form a major destination location and offer visitors driving from California the first opportunity to wager upon entering Nevada and the last opportunity before leaving.
     Primm Valley Resorts offer an array of amenities and attractions, including a 25,000-square foot conference center, numerous restaurants, and a variety of amusement rides. The 6,100-seat Star of the Desert Arena hosts top-name entertainers. Connected to Primm Valley Resorts is the Fashion Outlet of Las Vegas, a shopping mall containing approximately 400,000 square feet of retail space with over 100 retail outlet stores. The Fashion Outlet is owned and operated by a third party.
     In October 2006, we entered into an agreement to sell the Primm Valley Resorts for $400 million, subject to regulatory approval and other customary closing conditions. We expect the sale to be completed by the second quarter of 2007.
Circus Circus Reno
     Circus Circus Reno is a circus-themed hotel and casino complex situated in downtown Reno, Nevada. Like its sister property in Las Vegas, Circus Circus Reno offers its guests a variety of circus acts performed daily, free of charge. A mezzanine area has a circus midway with carnival-style games and an arcade that offers a variety of amusements and electronic games. The property also has several restaurants, cocktail lounges, and retail shops.
Silver Legacy
     Through a wholly-owned entity, we are a 50% participant with Eldorado Limited Liability Company in Circus and Eldorado Joint Venture, which owns and operates Silver Legacy, a hotel-casino and entertainment complex situated in downtown Reno, Nevada. Silver Legacy is located between Circus Circus Reno and the Eldorado Hotel & Casino, which is owned and operated by an affiliate of our joint venture partner at Silver Legacy. Silver Legacy is connected at the mezzanine level with Circus Circus Reno and the Eldorado by enclosed climate-controlled skyways above the streets between the respective properties. The resort’s exterior is themed to evoke images of historical Reno. Silver Legacy features several restaurants and bars, a special events center, custom retail shops, a health spa and an outdoor pool and sun deck.
Gold Strike and Nevada Landing
     We refer to Gold Strike and Nevada Landing collectively as the “Jean Properties.” Gold Strike is an “Old West"-themed hotel-casino located on the east side of Interstate-15 in Jean, Nevada. Jean is located approximately 25 miles south of Las Vegas and approximately 15 miles north of the California-Nevada state line. The property has, among other amenities, a swimming pool and spa, several restaurants, a banquet center, a gift shop and an arcade. The casino has a stage bar with regularly scheduled live entertainment and a casino bar.

4

     Nevada Landing is a turn-of-the-century riverboat-themed hotel-casino located in Jean across Interstate 15 from Gold Strike. Nevada Landing includes a specialty restaurant, a full-service coffee shop, a buffet, a snack bar, a gift shop, a swimming pool and spa and a 300-guest banquet facility.
     In February 2007, we entered into an operating agreement with Jeanco Realty Development, LLC, a venture owned by American Nevada Corporation and Diamond Resorts, LLC, to form a 50/50 joint venture whose purpose is to develop a mixed-use community in Jean, Nevada. We will contribute the Jean properties and the surrounding land to the joint venture. We also determined in February 2007 that Nevada Landing would close in April 2007.
The Laughlin Properties
     The Laughlin Properties consist of Colorado Belle and Edgewater. Colorado Belle is situated on the bank of the Colorado River in Laughlin, Nevada, approximately 90 miles south of Las Vegas. Colorado Belle features a 600-foot replica of a Mississippi riverboat, and also includes a buffet, a coffee shop, specialty restaurants, a microbrewery, snack bars and cocktail lounges, as well as a gift shop and other specialty shops. Edgewater is located adjacent to Colorado Belle along the Colorado River. Edgewater’s facilities include a specialty restaurant, a coffee shop, a buffet, a snack bar and cocktail lounges.
     In October 2006, we entered into an agreement to sell the Laughlin Properties for $200 million, subject to regulatory approval and other customary closing conditions. We expect the sale to be completed by the second quarter of 2007.
Railroad Pass
     Railroad Pass is located in Henderson, Nevada, a suburb located southeast of Las Vegas, and is situated along US Highway 93, the direct route between Las Vegas and Phoenix, Arizona. The property includes, among other amenities, full-service restaurants, a buffet, a gift shop, a swimming pool and a banquet facility. In contrast with our other Nevada properties, Railroad Pass caters to local residents, particularly from Henderson and Boulder City.
MGM Grand Detroit
     MGM Grand Detroit is our interim casino facility in Detroit, Michigan. MGM Grand Detroit is one of three casinos licensed in Detroit and is operated by MGM Grand Detroit, LLC. MGM Grand Detroit, Inc., our wholly-owned subsidiary, holds a controlling interest in MGM Grand Detroit, LLC. A minority interest in MGM Grand Detroit, LLC is held by Partners Detroit, LLC, a Michigan limited liability company owned by residents and entities located in the Detroit metropolitan area. MGM Grand Detroit’s interior is decorated in an Art Deco motif with themed bars, a VIP lounge and several restaurants. The site is conveniently located off the Howard Street exit from the John C. Lodge Expressway in downtown Detroit, and has parking for over 3,000 vehicles in two parking garages and additional on-site covered parking.
Beau Rivage
     Beau Rivage reopened in August 2006, after being closed for one year due to Hurricane Katrina. Beau Rivage is located on a beachfront site where Interstate 110 meets the Gulf Coast in Biloxi, Mississippi. Beau Rivage features several new restaurants including Olives, BR Prime and Jia, a 1,550-seat state-of-the-art theatre, a state-of-the-art convention center, extensive pool and a world-class spa and salon.
Gold Strike-Tunica
     Gold Strike-Tunica is a dockside casino located along the Mississippi River, 20 miles south of Memphis and approximately three miles west of Mississippi State Highway 61, a major north/south highway connecting Memphis with Tunica County. The property features an 800-seat showroom, a coffee shop, a specialty restaurant, a buffet, a snack bar and several cocktail lounges. Gold Strike-Tunica is part of a three-casino development covering approximately 72 acres. The other two casinos are owned and operated by unaffiliated third parties. We also own an undivided one-half interest in an additional 388 acres of land that may be used for future development.

5

Borgata
     The Borgata Hotel Casino and Spa is located at Renaissance Pointe in Atlantic City, New Jersey. In addition to its guest rooms and suites and extensive gaming floor, Borgata includes several specialty restaurants, retail shops, a European-style health spa, meeting space and unique entertainment venues. Borgata was the first new casino in Atlantic City in over 13 years when it opened in July 2003. Through a wholly-owned subsidiary, we own 50% of the limited liability company that owns Borgata. Boyd Gaming Corporation (“Boyd”) owns the other 50% and also operates the resort.
     Borgata recently expanded its gaming and non-gaming amenities, with additional table games and slot machines, an expanded poker room and race book, and additional restaurant, entertainment and other amenities. Additionally, Borgata has plans to add another hotel tower, the Water Club at Borgata, featuring 800 guestrooms and suites, along with a new spa, parking garage and meeting rooms. This $400 million project is expected to be completed in early 2008. Neither project is expected to require contributions from us, as existing operating cash flow and Borgata’s recently renegotiated bank credit facility are anticipated to provide for the cost of the expansions.
Grand Victoria
     Through wholly-owned entities, we are a 50% participant with RBG, L.P. in an entity which owns Grand Victoria, a Victorian-themed riverboat casino and land-based entertainment complex in Elgin, Illinois, a suburb approximately 40 miles northwest of downtown Chicago. The riverboat offers dockside gaming, which means its operation is conducted at dockside without cruising. The property also features a dockside complex that contains an approximately 83,000-square-foot pavilion with a buffet, a fine dining restaurant, a VIP lounge and a gift shop.
Golf Courses
     We own and operate an exclusive world-class golf course, Shadow Creek, designed by Tom Fazio and located approximately ten miles north of our Las Vegas Strip resorts. Shadow Creek is ranked 3rd in Golf Digest’s ranking of America’s 100 Greatest Public Courses. We also own and operate the Primm Valley Golf Club, located four miles south of the Primm Valley Resorts in California, which includes two 18-hole championship courses. These golf courses were also designed by Tom Fazio. The Primm Valley Golf Club is not being sold as part of the transaction to sell the Primm Valley Resorts. We also own Fallen Oak, a championship golf course also designed by Tom Fazio, located approximately 20 miles from Beau Rivage. Fallen Oak opened in November 2006.
Future Development
     The following sections discuss our current and potential development opportunities. We regularly evaluate possible expansion and acquisition opportunities in both the domestic and international markets. These opportunities may include the ownership, management and operationportfolio 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. Development and operation of any gaming facility in a new jurisdiction is 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.resorts are:
 We cannot be sure that we will decide or be able to proceed with any acquisition or expansion opportunities. In addition, the projects discussed below 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.
CityCenter
     We are developing CityCenter 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 470,000 square feet of retail shops, dining and entertainment venues; and approximately 2.3 million square feet of residential space in approximately 2,700 luxury condominium and condominium-hotel units in multiple towers.
     We believe CityCenter will cost approximately $7 billion, excluding land costs. After estimated proceeds of $2.5 billion from the sale of residential units, we believe the net project cost will be approximately $4.5 billion. CityCenter is located on a 67-acre site with a carrying value of approximately $1 billion. We expect CityCenter to open in late 2009.

6

Detroit, Michigan
     MGM Grand Detroit, LLC has operated an interim casino facility in downtown Detroit since July 1999. We are currently developing a permanent hotel-casino complex located near the site of our interim facility.
     The permanent complex is expected to open in late 2007 at a cost of approximately $750 million, excluding license and land costs, and will feature a 400-room hotel, 100,000-square foot casino, numerous restaurant and entertainment amenities, and spa and convention facilities. The permanent casino is located on a 25-acre site with a carrying value of approximately $50 million. In addition, we recorded license rights with a carrying value of $100 million as a result of MGM Grand Detroit’s obligations to the City of Detroit in connection with the permanent casino development agreement.
Macau
     We own 50% of MGM Grand Paradise Limited, an entity which is developing, and will operate, MGM Grand Macau, a hotel-casino resort in Macau S.A.R. Pansy Ho Chiu-king owns the other 50% of MGM Grand Paradise Limited. MGM Grand Macau will be located on a prime site and will feature at least 345 table games and 1,035 slots with room for significant expansion. Other features will include approximately 600 rooms, suites and villas, a luxurious spa, convertible convention space, a variety of dining destinations, and other attractions. MGM Grand Macau is estimated to cost $850 million, excluding license and land rights costs. The subconcession agreement, which allows MGM Grand Paradise Limited to operate a casino in Macau, cost $200 million and the land rights agreement with the government of Macau is estimated to cost $60 million. Construction of MGM Grand Macau began in the second quarter of 2005 and the resort is anticipated to open in late 2007. We have invested $266 million in the venture, and are committed to loaning the venture up to an additional $9 million. The venture has obtained a $700 million bank credit facility which, along with equity contributions and shareholder loans, is expected to be sufficient to fund the construction of MGM Grand Macau.
New York Racing Association
     We have entered into a definitive agreement with the New York Racing Association (“NYRA”) to manage video lottery terminals (“VLTs”) at NYRA’s Aqueduct horseracing facility in metropolitan New York. Subject to receipt of requisite New York State and Bankruptcy Court approvals, we will assist in the development of the facility, including providing project financing up to $190 million, and will manage the facility for a term of five years (extended automatically if the financing provided by us is not fully repaid) for a fee. We believe, based on recent legislative changes, that our agreement with respect to installations of VLTs at Aqueduct would extend past the expiration of NYRA’s current racing franchise and would be binding on any successor to NYRA in the event NYRA is not granted a new racing franchise. NYRA’s recent filing for reorganization under Chapter 11 has introduced additional uncertainties, but we remain committed to the development once these uncertainties are resolved.
Atlantic City, New Jersey
     We own approximately 130 acres on Renaissance Pointe in Atlantic City, New Jersey. We lease ten acres to Borgata under long-term leases for use in its current operations and for its expansion. Of the remaining 120 acres, approximately 72 acres are suitable for development. We lease nine of these developable acres to Borgata on a short-term basis for surface parking and a portion of the remaining acres consists of common roads, landscaping and master plan improvements which we designed and developed as required by our agreement with Boyd. We own an additional 15 developable acres in the Marina District near Renaissance Pointe.
     We must apply for and receive numerous governmental permits and satisfy other conditions before construction of a new resort on the Renaissance Pointe site could begin. No assurance can be given that we will develop a casino resort in New Jersey, or its ultimate schedule, size, configuration or cost if we do develop a casino resort.
United Kingdom
     The Gambling Act 2005 includes authorization for only one initial regional casino (unlimited table games and a maximum of 1,250 slot machines) and eight large casinos (unlimited table games and a maximum of 150 slot machines), a significant reduction from previous proposals. The Gambling Act 2005 allows for an increase in the number of regional casinos, but it is uncertain whether more regional casinos will be approved in the near term. In January 2007, the Casino Advisory Panel recommended that the first regional casino license should be awarded to Manchester. The Company continues to evaluate potential opportunities in the United Kingdom.

7

Mashantucket Pequot Tribal Nation
     We have entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Ledyard, Connecticut. Under the strategic alliance:
 •WeOur limited geographic diversification — our major resorts are consulting with MPTNconcentrated on the Las Vegas Strip and some of our largest competitors operate in the development of a new $700 million casino resort currently under construction adjacent to the existing Foxwoods casino resort. The new resort will utilize the “MGM Grand” brand name and is scheduled to open in Spring 2008.more gaming markets than we do;
 
 •There are a number of gaming facilities located closer to where our customers live than our resorts;
 • Additional new hotel-casinos and expansion projects at existing Las Vegas hotel-casinos are under construction or have been proposed. We have formed a jointly owned company with MPTN — Unity Gaming, LLC —are unable to acquire or developdetermine to what extent increased competition will affect our future gaming and non-gaming enterprises. We will provide a loan of up to $200 million to finance a portion of MPTN’s investment in joint projects.operating results.
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.
Mubadala Development CompanyGeneral
 
We have signed a memorandum of understanding for a strategic relationship with Mubadala Development Company of Abu Dhabi, U.A.E., to pursue non-gaming luxury hotel development globally. The parties intend to create a joint venture to pursue the developments, originally targeting locations in Abu Dhabi, Las Vegasprimarily own and the United Kingdom.
China
     We have signed a memorandum of understanding with the Diaoyutai State Guesthouse in Beijing, People’s Republic of China, to form a joint venture to develop luxury non-gaming hotels and resorts globally, initially targeting locations in the People’s Republic of China. We are in advanced negotiations on the definite agreement.
Operations
     We operate primarily in one segment, the operation of casino resorts, which includes offering gaming, hotel, dining, entertainment, retail and other resort amenities. Over half of our net revenue is now 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. We believe that we own several of the premier casino resorts in the world, and a main focus of our strategy is to continually reinvest in these resorts to maintain our competitive advantage.
 
As a resort-based company, our operating results are highly dependent on the volume of customers at our resorts, which in turn impacts the price we can charge for our hotel rooms and other amenities. 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.


3

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. Since we believe that the number of walk-in customers also affects the success of our casino resorts, we design our facilities to maximize their attraction to guests of other hotels.

8

     We utilize technology to maximize revenue and efficiency in our operations. We are in the process of implementing our Players Club program to the major Mandalay resorts. When the process is complete, Players Club will link our major resorts, and consolidate all slots and table games activity for customers with a Players Club account. Under the combined program, customers will qualify for benefits across all of these resorts, regardless of where they play. We believe that our Players Club enables us to more effectively market to our customers. A significant portion of the slot machines at our resorts operate with International Game Technology’s EZ-Pay™ cashless gaming system, including the Mandalay resorts where we recently converted many of the slot machines to EZ-Pay™. We believe that this system enhances the customer experience and increases the revenue potential of our slot machines.
 Technology is a critical part of our strategy in non-gaming
Customers 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 other MGM MIRAGE resorts to their hotel accounts. We are implementing a new hotel management system at most of our major resorts, started in 2006 and continuing in 2007 and 2008, which we expect will enhance our guest service and improve our yield management across our portfolio of resorts.
Marketing and Competition
General
 
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:
 • Locating our resorts in desirable leisure and business travel markets, and operating at superior sites within those markets.markets;
 
 • Constructing and maintaining high-quality resorts and facilities, including luxurious guestrooms along with premier dining, entertainment and retail amenities;
 
 • Recruiting, training and retaining well-qualified and motivated employees who provide superior and friendly customer service;
 
 • Providing unique, “must-see” entertainment attractions; and
 
 • Developing distinctive and memorable marketing and promotional programs.
Customers and Competition
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 132,600141,000 guestrooms in Las Vegas at December 31, 2006, down slightly2008, up 6% from approximately 133,200133,000 rooms at December 31, 2005.2007. Las Vegas visitor volume was 38.937.5 million in 2006, up slightly2008, a decrease of 4% from the 38.639.2 million reported for 2005.2007.
 
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.

9

 
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


4

on the Las Vegas Strip, and additional expansion in California could have a further adverse effect on these resorts. Our Nevada resorts not located in Las Vegas appeal primarily to middle-income customers attracted by room, food and beverage and entertainment prices that are lower than those offered by major Las Vegas hotel-casinos. Our target customer for these resorts is the value-oriented leisure traveler and the value-oriented local customer.
 
Outside Nevada, our wholly-owned resorts mainly compete for customers in local gaming markets, where location is a critical success factor.factor to success. In Tunica, Mississippi, one of our competitors is closer to Memphis, the area’s 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.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 south Florida leisure market, and with casinos in the Bahamas.
 
Our unconsolidated affiliates mainly compete for customers against casino resorts in their respective markets, and in some cases against our wholly-owned operations.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 and other Nevada resorts. Our major Las Vegas resorts offer luxury suite packages that include golf privileges at Shadow Creek. In connection with our marketing activities, we also invite our premium gaming customers to play Shadow Creek on a complimentary basis. We use Primm Valley Golf Club forAdditionally, marketing purposes at our Las Vegas and Primm resorts, including offering room and golf packages at special rates. Marketing efforts at Beau Rivage will benefit from the newly opened Fallen Oak golf course just 20 minutes north of Beau Rivage.
 
Competitive RisksEmployees and Management
 The principal negative factors relating
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, arebest-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 competitive position are:
•Our limited geographic diversification —customers. A large number of the slot machines at our major resorts are concentrated on the Las Vegas Strip and some of our largest competitors operate in more gaming markets than we do — though we feel it is important to selectively operate in markets with stable regulatory environments;
•There are a number of gaming facilities located closer to where our customers live than our resorts;
•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;
•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; and
•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.

10
5

Control Over Gaming Activitiesresorts operate with International Game Technology’s 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.
GeneralInternal 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.disbursements and other activities, such as cash transaction reporting. These controls include:
 • Locked cash boxes on the casino floor;
 
 • Daily cash and coin counts performed by employees who are independent of casino operations;
 
 • Constant observation and supervision of the gaming area;
 
 • Observation and recording of gaming and other areas by closed-circuit television;
 
 • Constant computer monitoring of our slot machines; and
 
 • Timely analysis of deviations from expected performance.
Issuance of Markers
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. A significant portion of our Company’s accounts receivable, for amounts unpaid resulting from markers which are not collectible through banking channels, is owed by major casino customers from the Far East. 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.
 
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:
• 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;


6

• 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
• 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.
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 a67-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 our72-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:
• Development and operation of gaming facilities in new or existing jurisdictions are subject to many contingencies. Several of these contingencies are outside of our control and may include the passage of appropriate gaming legislation, the issuance of necessary permits, licenses and approvals, the availability of appropriate financing and the satisfaction of other conditions;
• Expansion projects involve risks and uncertainties. For instance, the design, timing and costs of the projects may change and are subject to risks attendant to large-scale projects.
Leveraging Our Brand and Management Assets
We also seek to leverage our management expertise and well-recognized brands through strategic partnerships and international expansion opportunities. We feel that several of our brands, particularly the “MGM Grand” brand, are well suited to new projects in both gaming and non-gaming developments. The recently opened MGM Grand Macau 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 Hospitality’s 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, People’s Republic of China, to develop luxury non-gaming hotels and resorts globally, initially targeting prime locations, including Beijing, in the People’s 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, 2006,2008, we had approximately 56,80046,000 full-time and 13,20015,000 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. Our contract with the Culinary UnionIn August 2007, we entered a new five-year collective bargaining agreement covering approximately 21,000 employees at most of our Las Vegas Strip properties expires in May 2007; the contractemployees, not including MGM Grand Las Vegas. The collective bargaining agreement covering approximately 4,000 employees at MGM Grand does not expireLas Vegas expired in 2007.2008. We have signed an extension of such agreement and are currently negotiating a new agreement. In addition, our contract with various unionsin October 2007 we entered into a new four-year agreement covering approximately 1,7002,900 employees at MGM Grand Detroit expires in October 2007.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 9999.2 to this Annual Report onForm 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.

11
9

Forward-Looking Statements
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
 
ThisForm 10-K and our 20062008 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 ourForms 10-Q and8-K, as well as press releases and other materials we release to the public. Any or all of our forward-looking statements in thisForm 10-K, in our 20062008 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 thisForm 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 ourForms 10-K, 10-Q10-K,10-Q and8-K reports to the Securities and Exchange Commission (“SEC”). Also note that we provide the followinga discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business.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.
Factors that May Affect Our Future Results
     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.
•We have significant indebtedness. At December 31, 2006, we had approximately $13 billion of indebtedness. The interest rate on a large portion of our long-term debt will be subject to fluctuation based on changes in short-term interest rates and the level of debt-to-EBITDA (as defined) under the provisions of our senior credit facility. Our current senior credit facility and the indentures governing our debt securities do not prohibit us from borrowing additional funds in the future. Our interest expense could increase as a result of these factors. Additionally, our indebtedness could increase our vulnerability to general adverse economic and industry conditions, limit our flexibility in planning for or reacting to changes in our business and industry, limit our ability to borrow additional funds, and place us at a competitive disadvantage compared to other less leveraged competitors. Our ability to reduce our outstanding debt will be subject to our future cash flows, other capital requirements and other factors, some of which are not within our control.
•Our casinos in Las Vegas and elsewhere are destination resorts that compete with other destination travel locations throughout the United States and the world. We do not believe that our competition is limited to a particular geographic area, and gaming operations in other states or countries could attract our customers. To the extent that new casinos enter our markets or hotel room capacity is expanded by others in major destination locations, competition will increase. Major competitors, including new entrants, have either recently expanded their hotel room capacity or are currently expanding their capacity or constructing new resorts in Las Vegas. Also, the recent growth of gaming in areas outside Las Vegas, including California, has increased the competition faced by our operations in Las Vegas and elsewhere. In particular, as large scale gaming operations in Native American tribal lands increase, competition will increase.

12

•The expansion of Native American gaming in California has already impacted our operations. According to the California Gambling Control Commission, more than 60 compacts with tribes had been approved by the federal government as of December 31, 2006, with more than 50 of the tribes legally operating casinos in California in accordance with these compacts. Additional expansion of gaming in California could have an adverse impact on our results of operations.
•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. For instance, the gaming tax rate in Michigan was increased in 2004. Also, in 2006, Illinois passed legislation requiring a revenue-based payment to a trust established for the benefit of the horse-racing industry in Illinois.
•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 or economic slowdown could cause a reduction in visitation to our resorts, which would adversely affect our operating results.
•Certain of our casino properties are located in areas that may be subject to extreme weather conditions, including, but not limited to, hurricanes. Such extreme weather conditions may interrupt our operations, damage our properties, and reduce the number of customers who visit our facilities in such areas. Although we maintain both property and business interruption insurance coverage for certain extreme weather conditions, such coverage is subject to deductibles and limits on maximum benefits, including limitation on the coverage period for business interruption, and we cannot assure you that we will be able to fully insure such losses or fully collect, if at all, on claims resulting from such extreme weather conditions. Furthermore, such extreme weather conditions may interrupt or impede access to our affected properties and may cause visits to our affected properties to decrease for an indefinite period. For example, in August 2005, Hurricane Katrina caused significant damage to our Beau Rivage resort, which remained closed for a year. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Statement Impact of Hurricane Katrina.”
•We are a large consumer of electricity and other energy. Accordingly, increases in energy costs, such as those experienced recently may have a negative impact on our operating results. Additionally, higher energy and gasoline prices which affect our customers may result in reduced visitation to our resorts and a reduction in our revenues.
•Many of our customers travel by air. As a result, the cost and availability of air service and the impact of any events which disrupt air travel, can affect our business. Additionally, there is one principal interstate highway between Las Vegas and Southern California, where a large number of our customers reside. Capacity constraints of that highway or any other traffic disruptions may affect the number of customers who visit our facilities.
•Leisure and business travel, especially travel by air, are particularly susceptible to global geopolitical events, such as terrorist attacks or acts of war or hostility, which can create economic and political uncertainties that could adversely impact our business levels. Furthermore, although we have been able to purchase some insurance coverage for certain types of terrorist acts, insurance coverage against loss or business interruption resulting from war and some forms of terrorism continues to be unavailable.

13

•Our joint venture for the construction and operation of a hotel-casino in Macau S.A.R. involves significant risks. The facility, MGM Grand Macau, will be jointly owned and operated by the two shareholders. MGM Grand Macau’s operations will be subject to unique risks, including risks related to: (a) Macau’s 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, any 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, including foreign currency risks, foreign government regulations that may make it difficult for us to operate in a profitable manner in such jurisdiction, inability to adequately enforce our rights in such jurisdiction, general geopolitical risks such as political and economic instability, hostilities with neighboring countries, and changes in diplomatic and trade relationships, and potentially adverse tax consequences.
•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. We believe that the ultimate disposition of current matters will not have a material impact on our financial condition or results of operations. Please see the further discussion under “Legal Proceedings.”
•Tracinda Corporation beneficially owned approximately 56% of our outstanding common stock as of December 31, 2006. 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.

14

Executive Officers of the Registrant
 
The following table sets forth, as of February 16, 2007,15, 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.
       
Name Age Position
J. Terrence Lanni63Chairman and Chief Executive Officer
James J. Murren  4547  President, Chief Financial Officer, Treasurer and Director
John T. Redmond48President andChairman, Chief Executive Officer, of MGM Grand Resorts, LLCPresident and Director
Robert H. Baldwin  5658  PresidentChief Design and Chief ExecutiveConstruction Officer of Mirage Resorts, Incorporated, President of CityCenter and Director
Gary N. Jacobs  6163  Executive Vice President, General Counsel, Secretary and Director
Aldo Manzini45Executive Vice President and Chief Administrative Officer
Daniel J. D’Arrigo  3840  SeniorExecutive Vice President—FinancePresident and Chief Financial Officer
Robert C. Selwood53Executive Vice President and Chief Accounting Officer
Alan Feldman  4850  Senior Vice President—President — Public Affairs
Bruce Gebhardt58Senior Vice President—Global Security
Phyllis A. James  5456  Senior Vice President and Senior Counsel
Punam Mathur  4648  Senior Vice President—President — Corporate Diversity and Community Affairs
Cynthia Kiser Murphey49Senior Vice President—Human Resources
Shawn T. SaniJohn McManus  41Senior Vice President—Taxes
Robert C. Selwood51Senior Vice President—Accounting
Bryan L. Wright43  Senior Vice President, Assistant General Counsel and Assistant Secretary
Shawn T. Sani43Senior Vice President — Taxes
Cathryn Santoro40Senior Vice President and Treasurer


10

Mr. LanniMurren has served as Chairman and Chief Executive Officer of the Company since July 1995.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 the CompanyMirage Resorts from June 19952000 to December 1999,August 2007 and since March 2001.
     Mr. Murren has served as President of the Company since December 1999, as Chief Financial Officer since January 1998 and as Treasurer since November 2001.
     Mr. Redmond has served as President and Chief Executive Officer of MGM Grand Resorts, LLC since March 2001. He served as Co-Chief Executive Officer of the Company from December 1999 to March 2001. He served as Chairman of MGM Grand Detroit, LLC since February 2000.
     Mr. Baldwin has served as President and Chief Executive Officer of Mirage Resorts since June 2000 and as President of CityCenter since March 2005. He was President and Chief Executive Officer of Bellagio, LLC from June 1996 to March 2005.
 
Mr. Jacobs has served as Executive Vice President and General Counsel of the Company since June 2000 and as Secretary since January 2002. Prior thereto, he was a partner with the law firm of Christensen, Glaser, Weil, Fink, Jacobs, Weil & Shapiro, LLP,LLP.
Mr. Manzini has served as Executive Vice President and is currentlyChief Administrative Officer since March 2007. Prior thereto, he served as Senior Vice President of counselStrategic Planning for the Walt Disney Company and in various senior management positions throughout his tenure from April 1990 to that firm.January 2007.
 
Mr. D’Arrigo has served as Executive Vice President and Chief Financial Officer since August 2007. He served as Senior Vice President—President — Finance of the Company sincefrom February 2005. He served2005 to August 2007 and as Vice President—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—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.
 Mr. Gebhardt has served as Senior Vice President—Global Security of the Company since November 2004. Prior thereto, he served as a Special Agent of the Federal Bureau of Investigation for over 30 years, and was the FBI’s Deputy Director for two years prior to his retirement in October 2004.
Ms. James has served as Senior Vice President and Senior Counsel of the Company since March 2002. From 1994 to 2001 she served as Corporation (General) Counsel and Law Department Director for the City of Detroit. In that capacity she also served on various public and quasi-public boards and commissions on behalf of the City, including the Election Commission, the Detroit Building Authority and the Board of Ethics.

15

 
Ms. Mathur has served as Senior Vice President—President — Corporate Diversity and Community Affairs of the Company since May 2004. She served as Vice President—President — Corporate Diversity and Community Affairs of the Company from December 2001 to May 2004. She served as Vice President—President — Community Affairs of the Company from November 2000 to December 2001.
 Ms. Murphey
Mr. McManus has served as Senior Vice President—Human ResourcesPresident, Assistant General Counsel and Assistant Secretary of the Company since November 2000.July 2008. He served as Vice President and General Counsel for CityCenter’s 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 Company’s operating subsidiaries from May 2001 to January 2006.
 
Mr. Sani has served as Senior Vice President—President — Taxes of the Company since July 2005. He served as Vice President—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.
 Mr. Selwood has served as Senior Vice President—Accounting of the Company since February 2005. He served as Vice President—Accounting of the Company from December 2000 to February 2005.
     Mr. WrightMs. Santoro has served as Senior Vice President and Assistant General Counsel of the CompanyTreasurer since March 2005. HeAugust 2007. She served as Vice President and Assistant General Counsel— Treasury of the Company from July 2001August 2004 to March 2005. He has served as Assistant Secretary of the Company since January 2002.August 2007. Prior to joining the Company, Mr. Wright served asthereto she was a Vice President and Assistant General Counsel of Boyd Gaming Corporation andfor Wells Fargo Bank, serving in other legal capacities for Boyd Gaming Corporation from September 1993 to July 2001.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 SEC’s EDGAR database. Through that link, our filings are available as soon as reasonably practicablepractical after we file the documents.
 
These filings are also available on the SEC’s website atwww.sec.gov. In addition, the public may read and copy any materials that we file with the SEC at the SEC’s 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 at1-800-SEC-0330.
 
Our Corporate Governance Policies, the charter of our Audit Committee and our Code of Business Conduct and Ethics and Conflict of Interest Policy, along with any amendments or waivers to the Code, are available on our website under the “Investor Relations” link. We will provide a copy of these documents without charge to any stockholder upon receipt of a written request addressed to MGM MIRAGE, Attn: Corporate Secretary, 3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109.
 
Reference in this document to our website address does not constitute incorporation by reference of the information contained on the website.
ITEM 1A.  RISK FACTORS
You should be aware that the occurrence of any of the events described in this section and elsewhere in this report or in any other of our filings with the SEC could have a material adverse effect on our business, financial position, results of operations and cash flows. In evaluating us, you should consider carefully, among other things, the risks described below.
 
• 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.
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:
— increasing our exposure to general adverse economic and industry conditions;
— limiting our flexibility in planning for, or reacting to, changes in our business and industry;
— limiting our ability to borrow additional funds; and
— placing us at a competitive disadvantage compared to other less leveraged competitors.
• 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:
— 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;
— 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;


12

— The interest rate on outstanding borrowings under the senior credit facility was increased by 100 basis points; and
— 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.
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 incorporate by referenceintend to work with our lenders to obtain additional waivers or amendments prior to May 15, 2009 to address future noncompliance with the information appearingsenior 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 “Factorsour 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.
• 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.
• 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.
• 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.


13

• 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.
• 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.
For example, the downturn in consumer spending and economic conditions that May Affect Our Future Results”existed in Item 12008, and is expected to continue in 2009, has had a negative impact on our results of this Form 10-K.operations. In addition, the weak housing and real estate market — both generally and in Nevada particularly — has negatively impacted CityCenter’s 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 Center’s $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) Macau’s 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
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

16
15

ITEM 2.PROPERTIES
Our principal executive offices are located at Bellagio. The following table lists our significant land holdings. Unlessholdings; 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
Notes
Las Vegas, Nevada operations:
      
Bellagio  7776  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  104102   
Mandalay Bay  100   
The Mirage  100102  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  5253   
Monte Carlo  2528   
Circus Circus Las Vegas  69  Includes Slots-a-Fun.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 Resorts143Substantially all of this site is leased under three ground leases that expire (giving effect to our renewal options) in 2068.
Primm Valley Golf Club  448  Located in California, 4four miles from the Primm Valley Resorts.
Laughlin propertiesGold Strike, Jean, Nevada  3851  Colorado Belle occupies 22 acres; Edgewater occupies 16 acres.
Jean, Nevada properties106Gold Strike occupies 51 acres; Nevada Landing occupies 55 acres.
Railroad Pass, Henderson, Nevada  9
   
Other domestic operations:
      
MGM Grand Detroit  827   
Beau Rivage, Biloxi, Mississippi  41  Includes 10 acres of tidelands leased from the State of Mississippi under a lease that expires (giving effect to our renewal options) in 2049.2066.
Fallen Oak Golf Course,
Saucier, Mississippi  508   
Gold Strike, Tunica, Mississippi  24   
Other land:
      
CityCenter — OperationsSupport Services  67Future site of CityCenter.
CityCenter — Support1512  Includes approximately 10 acres behind New York-New York, being used for project administration offices;offices and approximately 2two acres adjacent to New York-New York, being used for the residential sales pavilion;pavilion. We own this land and approximately 3 acres behind Monte Carlo, being used forthese facilities, and we are leasing them to CityCenter on a concrete batch plant and other construction staging.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 — north34Located north of Circus Circus.
North Las Vegas, Nevada  66  Located adjacent to Shadow Creek.
Henderson, Nevada  47  Adjacent to Railroad Pass.
Primm, Nevada16Immediately north of Buffalo Bill’s; this land will be sold along with the Primm Valley Resorts.
Jean, Nevada  61116  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  258  Future siteSite of permanent MGM Grand Detroitformer temporary casino.
Tunica, Mississippi  388  We own an undivided 50% interest in this site with another, unaffiliated, gaming company.
Atlantic City, New Jersey  153152  Approximately 19 acres are leased to Borgata including nine acres under a short-term lease. Of the remaining land, approximately 7874 acres are suitable for development.
     We contributed approximately seven acres of land adjacent to MGM Grand Las Vegas to the ventures that developed Towers 1 and 2, and are developing Tower 3, of The Signature at MGM Grand Las Vegas. The land for each tower was, and still is for Tower 3, collateralized for construction financing for the development. The financing for Tower 3 was for an amount up to $186 million; at December 31, 2006, the outstanding balance on the Tower 3 financing was $101 million.

17
16

     Silver Legacy occupies approximately five acresThe 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 Reno, Nevada, adjacent to Circus Circus Reno. The site is collateralized by a mortgage securing Silver Legacy’s senior credit facility and 10.125% mortgage notes. As of December 31, 2006, $160 million of principal of the 10.125% mortgage notes were outstanding.2008.
 
Borgata occupies approximately 46 acres at Renaissance Pointe, including 19 acres we lease to Borgata. Borgata owns approximately 27 acres which are collateralized by a mortgage securingused as collateral for bank credit facilities in the amount of up to $750$850 million. As of December 31, 2006, $5552008, $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 Limited’s interest in the land use right agreement is used as collateral for MGM Grand Paradise Limited’s 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 Legacy’s 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 CityCenter’s 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.
     Primm Valley Resorts are not served by a municipal water system. We have rights to water in various wells located on federal land in the vicinity of the Primm Valley Resorts and have received permits to pipe the water to the Primm Valley Resorts. These permits and rights are subject to the jurisdiction and ongoing regulatory authority of the U.S. Bureau of Land Management, the States of Nevada and California and local governmental units. We believe that adequate water for the Primm Valley Resorts is available; however, we cannot be certain that the future needs will be within the permitted allowance. Also, we can give no assurance that any future requests for additional water will be approved or that no further requirements will be imposed by governmental agencies on our use and delivery of water for the Primm Valley Resorts.
ITEM 3.  LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
Boardwalk ShareholderMandalay Bay Ticket Processing Fee Litigation
 
On September 28, 1999, a former stockholder of our subsidiary which owns and, until January 2006 operated,July 14, 2008, the Boardwalk Hotel and Casino filed a first amended complaint inCompany was served with a putative class action lawsuit filed in DistrictLos Angeles Superior Court for Clark County, Nevada against Mirage Resortsin California (Jeff Feld v. Mandalay Corp. d/b/a Mandalay Bay Resort & Casino). The action purports to be brought pursuant to California’s 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 certain former directors and principal stockholdersdid not receive or received inaccurate notice of the Boardwalk subsidiary. The complaint alleged that Mirage Resorts inducedprocessing fee when they purchased the other defendants to breach their fiduciary duties to Boardwalk’s minority stockholders by devising and implementing a scheme by which Mirage Resorts acquired Boardwalk at significantly less than the true value of its shares. The complaint sought an unspecified amount of compensatory damages from Mirage Resorts and punitive damages from the other defendants, whom we are required to defend and indemnify.
     In June 2000, the court granted our motion to dismiss the complaint for failure to state a claim upon which relief may be granted.ticket. The plaintiff appealedalleges 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 ruling to the Nevada Supreme Court.foregoing was unlawful, a breach of contract, an unfair business practice, and a violation of California’s Civil Code and Business & Professions Code. The parties filed briefsplaintiff was seeking unspecified monetary damages including restitution, injunctive relief, attorneys’ fees and costs. In February 2009, Mandalay Bay reached a satisfactory settlement with the Nevada Supreme Court,individual plaintiff in this action. The settlement and oral arguments were conducted in October 2001. In February 2003, the Nevada Supreme Court overturned the District Court’s order granting our motion to dismiss the complaint and remanded the case to the District Court for further proceedings on the elements of the lawsuit involving wrongful conduct in approving the merger and/or in the valuation of the merged corporation’s shares. The Nevada Supreme Court affirmed the District Court’s dismissal of the plaintiff’s claims for lost profitsaction against Mandalay Bay and mismanagement. The Nevada Supreme Court’s ruling relates only to the District Court’s ruling on our motion to dismiss and is not a determination of the merits of the plaintiff’s case. The plaintiff filed an amended complaint, and in November 2003, the District Court certified the action as a class action.
     In March 2005, the District Court for Clark County, Nevada granted summary judgment in our favor. In May 2005 plaintiffs filed an appeal of the dismissal to the Nevada Supreme Court. At a mediation conference mandated by court rule, the parties reached a settlement agreement on terms favorable to us, which wasCompany are subject to final approval by the Nevada Supreme Court. On April 11, 2006 the Nevada Supreme Court on its own motion entered an order dismissing the appeal and cross-appeals as abandoned, and remanded the case to the District Court to conduct any further proceedings necessary to effectuate the parties’ settlement agreement. On January 23, 2007, the Nevada District Court entered an order pursuant to stipulation of the parties that dismissed the case with prejudice.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
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 2006.2008.

18
17

PART II
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock Information
 Effective May 2, 2005, our
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. These prices, along with all share and per share information in this Form 10-K, have been adjusted for a 2-for-1 stock split effected in May 2005.
                 
  2006 2005
  High Low High Low
First quarter $43.43  $35.26  $39.80  $34.50 
Second quarter  46.15   38.13   42.98   32.58 
Third quarter  41.28   34.20   46.75   39.30 
Fourth quarter  59.52   39.28   44.75   35.30 
 
                 
  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 3,8644,198 record holders of our common stock as of February 16, 2007.March 9, 2009.
 
We have not paid dividends on our common stock in the last two fiscal years. We intend to retain our earnings to fund the operation of our business, to service and repay our debt, to make strategic investments in high return growth projects at our proven resorts, to repurchase shares of common stock and to reserve our capital to raise our capacity to capture investment opportunities overseas and in emerging domestic markets. Furthermore, asAs 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. OurFurthermore, 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.
Equity Compensation Plan InformationShare Repurchases
 The following table includes information about our stock option plans at December 31, 2006:
             
  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  30,532  $25.37   4,717 
Our share repurchases are only conducted under repurchase programs approved by our Board of Directors and publicly announced. There were no share repurchasesWe did not repurchase shares of our common stock during the period from October 1, 2006 throughquarter ended December 31, 2006, other than approximately 3,000 shares surrendered by certain recipients2008. The maximum number of restricted shares, who elected to use a portion of the shares on which restrictions lapsed in October 2006 to pay required withholding taxes. At December 31, 2006 there were 8 million shares available for purchaserepurchase under the July 2004our May 2008 repurchase program which allows for the repurchase of up towas 20 million shares with no expiration.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 

19
18

ITEM 6.  SELECTED FINANCIAL DATA
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 
                     
  For the Years Ended December 31,
  2006 2005 2004 2003 2002
  (In thousands, except per share data)
Net revenues $7,175,956  $6,128,843  $4,001,804  $3,657,662  $3,552,404 
Operating income  1,758,248   1,330,065   932,613   684,879   727,742 
Income from continuing operations  635,996   435,366   345,209   226,719   283,484 
Net income  648,264   443,256   412,332   243,697   292,435 
                     
Basic earnings per share                    
Income from continuing operations $2.25  $1.53  $1.24  $0.76  $0.90 
Net income per share  2.29   1.56   1.48   0.82   0.93 
 
Weighted average number of shares  283,140   284,943   279,325   297,861   315,618 
                     
Diluted earnings per share                    
Income from continuing operations $2.18  $1.47  $1.19  $0.75  $0.89 
Net income per share  2.22   1.50   1.43   0.80   0.91 
 
Weighted average number of shares  291,747   296,334   289,333   303,184   319,880 
                     
At year-end                    
Total assets $22,146,238  $20,699,420  $11,115,029  $10,811,269  $10,568,698 
Total debt, including capital leases  12,997,927   12,358,829   5,463,619   5,533,462   5,222,195 
Stockholders’ equity  3,849,549   3,235,072   2,771,704   2,533,788   2,664,144 
Stockholders’ equity per share $13.56  $11.35  $9.87  $8.85  $8.62 
Number of shares outstanding  283,909   285,070   280,740   286,192   309,148 
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”).
In June 2003, we ceased operations of PLAYMGMMIRAGE.com, our online gaming website (“Online”).
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 October 2006, we entered into agreements to sell the Primm Valley Resorts and 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.
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 year ended December 31, 2006, incremental expense resulting from the adoption of SFAS 123(R) was $70 million (pre-tax).
During 2006, we began to recognize our share of profits from the sale of condominium units at The Signature at MGM Grand. For the year ended December 31, 2006, we recognized $117 million (pre-tax) of such income.
In the fourth quarter of 2006 we recognized $86 million (pre-tax) of income for insurance recoveries related to Hurricane Katrina.
• 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.

20
19

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
 
Current OperationsLiquidity 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:
• 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 our anticipated 2009 financial commitments, we have the following sources of funds in 2009:
• Available borrowings under our 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:  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:
• 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;
• 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;
• The interest rate on outstanding borrowings under the senior credit facility was increased by 100 basis points; and
• 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


20

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.
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:
• 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: and
• Decline to release subsidiary guarantees which would impact our ability to execute asset dispositions.
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 management’s objectives. We are evaluating the possibility of a) disposing of certain assets, b) raising additional debtand/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, 2006,2008, our operations consisted of 2317 wholly-owned casino resorts and 50% investments in threefour other casino resorts, including:
   
Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, TI, New York-New
York, Excalibur, Monte Carlo, Circus Circus Las Vegas and Slots-A-Fun.
  
Other domestic:Other: The Primm Valley Resorts (Whiskey Pete’s, Buffalo Bill’s and Primm Valley Resort) in Primm, Nevada; Circus Circus Reno and Silver Legacy (50% owned) in Reno, Nevada; Colorado Belle and Edgewater in Laughlin, Nevada (the “Laughlin Properties”); Gold Strike and Nevada Landing in
Jean, Nevada (the “Jean Properties”);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; and Grand Victoria (50% owned) in Elgin, Illinois.Illinois; and MGM Grand
Macau (50% owned).
 
Other operations include the Shadow Creek golf course in North Las Vegas; two golf coursesthe Primm Valley Golf Club at Primm Valley;the California state line; and Fallen Oak golf course in Saucier, Mississippi; a 50% investment in The Signature at MGM Grand, a condominium-hotel development adjacent to MGM Grand Las Vegas; and a 50% investment in MGM Grand Paradise Limited, which is constructing a casino resort in Macau.
Mississippi. In October 2006, we agreed to sell the Primm Valley Resorts, not including the two golf courses, and the Laughlin Properties. In February 2007,December 2008, we entered into an agreement to contribute the Jean Properties to a joint venture. See “Other Factors Affecting Liquidity.”
Mandalay Acquisition
     On April 25, 2005, we closed our merger with Mandalay Resort Group (“Mandalay”) under which we acquired Mandalaysell TI for $71 in cash for each share of common stock of Mandalay. The total acquisition cost of $7.3 billion included equity value of approximately $4.8 billion, the assumption or repayment of outstanding Mandalay debt with a fair value of approximately $2.9 billion and $0.1 billion of transaction costs, offset by the $0.5 billion received by Mandalay from$775 million; the sale is expected to close by June 30, 2009.


21

We own 50% of its interest in MotorCity Casino in Detroit, Michigan.
     The Mandalay acquisition expanded our portfolio of resortsCityCenter, currently under development on a67-acre site on the Las Vegas Strip, expanded our employeebetween Bellagio and customer bases significantly,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 provided additional sitesentertainment 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 future development. These factors resulted in the recognition of certain intangible assets and significant goodwill. We did not incur any significant employee termination costs or other exit costs in connection with the Mandalay acquisition.a fee.
 
Key Performance Indicators
 We operate primarily in one segment,
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 now 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 priceabove 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 a main focus ofhave continually reinvested in our strategy is to continually reinvest in these resorts to maintain our competitive advantage.
 
As a resort-based company, our operating results are highly dependent on the volume of customers at our resorts, which in turn impacts the price we can charge for our hotel rooms and other amenities. We also generate a significant portion of our operating income from the high-end gaming customers, which can cause variability in our results. Key performance indicators related to revenue are:
 • Gaming revenue indicators — table games drop and slots handle (volume indicators); “win” or “hold” percentage, which is not fully controllable by us. Our normal table games win percentage is in the range of 18% to 22% of table games drop and our normal slots win percentage is in the range of 6.5% to 7.5% of slots handle;
 
 • Hotel revenue indicators — hotel occupancy (volume indicator); average daily rate (“ADR”, price indicator); revenue per available room (“REVPAR”), a summary measure of hotel results, combining ADR and occupancy rate.

21

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 other recently openednew 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

Overall OutlookImpact 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:
• Weak housing market and significant declines in housing prices and related home equity;
• Higher oil and gas prices which impact travel costs;
• Weaknesses in employment and increases in unemployment;
• Decreases in air capacity to Las Vegas; and
• Decreases in equity market value, which impacted many of our customers.
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 willhave 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 benefitreview 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 2007the capital markets. For example:
• We postponed development on MGM Grand Atlantic City and our joint venture with Kerzner and Istithmar for a Las Vegas Strip project;
• We have significantly reduced our estimated capital expenditures for 2009;
• We entered into an agreement in December 2008 to sell TI for $775 million;
• 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;
• In connection with the September 2008 amendment to our bank credit facility to increase the maximum leverage covenant, we will incur higher interest costs;
• Our recent senior secured notes offering was completed at a higher interest rate than our existing fixed-rate indebtedness;
• 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;


23

• In February 2009, all of the major credit rating agencies — Moody’s, Standard & Poors, and Fitch — downgraded the rating on our long-term debt and in March 2009, Moody’s 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
• 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.
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 strategic capital investments we have made in our resorts overcredit and equity markets; and 3) current cash flow forecasts for the past several years. Mandalay resorts.
Other Items Affecting Future Operating Results
Our Las Vegas Strip resorts require ongoing capital investment to maintain their competitive advantages. We believe thesethe investments we have made in the past several years in additional non-gaming amenities have enhancedrelative to our competitors enhances our ability to generate increasedmaintain visitor volume and allowallows us to charge premiumhigher prices for our amenities. We expectamenities relative to continue to re-invest in our core assets on a targeted basis in 2007.
competitors. In 2006,2008, we completed many capital improvements at a variety ofour Las Vegas strip resorts, including:
 •New restaurants such as StripsteakA remodel of approximately 2,700 standard rooms at Mandalay Bay, Social HouseThe Mirage, approximately 2,700 standard rooms at TI, approximately 1,100 rooms at Gold Strike Tunica, and Japonaisapproximately 900 rooms at The Mirage.Excalibur.
 
 •The Beatles-themedA new Cirque du Soleil production show,LoveBelieve, featuring Criss Angel, at The Mirage.Luxor.
 
 •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.
 Various other amenities such as re-designed restaurants• A complete re-design and lounges, new Starbucks outletsrefurbishment of the casino floor at several resorts, and slot machine upgrades at Mandalay resorts.New York-New York.
In addition, the following items are relevant to entertainment offerings and several restaurants, we have invested heavily in our room product in the past few years. In 2007, we expect to complete a suite remodel at Bellagio, and standard room remodels at Mandalay Bay, MGM Grand Las Vegas and Excalibur. These improvements, along with other amenities and improvements projected to open in 2007, are expected to lead to continued increases in REVPAR and increased customer volumes in gaming areas, restaurants, shops, entertainment venues and our other resort amenities.overall outlook:
 We began recognizing our share of profits from condominium sales at The Signature at MGM Grand in 2006 and will continue to do so in 2007. Sales of all units in Tower 1 and 87% of units in Tower 2 were sold and closed by the end of 2006. In 2007, we expect to close on the remaining units in Tower 2 and most or all the Tower 3 units. In addition to the income we will recognize in 2007 related to Towers 2 and 3, we have begun to rent out units in Towers 1 and 2 for owners who have elected to participate in the rental program. Rental of these units will provide additional revenues and also provide additional customer volumes at MGM Grand Las Vegas.
• 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%.
• We expect to recognize a substantial gain from the sale of TI during 2009.
     In addition to the activity at our Las Vegas Strip resorts, we expect the permanent MGM Grand Detroit casino resort to open in late 2007. The permanent facility will feature a significantly larger casino and a 400-room hotel, as well as additional restaurants and other amenities. Also, Beau Rivage re-opened in August 2006 and we believe its operations, as well as additional income from insurance recoveries, will benefit results in 2007. MGM Grand Macau is on target to open in the fourth quarter of 2007 and we are anticipating significant earnings from this venture once opened.
Financial Statement Impact of Hurricane Katrina and the Monte Carlo Fire
 Beau Rivage closed in late August 2005 due to significant damage sustained as a result of Hurricane Katrina and re-opened in August 2006. The Company maintained
We maintain insurance covering both property damage and business interruption relating to catastrophic events, such as a result ofHurricane Katrina affecting Beau Rivage in August 2005 and the storm. The deductible under this coverage was approximately $15 million, based on the amount of damage incurred.rooftop fire at Monte Carlo in January 2008. Business interruption coverage covered lost profits and other costs incurred during the construction period of closure and up to six months following the reopening of the facility.

22

 As of December 31, 2006, we had received interim
Non-refundable insurance recoveries received in excess of the net book value of damaged assets,clean-up and post-stormdemolition costs, incurred. Theand post-event costs incurred to date were less thanare recognized as income in the anticipatedperiod received or committed based on our estimate of the total claim for property damage (recorded as “Property transactions, net”) and business interruption proceeds. Therefore, all post-storm(recorded as a reduction of “General and administrative” expenses) compared to the recoveries received at that time. All post-event costs and expected recoveries have beenare recorded net within “General and administrative” expenses, in the accompanying consolidated statements of income, except for depreciation of non-damaged assets, which is classified as “Depreciation and amortization.”


24

Insurance recoveries receivedare classified in excessthe 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 amounttotal 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 incurredincurred. During the year ended December 31, 2007, we recognized $284 million of $86insurance recoveries in income, of which $217 million have been recognized as income related to property damage and included inwas recorded within “Property transactions, net” and $67 million was recorded within the accompanying consolidated statements of income.“General and administrative expense.” The remaining $86 million previously recognized in income was recorded within “Property transactions, net” in 2006.
 Cash
During 2007, we received for$280 million in insurance recoveries, are treated in the statement of which $207 million was classified as investing cash flows and $73 million was classified as operating cash flows from investing activities if the recoveries relate to property damage, and cash flows from operations if the recoveries relate to business interruption.flows. During 2006, we received $309 million in insurance recoveries. Werecoveries related to Hurricane Katrina, of which $210 million was classified $200 million as investing cash flows related to property damage and $109$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:
                     
  Year Ended December 31,
      Percentage     Percentage  
  2006 Change 2005 Change 2004
      (In thousands, except per share data)       
Net revenues $7,175,956   17% $6,128,843   53% $4,001,804 
Operating income  1,758,248   32%  1,330,065   43%  932,613 
Income from continuing operations  635,996   46%  435,366   26%  345,209 
Net income  648,264   46%  443,256   7%  412,332 
Diluted income from continuing operations per share $2.18   48% $1.47   24% $1.19 
Diluted net income per share  2.22   48%  1.50   5%  1.43 
                 
  Year Ended December 31, 
     Percentage
    Percentage
   
  2008  Change 2007  Change 2006 
  (In thousands, except per share data) 
 
Net revenues $7,208,767  (6)% $7,691,637  7% $7,175,956 
Operating expenses:                
Casino and hotel operations  4,034,374  0%  4,027,558  8%  3,715,057 
General and administrative  1,278,501  2%  1,251,952  7%  1,169,271 
Corporate expense  109,279  (44)%  193,893  20%  161,507 
Preopening and restructuring  23,502  (74)%  92,105  146%  37,397 
Property transactions, net  1,210,749  NM  (186,313) NM  (40,980)
CityCenter gain  —  NM  (1,029,660) NM  — 
Depreciation and amortization  778,236  11%  700,334  11%  629,627 
                 
   7,434,641  47%  5,049,869  (11)%  5,671,879 
                 
Income from unconsolidated affiliates  96,271  (57)%  222,162  (13)%  254,171 
                 
Operating income (loss) $(129,603) (104)% $2,863,930  63% $1,758,248 
                 
Income (loss) from continuing operations $(855,286) (161)% $1,400,545  120% $635,996 
Net income (loss)  (855,286) (154)%  1,584,419  144%  648,264 
Diluted income (loss) from continuing operations per share $(3.06) (165)% $4.70  116% $2.18 
Diluted net income (loss) per share  (3.06) (158)%  5.31  139%  2.22 
     References to “same-store” throughout Management’s Discussion and Analysis exclude the Mandalay resorts, Monte Carlo and Beau Rivage, including income from insurance recoveries, for all periods. We owned 50% of Monte Carlo prior to the Mandalay acquisition and acquired the other 50% in the Mandalay acquisition.


25

On a consolidated basis, the most important factorssignificant events and trends contributing to our performance over the last three years have been:
 • The additioneconomic factors discussed in “Impact of Mandalay’s resortsCurrent Economic Conditions and Credit Markets on April 25, 2005. For the year ended December 31, 2006, net revenue for these operations was $2.7 billion and operating income was $657 million. For the eight months we owned the Mandalay resorts in 2005, net revenue for these operations was $1.8 billion and operating income was $426 million.Results of Operations.”
 
 •Our ongoing capital investmentsThe rooftop fire at Monte Carlo in our resorts,January 2008, which we believe is allowing us to market more effectively to visitors, capture a greater sharecaused the closure of our visitors’ increased travel budgets,the resort for several weeks and generate premium pricingreduced the number of rooms available at Monte Carlo for our resorts’ rooms and other amenities.the remainder of 2008.
 
 •The overall positive economic environmentRecognition of a $1.2 billion impairment charge in the United States since 2004, particularlyfourth quarter of 2008 related to goodwill and indefinite-lived intangible assets recognized in the leisure and business travel segments, resultingMandalay acquisition in increases2005. This non-cash charge is recorded in room pricing and increased visitation, particularly at our Las Vegas Strip resorts.“Property transactions, net” in the accompanying consolidated statement of operations.
 
 •The labor contract covering employees at our Las Vegas Strip resorts since mid-2002, which provides for significant annual wage and benefits increases through mid-2007.Recognition of a $1.03 billion gain in 2007 related to the contribution of the CityCenter assets to a joint venture.
 
 •The adoption of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123(R)”). We recorded $70 million of additional stock compensation expense in 2006 as a result of adopting SFAS 123(R). Prior to January 1, 2006, we did not recognize expense for employee stock options.
• The closure of Beau Rivage in August 2005 after Hurricane Katrina and subsequent reopening in August 2006. As a result, operating2006, and income related to insurance recoveries. Operating income at Beau Rivage was $104 million, $40 million, and $60 million in 2006, 2005 and 2004, respectively. 2006 operating income includes income from insurance recoveries of $284 million in 2007 and $86 million.million in 2006.
 
 • Recognition of our share of profits from the closings of condominium units of Tower 1 and Tower 2 of The Signature at MGM Grand.Grand, which were complete as of December 31, 2007. The venture recordsrecorded revenue and cost of sales as units close. Tower 1 was completed in May 2006 and 100%closed. In 2007, we recognized income of unit sales had been recognized through December 31, 2006. Tower 2 was completed in November 2006 and 87%approximately $84 million related to our share of the unit sales for Tower 2 had been recognized through December 31, 2006. Forventure’s profits and $8 million of deferred profit on land contributed to the year,venture. In 2006, we recognized income of approximately $102 million related to our share of the venture’s profits and $15 million of deferred profit on land contributed to the venture. These amounts are classified in “Income from unconsolidated affiliates” in the accompanying consolidated statements of income.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.

23

     As a result of the above factors, our netNet revenues increased 17%decreased 6% in 2006, and 53% in 2005. Operating margins were 25% in 20062008 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 andstart-up expenses, and profits from The Signature. Our operating margin decreased to 15% from 22% in 2005,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 23%development costs associated with our planned MGM Grand Atlantic City project. Depreciation and amortization expense increased 11% in 2004. See further discussion of operating income and operating margins in “Operating Results” below. The increase in income from continuing operations generally resulted from the increased operating income, offset in part by increased interest expense, discussed below in “Non-operating Results.”
Operating Results
     The following table includes key information about our operating results:
                     
  Year Ended December 31, 
      Percentage      Percentage    
  2006  Change  2005  Change  2004 
  (In thousands) 
Net revenues $7,175,956   17% $6,128,843   53% $4,001,804 
Operating expenses:                    
Casino and hotel operations  3,813,386   15%  3,316,870   55%  2,138,644 
General and administrative  1,070,942   20%  889,806   57%  565,387 
Corporate expense  161,507   24%  130,633   68%  77,910 
Preopening, restructuring and property transactions, net  (3,583)  (107)%  52,714   118%  24,135 
Depreciation and amortization  629,627   12%  560,626   46%  382,773 
                  
   5,671,879   15%  4,950,649   55%  3,188,849 
                  
Income from unconsolidated affiliates  254,171   67%  151,871   27%  119,658 
                  
Operating income $1,758,248   32% $1,330,065   43% $932,613 
                  
     The 2006 and 2005 increase in net revenues resulted primarily from the addition of Mandalay. Net revenues for 2006 includes a full year of operations for Mandalay resorts and 2005 includes approximately 8 months of operations for Mandalay resorts. On a same-store basis, net revenues increased 5% in 20062008 on top of a 12%an 11% increase in 2005. Additionally, net revenues increased significantly at many of our resorts in both 2006 and 2005 as a result of stronger year-over-year room pricing and increased volumes in gaming and across all non-gaming areas. These trends were particularly prominent at Bellagio, The Mirage and MGM Grand Las Vegas as a result of new and expanded amenities at those resorts.
     Operating income for 2006 increased 32% over 2005; same store operating income increased 15%, partially2007 due to the increasessignificant capital investments in our resorts over the past few years.
Excluding Beau Rivage, net revenues discussed above with continued strong operating margins. In addition, we recognizedin 2007 increased 4% over 2006, largely due to strength in hotel room rates and other non-gaming revenues. Operating income of $102 million from our share ofin 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, along with a $15 million gain on land contributed to the venture. Partially offsetting these items was the $70 million of incremental stock-based compensation expense. Excluding these items, same storepreopening andstart-up expenses, and property transactions. The decrease in operating income increased 10%, with an operating margin of 22% in 2006 compared2007 on a comparable basis mainly related to 21% in 2005.
     In 2005, operating income did not increase to the same extent as net revenues, largely due to already strong operating margins, a lower-than-normal bad debt provision in 2004, higher corporatedepreciation and amortization expense and higher preopening, restructuring and property transactions, net. This resulted in an operating margin of 21% versus 24% in 2004. Corporate expense increased as a percentage of revenue due primarily to merger integration costs.corporate expense.


26

     Operating margins in 2007 will be positively impacted by additional profits on the sale of the remaining condominium units at The Signature at MGM Grand and any income recognized for additional insurance recoveries related to Hurricane Katrina. Excluding these items from both 2007 and 2006, we expect margins will remain relatively consistent between periods.
Operating Results — Detailed Revenue Information
 
The following table presents detail of our net revenues:
                     
  Year Ended December 31, 
      Percentage      Percentage    
  2006  Change  2005  Change  2004 
          (In thousands)         
Casino revenue, net:                    
Table games $1,251,304   13% $1,107,337   18% $938,281 
Slots  1,770,176   13%  1,563,485   44%  1,083,979 
Other  108,958   16%  93,724   60%  58,492 
                  
Casino revenue, net  3,130,438   13%  2,764,546   33%  2,080,752 
                  
Non-casino revenue:                    
Rooms  1,991,477   22%  1,634,588   84%  889,443 
Food and beverage  1,483,914   17%  1,271,650   57%  807,535 
Entertainment, retail and other  1,190,904   17%  1,018,813   61%  634,412 
                  
Non-casino revenue  4,666,295   19%  3,925,051   68%  2,331,390 
                  
   7,796,733   17%  6,689,597   52%  4,412,142 
Less: Promotional allowances  (620,777)  11%  (560,754)  37%  (410,338)
                  
  $7,175,956   17% $6,128,843   53% $4,001,804 
                  

24

                 
  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 
                 

 On
Table games revenue decreased 12% in 2008 mainly due to a same-store basis,decrease in volumes. The table games hold percentage was near the mid-point of the range for both years. In 2007, table games revenue including baccarat, increaseddecreased 7% over 2005excluding Beau Rivage, with strong baccarat volume — up 4% —volumes essentially flat and a somewhat higher hold percentage. In 2005, table games revenue, including baccarat, was flat on a same-store basis. A 4% increase in table games volume was offset by a slightly lower hold percentage. Hold percentages were withinpercentage in 2007.
Volume decreases mainly at our normal range for all three years presented.
     OnLas Vegas Strip resorts in 2008 led to a same-store basis,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 increased 3%was flat, excluding Beau Rivage. Slots revenue was strong in 2006 as a result2007 at many of significant increases atour Las Vegas Strip Resorts, including Bellagio and MGM Grand Las Vegas — each up 8% over 2006 — and TI. In addition,The Mirage and Mandalay Bay Luxor— each up 5% over 2006.
Hotel revenue decreased 10% in 2008 due to decreased occupancy and Excalibur benefitedlower 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 upgraded slot machines and the roll-out of our Players Club loyalty program.96% to 93%. In 2005, slots2007, hotel revenue increased 11% on a same-store basis. Additional volume in 2005 was generated by the Spa Tower at Bellagio — Bellagio’s slots revenue increased over 30% — and the traffic generated byKÀand other amenities at MGM Grand Las Vegas, where slots revenue increased almost 10%.
     Hotel revenue increased 22% in 20065% excluding Beau Rivage, with a 3%7% increase in company-wide REVPAR. OnStrength in demand and room pricing in 2007 on the Las Vegas Strip led to a same-store basis, hotel revenue increased 4% in 2006 over 2005 due to strong room pricing. A 7%5% increase in same-store REVPAR was the result of ADR increasing from $164ADR.
Food and beverage, entertainment, and retail revenues in 2005 to $1742008 were all impacted by lower customer spending and decreased occupancy at our resorts. In 2007, increases in 2006food and occupancy of 97% versus 96% in the prior year. In 2005, hotelbeverage revenue increased 20% on a same-store basis. We had more rooms available aswere a result of the Bellagio expansioninvestments in new restaurants and 2004 room remodel activity at MGM Grand Las Vegas, and our company-wide same-store REVPAR increased 12% to $157. The increase in REVPAR in 2005 was mainly rate-driven, as same-store occupancy was consistent at 96%.
     Other non-gaming revenue increased 17% over prior year. Same-storenightclubs. In 2008, entertainment revenues increased 9% due tobenefited from the addition ofBelieveat Luxor. In 2007, entertainment revenues generatedbenefited fromLove, the Beatles-themed Cirque du Soleil show at The Mirage. In 2005,Mirage, which opened July 2006. Other revenues from continuing operations in 2008 increased 18% mainly due to reimbursed cost from CityCenter recognized as other non-gaming revenue increased significantly, withKÀleading to a 35% increase in same-store entertainment revenue and several new restaurants and bars at MGM Grand Las Vegas, Bellagio, TI and The Mirage leading to a 15% increase in same-store food and beverage revenue. We expect these increases to continue in 2007, corresponding amounts recognized as we continue to invest in new amenities at our resorts, particularly at Mandalay Bay, where among other new amenities we will complete a major pool area renovation in mid-2007.expense.
 
Operating Results — Details of Certain Charges
 
Stock compensation expense is recorded within the department of the recipient of the stock compensation award. In periods prior to January 1, 2006, such expense consisted only of restricted stock amortization and expense associated with stock options granted to non-employees. Beginning January 1, 2006, stock compensation expense includes the cost of all stock-based awards to employees under SFAS123(R).
The following table shows the amount of incremental compensation expense related to employee stock-based awards included within each income statement expense caption:
     
  Year ended December 31, 
  2006 
  (in thousands) 
Casino $13,659 
Other operating departments  5,319 
General and administrative  19,722 
Corporate expense and other  30,421 
Income from discontinued operations  1,267 
    
  $70,388 
    
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 andstart-up expenses consisted of the following:
             
  Year Ended December 31, 
  2006  2005  2004 
      (In thousands)     
CityCenter $9,429  $5,173  $— 
MGM Grand Macau  5,057   1,914   — 
MGM Grand Detroit  3,313   503   — 
The Signature at MGM Grand  8,379   1,437   668 
Loveat The Mirage
  3,832   —   — 
Jet nightclub at The Mirage  —   1,891   — 
Bellagio expansion  —   665   3,805 
KÀ
  —   1,871   3,655 
Other  6,352   2,298   2,148 
          
  $36,362  $15,752  $10,276 
          

25

             
  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 andstart-up expenses for CityCenter will continue to increase each year 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 andstart-up expenses relatein 2007 and 2006 related to our share of that venture’s preopening costs and will increase significantly in 2007 as the project is expected to open in late 2007. MGM Grand Detroit preopening and start-up expenses will also increase significantly in 2007 as the resort is expected to open in the fourth quarter of 2007. Preopening and start-up costs for The Signature at MGM Grand relate to our costs associated with preparing the towers for rental operations.costs.
 Restructuring costs (credit) consisted of the following:
             
  Year Ended December 31, 
  2006  2005  2004 
  (In thousands) 
Contract termination costs $—  $—  $3,693 
Other  1,035   (59)  1,932 
          
  $1,035  $(59) $5,625 
          
     There were no material restructuring activities in 2006 and 2005. At December 31, 2006, there were no material restructuring accruals — all material restructuring costs have been fully paid or otherwise resolved. In 2004, restructuring costs include $3 million for contract termination costs related to the Aqua restaurant at Bellagio and $2 million of workforce reduction costs at MGM Grand Detroit as a result of our efforts to minimize the impact of a gaming tax increase in Michigan.
Property transactions, net consisted of the following:
             
  Year Ended December 31, 
  2006  2005  2004 
  (In thousands) 
Impairment of assets to be disposed of $40,865  $22,651  $473 
Write-off of abandoned capital projects  —   5,971   — 
Demolition costs  348   5,362   7,057 
Insurance recoveries  (86,016)  —   — 
Other net losses on asset sales or disposals  3,823   3,037   704 
          
  $(40,980) $37,021  $8,234 
          
             
  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)
             
 Impairments
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 smaller capital projects, primarily at MGM Grand Las Vegas, Mandalay Bay and The Mirage, as well as the $4 million write-off of Luxor’s investment in theprojects.

28

Hairsprayshow. Insurance recoveries in 2006 relate to the interim insurance recoveries received related to property damage from Hurricane Katrina in excess of the book value of the damaged assets and post-storm costs incurred as of December 31, 2006 — see “Financial Statement Impact of Hurricane Katrina.”
     In 2005, impairments related primarily to assets removed from service in connection with capital projects at several resorts, including Bellagio, TI, The Mirage and Mandalay Bay. The amounts recorded were based on the net book value of the disposed assets. Demolition costs related primarily to room remodel activity at MGM Grand Las Vegas and the new showroom at The Mirage.
     Demolition costs in 2004 related primarily to preparation for the Bellagio standard room remodel, Bellagio expansion andKÀtheatre at MGM Grand Las Vegas.
Non-operating Results
 
The following table summarizes information related to interest on our long-term debt:
             
  Year Ended December 31, 
  2006  2005  2004 
  (In thousands) 
Interest cost $882,501  $670,285  $390,588 
Less: Capitalized interest  (122,140)  (29,527)  (23,005)
          
Interest expense, net $760,361  $640,758  $367,583 
          
             
Cash paid for interest, net of amounts capitalized $778,590  $588,587  $321,008 
Weighted average total debt balance $12.7 billion $10.1 billion $5.5 billion
End-of-year ratio of fixed-to-floating debt  66/34   61/39   99/1 
Weighted average interest rate  7.1%  6.8%  7.3%

26

             
  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% 

 Interest
In 2008, gross interest costs increased in 2006 over 2005decreased compared to 2007 mainly due to higher average outstanding debtlower interest rates on our variable rate borrowings. Capitalized interest decreased in 2008 due to a full year of debt outstandingless capitalized interest related to the Mandalay acquisition, incremental borrowings in 2006CityCenter and cessation of capitalized interest related to fund capital investments, and a slightly higher average interest rate. Capitalized interest increased in 2006 as we continued to capitalize interest on the CityCenter construction and our investment in MGM Grand Macau.Macau upon opening in November 2007. The increaseamounts 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 our weighted average interest rate was2007 compared to 2006 due to slightly higher market rates, which affects our variable rate debt.
     Interest cost was higheraverage debt balances during the year up until the significant reduction in 2005 due to the funding of the cash consideration in the Mandalay acquisition through senior credit facility borrowings, and the assumption of debt in the Mandalay acquisition. While variable marketfourth 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 rates continued to increase in 2005, our effective interest rate decreased due to a more normalized ratio2007 resulted from the ongoing construction of variable rate debt in 2005; our variable interest rate under our senior credit facility has been lower than the interest rates on our fixed-rate borrowings. Capitalized interest increased in 2005 as we began capitalizing interest on CityCenter, MGM Grand Detroit, and our investment in MGM Grand Macau.
 
The following table summarizes information related to our income taxes:
                        
 Year Ended December 31, Year Ended December 31, 
 2006 2005 2004 2008 2007 2006 
 (In thousands) (In thousands) 
Income from continuing operations before income tax $977,926 $667,085 $548,810 
Income (loss) from continuing operations before income tax $(668,988) $2,158,428  $977,926 
Income tax provision 341,930 231,719 203,601   186,298   757,883   341,930 
Effective income tax rate  35.0%  34.7%  37.1%  NM   35.1%   35.0% 
Cash paid for income taxes $369,450 $75,776 $128,393  $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 was slightly higher than 2005. Taxbenefited 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,complimentaries.
Cash taxes were reversed during 2006, but such reversal was less thanpaid in 2008 despite the one-time tax benefit recognized in 2005pre-tax operating loss due to the repatriationnon-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 foreign earnings from Australia — see below.
     The effective2007, the associated income tax ratetaxes were paid in 2005 was lower2008. Absent the cash taxes paid on the CityCenter gain, cash taxes were approximately $250 million less in 2008 than in 20042007. In addition, cash taxes for 2007 were only slightly higher than 2006 despite significantly higher pre-tax income due primarily to a tax benefit realized from the repatriation of foreign earnings from Australia as a result of the provisions of the American Jobs Creation Act of 2004 that provided for a special one-time deduction of 85 percent on certain repatriated earnings of foreign subsidiaries. Additionally, in 2004 the Company accrued additional state deferred taxes related to capital investments in New Jersey and incurred non-deductible costs related to a Michigan ballot initiative; neither of these items recurred in 2005.
     Cash paid for income taxes increased significantly in 2006 due primarily to the paymentdeferral of taxes on the CityCenter gain on Mandalay’s sale of MotorCity Casino, taxable income associated with the sales of units at the Signature at MGM Grand, and an increase in pre-tax income resulting from the Mandalay merger and continued improvements in operating results.
     In 2005, taxes paid were lower than 2004 in part due to increased tax benefits from stock option exercises and one-time benefit plan deductions, partially offset by decreased accelerated tax depreciation deductions and increased pre-tax income. In addition, a federal tax overpayment from 2004 was applied to 2005, reducing the 2005 tax payments.into 2008.

27
29

Liquidity and Capital Resources
 
Cash Flows — Summary
 
Our cash flows consisted of the following:
                        
 Year Ended December 31,  Year Ended December 31, 
 2006 2005 2004  2008 2007 2006 
 (In thousands)  (In thousands) 
Net cash provided by operations $1,241,952 $1,182,796 $829,247 
       
Net cash provided by operating activities $753,032  $994,416  $1,231,952 
        
Investing cash flows:             
Capital expenditures  (1,884,053)  (759,949)  (702,862)
Acquisition of Mandalay Resort Group, net —  (4,420,990) — 
Proceeds from the sale of subsidiaries, net — — 345,730 
Hurricane Katrina insurance proceeds 199,963 46,250 — 
Investments in unconsolidated affiliates  (86,000)  (183,000)  (11,602)
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 117,663 14,872 20,981   58,667   63,316   9,693 
              
Net cash used in investing activities  (1,652,427)  (5,302,817)  (347,753)
       
Net cash provided by (used in) investing activities  (1,981,440)  209,301   (1,642,427)
        
Financing cash flows:             
Net borrowing (repayment) under bank credit facilities  (393,150) 4,725,000  (1,574,489)
Net borrowings (repayments) under bank credit facilities  2,480,450   (1,152,300)  (393,150)
Issuance of long-term debt 1,500,000 880,156 1,528,957   698,490   750,000   1,500,000 
Repayment of long-term debt  (444,500)  (1,408,992)  (52,149)  (789,146)  (1,402,233)  (444,500)
Issuance of common stock 89,113 145,761 135,910   —   1,192,758   — 
Purchase of treasury stock  (246,892)  (217,316)  (348,895)
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 5,453  (61,783)  (15,306)  (40,971)  100,211   5,453 
              
Net cash provided by (used in) financing activities 510,024 4,062,826  (325,972)  1,122,082   (1,240,537)  510,024 
              
Net increase (decrease) in cash and cash equivalents $99,549 $(57,195) $155,522  $(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 non-cash charges,gains and losses from investing activities and net property transactions, since our business is primarily cash-based. Cash flow from operations has increaseddecreased 26% in each2008 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 the last two years as a result of higher operating incomenet cash outflows related to real estate under development expenditures partially offset by higher interest and tax payments — tax payments in particular increased to $369 million in 2006 versus $76 million in 2005. In addition, $109 million of insurance recoveries has been reflected as operating cash inflows in 2006 and $90 million of spending onresidential sales deposits when CityCenter residential projects has been reflected as operating cash outflows in 2006. In 2006, the $48 million excess tax benefit from stock-based compensation is included as cash flows from financing activities; in prior years, this amount was included in operating cash flows.wholly owned.
 
At December 31, 20062008 and 2005,2007, we held cash and cash equivalents of $453$296 million and $378$416 million, respectively. We require a certain amount of cash on hand to operate our resorts. The amount required on hand increased in 2006 due to the reopening of Beau Rivage and the implementation of ticket and ATM kiosks on our gaming floors, which increase efficiency for customer transactions but require more cash on hand. 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 2006,2008, we spent $1.4 billion, excluding capitalized interest on development projects, including the non-residential components ofand Dubai World each made loans to CityCenter the permanent MGM Grand Detroit resort and the rebuilding of Beau Rivage. Remaining capital expenditures of $500 million consistedand equity contributions of capital expenditures at existing resorts, including spending$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 the new theatre and new restaurants atLas Vegas Boulevard, 10 miles south of Bellagio. The Mirage, and capitalized interest.note is convertible, with certain restrictions, into a 50% equity position in The M Resort LLC. Investments in unconsolidated affiliates of $86 million in the 2006 period represent partial funding of a required loan, in an amount up to $100 million (including accrued interest), to MGM Grand Macau. We are accounting for the loan as additional capital investment due to the subordinated nature of our repayment rights under the loan. Also, construction payables increased due to an increase in construction activity at CityCenter, which is included in “Other” in the above table. Offsetting these expenditures was $200 million in insurance proceeds related to Hurricane Katrina.
     In 2005, capital expenditures were $760 million, and included room enhancements and other projects at MGM Grand Las Vegas, expenditures for The Mirage theatre, and preliminary expenditures for CityCenter and the permanent casino in Detroit. Also in the 2005 period, we completed the acquisition of Mandalay, with net cash paid of $4.4 billion, and invested $183 millionprimarily 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;

28
31

 Capital expenditures
• $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 2004 consistedthe fourth quarter of capital projects,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 asdebentures.
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 Bellagio expansionfollowing senior and theKÀtheatresenior subordinated notes at MGM Grand Las Vegas,their scheduled maturity: $710 million of 9.75% senior subordinated notes; $200 million of 6.75% senior notes; and maintenance capital activities, such as room remodel projects at New York — New York and MGM Grand Las Vegas and new restaurant and entertainment amenities at several resorts. The$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 Golden Nugget Subsidiaries closedexercise of employee stock options in January 2004 with net proceeds to the Company of $210 million. The sale of MGM Grand Australia closed in July 2004 with net proceeds to the Company of $136 million.years ended December 31, 2008, 2007 and 2006, respectively.
 Cash Flows — Financing Activities
     WeIn 2006, we borrowed net debt of $662 million, in 2006. The increase in net debt was due primarily to the level of capital expenditures, share repurchases and investments in unconsolidated affiliates and share repurchases. At December 31, 2006 our senior credit facility had a balance of $4.4 billion, with available liquidity of $2.6 billion.affiliates. We had the following issuances of senior notes in 2006:
•In April 2006, we issued $500 million of 6.75% senior notes due 2013 and $250 million of 6.875% senior notes due 2016.
•In December 2006, we issued $750 million of 7.625% senior notes due 2017.
     In 2006, we repaid at their scheduled maturity our $200 million 6.45% senior notes and our $245 million 7.25% senior notes.
     Our primary financing activities in 2005 related to the Mandalay acquisition. The cash purchase price of Mandalay was funded from borrowings under our senior credit facility. We also issued $875 million of fixed rate debt in various issuances:
•In June 2005, we issued $500 million of 6.625% senior notes due 2015;
•In September 2005, we issued $375 million of 6.625% senior notes due 2015.
     In the first quarter of 2005, we repaid at their scheduled maturity two issues of senior notes at their maturity — $176.4 million of 6.625% senior notes, and $300 million of 6.95% senior notes — and redeemed one issue of senior notes due in 2008 — $200 million of 6.875% senior notes. The redemption of the 2008 senior notes resulted in a loss on early retirement of debt of $20 million, which is classified as “Other, net” in the accompanying consolidated statements of income. In addition, in the second quarter of 2005 we initiated a tender offer for several issuances of Mandalay’s senior notes and senior subordinated notes totaling $1.5 billion. Holders of $155 million of Mandalay’s senior notes and senior subordinated notes redeemed their holdings. Holders of Mandalay’s floating rate convertible senior debentures with a principal amount of $394 million had the right to redeem the debentures for $566 million through June 30, 2005. $388 million of principal of the convertible debentures were tendered for redemption and redeemed for $558 million.
     In 2004, we issued $1.5 billion of fixed rate debt insenior notes at various issuances:
•In February and March 2004, we issued $525 million of 5.875% senior notes due 2014;
•In August 2004, we issued $550 million of 6.75% senior notes due 2012;
•In September 2004, we issued $450 million of 6% senior notes due 2009 at a premium to yield 5.65%.
times throughout the year, with interest rates ranging from 6.75% to 7.625% and maturities ranging from 2013 to 2017.
 In 2004, we repaid a net $1.6 billion on our bank credit facilities with the proceeds from the above offerings.
Our share repurchases are only conducted under repurchase programs approved by our Board of Directors and publicly announced. AtIn May 2008, our Board of Directors approved a 20 million share authorization which is still fully available at December 31, 2006, we had 8 million shares available for repurchase under the July 2004 authorization.2008. Our share repurchase activity was as follows:
             
  Year Ended December 31, 
  2006  2005  2004 
      (In thousands)     
November 2003 authorization (16 million shares purchased) $—  $—  $348,895 
July 2004 authorization (6.5 million and 5.5 million shares purchased)  246,892   217,316   — 
          
  $246,892  $217,316  $348,895 
          
             
Average price of shares repurchased $37.98  $39.51  $21.80 
             
  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 
 We received $89 million, $146 million and $136 million in proceeds from the exercise of employee stock options in the years ended December 31, 2006, 2005 and 2004, respectively.

29

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 10.25%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 ishas a total capacity of $7.0 billion, five-year credit facility with a syndicate of banks led by Bank of America, N.A.,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, 2006,2008, we had approximately $2.6$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. NoneAt 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
 
Long-term Debt Payable in 2007Amendment to senior credit facility.. We have a  In September 2008, we amended our senior credit facility to increase the maximum total of $1.4 billion in senior notes and senior subordinated notes that we expectleverage ratio (debt to repay at maturity inEBITDA, as defined) to 7.5:1.0 beginning with the second and third quarters of 2007.
Distributions from The Signature at MGM Grand. Tower 1 of The Signature at MGM Grand was completed in the secondfiscal quarter of 2006. We received distributions totaling $51 million related to Tower 1. Distributions for Tower 2 began in 2006 and as ofending December 31, 2006, we had received $43 million of such distributions. We expect to receive additional distributions on Tower 2,2008, which will remain in effect through December 31, 2009, with step downs thereafter. The amendment modified drawn and undrawn pricing levels as well as Tower 3, in 2007. Tower 3revised certain definitions and limitations on secured indebtedness. Our drawn pricing levels over LIBOR remain unchanged when the maximum total leverage ratio is expectedless than 5.0:1. When the maximum total leverage ratio exceeds that level, the drawn pricing levels over LIBOR range from 1.25% to be completed in April 2007 and closings will begin shortly thereafter.2.00%.
 
Sale of Primm Valley Resorts and Laughlin PropertiesRequest to borrow remaining available funds under the senior credit facility.  In October 2006,February 2009, we entered into an agreement to sell Colorado Belle and Edgewatersubmitted a borrowing request for $200$842 million, and an agreement to sell the Primm Valley Resorts for $400 million. We will use the net proceeds from the sales to repay borrowingsremaining amount of available funds (other than outstanding letters of credit) under our senior credit facility. Both agreementsThe 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 regulatory approval and other 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 both sales to be completed byreport a substantial gain on the second quartersale. Under the terms of 2007,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 which time we expect to record substantial gains on both sales.par.
 
CityCenterMGM Grand Atlantic City development..  In November 2004October 2007, we announced a plan to developplans for a multi-billion dollar urban metropolis, CityCenter,resort complex 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 boutique hotels, one of which will be managed by luxury hotelier Mandarin Oriental; approximately 470,000 square feet of retail shops, dining and entertainment venues; and approximately 2.3 million square feet of residential spaceour72-acre site in approximately 2,700 luxury condominium and condominium-hotel unitsAtlantic City. Since making that announcement, we have made extensive progress in multiple towers.
     We believe CityCenter will cost approximately $7 billion, excluding land costs. After estimated proceeds of $2.5 billion from the sale of residential units, we believe the net project cost will be approximately $4.5 billion. CityCenter is located on a 67-acre site with a carrying value of approximately $1 billion. We expect the project to open in late 2009.
Detroit Permanent Casino. The permanent casino at MGM Grand Detroit is expected to open in late 2007 at a cost of approximately $750 million, excluding license and land costs, and will feature a 400-room hotel, 100,000-square foot casino, numerous restaurant and entertainment amenities, and spa and convention facilities. The permanent casino is located on a 25-acre site with a carrying value of approximately $50 million. In addition, we recorded license rights with a carrying value of $100 million as a result of MGM Grand Detroit’s obligations to the City of Detroit in connection with the permanent casino development agreement.
Macau. We own 50% of MGM Grand Paradise Limited, an entity which is developing, and will operate, MGM Grand Macau, a hotel-casino resort in Macau S.A.R. Pansy Ho Chiu-king owns the other 50% of MGM Grand Paradise Limited. MGM Grand Macau will be located on a prime site and will feature at least 345 table games and 1,035 slots with room for significant expansion. Other features will include approximately 600 rooms, suites and villas, a luxurious spa, convention space, a variety of dining destinations,design and other attractions. MGM Grand Macau is estimatedpre-development activities. However, current economic conditions, including limited access to cost approximately $850 million, excluding license and land rights costs. The subconcession agreement, which allows MGM Grand Paradise Limitedcapital markets for projects of this scale have caused us to operate a casino in Macau, cost $200 million and the land rights agreement with the government of Macau is estimated to cost $60 million. Construction of MGM Grand Macau began in the second quarter of 2005 and the resort is anticipated to open in late 2007. We have invested $266 million in the venture and are committed to loaning the venture up to an additional $9 million. The venture has obtained a $700 million bank credit facility which, along with equity contributions and shareholder loans, is expected to be sufficient to fund the construction of MGM Grand Macau.

30

     MGM Grand Paradise Limited recently announced that it has been engaged in discussions with the Government of Macau S.A.R concerning the development of its second major resort project in Macau to be located in Cotai. The site, scope and financing related toreassess timing for this project are still being evaluated.
Beau Rivage Rebuilding. Beau Rivage reopened in August 2006. The resort’s guest rooms, casino floor and most public areas opened in August, and three restaurants and the showroom opened in December. In addition, Fallen Oak, a Tom Fazio-designed golf course, opened in November 2006.
     We believe that a large portion of the costs to rebuild Beau Rivage will be covered under our insurance policies. However, we cannot determine the exact amount of reimbursement until we submit our claims and receive notice of approval from our insurers. It is also uncertain as to the timing of such reimbursements, andproject. Accordingly, we have been funding the rebuilding costs in advance of receiving reimbursements from our insurers.postponed current development activities.
 
New York Racing AssociationMashantucket Pequot Tribal Nation..  We have entered into a definitive agreement with the New York Racing Association (“NYRA”)series of agreements to manage video lottery terminals (“VLTs”) at NYRA’s Aqueduct horseracing facility in metropolitan New York. Subject to receipt of requisite New York State approvals, we will assist in the development of the facility, including providing project financing up to $190 million, and will manage the facility for a term of five years (extended automatically if the financing provided by us is not fully repaid) for a fee. We believe, based on recent legislative changes, that our agreement with respect to installation of VLTs at Aqueduct would extend past the expiration of NYRA’s current racing franchise and would be binding on any successor to NYRA in the event NYRA is not granted a new racing franchise. NYRA’s recent filing for reorganization under Chapter 11 has introduced additional uncertainties, but we remain committed to the development once these uncertainties are resolved.
Mashantucket Pequot Tribal Nation. We have agreed to enterimplement a strategic alliance subject to definitive agreements, with the Mashantucket Pequot Tribal Nation (“MPTN”). The, which owns and operates Foxwoods Casino Resort in Mashantucket, Connecticut. Under the strategic alliance, has several elements, one of which calls fora new casino resort owned and operated by MPTN located adjacent to the creation ofexisting Foxwoods casino resort carries the “MGM Grand” brand name. The resort opened in May 2008. We are receiving a 50/50 joint venture to seek future development opportunities.brand licensing and consulting fee in connection with this agreement. We have agreedalso 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 development subsidiary of MPTN with a loan of up to $200 million intended to fundfinance a portion of that subsidiary’s matchingMPTN’s investment in any future joint development projects.
 
Jean PropertiesKerzner/Istithmar joint venture.. We have  In September 2007, we entered into an operatinga definitive agreement to formwith Kerzner International and Istithmar forming a 50/50 joint venture with Jeanco Realty Development, LLC. The venture will master plan andto develop a mixed-use communitymulti-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 Jean, Nevada. We will donate the Jean Properties and surrounding land to the joint venture. The valueKerzner International and Istithmar will contribute cash totaling $600 million, of this contribution per the operating agreementwhich $200 million will be $150 million. We expectdistributed to receive a distribution of $55 million upon transferus, for the other 50% of the Jean Properties and surrounding land to the venture, which is subject to the venture obtaining necessary regulatory and other approvals, and $20 million no later than August 2008. Nevada Landing is expected to close in April 2007.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 and The Signature at MGM Grand.Macau. We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions other than straightforward interest rate swaps.transactions. Our joint venture and 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 provided a guaranty for up to 50% of the interest and principal payment obligations on the construction financing for The Signature at MGM Grand. Otherwise, we have not historically guaranteed financing obtained by our investees, norand there are there anyno 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 partner’s 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, 2006,2008, we had outstanding letters of credit totaling $59$92 million, of which $50 million support bonds issued by the Economic Development Corporation of the City of Detroit.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.

31

 
Commitments and Contractual Obligations
 
The following table summarizes our scheduled contractual commitmentsobligations as of December 31, 2006:2008:
                         
  2007  2008  2009  2010  2011  Thereafter 
  (In millions) 
Long-term debt $1,402  $377  $1,276  $1,123  $4,914  $3,860 
Estimated interest payments on long-term debt (1)  865   772   733   630   548   1,013 
Capital leases  2   1   —   —   —   — 
Operating leases (2)  16   14   12   11   11   355 
Long-term liabilities (3)  116   5   54   5   2   17 
Other purchase obligations:                        
Construction commitments (4)  1,012   249   30   3   —   100 
Employment agreements  134   74   40   4   —   — 
Entertainment agreements (5)  128   30   15   —   —   — 
Other (6)  190   49   3   1   —   4 
                   
  $3,865  $1,571  $2,163  $1,777  $5,475  $5,349 
                   
 
                         
  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, 20062008 and forecasted LIBOR rates for our bank credit facility.


34

(2)The majorityApproximately $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 relate to ground leases for land in Primm, Nevada. These lease obligations are included in the pending sale of the Primm Valley Resorts.will conclude.
 
(3)Includes our obligation to support $50 million of bonds issued by the Economic Development Corporation of the City of Detroit as part of our development agreement with the City. The bonds mature in 2009. Also includes the estimated payments of obligations under our deferred compensation and supplemental executive retirement plans, based on balances as of December 31, 2006 and assumptions of retirement based on plan provisions.
 
(4)Included in construction commitments is $1 billion relatedAs of December 31, 2008 we were committed to CityCenter. While we have entered into a contract with a general contractor for the constructionfund equity contributions of most of$731 million to CityCenter during 2009. In addition, we are not committed to any componentfund 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 the project until we request and approve a guaranteed maximum price (“GMP”) for the component with the general contractor. We expectproceeds to approve GMPs for most or all of the components of CityCenter in 2007.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 20072009 includes approximately $88$58 million of open purchase orders. Other commitments are for various contracts, including corporate aircraft purchases,advertising, maintenance and other service agreements and advertising commitments.agreements.
 Summary
See “Executive Overview — Liquidity and Financial Position” for discussion of Expected Sources and Usesthe impacts of Funds
     In addition to the above contractual obligations disclosed above, other significant operating uses of cash in 2007 include tax paymentson our liquidity and uncommitted capital spending on CityCenter residential projects. Other significant investing uses of cash flow in 2007 include uncommitted capital expenditures, expected to be approximately $1.5 billion, excluding capitalized interest and the residential components of CityCenter.financial position.
 We plan to fund our contractual obligations and other estimated spending through a combination of operating cash flow, available borrowings under our senior credit facility and potential issuances of fixed rate long-term debt. We generated almost $1.2 billion in operating cash flow in 2006, which included deductions for interest payments, tax payments and certain contractually committed payments reflected in the above table, including operating leases, employment agreements and entertainment agreements.
Critical Accounting Policies and Estimates
 
Management’s 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.

32

 
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, 20062008 and 2005,2007, approximately 48%52% and 44%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, 20062008 and 2005,2007, approximately 37%34% and 42%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 customer’s 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 region’s economy occur.
 
The following table shows key statistics related to our casino receivables:
            
             At December 31, 
 At December 31, 2008 2007 2006 
 2006 2005 2004   (In thousands)   
 (In thousands)
Casino accounts receivable $248,044 $221,873 $174,713  $243,600  $266,059  $248,044 
Allowance for doubtful casino accounts receivable 83,327 68,768 57,111   92,278   76,718   83,327 
Allowance as a percentage of casino accounts receivable  34%  31%  33%  38%   29%   34% 
Median age of casino accounts receivable 46 days 39 days 33 days  36 days   28 days   46 days 
Percentage of casino accounts outstanding over 180 days  21%  19%  15%  21%   18%   21% 
 
The allowance for doubtful accounts as a percentage of casino accounts receivable has increased slightly in the current year due to an increase in aging of accounts. At December 31, 2006,2008, a 100 basis-point change in the allowance for doubtful accounts as a percentage of casino accounts receivable would change net income by $1.6$2 million, or less than $0.01 per share.
 
Fixed asset capitalizationAsset Capitalization and depreciation policiesDepreciation 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.

33

 
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 2006, 20052008, 2007 and 2004.2006. In October 2006, we entered into agreements to sell Primm Valley Resorts and Laughlin Properties. The fair value less costs to sell exceedsexceeded the carrying value, therefore no impairment was indicated. In February 2004, we entered into an agreement to sell MGM Grand Australia. The fair value less costs to sell exceeded the carrying value, therefore noSee “Goodwill Impairment” for discussion of impairment was indicated.of goodwill recorded in 2008. Other than the above items, we are not aware of events or circumstances through December 31, 20062008 that would cause us to review any material long-lived assets, goodwill or indefinite-lived intangible assets for impairment.
 
Income taxesTaxes
 We are subject to income taxes in the United States, and in several states and foreign jurisdictions in which we operate.
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.
     At December 31, 2006, we had $144 million of deferred tax assets and $3.5 billion of deferred tax liabilities. 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. The valuation allowance at December 31, 2006 related to the New Jersey deferred tax assets, the foreign tax credit carryforward and foreign deferred tax assets were $6 million, $2 million and $2 million, respectively.

34

 
Our income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities. While positionsPositions taken in tax returns are sometimes subject to uncertainty in the tax laws we doand may not take such positions unless we have “substantial authority” to do so under the Internal Revenue Code and applicable regulations. We may take positions on our tax returns based on substantial authority that are not ultimately be accepted by the IRS.IRS or other tax authorities.
 We assess such potential unfavorable outcomes based on the criteria of Statement of
Effective January 1, 2007, we adopted Financial Accounting Standards No. 5, “Accounting for Contingencies” (“SFAS 5”). We establish a tax reserve if an unfavorable outcome is probable and the amount of the unfavorable outcome can be reasonably estimated. We assess the potential outcomes of tax uncertainties on a quarterly basis. In determining whether the probable criterion of SFAS 5 is met, we presume that the taxing authority will focus on the exposure and we assess the probable outcome of a particular issue based upon the relevant legal and technical merits. We also apply our judgment regarding the potential actions by the tax authorities and resolution through the settlement process.
     We maintain required tax reserves until such time as the underlying issue is resolved. When actual results differ from reserve estimates, we adjust the income tax provision and our tax reserves in the period resolved. For tax years that are examined by taxing authorities, we adjust tax reserves in the year the tax examinations are settled. For tax years that are not examined by taxing authorities, we adjust tax reserves in the year that the statute of limitations expires. In addition, resolution of uncertainties may occur upon the issuance of specific IRS guidance on the issue. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental, and we believe we have adequately provided for any reasonable and foreseeable outcomes related to uncertain tax matters. See also “Recently Issued Accounting Standards — Uncertain Tax Positions.”
     In the third quarter of 2006, we reversed tax reserves of $6 million that were no longer required based upon guidance issued by the IRS during the quarter related to the deductibility of certain complimentaries, resulting in a reduction in our provision for income taxes. In the third quarter of 2004, the statute of limitations expired for our 2000 tax return, resulting in a reduction of our tax reserves of $6 million and a corresponding reduction in our provision for income taxes.
     The IRS is in the final stages of auditing our 2001 and 2002 tax returns and has initiated an audit of the 2003 and 2004 tax returns. The tax returns for subsequent years are also subject to possible future examination. The statutes of limitation for assessing tax have expired on all years prior to 2001.
     We classify reserves for tax uncertainties within “Other accrued liabilities” in the accompanying consolidated balance sheets, separate from any related income tax payable or deferred income taxes. Reserve amounts may relate to the deductibility of an item, as well as potential interest associated with those items.
     A portion of our tax reserves was assumed in the Mirage Resorts and Mandalay acquisitions. Any future adjustments to the acquired Mirage Resorts and Mandalay tax reserves will be recorded as an adjustment to goodwill.
Stock-based Compensation
     We account for stock-based compensation in accordance with SFAS 123(R). We measure fair value of share-based awards using the Black-Scholes model. There are several management assumptions required to determine the inputs into the Black-Scholes model. We have determined that our volatility and expected term assumptions can significantly impact the fair value of stock-based awards. The extent of the impact will depend, in part, on the extent of stock-based awards in any given year. In 2006, we granted 1.9 million stock appreciation rights with a total fair value of $28 million. In 2005, we granted 14.6 million stock options and stock appreciation rights with a total fair value of $186 million.
     For 2006 awards, a 10% change in the volatility assumption (33% for 2006; for sensitivity analysis, volatility was assumed to be 30% and 36%) would have resulted in a $1.8 million, or 6%, change in fair value. A 10% change in the expected term assumption (4.1 years for 2006; for sensitivity analysis, expected term was assumed to be 3.7 years and 4.5 years) would have resulted in a $1.5 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 change that a change in the expected term would cause other changes, since the risk-free rate and volatility assumptions are specific to the term; we did not attempt to adjust those assumptions in performing the sensitivity analysis above.
Business Combinations
     We account for business combinations in accordance with Statement of Financial Accounting Standards No. 141, “Accounting for Business Combinations” (“SFAS 141”) and Statement of Financial Accounting Standards No. 142, “Accounting for Goodwill and Other Intangible Assets” (“SFAS 142”), and related interpretations. SFAS 141 requires that we record the net assets of acquired businesses at fair value, and we must make estimates and assumptions to determine the fair value of these acquired assets and assumed liabilities.

35

     The determination of the fair value of acquired assets and assumed liabilities in the Mandalay acquisition required us to make certain fair value estimates, primarily related to land, property and equipment and intangible assets. These estimates require significant judgment and include a variety of assumptions in determining the fair value of acquired assets and assumed liabilities, including market data, estimated future cash flows, growth rates, current replacement cost for similar capacity for certain fixed assets, market rate assumptions for contractual obligations and settlement plans for contingencies and liabilities.
Recently Issued Accounting Standards
Uncertain Tax Positions
     In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,”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. UncertainAs required by the standard, we review uncertain tax positions must be reviewed at each balance sheet date. Liabilities recordedwe record as a result of this analysis must generally beare 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.
     FIN 48 also requires additional disclosures Additionally, we recognize accrued interest and penalties related to uncertainunrecognized tax positions, includingbenefits in income tax expense, a reconciliationpolicy that did not change as a result of changes in the beginning and ending aggregate amounts of liability recorded for uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006.
     Upon adoption of FIN 4848.
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 expectbelieve that it is reasonably possible to recordsettle 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 adjustmentexamination 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 stockholders’ equity asexamination 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 cumulative effectpayment of change in accounting principle and a reclassification between deferred incomeadditional taxes and interest of less than $1 million. No other accrued liabilities. state or local income tax returns are currently under exam.
Stock-based Compensation
We have completed an initial evaluationaccount 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 FSPFAS 140-4 and FIN 4846(R)-8 “Disclosures by Public Entities (Enterprises) About Transfers of Financial Assets and determined thatInterests 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 willof the FSP did not have a material impact on our consolidated financial position or results of operations.statements.
 
Materiality of Financial Statement MisstatementsEquity Method Investment Accounting Considerations
 
In September 2006,November 2008, the Securities and Exchange CommissionEmerging Issues Task Force (“SEC”EITF”) issuedof the FASB ratified its consensus on EITFNo. 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 investee’s 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 investee’s issuance of shares in earnings in accordance with the SEC’s Staff Accounting Bulletin No. 108 (“SAB 108”), which documents51 were removed to achieve consistency with SFAS 160; and d) the SEC staff’s views regardingguidance in APB Opinion 18 to account for a change in the process of quantifying financial statement misstatements. Under SAB 108, we must evaluateinvestor’s accounting from the materiality of an identified unadjusted error by consideringequity method to the impact of both the current year error and the cumulative error, if applicable. This also means that both the impact on the current period income statement and the period-end balance sheet mustcost method should still be considered.
     SAB 108 isapplied.EITF 08-6 became effective for fiscal years ending after November 15, 2006. Any past adjustments required to be recorded as a result of adopting SAB 108 are recorded as a cumulative effect adjustment to the opening balance of retained earnings. The adoption of SAB 108 had no impactus on our financial position or results of operations.
Planned Major Maintenance Activities
     In September 2006, the Financial Accounting Standards Board issued FASB Staff Position No. AUG AIR-1, “Accounting for Planned Major Maintenance Activities,” (“FSP AUG AIR-1”). FSP AUG AIR-1 prohibits the use of the “accrue-in-advance” method of accounting for planned major maintenance activities, previously one of four acceptable methods included in the AICPA Industry Audit Guide for Airlines. FSP AUG AIR-1 is effective for fiscal years beginning after December 15, 2006.
January 1, 2009. We do not believe the adoption of FSP AUG AIR-1EITF 08-6 will have anya material impact on our consolidated financial position or results of operations. We expense planned major maintenance activities at our operating resorts as incurred. For our corporate aircraft, we apply the “deferral” method of accounting to planned engine overhauls; the deferral method is one of the three remaining acceptable methods included in the Industry Audit Guide for Airlines. Under the deferral method, the cost of each engine overhaul is capitalized and amortized over the estimated period to the next required overhaul.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, 2006,2008, long-term fixed rate borrowings represented approximately 66%58% of our total borrowings. Based on December 31, 20062008 debt levels, an assumed 100 basis-point change in LIBOR would cause our annual interest cost to change by approximately $44$57 million.

36
39

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We incorporate by reference the information appearing under “Market Risk” in Item 7 of thisForm 10-K.
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and Notes to Consolidated Financial Statements, including the Independent Registered Public Accounting Firm’s Report thereon, referred to in Item 15(a)(1) of thisForm 10-K, are included at pages 5052 to 7888 of thisForm 10-K.
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.  CONTROLS AND PROCEDURES
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, 2006.2008. This conclusion is based on an evaluation conducted under the supervision and with the participation of Companythe 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.
Management’s Annual Report on Internal Control Over Financial Reporting
 
Management’s Annual Report on Internal Control Over Financial Reporting, referred to in Item 15(a)(1) of thisForm 10-K, is included at page 4850 of thisForm 10-K.
Attestation Report of the Independent Registered Public Accounting Firm
 
The Independent Registered Public Accounting Firm’s Attestation Report on management’s assessment of our internal control over financial reporting referred to in Item 15(a)(1) of thisForm 10-K, is included at page 4951 of this Form10-K.
Changes in Internal Control overOver Financial Reporting
 
During the quarter ended December 31, 2006, we had the following changes in our internal control over financial reporting that materially affected, or are reasonably likely to affect, our internal control over financial reporting, all of which relate to changes made at Mandalay resorts since our acquisition of Mandalay in April 2005:
•We implemented a new slot accounting system and the Players Club point-loyalty program at the major Mandalay resorts;
•We consolidated the accounts payable processing functions at most Mandalay resorts into our existing shared services function;
•We added accounting and finance staff to many of the Mandalay resorts, adopting our legacy practices of having 1) a chief financial officer at each resort, 2) functional controllers over the different revenue areas at each resort, and 3) financial analysis staff at each resort.
     In addition to the above significant changes, we made other changes to systems, policies and processes that2008, there were not considered significant. For instance, Mandalay historically used the same general ledger accounting system as we did, but we modified the Mandalay chart of accounts to make it consistent with ours. We also changed Mandalay’s banking structure to fit with our legacy structure, including moving bank accounts to a consolidated vendor. We did not consider these changes, or changes of a similar nature, to be significant since they are relatively routine when integrating a significant acquisition such as Mandalay.
     There were no other 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
ITEM 9B. OTHER INFORMATION
None.

37
40

PART III
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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 thisForm 10-K and under “Election of Directors” and “Corporate Governance” in our definitive Proxy Statement for our 20072009 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about April 9, 20073, 2009 (the “Proxy Statement”).
ITEM 11.  EXECUTIVE COMPENSATION
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 thisForm 10-K, and under “Principal Stockholders” and “Election of Directors” in the Proxy Statement.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE
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
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.ITEM 15.  
Included in Part II of this Report:
Management’s 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, 2006 and 2005
Years Ended December 31, 2006, 2005 and 2004
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements
(a)(2).Financial Statement Schedule.EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Years Ended December 31, 2006, 2005 and 2004
Schedule II — Valuation and Qualifying Accounts
(a)(1). Financial Statements.
 
Included in Part II of this Report:
Management’s 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.

38
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 StatementNo. 33-3305 and to Exhibit 3(a) to the Company’s Annual Report onForm 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 Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 1999 (the “199910-K”)).
3(3) Certificate of Amendment to Certificate of Incorporation of the Company, dated January 7, 2000, relating to a2-for-1 stock split (incorporated by reference to Exhibit 3(3) to the 199910-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 Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended September 30, 2000 (the “September 200010-Q”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 Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended June 30, 2003 (the “June 200310-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 Company’sForm 8-A filed with the Commission on May 11, 2005).
3(7) Amended and Restated Bylaws of the Company, effective August 8, 2006December 4, 2007 (incorporated by reference to Exhibit 3 to the Company’s Current Report onForm 8-K dated August 8, 2006)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 Mandalay’s Current Report onForm 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 Mandalay’s Current Report onForm 8-K dated January 29, 1996 (the “Mandalay January 19968-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 Mandalay’s Quarterly Report onForm 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 199610-Q).

39

Exhibit
NumberDescription
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 199610-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 199610-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 199610-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 onForm 10-Q of MRI for the fiscal quarter ended June 30, 1997 (the “MRI June 199710-Q”)).


42

  
Exhibit
Number
Description
 
4(9) Supplemental Indenture, dated as of August 1, 1997, to the MRI 1997 Indenture, with respect to $200 million aggregate principal amount of 6.75% Notes due 2007 and $100 million aggregate principal amount of 7.25% Debentures due 2017 (incorporated by reference to Exhibit 4.2 to the MRI June 199710-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 Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2000 10-K)(the “200010-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 onForm 10-K of MRI for the fiscal year ended December 31, 1997 (the “MRI 199710-K”)).
4(12)Supplemental Indenture, dated as of February 4, 1998, to the MRI 1998 Indenture, with respect to $200 million aggregate principal amount of 6.75% Notes due 2008 (incorporated by reference to Exhibit 4(f) to the MRI 1997 10-K).
4(13) Second Supplemental Indenture, dated as of October 10, 2000, to the MRI 1998 Indenture (incorporated by reference to Exhibit 4(15) to the 200010-K).
4(14)Indenture, dated as of May 31, 2000, among the Company, as issuer, the Subsidiary Guarantors parties thereto, as guarantors, and The Bank of New York, as trustee, with respect to $710 million aggregate principal amount of 9.75% Senior Subordinated Notes due 2007 (incorporated by reference to Exhibit 4 to the Company’s Current Report on Form 8-K dated May 22, 2000 (the “May 2000 8-K”)).
4(15)First Supplemental Indenture, dated as of September 30, 2000, among the Company, Bellagio Merger Sub, LLC and The Bank of New York, as trustee (incorporated by reference to Exhibit 4(12) to the 2000 10-K).
4(16)Second Supplemental Indenture, dated as of December 31, 2000, among the Company, MGM Grand Hotel & Casino Merger Sub, LLC and The Bank of New York, as trustee (incorporated by reference to Exhibit 4(16) to the 2000 10-K).
4(17)Indenture dated as of July 24, 2000 by and between Mandalay and The Bank of New York with respect to $500 million aggregate principal amount of 10.25% Senior Subordinated Notes due 2007 (incorporated by reference to Exhibit 4.1 to Mandalay’s Form S-4 Registration Statement No. 333-44216).
4(18)Indenture dated as of August 16, 2000 by and between Mandalay and The Bank of New York, with respect to $200 million aggregate principal amount of 9.5% Senior Notes due 2008 (incorporated by reference to Exhibit 4.1 to Mandalay’s Form S-4 Registration Statement No. 333-44838).

40

Exhibit
NumberDescription
4(19)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 Company’s Amended Current Report onForm 8-K/A dated September 12, 2000).
4(20)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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the “2000 10-K”))10-K).
4(21)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 200010-K)..
4(22)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 Company’s Current Report onForm 8-K dated January 18, 2001).
4(23)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 Mandalay’sForm S-4 Registration StatementNo. 333-82936).
4(24)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 Mandalay’s Annual Report onForm 10-K for the fiscal year ended January 31, 2003).
4(25)4(19) First Supplemental Indenture dated as of July 26, 2004, relating to Mandalay’s Floating Rate Senior Convertible Debentures due 2033 (incorporated by reference to Exhibit 4 to Mandalay’s Current Report onForm 8-K dated July 26, 2004).
4(26)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 Mandalay’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 31, 2003).
4(27)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 Company’s Current Report onForm 8-K dated September 11, 2003).
4(28)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 Mandalay’s Quarterly Report onForm 10-Q for the fiscal quarter ended October 31, 2003).
4(29)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 Company’s Current Report onForm 8-K, dated February 27, 2004).

43

   
4(30)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 Company’s Current Report onForm 8-K dated August 25, 2004).

41

Exhibit
NumberDescription
4(31)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 Company’s Current Report onForm 8-K dated June 20, 2005).
4(32)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 Company’s Current Report onForm 8-K dated September 9, 2005).
4(33)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 Company’s Current Report onForm 8-K dated April 5, 2006 (the “April 20068-K”)).
4(34)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 20068-K).
4(35)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 Company’s Current Report onForm 8-K dated December 21, 2006 (the “December 20068-K”)).
4(36)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 20068-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 Company’s Current Report onForm 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 Company’s Current Report onForm 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 Company’s Current Report onForm 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 Company’s Current Report onForm 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 20008-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 20008-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 20008-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 20008-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 20008-K).
10.1(6)Guarantee (MGM MIRAGE 9.75% Senior Subordinated Notes due 2007) dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York 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 10.6 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005 (the “September 2005 10-Q”)).

42

Exhibit
NumberDescription
10.1(7) 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 200510-Q).
10.1(8)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 200510-Q).
10.1(9)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 200510-Q).
10.1(10)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 200510-Q).
10.1(11)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 200510-Q).
10.1(12)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 200510-Q).
10.1(13)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 200510-Q).
10.1(14)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 200510-Q).
10.1(15)10.1(14) Guarantee (Mirage Resorts, Incorporated 6.75% Senior Notes due 2007 and 7.25% Debentures due 2017), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of Wells Fargo Bank Northwest, National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.17 to the September 200510-Q).
10.1(16)Guarantee (Mirage Resorts, Incorporated 6.75% Senior Notes due 2008), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of JPMorgan Chase Bank, N.A., successor in interest to PNC Bank, National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.18 to the September 2005 10-Q).
10.1(17)Guarantee (Mandalay Resort Group 10.25% Senior Subordinated Notes due 2007), 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 10.19 to the September 2005 10-Q).

4345

   
Exhibit
  
Number 
Description
10.1(18)
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 200510-Q).
10.1(19)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 200510-Q).
10.1(20)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 200510-Q).
10.1(21)Guarantee (Mandalay Resort Group 9.5% Senior Notes due 2008), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.23 to the September 2005 10-Q).
10.1(22)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 200510-Q).
10.1(23)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 200510-Q).
10.1(24)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 200510-Q).
10.1(25)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 Company’s Current Report onForm 8-K dated October 3, 2006).
10.1(22) 
10.1(26)GuarantyAmendment No. 1 to the Fifth Amended and Restated Loan Agreement dated August 16, 2004,as of October 3, 2006, by and among MGM MIRAGE, in favor ofas borrower; MGM Grand Detroit, LLC, as co-borrower; the Lenders and Co-Documentation Agents named therein; Bank of America, N.A., as Administrative Agent forAgent; the benefitRoyal Bank of the Lenders from time to time party to a Construction Loan Agreement with the Borrower, Turnberry/MGM Grand Towers,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 10.2 of10 to the September 2004 10-Q)Company’s Current Report onForm 8-K dated October 6, 2008).
10.1(23) 
10.1(27)GuarantySponsor Contribution Agreement, dated September 21, 2005,October 31, 2008, by and among MGM MIRAGE, in favor ofas sponsor, CityCenter Holdings, LLC, as borrower, and Bank of America, N.A., as AdministrativeCollateral Agent for the benefit of the Lenders from time to time party to a Construction Loan Agreement with the Borrower, Turnberry/MGM Grand Tower B, LLC. (incorporated by reference to Exhibit 10.1(30)10 to the Company’s Annual reportCurrent Report onForm 10-K for the year ended December 31, 2005 (the “2005 10-K”))8-K dated November 6, 2008).

44

10.1(24) 
Exhibit
NumberDescription
10.1(28)Guaranty Agreement,Sponsor Completion Guarantee, dated July 19, 2006,October 31, 2008, by and among MGM MIRAGE, in favor ofas completion guarantor, CityCenter Holdings, LLC, as borrower, and Bank of America, N.A., as AdministrativeCollateral Agent for(incorporated by reference to Exhibit 10 to the benefit of the Lenders from time to time party to a Construction Loan Agreement with the Borrower, Turnberry/MGM Grand Tower C, LLC.
Company’s Current Report onForm 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 Mandalay’s Registration Statement (No.(No. 2-85794) onForm 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 Mandalay’s Registration Statement (No.(No. 33-4475) onForm S-1).
10.2(3)Amended and Restated Ground Lease Agreement, dated July 1, 1993, between Primm South Real Estate Company and The Primadonna Corporation (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Primadonna Resorts, Inc. (Commission File No. 0-21732) for the fiscal quarter ended September 30, 1993).
10.2(4)First Amendment to the Amended and Restated Ground Lease Agreement and Consent and Waiver, dated as of August 25, 1997, between The Primadonna Corporation and Primm South Real Estate Company (incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K of Primadonna Resorts, Inc. for the fiscal year ended December 31, 1997).
10.2(5) 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 onForm 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 Company’s Annual Report onForm 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 200410-Q).
*10.3(3)Amendment to the MGM MIRAGE 1997 Nonqualified Stock Option Plan (incorporated by reference to Exhibit 10 to the Company’s Current Report onForm 8-K dated July 9, 2007).
*10.3(4) MGM MIRAGE 2005 Omnibus Incentive Plan (incorporated by reference to Exhibit 10 to the Company’s Registration Statement onForm S-8 filed May 12, 2005).
*10.3(4)10.3(5) Amended and Restated Annual Performance-Based Incentive Plan for Executive Officers, giving effect to amendment approved by the Company’s shareholders on May 9, 2006 (incorporated by reference to Appendix A to the Company’s 2006 Proxy Statement).
*10.3(5)Non-Qualified Deferred Compensation Plan, dated as of January 1, 2001 (incorporated by reference to Exhibit 10.3(12) to the 2000 10-K).
*10.3(6)Supplemental Executive Retirement Plan, dated as of January 1, 2001 (incorporated by reference to Exhibit 10.3(13) to the 2000 10-K).
*10.3(7) Deferred Compensation Plan II, dated as of December 30, 2004 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report onForm 8-K dated January 10, 2005 (the “January 20058-K”).
*10.3(8)10.3(7) Supplemental Executive Retirement Plan II, dated as of December 30, 2004 (incorporated by reference to Exhibit 10.1 to the January 20058-K).
*10.3(9)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 200510-K).

45

*10.3(9) 
Amendment No. 1 to the Deferred Compensation Plan II, dated as of July 10, 2007 (incorporated by reference to Exhibit
NumberDescription 10.3(11) to the Company’s Annual Report onForm 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 200710-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 200710-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 200710-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 Company’s Current Report onForm 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 Company’s Current Report onForm 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 Company’s Current Report onForm 8-K dated September 16, 2005 (the “September 16, 20058-K”)).
*10.3(11)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, 20058-K).
*10.3(12)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, 20058-K).

47

   
Exhibit
Number
Description
*10.3(13)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, 20058-K).
*10.3(14)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, 20058-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 D’Arrigo (incorporated by reference to Exhibit 10 to the Company’s Current Report onForm 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 Company’s Current Report onForm 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 Company’s Current Report onForm 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 Company’s Current Report onForm 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. D’Arrigo (incorporated by reference to Exhibit 4.1 to the Company’s Current Report onForm 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 200010-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 200010-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 theForm S-4 Registration Statement of Circus and Eldorado Joint Venture and Silver Legacy Capital Corp.—Commission FileNo. 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 Mandalay’s Quarterly Report onForm 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 200510-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 Company’s Current Report onForm 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 Company’s Current Report onForm 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 Company’s Current Report onForm 8-K dated August 21, 2007 (the “August 20078-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 Company’s Current Report onForm 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 Company’s Current Report onForm 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 Company’s Current Report onForm 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 200210-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 Mandalay’s Annual Report onForm 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 20078-K).
10.6(1)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 Company’s Current Report onForm 8-K dated October 17, 2007).
10.6(3) Purchase Agreement dated OctoberDecember 13, 2006,2008, by and among Mandalay Resort Group,The Mirage Casino-Hotel, as seller, Edgewater Hotel Corporation, Colorado Belle Corporation, and Aces High Management,Ruffin Acquisition, LLC, as purchaser (incorporated by reference to the Company’s Amendment No. 1 to Current Report onForm 8-K8-K/A dated October 13, 2006).

46

Exhibit
NumberDescription
10.6(2)Purchase Agreement dated October 31, 2006, by and among New York-New York Hotel & Casino, LLC, as seller, PRMA Land Development Company, The Primadonna Company LLC, and Herbst Gaming Inc., as purchaser (incorporated by reference to the Company’s Current Report on Form 8-K dated October 31, 2006).
10.6(3)Operating Agreement of Jeanco, LLC, dated FebruaryJanuary 9, 2007, (incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K dated February 9, 2007)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.
9999.2 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.

4749

MANAGEMENT’S ANNUAL REPORT
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
Management’s 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 Company’s 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.
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.
Management’s Evaluation
 
Management has evaluated the Company’s internal control over financial reporting using the criteria established in Internal Control—Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation as of December 31, 2006,2008, management believes that the Company’s 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 Company’s consolidated financial statements as of and for the periodyear ended December 31, 20062008 and issued their report thereon, which is included in this annual report. Deloitte & Touche LLP has also issued an attestation report on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting and such report is also included in this annual report.

48
50

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of MGM MIRAGE
 
We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, thatinternal control over financial reporting of MGM MIRAGE and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006,2008, based on criteria established inInternal Control—Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s 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, evaluating management’s assessment,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 opinions.opinion.
 
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s 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 company’s 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 company’s 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, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006,2008, based on the criteria established inInternal Control—Control — Integrated Frameworkissued 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, 2006 of the Company and our2008. Our report dated February 28, 2007March 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 Company’s ability to continue as a going concern; and (b) an explanatory paragraph regarding the adoption of Statement of Financial Accounting Standards Board Interpretation No. 123(R),48,Share-Based Payment.Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 28, 2007
March 17, 2009

49
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, 20062008 and 2005,2007, and the related consolidated statements of income,operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006.2008. 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 Company’s 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, 20062008 and 2005,2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006,2008, 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 142 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 Company’s ability to fulfill its financial commitments as they become due. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s 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, 2006,2007, the Company adopted the provisions of Statement of Financial Accounting Standards Board Interpretation No. 123(R),48,Share-Based Payment.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 effectiveness of the Company’s internal control over financial reporting as of December 31, 2006,2008, based on the criteria established inInternal Control—Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2007March 17, 2009 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 28, 2007
March 17, 2009

50
52

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)
        
         At December 31, 
 At December 31,  2008 2007 
 2006 2005 
ASSETS
ASSETS
ASSETS
Current assets
         
Cash and cash equivalents $452,944 $377,933  $295,644  $416,124 
Accounts receivable, net 362,921 352,673   303,416   412,933 
Inventories 118,459 111,825   111,505   126,941 
Income tax receivable 18,619 —   64,685   — 
Deferred income taxes 68,046 65,518   63,153   63,453 
Prepaid expenses and other 124,414 110,634   155,652   106,364 
Assets held for sale 369,348 —   538,975   — 
          
Total current assets 1,514,751 1,018,583   1,533,030   1,125,815 
          
  
Real estate under development
 188,433 — 
 
Property and equipment, net
 17,241,860 16,541,651   16,289,154   16,870,898 
  
Other assets
         
Investments in unconsolidated affiliates 1,092,257 931,154 
Investments in and advances to unconsolidated affiliates  4,642,865   2,482,727 
Goodwill 1,300,747 1,314,561   86,353   1,262,922 
Other intangible assets, net 367,200 377,479   347,209   362,098 
Deposits and other assets, net 440,990 515,992   376,105   623,226 
          
Total other assets 3,201,194 3,139,186   5,452,532   4,730,973 
          
 $22,146,238 $20,699,420  $23,274,716  $22,727,686 
          
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities
         
Accounts payable $182,154 $156,373  $142,693  $220,495 
Construction payable 234,486 109,228   45,103   76,524 
Income taxes payable — 125,503   —   284,075 
Current portion of long-term debt — 14   1,047,614   — 
Accrued interest on long-term debt 232,957 229,930   187,597   211,228 
Other accrued liabilities 958,244 913,520   1,549,296   932,365 
Liabilities related to assets held for sale 40,259 —   30,273   — 
          
Total current liabilities 1,648,100 1,534,568   3,002,576   1,724,687 
          
 
Deferred income taxes
 3,441,157 3,378,371   3,441,198   3,416,660 
Long-term debt
 12,994,869 12,355,433   12,416,552   11,175,229 
Other long-term obligations
 212,563 195,976   440,029   350,407 
  
Commitments and contingencies (Note 12)
 
 
Commitments and contingencies (Note 13)
        
Stockholders’ equity
         
Common stock, $.01 par value: authorized 600,000,000 shares, issued 362,886,027 and 357,262,405 shares; outstanding 283,909,000 and 285,069,516 shares 3,629 3,573 
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 2,806,636 2,586,587   4,018,410   3,951,162 
Deferred compensation —  (3,618)
Treasury stock, at cost (78,977,027 and 72,192,889 shares)  (1,597,120)  (1,338,394)
Treasury stock, at cost (92,777,027 and 74,627,027 shares)  (3,355,963)  (2,115,107)
Retained earnings 2,635,989 1,987,725   3,365,122   4,220,408 
Accumulated other comprehensive income (loss) 415  (801)  (56,901)  556 
          
Total stockholders’ equity 3,849,549 3,235,072   3,974,361   6,060,703 
          
 $22,146,238 $20,699,420  $23,274,716  $22,727,686 
          
The accompanying notes are an integral part of these consolidated financial statements.

51
53

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS

(In thousands, except per share amounts)
            
             Year Ended December 31, 
 Year Ended December 31,  2008 2007 2006 
 2006 2005 2004 
Revenues
             
Casino $3,130,438 $2,764,546 $2,080,752  $2,975,680  $3,239,054  $3,130,438 
Rooms 1,991,477 1,634,588 889,443   1,907,093   2,130,542   1,991,477 
Food and beverage 1,483,914 1,271,650 807,535   1,582,367   1,651,655   1,483,914 
Entertainment 459,540 426,175 268,595   546,310   560,909   459,540 
Retail 278,695 253,214 181,630   261,053   296,148   278,695 
Other 452,669 339,424 184,187   611,692   519,360   452,669 
              
 7,796,733 6,689,597 4,412,142   7,884,195   8,397,668   7,796,733 
Less: Promotional allowances  (620,777)  (560,754)  (410,338)  (675,428)  (706,031)  (620,777)
              
 7,175,956 6,128,843 4,001,804   7,208,767   7,691,637   7,175,956 
              
 
Expenses
             
Casino 1,612,992 1,422,472 1,028,351   1,618,914   1,646,883   1,586,448 
Rooms 539,442 454,082 237,837   533,559   542,289   513,522 
Food and beverage 902,278 782,372 462,864   930,716   947,475   870,683 
Entertainment 333,619 305,799 191,256   384,822   395,611   330,439 
Retail 179,929 164,189 116,556   168,859   187,386   177,479 
Other 245,126 187,956 101,780   397,504   307,914   236,486 
General and administrative 1,070,942 889,806 565,387   1,278,501   1,251,952   1,169,271 
Corporate expense 161,507 130,633 77,910   109,279   193,893   161,507 
Preopening and start-up expenses 36,362 15,752 10,276   23,059   92,105   36,362 
Restructuring costs (credit) 1,035  (59) 5,625 
Restructuring costs  443   —   1,035 
Property transactions, net  (40,980) 37,021 8,234   1,210,749   (186,313)  (40,980)
Gain on CityCenter transaction  —   (1,029,660)  — 
Depreciation and amortization 629,627 560,626 382,773   778,236   700,334   629,627 
       
 5,671,879 4,950,649 3,188,849        
         7,434,641   5,049,869   5,671,879 
        
Income from unconsolidated affiliates
 254,171 151,871 119,658   96,271   222,162   254,171 
              
 
Operating income
 1,758,248 1,330,065 932,613 
       
Operating income (loss)
  (129,603)  2,863,930   1,758,248 
        
Non-operating income (expense)
             
Interest income 11,192 12,037 5,663   16,520   17,210   11,192 
Interest expense, net  (760,361)  (640,758)  (367,583)  (609,286)  (708,343)  (760,361)
Non-operating items from unconsolidated affiliates  (16,063)  (15,825)  (12,298)  (34,559)  (18,805)  (16,063)
Other, net  (15,090)  (18,434)  (9,585)  87,940   4,436   (15,090)
              
  (780,322)  (662,980)  (383,803)  (539,385)  (705,502)  (780,322)
              
 
Income from continuing operations before income taxes
 977,926 667,085 548,810 
Income (loss) from continuing operations before income taxes
  (668,988)  2,158,428   977,926 
Provision for income taxes  (341,930)  (231,719)  (203,601)  (186,298)  (757,883)  (341,930)
              
 
Income from continuing operations
 635,996 435,366 345,209 
       
Income (loss) from continuing operations
  (855,286)  1,400,545   635,996 
        
Discontinued operations
             
Income from discontinued operations, including a gain on disposal of $82,538 in 2004 18,473 11,815 101,212 
Income from discontinued operations  —   10,461   18,473 
Gain on disposal of discontinued operations  —   265,813   — 
Provision for income taxes  (6,205)  (3,925)  (34,089)  —   (92,400)  (6,205)
              
 12,268 7,890 67,123   —   183,874   12,268 
              
Net income (loss)
 $(855,286) $1,584,419  $648,264 
        
Net income
 $648,264 $443,256 $412,332 
       
 
Basic income per share of common stock
 
Income from continuing operations $2.25 $1.53 $1.24 
Basic income (loss) per share of common stock
            
Income (loss) from continuing operations $(3.06) $4.88  $2.25 
Discontinued operations 0.04 0.03 0.24   —   0.64   0.04 
              
Net income per share $2.29 $1.56 $1.48 
Net income (loss) per share $(3.06) $5.52  $2.29 
              
 
Diluted income per share of common stock
 
Income from continuing operations $2.18 $1.47 $1.19 
Diluted income (loss) per share of common stock
            
Income (loss) from continuing operations $(3.06) $4.70  $2.18 
Discontinued operations 0.04 0.03 0.24   —   0.61   0.04 
              
Net income per share $2.22 $1.50 $1.43 
Net income (loss) per share $(3.06) $5.31  $2.22 
              
The accompanying notes are an integral part of these consolidated financial statements.

52
54

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
            
             Year Ended December 31, 
 Year Ended December 31,  2008 2007 2006 
 2006 2005 2004 
Cash flows from operating activities
             
Net income $648,264 $443,256 $412,332 
Adjustments to reconcile net income to net cash provided by 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 653,919 588,102 403,039   778,236   700,334   653,919 
Amortization of debt discounts, premiums and issuance costs  (3,096) 5,791 31,217   10,620   4,298   (3,096)
Provision for doubtful accounts 47,950 25,846  (3,522)  80,293   32,910   47,950 
Stock-based compensation 73,626 7,323 7,170   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  (41,135) 36,880 8,661   1,210,749   (186,313)  (41,135)
Loss on early retirements of debt — 18,139 5,527 
(Gain) loss on disposal of discontinued operations — —  (82,538)
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  (229,295)  (134,132)  (107,360)  (40,752)  (162,217)  (229,295)
Distributions from unconsolidated affiliates 212,477 89,857 51,500   70,546   211,062   212,477 
Deferred income taxes 59,764 51,759 55,647   79,516   32,813   59,764 
Tax benefit from stock option exercises — 94,083 38,911 
Changes in current assets and liabilities:             
Accounts receivable  (65,467)  (68,159)  (48,533)  20,500   (82,666)  (65,467)
Inventories  (10,431)  (7,017)  (8,557)  12,366   (8,511)  (10,431)
Income taxes receivable and payable  (129,929) 8,058 14,891   (346,878)  315,877   (129,929)
Prepaid expenses and other  (21,921) 10,830 1,109   14,983   10,937   (21,921)
Accounts payable and accrued liabilities 111,559 75,404 72,392   (187,858)  32,720   111,559 
Increase in real estate under development  (89,724) — — 
Hurricane Katrina insurance recoveries 108,786 — — 
Change in Hurricane Katrina insurance receivable  (46,581)  (46,275) — 
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  (36,814)  (16,949)  (22,639)  (34,685)  (30,334)  (50,784)
              
Net cash provided by operating activities 1,241,952 1,182,796 829,247   753,032   994,416   1,231,952 
              
 
Cash flows from investing activities
             
Capital expenditures  (1,884,053)  (759,949)  (702,862)
Acquisition of Mandalay Resort Group, net of cash acquired —  (4,420,990) — 
Proceeds from the sale of the Golden Nugget Subsidiaries and
MGM Grand Australia, net		 — — 345,730 
Hurricane Katrina insurance recoveries 199,963 46,250 — 
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 11,375 7,828 32,978   85,968   47,571   11,375 
Investments in unconsolidated affiliates  (86,000)  (183,000)  (11,602)
Change in construction payable 125,258 40,803 17,329 
Other  (18,970)  (33,759)  (29,326)  (27,301)  15,745   (1,682)
              
Net cash used in investing activities  (1,652,427)  (5,302,817)  (347,753)
       
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		 756,850 325,000  (1,574,489)  2,760,450   (402,300)  756,850 
Borrowings under bank credit facilities — maturities longer than 90 days 7,000,000 4,400,000 —   8,170,000   6,750,000   7,000,000 
Repayments under bank credit facilities — maturities longer than 90 days  (8,150,000) — —   (8,450,000)  (7,500,000)  (8,150,000)
Issuance of long-term debt 1,500,000 880,156 1,528,957   698,490   750,000   1,500,000 
Repayment of long-term debt  (444,500)  (1,408,992)  (52,149)
Retirement of senior notes  (789,146)  (1,402,233)  (444,500)
Debt issuance costs  (28,383)  (50,331)  (13,349)  (48,700)  (5,983)  (28,383)
Issuance of common stock 89,113 145,761 135,910   —   1,192,758   — 
Purchases of treasury stock  (246,892)  (217,316)  (348,895)
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 47,330 — —   9,509   102,479   47,330 
Other  (13,494)  (11,452)  (1,957)  (1,781)  3,715   (13,494)
              
Net cash provided by (used in) financing activities 510,024 4,062,826  (325,972)  1,122,082   (1,240,537)  510,024 
              
 
Cash and cash equivalents
             
Net increase (decrease) for the year 99,549  (57,195) 155,522   (106,326)  (36,820)  99,549 
Cash related to discontinued operations  (24,538) — — 
Cash related to assets held for sale  (14,154)  —   (24,538)
Balance, beginning of year 377,933 435,128 279,606   416,124   452,944   377,933 
              
Balance, end of year $452,944 $377,933 $435,128  $295,644  $416,124  $452,944 
              
 
Supplemental cash flow disclosures
             
Interest paid, net of amounts capitalized $778,590 $588,587 $321,008  $622,297  $731,618  $778,590 
State, federal and foreign income taxes paid, net of refunds 369,450 75,776 128,393   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.

53
55

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)
For the Years Ended December 31, 2006, 20052008, 2007 and 20042006
                                                                
 Accumulated Other                Accumulated Other
   
 Common Stock Capital in Comprehensive Total  Common Stock Capital in
       Comprehensive
 Total
 
 Shares Par Excess of Deferred Treasury Retained Income Stockholders’  Shares
 Par
 Excess of
 Deferred
 Treasury
 Retained
 Income
 Stockholders’
 
 Outstanding Value Par Value Compensation Stock Earnings (Loss) Equity  Outstanding Value Par Value Compensation Stock Earnings (Loss) Equity 
Balances, January 1, 2004
 286,192 $3,366 $2,171,625 $(19,174) $(760,594) $1,132,220 $6,345 $2,533,788 
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 — — — — — 412,332 — 412,332   —   —   —   —   —   648,264   —   648,264 
Currency translation adjustment — — — — — —  (10,336)  (10,336)  —   —   —   —   —   —   1,213   1,213 
Derivative income from unconsolidated affiliate, net — — — — — — 2,824 2,824 
   
Total comprehensive income 404,820 
 
Stock-based compensation — — — 7,170 — — — 7,170 
Tax benefit from stock-based compensation — — 38,911 — — — — 38,911 
Cancellation of restricted stock  (64) —  (64) 1,126  (1,062) — — — 
Issuance of common stock upon exercise of stock options 10,612 106 135,857 — —  (53) — 135,910 
Purchases of treasury stock  (16,000) — — —  (348,895) — —  (348,895)
                 
 
Balances, December 31, 2004
 280,740 3,472 2,346,329  (10,878)  (1,110,551) 1,544,499  (1,167) 2,771,704 
 
Net income — — — — — 443,256 — 443,256 
Currency translation adjustment — — — — — —  (1,631)  (1,631)
Derivative income from unconsolidated affiliate, net — — — — — — 1,997 1,997 
Other comprehensive income from unconsolidated affiliate, net  —   —   —   —   —   —   3   3 
      
Total comprehensive income 443,622                               649,480 
Stock-based compensation — — — 7,323 — — — 7,323   —   —   71,186   3,238   —   —   —   74,424 
Tax benefit from stock-based compensation — — 94,083 — — — — 94,083   —   —   60,033   —   —   —   —   60,033 
Cancellation of restricted stock  (24) — — 422  (422) — — —   (4)  —   —   70   (70)  —   —   — 
Issuance of common stock upon exercise of stock options 10,115 101 145,690 — —  (30) — 145,761   5,623   56   89,057   —   —   —   —   89,113 
Purchases of treasury stock  (5,500) — — —  (217,316) — —  (217,316)  (6,500)  —   —   —   (246,892)  —   —   (246,892)
Restricted shares turned in for tax withholding  (261) — — —  (10,105) — —  (10,105)  (280)  —   —   —   (11,764)  —   —   (11,764)
Other — — 485  (485) — — — —   —   —   (227)  310   —   —   —   83 
                                  
 
Balances, December 31, 2005
 285,070 3,573 2,586,587  (3,618)  (1,338,394) 1,987,725  (801) 3,235,072 
Balances, December 31, 2006
  283,909   3,629   2,806,636   —   (1,597,120)  2,635,989   415   3,849,549 
Net income — — — — — 648,264 — 648,264   —   —   —   —   —   1,584,419   —   1,584,419 
Currency translation adjustment — — — — — — 1,213 1,213   —   —   —   —   —   —   583   583 
Derivative income from unconsolidated affiliate, net — — — — — — 3 3 
Other comprehensive loss from unconsolidated affiliate, net  —   —   —   —   —   —   (442)  (442)
      
Total comprehensive income 649,480                               1,584,560 
 
Stock-based compensation — — 71,186 3,238 — — — 74,424   —   —   48,063   —   —   —   —   48,063 
Tax benefit from stock-based compensation — — 60,209 — — — — 60,209   —   —   115,439   —   —   —   —   115,439 
Cancellation of restricted stock  (4) — — 70  (70) — — — 
Issuance of common stock upon exercise of stock options 5,623 56 89,057 — — — — 89,113 
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  (6,500) — — —  (246,892) — —  (246,892)  (9,850)  —   —   —   (826,765)  —   —   (826,765)
Restricted shares turned in for tax withholding  (280) — — —  (11,764) — —  (11,764)
Other — —  (403) 310 — — —  (93)  —   —   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)
    
Balances, December 31, 2006
 283,909 $3,629 $2,806,636 $— $(1,597,120) $2,635,989 $415 $3,849,549 
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.

54
56

MGM MIRAGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION
 
NOTE 1 —ORGANIZATION
MGM MIRAGE (the “Company”) is a Delaware corporation, incorporated on January 29, 1986. As of December 31, 2006,2008, approximately 56%54% of the outstanding shares of the Company’s 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 Company’s entire Board of Directors and determine the outcome of other matters submitted to the Company’s stockholders, such as the approval of significant transactions. MGM MIRAGE acts largely as a holding company and, through wholly-owned subsidiaries, ownsand/or operates casino resorts. On April 25, 2005, the Company completed its merger with Mandalay Resort Group (“Mandalay”) – see Note 3.
 
The Company owns and operates the following casino resorts in Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, Treasure Island (“TI”), New York-New York, Excalibur, Monte Carlo, Circus Circus Las Vegas andSlots-A-Fun. Operations at MGM Grand Las Vegas include management of The Company ownsSignature at MGM Grand Las Vegas, a condominium-hotel consisting of three resorts in Primm, Nevada, at the California/Nevada state line – Whiskey Pete’s, Buffalo Bill’s and the Primm Valley Resort (the “Primm Valley Resorts”) – as well as two championship golf courses located near the resorts.towers. Other Nevada operations include Circus Circus Reno, Colorado Belle and Edgewater in Laughlin, Gold Strike and Nevada Landing in Jean, (the “Jean Properties”), and Railroad Pass in Henderson. The Company has a 50% investment in Silver Legacy in Reno, which is adjacent to Circus Circus Reno. In addition, the Company owns a 50% interest in the entity developing The Signature at MGM Grand, which is adjacent to MGM Grand Las Vegas. The Signature is a condominium-hotel development, with one tower open, one tower completed and in the closing process, and a final tower currently under construction. The Company also owns Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip resorts.resorts, and Primm Valley Golf Club at the California/Nevada state line.
 
In October 2006,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 Bill’s, Primm Valley, and Whiskey Pete’s casino resorts (the “Primm Valley Resorts”), not including the Primm Valley Golf Club, with net proceeds to the Company of approximately $398 million. In June 2007, the Company completed the sale of the Colorado Belle and Edgewater in Laughlin (the “Laughlin Properties”) for $200 million, and an agreement, with net proceeds to sell the Primm Valley Resorts, not including the two golf courses, for $400 million. The Company expects to complete the sale of the Laughlin Properties and Primm Valley Resorts by the second quarter of 2007. Both agreements are subject to regulatory approval and other customary closing conditions. See Note 4 for further information regarding these discontinued operations.
     In February 2007, the Company entered into an agreement to form a 50/50 joint venture whose purpose is to develop a mixed-use community in Jean, Nevada. The Company will contribute the Jean Properties and surrounding land to the venture. Nevada Landing is expected to close in April 2007. See Note 21 for further discussion.
     The Company and its local partners own MGM Grand Detroit, LLC, which operates a casino in an interim facility located in downtown Detroit, Michigan. MGM Grand Detroit, LLC is currently developing a permanent casino facility, expected to open in late 2007 at a cost of approximately $750 million, excluding license and land costs. The permanent casino is located on a 25-acre site with a carrying value of approximately $50$199 million. In addition, the Company recorded license rights with a carrying value of $100 million as a result of MGM Grand Detroit’s obligations to the City of Detroit in connection with the permanent casino development agreement. 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 2005. The Company has 50% interests in two resorts outside of Nevada – Borgata and Grand Victoria. Borgata is a casino resort located on Renaissance Point in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation owns the other 50% of Borgata and also operates the resort. 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.
 The Company owns 50% of MGM Grand Paradise Limited, a joint venture with Pansy Ho Chiu-king that is constructing and will operate a hotel-casino resort, MGM Grand Macau, in Macau S.A.R. MGM Grand Macau is estimated to cost approximately $850 million, excluding license and land rights costs. The subconcession agreement, which allows MGM Grand Paradise Limited to operate a casino in Macau, cost $200 million and the land rights agreement with the government of Macau is estimated to cost $60 million. The resort is anticipated to open in late 2007.
The Company is developinga 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 470,000425,000 square feet of retail shops, dining and entertainment venues; and approximately 2.32.1 million square feet of residential space in approximately 2,7002,400 luxury condominium and condominium-hotel units in multiple towers. The overall cost of CityCenter is estimated at approximately $7 billion, excluding land costs. After estimated proceeds of $2.5 billion from the sale of residential units, net project cost is estimated at approximately $4.5 billion. CityCenter is located on a 67-acre site with a carrying value of approximately $1 billion. CityCenter is expected to open in late 2009.2009, 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 resort’s 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

55
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 — SIGNIFICANT ACCOUNTING POLICIESLIQUIDITY AND BASIS OF PRESENTATIONFINANCIAL 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s ability to execute asset dispositions.
In addition, there are provisions in certain of the Company’s 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 Company’s 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 Company’s 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 Company’s 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. Management’s 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 management’s objectives. The Company is evaluating the possibility of a) disposing of certain assets, b) raising additional debtand/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 VariousVariable 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 Company’s operations are primarily in one segment –— operation of casino resorts. Other operations, and foreign operations, are not material.
 
Management’s 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 Company’s 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 maintainedmaintains insurance coveringfor both property damage and business interruption relating to catastrophic events, such as a result of wind and flood damage sustained atHurricane Katrina affecting Beau Rivage. The deductible under this coverage was $15 million, based on the amount of damage incurred. The net book value of damaged assets was $126 millionRivage in August 2005 and the Company incurred $34 millionrooftop fire at Monte Carlo in clean-up and demolition costs.
January 2008. Business interruption coverage coveredcovers lost profits and other costs incurred during the constructionclosure period and up to six months following the re-opening of the facility. Costs during the interruption period were less than the anticipated business interruption proceeds. As of December 31, 2006, the Company had receivedre-opening.
Non-refundable insurance recoveries of $355 million. This amount isreceived in excess of the net book value of damaged assets,clean-up and demolition costs, and post-stormpost-event costs are recognized as income in the period received or committed based on the Company’s estimate of $99 million incurred through December 31, 2006. Post-stormthe 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, in the accompanying consolidated statements of income, except for depreciation of non-damaged assets, which is classified as “Depreciation and amortization.” The excess non-refundable insurance recoveries have been recognized as income related to property damage and have therefore been classified as “Property transactions, net” in the accompanying consolidated statements of income. The Company has treated these amounts as related to property damage based on its current estimate of the total claim for property damage and business interruption compared to the recoveries received to date.
Insurance recoveries of $10 million were submitted to the Company under reservation of rights and have therefore been deferred and included in “Other accrued liabilities” in the accompanying consolidated balance sheet as of December 31, 2006.
     Insurance proceeds are classified in the statement of cash flows based on the coverage the proceeds relate to; however,to which they relate. Recoveries related to business interruption are classified as operating cash flows and recoveries related to property damage are classified as investing cash flows. However, the Company’s insurance policy includes undifferentiated coverage for both property damage and business interruption. TheTherefore, the Company treatedclassifies insurance recoveries as being related to property damage and therefore classified the proceeds as an investing cash flow, until the full $160 millionamount of damaged assets and demolition costs were recovered. The Company treatedare recovered, and classifies additional recoveries up to the amount of the post-stormpost-event costs incurred as being related to business interruption,interruption. Insurance recoveries beyond that amount are classified as operating or investing cash flows based on the Company’s estimated allocation of the total claim.
The following table shows the net pre-tax impact on the statements of operations for insurance recoveries from Hurricane Katrina and therefore classified thesethe 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 as an operating cash flow. As explained above,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 excessincome 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 post-stormoperating costs have been treated as related to property damage and are therefore classified as investing cash flows inof $21 million. As of December 31, 2008, the accompanying consolidated statementCompany had a receivable of cash flows.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 Company’s cash management program are recorded as accounts payable.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, 2006,2008, a substantial portion of the Company’s 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 Company’s 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, 2006,2008, 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.

56

 Real estate under development. Real estate under development represents capitalized costs of wholly-owned real estate projects to be sold, which consist entirely of condominium and condominium-hotel developments. Real estate under development includes land, direct construction and development costs, and capitalized property taxes and interest.
Property and equipment.Property and equipment are stated at cost. Gains or losses on dispositions of property and equipment are included in the determination of income. Maintenance costs are expensed as incurred. Property and equipment are generally depreciated over the following estimated useful lives on a straight-line basis:
     
Buildings and improvements 30 to 45 years
Land improvements  10 to 20 years 
Furniture and fixtures  3 to 10 years 
Equipment  3 to 20 years 
 We evaluate our
The Company evaluates its property and equipment and other long-lived assets for impairment in accordance with the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” For assets to be disposed of, we recognizethe 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, we reviewthe Company reviews fixed assets for impairment whenever indicators of impairment exist. If an indicator of impairment exists, we comparethe 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 Company’s 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 Company’s 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 LLC’s 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 Company’s 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 assetsassets..  Goodwill represents the excess of purchase price over fair market value of net assets acquired in business combinations. Goodwill and indefinite-lived intangible assets must be reviewed for impairment at least annually and between annual test dates in certain circumstances. The Company performs its annual impairment test for goodwill and indefinite-lived intangible assetstests in the fourth quarter of each fiscal year. No impairments were indicated as a result of the annual impairment reviewsreview for goodwill and indefinite-lived intangible assets in 2006, 2005 or 2004 .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 Company’s reporting units discounted using the Company’s 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, 
  2006  2005  2004 
  (In thousands) 
Rooms $91,799  $74,022  $57,091 
Food and beverage  296,866   229,892   176,092 
Other  34,439   31,733   22,826 
          
  $423,104  $335,647  $256,009 
          

57

             
  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 
             

 Revenue
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 Company’s management of CityCenter and totaled $47 million for residential sales is deferred until closing occurs, which is when title, possession2008 and $5 million for 2007, and are classified as other revenue and other attributesoperating expenses in the accompanying consolidated statements of ownership have been transferred to the buyer and the Company is not obligated to perform activities after the sale. Prior to closing, customer deposits are treated as liabilities. Costs associated with residential sales are also deferred, except for indirect selling costs and general and administrative expense, which are expensed as incurred. For the year ended December 31, 2006, the Company expensed $6 million of such costs; no such costs were incurred in 2005 or 2004. Capitalized costs will be charged to cost of sales upon closing based on relative sales value to the project as a whole.operations.
 
Point-loyalty programs.The Company operates various point-loyalty programs.  The Company’s 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 Company’s 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 Company’s resorts generally operate in a similar manner, though they generally are available only to customers at the individual resorts. At December 31, 20062008 and 2005,2007, the total company-wide liability for point-loyalty programs was $47$52 million and $43$56 million, respectively, including amounts classified as liabilities related to assets held for sale.
 Mandalay operated its own loyalty program, One Club, which was largely phased out through 2006 and early 2007. In One Club, customers earned points based on both their slots and table games play through July 2006, with slots play contributing to a points balance which could be redeemed for cash and both table games and slots play contributing to a points balance which could be redeemed for complimentaries. After July 2006, customers stopped earning points which could be redeemed for complimentaries. The Company recorded a liability based on the points earned times the redemption value. For cash points, the redemption value was the cash value, and the offsetting entry was a reduction in casino revenue. For complimentaries points, the redemption value was based on the average departmental cost of the free rooms, food and beverage and other services and estimated redemption patterns, and the offsetting entry was a casino operating expense.
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 $98 millionfor 2008, 2007 and $52 million for 2006, 2005 and 2004, respectively.
 
Corporate expense.Corporate expense represents unallocated payroll and aircraft costs, professional fees and various other expenses not directly related to the Company’s casino resort operations. In addition, corporate expense includes the costs associated with the Company’s evaluation and pursuit of new business opportunities, which are expensed as incurred until development of a specific project has become probable.
 
Preopening andstart-up expenses.The Company accounts for costs incurred during the preopening andstart-up phases of operations in accordance with the American Institute of Certified Public Accountants’ (“AICPA”) Statement of Position98-5, “Reporting on the Costs ofStart-up Activities.” Preopening andstart-up costs, including


63

organizational costs, are expensed as incurred. Costs classified as preopening andstart-up expenses include payroll, outside services, advertising, and other expenses related to new orstart-up operations and new customer initiatives.
 
Property transactions, net.The Company classifies transactions related to long-lived assets – such as write-downs and impairments, demolition costs, and normal gains and losses on the sale of fixed assets – as “Property transactions, net” in the accompanying consolidated statements of income.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, 
  2006  2005  2004 
  (In thousands) 
Weighted-average common shares outstanding used in the calculation
of basic earnings per share		  283,140   284,943   279,325 
Potential dilution from stock options and restricted stock  8,607   11,391   10,008 
          
Weighted-average common and common equivalent shares used
in the calculation of diluted earnings per share		  291,747   296,334   289,333 
          

58

             
  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 loss.income.
 
Comprehensive income.Comprehensive income includes net income (loss) and all other non-stockholder changes in equity, or other comprehensive income. Elements of the Company’s other comprehensive income are reported in the accompanying consolidated statementstatements of stockholders’ equity, and the cumulative balance of these elements consisted of the following:
         
  At December 31, 
  2006  2005 
  (In thousands) 
Derivative loss from unconsolidated affiliate, net $137  $134 
Foreign currency translation adjustments  278   (935)
       
  $415  $(801)
       
         
  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.
NOTE 3 — ACQUISITION
     On April 25, 2005, the Company closed its merger with Mandalay under which the Company acquired 100% Substantially all of the outstanding common stockprior year reclassifications relate to the classification of Mandalay for $71meals provided free to employees as a “General and administrative” expense, while in cash forpast periods the cost of these meals was charged to each share of Mandalay’s common stock. The acquisition expanded the Company’s portfolio of resorts on the Las Vegas Strip, provided additional sites for future development and expanded the Company’s employee and customer bases significantly. These factors resulted in the recognition of certain intangible assets, discussed below, and significant goodwill.operating department. The total acquisition cost included (in thousands):
     
Cash consideration for Mandalay’s outstanding shares and stock options $4,831,944 
Estimated fair value of Mandalay’s long-term debt  2,849,225 
Transaction costs and expenses and other  111,944 
    
   7,793,113 
Less: Net proceeds from the sale of MotorCity Casino  (526,597)
    
  $7,266,516 
    
amount reclassified to general and administrative expenses for the years ending 2007 and 2006 was $112 million and $98 million, respectively.
 Cash paid, net
Fair value measurement.  The Company adopted Statement of cash acquired, was $4.4 billion. The transaction was accountedFinancial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”) for as a purchase and, accordingly, the purchase price was allocated to the underlyingfinancial assets acquired and liabilities assumed based upon their estimatedon January 1, 2008. SFAS 157 establishes a framework for measuring the fair values.
     The following table sets forth the allocation of purchase price (in thousands):
     
Current assets (including cash of $134,245) $413,502 
Property and equipment  7,130,376 
Goodwill  1,221,990 
Other intangible assets  245,940 
Other assets  340,930 
Assumed liabilities, excluding long-term debt  (591,113)
Deferred taxes  (1,495,109)
    
  $7,266,516 
    
     The amount allocated to intangible assets includes the recognition of customer lists with an estimated value of $12 millionfinancial 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 estimated useful life of five years and trade names and trademarks with an estimated value of $234 million and an indefinite life. Goodwill and indefinite-lived intangible assets are not amortized.active market; “Level 2” inputs,

59
64

which are observable inputs for similar assets; and “Level 3” inputs, which are unobservable inputs. The operatingCompany’s only significant assets and liabilities affected by the adoption of SFAS 157 are:
1) Marketable securities held in connection with the Company’s 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 Company’s 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 FSPFAS 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 entity’s 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 Company’s consolidated financial statements.
Equity Method Investment Accounting Considerations.  In November 2008, the Emerging Issues Task Force (“EITF”) of the FASB ratified its consensus on EITFNo. 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 investee’s 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 investee’s issuance of shares in earnings in accordance with the SEC’s 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 investor’s 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 ofEITF 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 Mandalay are includedsale and liabilities related to assets held for sale in the accompanying consolidated statements of income from the datebalance 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 acquisition. The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the Mandalay acquisition had occurred on January 1, 2004.
         
  Year Ended December 31,
  2005 2004
  (In thousands, except per share amounts)
Net revenues $6,977,609  $6,509,886 
Operating income  1,488,013   1,399,092 
Income from continuing operations  454,365   407,176 
Net income  465,539   479,455 
Basic earnings per share:        
Income from continuing operations $1.59  $1.46 
Net income  1.63   1.72 
Diluted earnings per share:        
Income from continuing operations $1.53  $1.41 
Net income  1.57   1.66 
NOTE 4 — DISCONTINUED OPERATIONS
     In January 2004, the Company completedPrimm Valley Resorts in April 2007 resulted in a pre-tax gain of $202 million and the sale of the Golden Nugget Las Vegas in downtown Las Vegas and the Golden Nugget Laughlin in Laughlin, Nevada (the “Golden Nugget Subsidiaries”), with net proceeds to the Company of $210 million. In July 2004, the Company completed the sale of the subsidiaries that owned and operated MGM Grand Australia with net proceeds to the Company of $136 million. Included in discontinued operations for the year ended December 31, 2004 is a gain on the sale of the Golden Nugget Subsidiaries of $8 million and a gain on sale of MGM Grand Australia of $74 million. In October 2006, the Company entered into an agreement to sell the Laughlin Properties for $200 million, and an agreement to sell the Primm Valley Resorts, not including the two golf courses, for $400in June 2007 resulted in a pre-tax gain of $64 million. Both agreements are subject to regulatory approval and other customary closing conditions. These resorts had a combined carrying value of approximately $329 million, including assigned goodwill, at December 31, 2006.
The results of the Laughlin Properties and Primm Valley Resorts the Golden Nugget Subsidiaries, and MGM Grand Australia are classified as discontinued operations in the accompanying consolidated statements of income for all periods presented, as applicable. Net revenues of discontinued operations were $412 million, $353 million, and $281 million, respectively, for the years ended December 31, 2006, 20052007 and 2004. Included in income from discontinued operations is an allocation of interest expense based on the ratio of the net assets of the discontinued operations to the total consolidated net assets and debt of the Company. Interest allocated to discontinued operations was $18 million, $15 million and $13 million for the years ended December 31, 2006, 2005 and 2004, respectively.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 a50/50 joint venture for the CityCenter development. The following table summarizesjoint 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 liabilitiesonly if the following criteria are met: 1) the buyer is independent of discontinued operations (the Laughlin Properties and Primm Valley Resorts) as of December 31, 2006, included as assets held for sale and liabilities related to assets held for sale in the accompanying consolidated balance sheet:
     
  At December 31, 
  2006 
  (In thousands) 
Cash $24,538 
Accounts receivable, net  3,203 
Inventories  3,196 
Prepaid expenses and other  8,141 
    
Total current assets  39,078 
Property and equipment, net  316,332 
Goodwill  5,000 
Other assets, net  8,938 
    
Total assets  369,348 
    
     
Accounts payable  6,622 
Other current liabilities  29,142 
    
Total current liabilities  35,764 
Other long-term obligations  4,495 
    
Total liabilities  40,259 
    
     
Net assets $329,089 
    
seller;

60
66

NOTE 5 — ACCOUNTS RECEIVABLE, NET2) 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 Company’s 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 World’s 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 Company’s 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, 
 At December 31,  2008 2007 
 2006 2005  (In thousands) 
 (In thousands) 
Casino $248,044 $221,873  $243,600  $266,059 
Hotel 175,770 173,049   112,985   181,983 
Other 29,131 35,021   46,437   50,815 
          
 452,945 429,943   403,022   498,857 
Less: Allowance for doubtful accounts  (90,024)  (77,270)  (99,606)  (85,924)
          
 $362,921 $352,673  $303,416  $412,933 
          
NOTE 6 — PROPERTY AND EQUIPMENT, NET


67

 
NOTE 7 —PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
        
         At December 31, 
 At December 31,  2008 2007 
 2006 2005  (In thousands) 
 (In thousands) 
Land $7,905,430 $8,018,301  $7,449,254  $7,728,488 
Buildings, building improvements and land improvements 7,869,972 7,595,257   8,806,135   8,724,339 
Furniture, fixtures and equipment 2,954,921 2,695,746   3,435,886   3,231,725 
Construction in progress 1,306,770 607,447   407,440   552,667 
          
 20,037,093 18,916,751   20,098,715   20,237,219 
Less: Accumulated depreciation and amortization  (2,795,233)  (2,375,100)  (3,809,561)  (3,366,321)
          
 $17,241,860 $16,541,651  $16,289,154  $16,870,898 
          
NOTE 7 — INVESTMENTS IN UNCONSOLIDATED AFFILIATES
 The Company has investments
NOTE 8 —INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
. Investments in unconsolidated affiliates accounted for under the equity method. Under the equity method, carrying value is adjusted for the Company’s share of the investees’ earnings and losses, as well as capital contributionsadvances to and distributions from these companies. Investments in unconsolidated affiliates consisted of the following:
         
  At December 31, 
  2006  2005 
  (In thousands) 
Marina District Development Company — Borgata (50%) $454,354  $461,211 
Elgin Riverboat Resort-Riverboat Casino — Grand Victoria (50%)  300,151   241,279 
MGM Grand Paradise Limited — Macau (50%)  285,038   187,568 
Circus and Eldorado Joint Venture — Silver Legacy (50%)  31,258   26,492 
Other  9,795   14,604 
       
   1,080,596   931,154 
         
Turnberry/MGM Grand Towers — The Signature at MGM Grand (50%)  11,661   (7,400)
       
  $1,092,257  $923,754 
       
         
  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 
         
 The Company’s investment in MGM Grand Paradise Limited consists
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 partner’s loan funding was converted to equity and subordinated debt. Theeach partner provided additional equity contributions of $228 million. Under the terms of the credit facility described below, the Company is committedand Infinity World were each required to loaning the venturemake additional equity commitments of up to an$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 $9contributions 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 treatedused 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 an additional investment“Other” operating expenses, and the reimbursement of such costs is recorded as “Other” revenue in the venture.
     Asaccompanying consolidated statements of December 31, 2006,operations.


68

During 2007, sales of units at The Signature at MGM Grand had closedwere completed and the joint venture essentially ceased sales on alloperations. During the unitsfourth quarter of Tower 1 and a portion of2007, the Company purchased the remaining 88 units in Tower 2. The Company’s share ofTowers B and C from the profits from these transactions totaled $102 million for the year ended December 31, 2006. The Company also recognized a $15 million gain in 2006 on land contributed to thejoint venture for Towers 1$39 million. These units have been recorded as property, plant and 2. As of December 31, 2006 and 2005, the Company had deferred income related to its land contributions of $9 million and $16 million, respectively, which is classified as “Other long-term obligations”equipment in the accompanying consolidated balance sheets. As
The Company recognized the following related to its share of December 31, 2005profit 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 Company’s investment in unconsolidated affiliates does not equal the Company had a negative investment balanceventure-level equity due to cumulative distributions exceedingvarious basis differences. Basis differences related to depreciable assets are being amortized based on the book valueuseful lives of land contributed. Therefore, the investment balance in 2005 was classified in “Other long-term obligations.”

61

related assets and liabilities and basis differences related to non-depreciable assets are not being amortized. Differences between the Company’s venture-level equity and investment balances are as follows:
         
  At December 31, 
  2006  2005 
  (In thousands) 
Venture-level equity $698,587  $603,015 
Fair value adjustments  321,814   264,814 
Capitalized interest  68,806   52,689 
Other adjustments  3,050   3,236 
       
  $1,092,257  $923,754 
       
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Venture-level equity $3,711,900  $2,874,157 
Fair value adjustments to investments acquired in business combinations(A)  321,814   321,814 
Capitalized interest(B)  236,810   99,055 
Adjustment to CityCenter equity upon contribution of net assets by MGM MIRAGE(C)  (662,492)  (662,492)
CityCenter delayed equity contribution and partial completion guarantee(D)  883,831   — 
Advances to CityCenter, net of discount(E)  323,950   — 
Other adjustments(F)  (172,948)  (149,807)
         
  $4,642,865  $2,482,727 
         
 The fair value adjustments at December 31, 2006 include a $90 million increase for Borgata, related to land, a $267 million increase for Grand Victoria, related to indefinite-lived gaming license rights, and a $35 million reduction for Silver Legacy related to long-term assets and long-term debt. The adjustments for Borgata and Grand Victoria are not being amortized; the adjustments for Silver Legacy are being amortized based on the useful lives of the related assets and liabilities.
 
(A)Includes: a $90 million increase for Borgata, related to land; a $267 million increase for Grand Victoria, related to indefinite-lived gaming license rights; and a $35 million reduction for Silver Legacy, related to long-term assets and long-term debt.
(B)Relates to interest capitalized on the Company’s investment balance during the unconsolidated affiliates’ development and construction stages.
(C)Relates to land, construction in progress, real estate under development, and other assets — see Note 5.
(D)The Company recorded increases to its investment and corresponding liabilities for its partial completion guarantee and equity contributions, both as required under the CityCenter credit facility. These basis differences will be resolved as the Company makes the related payments or such liabilities are otherwise resolved.
(E)The advances to CityCenter are recognized as long-term debt by CityCenter; however, since such advances were provided at below market rates, CityCenter recorded the advances at a discount with a corresponding equity contribution. This basis difference will be resolved when the advances are repaid.
(F)Other adjustments include the deferred gain on the CityCenter transaction as discussed in Note 5.


69

The Company recorded its share of the results of operations of the unconsolidated affiliates as follows:
            
             Year Ended December 31, 
 Year Ended December 31,  2008 2007 2006 
 2006 2005 2004  (In thousands) 
 (In thousands) 
Income from unconsolidated affiliates $254,171 $151,871 $119,658  $96,271  $222,162  $254,171 
Preopening and start-up expenses  (8,813)  (1,914) —   (20,960)  (41,140)  (8,813)
Non-operating items from unconsolidated affiliates  (16,063)  (15,825)  (12,298)  (34,559)  (18,805)  (16,063)
              
 $229,295 $134,132 $107,360  $40,752  $162,217  $229,295 
              
 
Summarized balance sheet information of the unconsolidated affiliates is as follows:
        
         At December 31, 
 At December 31,  2008 2007 
 2006 2005  (In thousands) 
 (In thousands) 
Current assets $281,766 $220,708  $555,615  $676,746 
Property and other assets, net 2,227,570 2,008,912   11,546,361   7,797,343 
Current liabilities 248,931 213,135   945,412   817,208 
Long-term debt and other liabilities 1,009,565 871,173   3,908,088   2,015,631 
Equity 1,250,840 1,145,312   7,248,476   5,641,250 
 
Summarized results of operations of the unconsolidated affiliates are as follows:
            
             Year Ended December 31, 
 Year Ended December 31,  2008 2007 2006 
 2006 2005 2004  (In thousands) 
 (In thousands) 
Net revenues $2,020,523 $1,243,465 $966,642  $2,445,835  $1,884,504  $2,020,523 
Operating expenses, except preopening expenses  (1,536,253)  (938,972)  (721,998)  (2,258,033)  (1,447,749)  (1,536,253)
Preopening and start-up expenses  (12,285)  (1,352) —   (41,442)  (79,879)  (12,285)
              
Operating income 471,985 303,141 244,644   146,360   356,876   471,985 
Interest expense  (37,898)  (35,034)  (34,698)  (81,878)  (47,618)  (37,898)
Other non-operating income (expense) 2,462 1,435 9,789   (5,660)  5,194   2,462 
              
Net income $436,549 $269,542 $219,735  $58,822  $314,452  $436,549 
              
Summarized balance sheet information of the CityCenter joint venture is as follows:
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Current assets $75,944  $217,415 
Property and other assets, net  8,727,378   4,973,887 
Current liabilities  573,797   337,598 
Long-term debt and other liabilities  2,041,166   286,952 
Equity  6,188,359   4,566,752 
Summarized income statement information of the CityCenter joint venture is as follows:
         
  Year Ended December 31, 
  2008  2007 
  (In thousands) 
 
Operating expenses, except preopening expenses $  (39,347) $  (3,842)
Preopening andstart-up expenses
  (34,420)  (5,258)
         
Operating loss  (73,767)  (9,100)
Interest income  5,808   1,913 
Other non-operating income  154   — 
         
Net loss $(67,805) $(7,187)
         

62
70

NOTE 8 — GOODWILL AND OTHER INTANGIBLE ASSETS
 
NOTE 9 —GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consisted of the following:
        
         At December 31, 
 At December 31,  2008 2007 
 2006 2005  (In thousands) 
 (In thousands) 
Goodwill:         
Mandalay acquisition (2005) $1,216,990 $1,230,804 
Mirage Resorts acquisition (2000) 76,342 76,342  $39,648  $47,186 
Mandalay Resort Group acquisition (2005)  45,510   1,214,297 
Other 7,415 7,415   1,195   1,439 
     
 $1,300,747 $1,314,561      
      $86,353  $ 1,262,922 
      
Indefinite-lived intangible assets:         
Detroit development rights $100,056 $100,056  $98,098  $98,098 
Trademarks, license rights and other 247,346 251,754   235,672   247,346 
          
 347,402 351,810   333,770   345,444 
Other intangible assets, net 19,798 25,669   13,439   16,654 
          
 $367,200 $377,479  $   347,209  $362,098 
          
 Goodwill related to
Changes in the Mandalay acquisition was primarily assigned to Mandalay Bay, Luxor, Excalibur and Gold Strike Tunica. recorded balances of goodwill are as follows:
         
  Year Ended December 31, 
  2008  2007 
  (In thousands) 
 
Balance, beginning of year $1,262,922  $ 1,300,747 
Goodwill impairment charge  (1,168,088)  — 
Resolution of Mirage Resorts acquisition tax reserves  —   (29,156)
Finalization of the Mandalay purchase price allocation  —   (2,693)
Other  (8,481)  (5,976)
         
Balance, end of the year $86,353  $1,262,922 
         
Goodwill related to the Mirage Resorts acquisition was assigned to Bellagio, The Mirage and TI. OtherGoodwill related to the Mandalay Resort Group acquisition was primarily assigned to Mandalay Bay, Luxor, Excalibur and Gold Strike Tunica. As a result of the Company’s annual impairment test of goodwill, the Company recognized a non-cash impairment charge of goodwill of $1.17 billion in the fourth quarter of 2008 — included in “Property transactions, net” in the accompanying consolidated statement of operations. Such charge solely related to goodwill recognized in the Mandalay acquisition. Assumptions used in such analysis were impacted by current market 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 affected resorts. The remaining balance of the Mandalay acquisition goodwill primarily relates to goodwill assigned to Gold Strike Tunica.
The Company’s indefinite-lived intangible assets balance of $334 million includes trademarks and trade names of $217 million related to the Mandalay acquisition. As a result of the Company’s 2003 acquisitionannual impairment test of majority interestsindefinite-lived intangible assets, the Company recognized a non-cash impairment charge of $12 million in the entities that operate the nightclubs Light and Caramel, locatedfourth quarter of 2008 — included in Bellagio, and Mist, located in TI. Changes“Property transactions, net” in the recorded balancesaccompanying consolidated statement of goodwill are as follows:
         
  Year Ended December 31, 
  2006  2005 
  (In thousands) 
Balance, beginning of period $1,314,561  $83,757 
Goodwill acquired during the period  —   1,230,804 
Finalization of the Mandalay purchase price allocation  (8,814)  — 
Goodwill assigned to discontinued operations  (5,000)  — 
       
Balance, end of the period $1,300,747  $1,314,561 
       
operations. Such charge solely related to trade names recognized in the Mandalay acquisition. The fair value of the trade names was determined using the relief-from-royalty method and was negatively impacted by the factors discussed above relating to the impairment of goodwill. The Company’s indefinite-lived intangible assets consist primarily of development rights in Detroit and trademarks . trademarks.
The Company’s finite–livedremaining finite-lived intangible assets consist primarily of customer lists amortized over five years, lease acquisition costs amortized over the life of the related leases, and certain license rights amortized over their contractual life.


71

NOTE 9 — OTHER ACCRUED LIABILITIES
 
NOTE 10 —OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
         
  At December 31, 
  2006  2005 
  (In thousands) 
Payroll and related $304,924  $297,946 
Advance deposits and ticket sales  163,121   120,830 
Casino outstanding chip liability  89,574   100,621 
Casino front money deposits  71,918   71,768 
Other gaming related accruals  76,739   78,921 
Taxes, other than income taxes  66,827   68,632 
Other  185,141   174,802 
       
  $958,244  $913,520 
       

63

         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Payroll and related $   251,750  $   304,101 
Advance deposits and ticket sales  105,809   137,814 
Casino outstanding chip liability  96,365   105,015 
Casino front money deposits  74,165   71,069 
Other gaming related accruals  82,827   89,906 
Taxes, other than income taxes  59,948   72,806 
Delayed equity contribution to CityCenter  700,224   — 
Other  178,208   151,654 
         
  $1,549,296  $  932,365 
         

NOTE 10 — LONG-TERM DEBT
 
NOTE 11 —LONG-TERM DEBT
Long-term debt consisted of the following:
         
  At December 31, 
  2006  2005 
  (In thousands) 
Senior credit facility $4,381,850  $4,775,000 
$200 million 6.45% senior notes, repaid at maturity in 2006  —   200,223 
$244.5 million 7.25% senior notes, repaid at maturity in 2006  —   240,353 
$710 million 9.75% senior subordinated notes, due 2007, net  709,477   708,223 
$200 million 6.75% senior notes, due 2007, net  197,279   192,977 
$492.2 million 10.25% senior subordinated notes, due 2007, net  505,704   527,879 
$180.4 million 6.75% senior notes, due 2008, net  175,951   172,238 
$196.2 million 9.5% senior notes, due 2008, net  206,733   212,895 
$226.3 million 6.5% senior notes, due 2009, net  227,955   228,518 
$1.05 billion 6% senior notes, due 2009, net  1,053,942   1,055,232 
$297.6 million 9.375% senior subordinated notes, due 2010, net  319,277   325,332 
$825 million 8.5% senior notes, due 2010, net  823,197   822,705 
$400 million 8.375% senior subordinated notes, due 2011  400,000   400,000 
$132.4 million 6.375% senior notes, due 2011, net  133,529   133,725 
$550 million 6.75% senior notes, due 2012  550,000   550,000 
$150 million 7.625% senior subordinated debentures, due 2013, net  155,351   155,978 
$500 million 6.75% senior notes due 2013  500,000   — 
$525 million 5.875% senior notes, due 2014, net  522,839   522,604 
$875 million 6.625% senior notes, due 2015, net  879,592   879,989 
$250 million 6.875% senior notes due 2016  250,000   — 
$100 million 7.25% senior debentures, due 2017, net  83,556   82,699 
$750 million 7.625% senior notes due 2017  750,000   — 
Floating rate convertible senior debentures due 2033  8,472   8,472 
$150 million 7% debentures due 2036, net  155,900   155,961 
$4.3 million 6.7% debentures, due 2096  4,265   4,265 
Other notes  —   179 
       
   12,994,869   12,355,447 
Less: Current portion  —   (14)
       
  $12,994,869  $12,355,433 
       
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Senior credit facility $5,710,000  $3,229,550 
$180.4 million 6.75% senior notes, due 2008, net  —   180,085 
$196.2 million 9.5% senior notes, due 2008, net  —   200,203 
$226.3 million 6.5% senior notes, due 2009, net  226,720   227,356 
$820 million 6% senior notes, due 2009, net  820,894   1,052,577 
$297.6 million 9.375% senior subordinated notes, due 2010, net  305,893   312,807 
$782 million 8.5% senior notes, due 2010, net  781,223   823,689 
$400 million 8.375% senior subordinated notes, due 2011  400,000   400,000 
$128.7 million 6.375% senior notes, due 2011, net  129,399   133,320 
$544.7 million 6.75% senior notes, due 2012  544,650   550,000 
$150 million 7.625% senior subordinated debentures, due 2013, net  153,960   154,679 
$484.2 million 6.75% senior notes due 2013  484,226   500,000 
$750 million 13% senior secured notes due 2013, net  699,440   — 
$508.9 million 5.875% senior notes, due 2014, net  507,304   523,089 
$875 million 6.625% senior notes, due 2015, net  878,728   879,173 
$242.9 million 6.875% senior notes due 2016  242,900   250,000 
$732.7 million 7.5% senior notes due 2016  732,749   750,000 
$100 million 7.25% senior debentures, due 2017, net  85,537   84,499 
$743 million 7.625% senior notes due 2017  743,000   750,000 
Floating rate convertible senior debentures due 2033  8,472   8,472 
$0.5 million 7% debentures due 2036, net  573   155,835 
$4.3 million 6.7% debentures, due 2096  4,265   4,265 
Other notes  4,233   5,630 
         
   13,464,166   11,175,229 
Less: Current portion  (1,047,614)  — 
         
  $12,416,552  $11,175,229 
         
 Amounts
At December 31, 2007, amounts due within one year of the balance sheet date arewere classified as long-term in the accompanying consolidated balance sheets because the Company hashad both the intent and ability to repay these amounts with available borrowings under theits senior credit facility.
     Total interest incurred during 2006, 2005 and 2004 was $900 million, $686 million and $404 million, respectively, of which $122 million, $30 million and $23 million, respectively, was capitalized and $18 million, $15 million, and $13 million, respectively, was allocated to discontinued operations.
     In October 2006, the Company entered into an amended and restated senior credit facility. The initial total capacity of As discussed in Note 2, the senior credit facility remains atwas fully drawn during February 2009; therefore, the Company’s senior notes due in 2009 have been classified as current obligations as of December 31, 2008. We have not reclassified amounts outstanding on other long-term debt obligations — including the senior credit facility — as current. The Company does not believe that the inclusion of


72

an explanatory paragraph relating to its ability to continue as a going concern in the report of the Company’s independent registered public accounting firm constitutes an event of default under the senior credit facility, and does not believe the lenders could successfully assert such claim. However, in entering into the waiver and amendment described in Note 2, the lenders have indicated they are likely to assert such claim, though they have waived their right to assert such claim through May 15, 2009. To the extent the lenders were successful in such assertion, they could demand immediate repayment of all outstanding borrowings under the senior credit facility, and holders of our other long-term debt obligations could make similar demands under cross-default provisions.
Interest expense, net consisted of the following:
             
  Year Ended December 31, 
  2008  2007  2006 
     (In thousands)    
 
Total interest incurred $795,049  $930,138  $900,661 
Interest capitalized  (185,763)  (215,951)  (122,140)
Interest allocated to discontinued operations  —   (5,844)  (18,160)
             
  $609,286  $708,343  $760,361 
             
The senior credit facility has a total capacity of $7 billion with the maturity extended toand matures in 2011. The Company has the ability to solicit additional lender commitments to increase the capacity to $8 billion. The components of the senior credit facility also changed, with theinclude a term loan facility increasing toof $2.5 billion and thea revolving credit facility decreasing toof $4.5 billion. InterestThe weighted average interest rate on outstanding borrowings under the senior credit facility is based on the bank reference rate or Eurodollar rate. The Company’s borrowing rate on the senior credit facility was approximately 6.5% at December 31, 2006 and 5.3% at2008 was 3.4%. At December 31, 2005. Stand-by letters2008, the Company had approximately $1.2 billion of credit totaling $59 million were outstanding as of December 31, 2006, thereby reducing the availabilityavailable borrowing capacity under the senior credit facility. At December 31, 2006,After giving effect to the events described in Note 2, the Company had approximately $2.6 billionhas borrowed the entire amount of available borrowings under the senior credit facility.facility as of February 28, 2009.
 
In February 2006, the Company repaid the $200 million 6.45% senior notes at their maturity. In October 2006, the Company repaid the $244.5 million 7.25% senior notes at their maturity. The Company repaid both issuances of senior notes with borrowings under the senior credit facility.
     In April 2006, the Company issued $500 million of 6.75% senior notes due 2013 and $250 million of 6.875% senior notes due 2016. In December 2006,November 2008, the Company issued $750 million in aggregate principal amount of 7.625%13% senior secured notes due 2017.2013, at a discount to yield 15% with net proceeds to the Company of $687 million. The notes are secured by the equity interests and assets of New York-New York and otherwise rank equally with the Company’s existing and future senior indebtedness. The senior secured notes require that upon consummation of an asset sale, such as the proposed sale of TI, the Company 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.
In November 2008, the Company redeemed $149.4 million of the April 2006 and December 2006 issuances were usedaggregate outstanding principal amount of its 7% debentures due 2036 pursuant to repay outstanding borrowings under the senior credit facility.

64

     In June 2005, the Company issued $500 million of 6.625% senior notes due 2015 and in September 2005, the Company issued an additional $375 million of 6.625% senior notes due 2015. In 2004, the Company issued $525 million of 5.875% senior notes due 2014, $550 million of 6.75% senior notes due 2012, and $450 million of 6% senior notes due 2009.
     In May 2005, the Company initiated a tender offer for several issuances of Mandalay’s senior notes and senior subordinated notes totaling $1.5 billion, as requiredone-time put option by the changeholders of control provisions contained in the respective indentures. Holders of $155such debentures. The Company recognized a $6 million of Mandalay’s senior notes and senior subordinated notes redeemed their holdings, resulting in a gain on early retirementthe redemption of debt of $1 million, classified asthese debentures, included within “Other, net” in the accompanying consolidated statementsstatement of income. Holders of Mandalay’s floating rate convertible senior debentures with a principal amount of $394 million had the right to redeem the debentures for $566 million through June 30, 2005. $388 million of principal of the convertible senior debentures were tendered for redemption and redeemed for $558 million.operations.
 
In February 2005, the Company redeemed all of its outstanding 6.875% senior notes due FebruaryOctober 2008, at the present value of future interest payments plus accrued interest at the date of redemption. The Company recorded a loss on retirement of debt of $20 million in the first quarter of 2005, classified as “Other, net” in the accompanying consolidated statements of income.
     In August 2003, the Company’s Board of Directors authorized the repurchasepurchase of up to $100$500 million of the Company’s public debt securities. In 2004,2008, the Company repurchased $49$345 million of principal amounts of its outstanding senior notes for $52 million. This resultedat a purchase price of $263 million in a lossopen market repurchases as follows:
• $230 million in principal amount of our 6% senior notes due 2009;
• $43 million in principal amount of our 8.5% senior notes due 2010;
• $3.7 million in principal amount of the 6.375% senior notes due 2011;
• $5.4 million in principal amount of our 6.75% senior notes due 2012;
• $15.8 million in principal amount of our 6.75% senior notes due 2013;
• $16.1 million in principal amount of our 5.875% senior notes due 2014;
• $7.1 million in principal amount of our 6.875% senior notes due 2016;
• $17.3 million in principal amount of our 7.5% senior notes due 2016; and
• $7 million in principal amount of our 7.625% senior notes due 2017.


73

The Company recognized an $82 million gain on early retirementthe repurchase of debt of $6 million related to repurchase premiums and unamortized debt issuance costs. The loss is classified as “Other,the above senior notes, included in “other, net” in the accompanying consolidated statementsstatement of income. operations.
In December 2004,February 2008, the Company’s Board of Directors renewed its authorization for up to $100Company repaid the $180.4 million of additional debt securities.
     The Company attempts to limit its exposure to interest rate risk by managing the mix of its long-term fixed rate borrowings and short-term6.75% senior notes at maturity using borrowings under its bankthe senior credit facilities.facility. In the past,August 2008, the Company has also utilized interest rate swap agreements to manage this risk. At December 31, 2006,repaid the $196.2 million of 9.5% senior notes at maturity using borrowings under the senior credit facility.
In May 2007, the Company had no outstanding interest rate swaps. Allissued $750 million of 7.5% senior notes due 2016. In June 2007, the Company’s interest rate swaps have metCompany repaid the criteria for$710 million of 9.75% senior subordinated notes at maturity. In August 2007, the Company repaid the $200 million of 6.75% senior notes and the $492.2 million of 10.25% senior subordinated notes at maturity using borrowings under the “shortcut method” allowed under Statement of Financial Accounting Standards No. 133. The amounts received for the termination of past interest rate swaps, including the last $100 million swap terminated in May 2005, have been added to the carrying value of the related debt obligations and are being amortized and recorded as a reduction of interest expense over the remaining life of that debt.senior credit facility.
 
The Company and each of its material subsidiaries, excluding MGM Grand Detroit, LLC and the Company’s foreign subsidiaries, are directly liable for or unconditionally guarantee the senior credit facility, senior notes, senior debentures, and senior subordinated notes. MGM Grand Detroit, LLC is a guarantor under the senior credit facility, but only to the extent that MGM Grand Detroit, LLC borrows under such facilities. At December 31, 2008, the outstanding amount of borrowings related to MGM Grand Detroit, LLC was $404 million. See Note 19 for consolidating condensed financial information of the subsidiary guarantors and non-guarantors. NoneSubstantially all of the Company’sassets 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 its senior credit facility, senior notes, or other long-term debt.our principal debt arrangements.
 
The Company’s long-term debt obligations contain customary covenants, including requiring the Company to maintain certain financial ratios. At December 31, 2006,In September 2008, the Company was requiredamended its senior credit facility to maintain aincrease the maximum total leverage ratio (debt to EBITDA, as defined) of 6.5:1 andto 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 Company is also required to maintain a minimum coverage ratio (EBITDA to interest charges, as defined) of 2.0:1. As of1.0. At December 31, 2006,2008, the Company’s leverage and interest coverage ratios were 5.0:16.7:1.0 and 2.8:1,2.7:1.0, respectively. See Note 2 for further discussion of the financial covenants in our senior credit facility.
 
Maturities of the Company’s long-term debt as of December 31, 20062008 are as follows:
     
  (In thousands) 
    
Years ending December 31,   
2007 $1,402,233 
2008  376,663 
2009  1,276,330 
2010  1,122,556 
2011  4,914,210 
Thereafter  3,860,169 
    
   12,952,161 
Debt premiums  41,705 
Swap deferred gain  1,003 
    
  $12,994,869 
    

65

     
  (In thousands) 
 
Years ending December 31,    
2009 $1,047,675 
2010  1,080,891 
2011  6,240,015 
2012  544,879 
2013  1,384,226 
Thereafter  3,215,837 
     
   13,513,523 
Debt premiums and discounts, net  (49,357)
     
  $13,464,166 
     

 
The estimated fair value of the Company’s long-term debt at December 31, 20062008 was approximately $13$8.5 billion, consistent withversus its book value.value of $13.5 billion. At December 31, 2005,2007, the estimated fair value of the Company’s long-term debt was approximately $12.5$10.9 billion, versus its book value of $12.4$11.2 billion. The estimated fair value of the Company’s public debt securitiessenior and senior subordinated notes was based on quoted market prices on or about December 31, 20062008 and 2005. The estimated2007; the fair value of the Company’s senior credit facility was assumed to approximate book value due to the short-term nature of the borrowings.is based on estimated amounts.
NOTE 11 — INCOME TAXES
 
NOTE 12 —INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.


74

The income tax provision attributable to continuing operations and discontinued operations is as follows:
            
             Year Ended December 31, 
 Year Ended December 31,  2008 2007 2006 
 2006 2005 2004  (In thousands) 
 (In thousands) 
Continuing operations $341,930 $231,719 $203,601  $186,298  $757,883  $341,930 
Discontinued operations 6,205 3,925 34,089   —   92,400   6,205 
              
 $348,135 $235,644 $237,690  $186,298  $850,283  $348,135 
              
 
The income tax provision attributable to income (loss) from continuing operations before income taxes is as follows:
             
  Year Ended December 31, 
  2006  2005  2004 
  (In thousands) 
Current—federal $328,068  $218,901  $197,954 
Deferred—federal  8,152   4,164   (9,048)
          
Provision for federal income taxes  336,220   223,065   188,906 
          
             
Current—state  3,920   5,252   2,851 
Deferred—state  1,432   6,811   11,420 
          
Provision for state income taxes  5,352   12,063   14,271 
          
             
Current—foreign  (72)  (2,979)  424 
Deferred—foreign  430   (430)  — 
          
Provision for foreign income taxes  358   (3,409)  424 
          
  $341,930  $231,719  $203,601 
          
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Current — federal $186,051  $729,249  $328,068 
Deferred — federal  (14,537)  16,921   8,152 
Other noncurrent — federal  8,627   6,326   — 
             
Provision for federal income taxes  180,141   752,496   336,220 
             
Current — state  8,608   2,493   3,920 
Deferred — state  (651)  728   1,432 
Other noncurrent — state  (1,800)  2,166   — 
             
Provision for state income taxes  6,157   5,387   5,352 
             
Current — foreign  —   —   (72)
Deferred — foreign  —   —   430 
             
Provision for foreign income taxes  —   —   358 
             
  $186,298  $757,883  $341,930 
             
 
A reconciliation of the federal income tax statutory rate and the Company’s effective tax rate is as follows:
            
             Year Ended December 31, 
 Year Ended December 31, 2008 2007 2006 
 2006 2005 2004
Federal income tax statutory rate  35.0%  35.0%  35.0%  (35.0)%  35.0%  35.0%
State income tax (net of federal benefit) 0.4 1.2 1.7   0.8   0.1   0.4 
Goodwill write-down  61.1   —   — 
Reversal of reserves for prior tax years  (0.8) —  (1.0)  —   (0.2)  (0.8)
Foreign earnings repatriation — benefit of American Job Creation Act of 2004 —  (1.5) — 
Losses of unconsolidated foreign affiliates  1.0   2.0   — 
Domestic Production Activity deduction  —   (1.8)  — 
Tax credits  (0.6)  (1.3)  (0.6)  (1.0)  (0.3)  (0.6)
Permanent and other items 1.0 1.3 2.0   0.9   0.3   1.0 
              
  35.0%  34.7%  37.1%  27.8%  35.1%  35.0%
              

66
75

The major tax-effected components of the Company’s net deferred tax liability are as follows:
                
 At December 31,  At December 31, 
 2006 2005  2008 2007 
 (In thousands)  (In thousands) 
Deferred tax assets—federal and state 
Deferred tax assets — federal and state        
Bad debt reserve $35,454 $32,490  $41,452  $38,144 
Deferred compensation 39,039 31,230   35,978   48,439 
Net operating loss carryforward 5,705 7,253   1,204   1,054 
Preopening and start-up costs 5,006 3,801   4,928   4,278 
Accruals, reserves and other 34,316 33,413   69,321   70,350 
Investments in unconsolidated affiliates — 265 
Long-term debt 6,338 20,902 
Stock-based compensation 23,662 2,262   50,677   37,059 
Tax credits 2,491 —   2,491   2,491 
          
 152,011 131,616   206,051   201,815 
Less: Valuation allowance  (8,308)  (5,734)  (4,197)  (4,047)
          
 143,703 125,882  $201,854  $197,768 
          
 
Deferred tax liabilities—federal and state 
Deferred tax liabilities — federal and state        
Property and equipment  (3,385,984)  (3,350,365) $(3,455,987) $(3,420,115)
Long-term debt  (6,500)  (1,479)
Investments in unconsolidated affiliates  (31,839) —   (15,709)  (26,643)
Intangibles  (98,991)  (88,800)  (101,703)  (102,738)
          
  (3,516,814)  (3,439,165)  (3,579,899)  (3,550,975)
          
 
Deferred taxes—foreign 2,144 2,027 
Deferred taxes — foreign  2,034   2,214 
Less: Valuation allowance  (2,144)  (1,597)  (2,034)  (2,214)
     
 — 430 
          
Net deferred tax liability $(3,373,111) $(3,312,853) $(3,378,045) $(3,353,207)
          
 
For federal income tax purposes, the Company has a foreign tax credit carryforward of $2 million that will expire in 2015 if not utilized.
 
For state income tax purposes, the Company has a New Jersey net operating loss carryforwardcarryforwards of $98$21 million, which equates to a deferred tax asset of $6$1 million, after federal tax effect, and before valuation allowance. The New Jersey net operating loss carryforwards began towill expire in 2005.at various dates from 2009 through 2015 if not utilized.
 
At December 31, 2006,2008, there is a $6$2 million valuation allowance, after federal effect, provided on certain New Jersey state net operating loss carryforwards and other New Jersey state deferred tax assets, a valuation allowance of $2 million on the foreign tax credit, and a $2 million valuation allowance related to certain foreign deferred tax assets because management believes these assets do not meet the “more likely than not” criteria for recognition under SFAS 109. Management believes all other deferred tax assets are more likely than not to be realized because of the future reversal of existing taxable temporary differences and expected future taxable income. Accordingly, there are no other valuation allowances provided at December 31, 2008.
Effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 requires that tax positions be assessed using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred income tax accounts, and at December 31, 2008, the Company has classified $1 million as current (“Other accrued liabilities”) and $118 million as long-term (“Other long-term obligations”) in the accompanying consolidated balance sheets, based on the time until expected payment. A cumulative effect adjustment to retained earnings was not required as a result of the implementation of FIN 48.


76

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows (in thousands):
         
  Year Ended December 31, 
  2008  2007 
 
Gross unrecognized tax benefits at January 1 $77,328  $105,139 
Gross increases — Prior period tax positions  25,391   14,423 
Gross decreases — Prior period tax positions  (12,467)  (47,690)
Gross increases — Current period tax positions  13,058   13,220 
Settlements with taxing authorities  (527)  (7,162)
Lapse in statutes of limitations  —   (602)
         
Gross unrecognized tax benefits at December 31 $102,783  $77,328 
         
The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate was $29 million and $24 million at December 31, 2008 and December 31, 2007, respectively.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. This policy did not change as a result of the adoption of FIN 48. The Company had $17 million and $11 million in interest related to unrecognized tax benefits accrued as of December 31, 2008 and December 31, 2007, respectively. No amounts were accrued for penalties as of either date. Income tax expense for the years ended December 31, 2008 and December 31, 2007 includes interest related to unrecognized tax benefits of $6 million and $7 million, respectively. For the year prior to adoption of FIN 48, income tax expense included amounts accrued for interest expense of $2 million for the year ended December 31, 2006.
 
The United States Treasury issued guidance during 2005 that clarified provisionsCompany files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the taxes paid in foreign jurisdictions are not material. As of December 31, 2008, the Company was no longer subject to examination of its U.S. federal income tax returns filed for years ended prior to 2003. While the IRS examination of the American Job Creation Act2001 and 2002 tax years closed during the first quarter of 2004 (the “Act”) that provide2007, the statute of limitations for a special one-time deduction of 85 percent on certain repatriated earnings of foreign subsidiaries. This guidance clarifiedassessing tax for such years has been extended in order for the Company to appeal issues related to a land sale transaction that were not agreed upon at the planned repatriationclosure of the net proceeds of its Australia operations would qualify forexamination. The appeals discussions continue, and the one-time deduction.Company has requested to enter into appeals mediation procedures with the IRS. Consequently, the Company repatriatedbelieves that it is reasonably possible to settle these issues within the net proceeds during 2005next twelve months. The IRS is currently examining the Company’s federal income tax returns for the 2003 and secured the benefits2004 tax years and a subsidiary of the deduction. SinceCompany for the 2004 through 2006 tax years. Tax returns for subsequent years of the Company provided deferredare 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, the Company was no longer subject to examination of its 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 in 2004and interest of less than $1 million. No other state or local income tax returns of the Company are currently under exam.
The Company believes that it is reasonably possible that the total amounts of unrecognized tax benefits at December 31, 2008 may decrease by a range of $0 to $2 million within the next twelve months, primarily on the basisexpectation that the net proceeds would be repatriated without the benefitappeal of the one-time deduction,2001 and 2002 tax year issues may close during such period. As of December 31, 2007, the Company believed that it was reasonably possible that the amount of unrecognized tax benefits at such date may decrease by a tax benefitrange of $10$0 to $8 million was recorded in 2005 to reflectduring the benefityear ended December 31, 2008, primarily on the expectation that the appeal of the Act. The2001 and 2002 tax year issues would close and various statutes of limitation would lapse during 2008. However, the appeal did not close during 2008 and the Company consideredincreased the earningsamount of its Australia operations permanently reinvested prior tocertain other unrecognized tax benefits during 2008 based upon a reassessment of the salemeasurement of such operations in 2004.tax benefits during the year.


77

NOTE 13 —COMMITMENTS AND CONTINGENCIES
NOTE 12 — COMMITMENTS AND CONTINGENCIES
Leases.The Company leases real estate and various equipment under operating and, to a lesser extent, capital lease arrangements. Certain real estate leases provide for escalation of rent based upon a specified price indexand/or based upon periodic appraisals.

67

 
At December 31, 2006,2008, the Company was obligated under non-cancelable operating leases and capital leases to make future minimum lease payments as follows:
        
         Operating
 Capital
 
 Operating Capital  Leases Leases 
 Leases Leases  (In thousands) 
 (In thousands) 
Years ending December 31,         
2007 $16,367 $1,800 
2008 13,796 808 
2009 11,792 296  $13,626  $1,887 
2010 10,928 300   10,844   1,859 
2011 10,706 92   8,974   1,670 
2012  7,901   1,204 
2013  5,884   37 
Thereafter 354,956 —   44,052   — 
          
Total minimum lease payments $418,545 3,296  $91,281   6,657 
      
Less: Amounts representing interest  (238)      (212)
      
Total obligations under capital leases 3,058       6,445 
Less: Amounts due within one year  (1,610)      (1,685)
      
Amounts due after one year $1,448      $4,760 
      
 The majority of the operating lease amounts relate to ground leases for land in Primm, Nevada. These lease obligations are included in the pending sale of the Primm Valley Resorts.
The current and long-term obligations under capital leases are included in “Other accrued liabilities” and “Other long-term obligations,” respectively, in the accompanying consolidated balance sheets. Rental expense for operating leases, including rental expense of discontinued operations, was $29 million $28for December 31, 2008 and $36 million and $13 million for each of the years ended December 31, 2006, 20052007 and 2004, respectively.2006.
 
Detroit Development Agreement.Mashantucket Pequot Tribal Nation.Under the August 2002 revised development agreement  The Company entered into a series of agreements to implement a strategic alliance with the City of Detroit, MGM Grand Detroit,Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Mashantucket, Connecticut. The Company and MPTN have formed a jointly owned company — Unity Gaming, LLC — to acquire or develop future gaming and non-gaming enterprises. Under certain circumstances, the Company are subject to certain obligations in exchange for the ability to developwill provide a permanent casino complex. The Company recorded an intangible asset (development rights, deemed to have an indefinite life) in connection with its obligations under the revised development agreement. Outstanding obligations include continued letter of credit support for $50 million of bonds issued by the Economic Development Corporation of the City of Detroit, which mature in 2009. In addition, the City required an indemnificationloan of up to $20$200 million for certain litigation related to the permanent casino process,finance a portion of which $2.5 million had been paid as of December 31, 2006.MPTN’s investment in joint projects.
Kerzner/Istithmar Joint Venture.  In April 2005, the Sixth Court of Appeals ruled on all outstanding aspects of the Lac Vieux-related litigation, including approving the settlement agreement among Lac Vieux, MotorCity Casino and Greektown Casino, dismissing Lac Vieux’s request for a reselection process for the subsidiary’s MGM Grand Detroit’s casino franchise and lifting the injunction prohibiting the City and the casino developers from commencing construction of the permanent hotel-casino complexes. At December 31, 2006September 2007, the Company has an accrual of $2.5 million for the remaining litigation subject to the indemnification. In addition to the above obligations, the Company began paying the City of Detroit 2% of gaming revenues beginning January 1, 2006.
New York Racing Association.The Company has 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 New York Racing Association (“NYRA”)southwest corner of Las Vegas Boulevard and Sahara Avenue. In September 2008, the Company and its partners agreed to manage video lottery terminals (“VLTs”) at NYRA’s Aqueduct horseracing facility in metropolitan New York. Subject to receipt of requisite New York State approvals,defer additional design and pre-construction activities and amended their joint venture agreement accordingly. In the event the joint venture determines that the resort will be developed, the Company will assistcontribute 40 acres of land, valued at $20 million per acre, for fifty percent of the equity in the developmentjoint venture. Kerzner International and Istithmar will contribute cash totaling $600 million, of which $200 million will be distributed to the Company, for the other 50% of the facility, including providing project financing up to $190 million, and will manage the facility for a term of five years (extended automatically if the financing provided byequity.
CityCenter completion guarantee.  As discussed in Note 8, the Company is not fully repaid)and Infinity World have entered into partial completion guarantees in conjunction with the CityCenter credit facility. The partial completion guarantees provide for a fee. The Company believes that its agreement with respect to installationadditional contingent funding of VLTs at Aqueduct would extend past the expiration of NYRA’s current racing franchise and would be binding on any successor to NYRAconstruction costs in the event NYRAsuch funding is not grantednecessary to complete the project, up to a new racing franchise. NYRA’s recent filing for reorganization under Chapter 11 has introduced additional uncertainties, butmaximum amount of $600 million from each partner. During the fourth quarter of 2008, the Company remains committed to the development once these uncertainties are resolved.

68

The Signature at MGM Grand.The Company provided guarantees for the debt financing on Towers 1, 2 and 3 of The Signature at MGM Grand. The loan amounts for Towers 1 and 2 have been completely repaid as of December 31, 2006, relieving the Company’s guaranty obligation for Towers 1 and 2. The Company’s obligation on Tower 3 generally provides for a guaranty of 50% of the principal and interest, with the guaranty decreasing by 50% relative to the principal when construction is 50% complete. The remaining 50% of interest and principal obligations is guaranteed by affiliates of the venture’s other investor. The Company and the affiliates have also jointly and severally provided a completion guaranty.
     The maximum borrowings allowed for Tower 3 is $186 million. At December 31, 2006, the Company had recorded a guaranty obligation liability of $1$205 million, for Tower 3, classified inas “Other long-term obligations” in the accompanying consolidated balance sheets.sheets, equal to the fair value of its partial completion guarantee in accordance with FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.”


78

Other guarantees.The Company is party to various guarantee contracts in the normal course of business, which are generally supported by letters of credit issued by financial institutions. The Company’s senior credit facility limits the amount of letters of credit that can be issued to $250 million, and the amount of available borrowings under the senior credit facility is reduced by any outstanding letters of credit. At December 31, 2006,2008, the Company had provided a$92 million of total letters of credit, including $50 million letter of credit to support bonds issued by the Economic Development Corporation of the City of Detroit, bonds referred to above, which are recorded as a liability of the Company. Though not subject to a letter of credit, the Company has an agreement with the Nevada Gaming Control Board to maintain $120 million of availability under its senior credit facility to support normal bankroll requirements at the Company’s Nevada operations. Due to the fact that the Company borrowed the remaining available funds under its senior credit facility after December 31, 2008 as described in Note 2, the Company has established separate bank accounts to hold a minimum of $120 million to support its obligation under the bankroll requirements.
 
Mashantucket Pequot Tribal NationSales and use tax on complimentary meals..  In March 2008, the Nevada Supreme Court ruled, in a case involving another casino company, that food and non-alcoholic beverages purchased for use in providing complimentary meals to customers and to employees were exempt from sales and use tax. The Company had previously paid use tax on these items and has agreedgenerally filed for refunds for the periods from January 2001 to enter a strategic alliance,February 2008 related to this matter. The amount subject to definitive agreements,these refunds, including amounts related to the Mandalay Resort Group properties prior to the Company’s 2005 acquisition of Mandalay Resort Group, is approximately $38 million.
The Nevada Department of Taxation (the “Department”) filed a petition for rehearing, which the Nevada Supreme Court announced in July 2008 it would not grant. As of December 31, 2008, the Company had not recorded income related to this matter because the refund claims are subject to audit and it is unclear whether the Department will pursue alternative legal theories in connection with certain issues raised in the Mashantucket Pequot Tribal Nation (“MPTN”). The strategic alliance has several elements, one of which calls for the creation of a 50/50 joint venture to seek future development opportunities. The Company has agreed to provide a development subsidiary of MPTN with a loan of up to $200 million intended to fund a portion of that subsidiary’s matching investmentSupreme Court case in any future joint development projects.audit of the refund claims. However, the Company is claiming the exemption on sales and use tax returns for periods after February 2008 in light of the Nevada Supreme Court decision.
 
Litigation.The Company is a party to various legal proceedings, most of which relate to routine matters incidental to its business. Management does not believe that the outcome of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.
NOTE 14 —NOTE 13 — STOCKHOLDERS’ EQUITY
Tender offer.  In February 2008, the Company and a wholly-owned subsidiary of Dubai World completed a joint tender offer to purchase 15 million shares of Company common stock at a price of $80 per share. The Company purchased 8.5 million shares at a total purchase price of $680 million.
 
Stock split.sale.In May 2005,  On October 18, 2007, the Company completed the sale of 14.2 million shares of common stock to Infinity World Investments, a 2-for-1 stock split effected in the formwholly-owned subsidiary of Dubai World, at a 100% stock dividend. All share andprice of $84 per share data infor total proceeds of approximately $1.2 billion. These shares were previously held by the accompanying financial statements and notes thereto have been restated for all periods presentedCompany as treasury stock. Proceeds from the sale were used to reflectreduce amounts outstanding under the 100% stock dividend.senior credit facility.
 
Stock repurchases.Share repurchases are only conducted under repurchase programs approved by the Board of Directors and publicly announced. Share repurchase activity was as follows:
             
  Year Ended December 31,
  2006  2005  2004 
      (In thousands)     
November 2003 authorization (16 million shares purchased) $—  $—  $348,895 
July 2004 authorization (6.5 million and 5.5 million shares purchased)  246,892   217,316   — 
          
  $246,892  $217,316  $348,895 
          
             
Average price of shares repurchased $37.98  $39.51  $21.80 
At December 31, 2006,2008, the Company had 820 million shares available for repurchase under the May 2008 authorization. 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 


79

NOTE 15 —STOCK-BASED COMPENSATION
Information about the Company’s share-based awards.  The Company adopted an omnibus incentive plan in 2005 which, as amended, allows it to grant stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), and other stock-based awards to eligible directors, officers and employees of the Company and its subsidiaries. The plans are administered by the Compensation Committee (the “Committee”) of the Board of Directors. The Committee has discretion under the omnibus plan regarding which type of awards to grant, the vesting and service requirements, exercise price and other conditions, in all cases subject to certain limits, including:
• As amended, the omnibus plan allows for the issuance of up to 35 million (20 million prior to an August 2008 amendment) shares or share-based awards;
• For stock options and SARs, the exercise price of the award must be at least equal to the fair market value of the stock on the date of grant and the maximum term of such an award is 10 years.
Stock options and SARs granted under all plans generally have terms of either seven or ten years, and in most cases vest in either four or five equal annual installments. RSUs granted vest ratably over 4 years. The Company’s practice is to issue new shares upon exercise or vesting of awards.
Exchange offer.  In September 2008, the Company offered certain eligible employees an opportunity to exchange certain outstanding stock options and SARs for RSUs which provide a right to receive one share of common stock for each RSU. The exchange offer expired in October 2008. The number of RSUs to be granted in the exchange offer was based on an exchange ratio for each grant determined by the Committee. The total number of stock options and SARs eligible to be exchanged was approximately 4.7 million, of which approximately 4.2 million were exchanged for a total of approximately 0.7 million RSUs. On the date of the exchange, the estimated fair value of the RSUs did not exceed the estimated fair value of the exchanged stock options and SARs calculated immediately prior to the exchange. Therefore, the Company will not record additional expense related to the exchange and the unamortized compensation related to the exchanged stock options and SARs will continue to be amortized to expense ratably over the remaining life of the new RSUs. The RSUs granted in the exchange offer will vest on the same dates that the underlying stock options and SARs would have otherwise vested, except that no RSUs will vest prior to July 2004 authorization.1, 2009. All exchanged stock options and SARs which have vested, or would have vested, before July 1, 2009 were replaced by RSUs that vest on July 1, 2009.
Activity under share-based payment plans.  As of December 31, 2008, the aggregate number of share-based awards available for grant under the omnibus plan was 17.6 million. A summary of activity under the Company’s share-based payment plans for the twelve months ended December 31, 2008 is presented below:
Stock options and stock appreciation rights
                 
        Weighted
    
     Weighted
  Average
  Aggregate
 
     Average
  Remaining
  Intrinsic
 
  Shares
  Exercise
  Contractual
  Value
 
  (000’s)  Price  Term  ($000’s) 
 
Outstanding at January 1, 2008  26,674  $31.90         
Granted  4,952   35.60         
Exercised  (888)  16.08         
Exchanged  (4,235)  68.06         
Forfeited or expired  (1,293)  34.91         
                 
Outstanding at December 31, 2008  25,210   26.98   4.02  $7,348 
                 
Vested and expected to vest at December 31, 2008  24,938   26.96   4.75  $7,348 
                 
Exercisable at December 31, 2008  16,301   23.34   3.60  $7,348 
                 

69
80

NOTE 14 — STOCK-BASED COMPENSATIONAs of December 31, 2008, there was a total of $54 million of unamortized compensation related to stock options and SARs expected to vest, which is expected to be recognized over a weighted-average period of 1.9 years. The following table includes additional information related to stock options and SARs:
 Adoption
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Intrinsic value of stock options and SARs exercised $33,342  $339,154  $166,257 
Income tax benefit from stock options and SARs exercised  10,494   114,641   56,351 
Proceeds from stock option exercises  14,116   97,792   89,113 
Restricted stock units
During the fourth quarter of SFAS 123(R).Effective January 1, 2006,2008, the Company accountsissued RSUs for stock-based0.7 million shares as part of the exchange offer discussed above and granted additional RSUs for 0.4 million shares to certain eligible employees.
         
     Weighted
 
     Average
 
  Shares
  Grant-Date
 
  (000’s)  Fair Value 
 
Nonvested at January 1, 2008  —  $— 
Granted in exchange offer  699   18.90 
Granted  386   19.00 
Vested  —   — 
Forfeited  (31)  19.00 
         
Nonvested at December 31, 2008  1,054   18.93 
         
As of December 31, 2008, there was a total of $73 million of unamortized compensation related to restricted stock units, which is expected to be recognized over a weighted-average period of 2.1 years. $67 million of such unamortized compensation relates to the RSUs granted in accordance withthe exchange. RSUs granted to corporate officers are subject to certain performance requirements determined by the Committee. Such performance requirements do not apply to RSUs granted in the exchange offer.
Recognition of compensation cost.  The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”). on January 1, 2006 using the modified prospective method. The Company previously accounted for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” andrecognizes the Financial Accounting Standards Board’s Interpretation No. 44, “Accounting for Certain Transactions involving Stock Compensation, an interpretationestimated fair value of APB Opinion No. 25,” and disclosed supplemental information in accordance with Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under these standards, the Company did not incur compensation expense for employee stock options whenand SARs granted under the exercise price wasCompany’s omnibus plan based on the estimated fair value of these awards measured at least 100%the date of grant using the Black-Scholes model. For restricted stock units, compensation cost is calculated based on the fair market value of the Company’s commonour stock on the date of grant. SFAS 123(R) requires that all stock-based compensation, including shares and share-based awards to employees, be valued at fair value. The Company measures fair value of share-based awards using the Black-Scholes model.
     Under SFAS 123(R), compensation is attributed to the periods of associated service. For stock options awards granted prior to January 1, 2006, suchadoption, the unamortized expense is being recognized on an accelerated basis, since that isthis was the method used for disclosure purposes prior to the Company previously applied in its supplemental disclosures. Beginning withadoption of SFAS 123(R). For all awards granted on January 1, 2006,after adoption, such expense is being recognized on a straight-line basis over the vesting period of the awards. Forfeitures are estimated at the time of grant, with such estimate updated periodically and with actual forfeitures recognized currently to the extent they differ from the estimate.
The Company adopted SFAS 123(R) by applying the modified-prospective transition method. Under this method, the Company began applying the valuation and other criteria of SFAS 123(R) on January 1, 2006, and began recognizing expense for the unvested portion of previously issued grants at the same time, based on the valuation and attribution methods originally used to calculate the disclosures.
     The impact of adopting SFAS 123(R) was as follows, due to the incremental compensation cost recognized for employee stock options and stock appreciation rights:
     
  Year Ended 
  December 31, 
  2006 
  (In thousands, except 
  per share amounts) 
Incremental stock-based compensation under SFAS123(R) $71,186 
Less: Amounts capitalized  (798)
    
Total stock-based compensation recognized as expense $70,388 
    
Recorded in continuing operations $69,121 
    
Recorded in discontinued operations $1,267 
    
     
Reduction of income from continuing operations $45,090 
    
Reduction in net income $45,914 
    
Reduction in basic earnings per share $0.16 
    
Reduction in diluted earnings per share $0.16 
    
     In addition, SFAS 123(R) requires the excess tax benefits from stock option exercises – tax deductions in excess of compensation cost recognized – to be classified as a financing activity. Previously, all tax benefits from stock option exercises were classified as operating activities. Had the Company not adopted SFAS 123(R), the $48 million of excess tax benefits classified as a financing cash inflow would have been classified as an operating cash inflow.

70

\

Information about the Company’s share-based awards.The Company adopted an omnibus incentive plan in 2005 which allows for the granting of stock options, stock appreciation rights, restricted stock, and othercapitalizes stock-based awards to eligible directors, officers and employees. The plans are administered by the Compensation and Stock Option Committee (the “Committee”) of the Board of Directors. Salaried officers, directors and other key employees of the Company and its subsidiaries are eligible to receive awards. The Committee has discretion under the omnibus plan regarding which type of awards to grant, the vesting and service requirements, exercise price and other conditions, in all cases subject to certain limits, including:
•The omnibus plan allowed for the issuance of up to 20 million shares or share-based awards;
•For stock options and stock appreciation rights, the exercise price of the award must equal the fair market value of the stock on the date of grant and the maximum term of such an award is ten years.
     To date, the Committee has only awarded stock options and stock appreciation rights under the omnibus plan. The Company’s practice has been to issue new shares upon the exercise of stock options. Under the Company’s previous plans, the Committee had issued stock options and restricted stock. Stock options and stock appreciation rights granted under all plans generally have either 7-year or 10-year terms, and in most cases are exercisable in either four or five equal annual installments. Restrictions on restricted shares granted under a previous plan lapsed 50% on the third anniversary date after the grant and 50% on the fourth anniversary date after the grant.
     As of December 31, 2006, the aggregate number of share-based awards available for grant under the omnibus plan was 4.7 million. A summary of activity under the Company’s share-based payment plans for the year ended December 31, 2006 is presented below:
Stock options and stock appreciation rights
                 
          Weighted    
      Weighted  Average  Aggregate 
      Average  Remaining  Intrinsic 
  Shares  Exercise  Contractual  Value 
  (000’s)  Price  Term  ($000’s) 
Outstanding at January 1, 2006  34,825  $22.93         
Granted  1,914   42.54         
Exercised  (5,623)  15.85         
Forfeited or expired  (584)  27.95         
              
Outstanding at December 31, 2006  30,532   25.37   5.6  $976,050 
              
Vested and expected to vest at December 31, 2006  29,615   25.27   5.6  $921,203 
              
Exercisable at December 31, 2006  10,602   18.89   5.2  $407,700 
              
     The total intrinsic value of stock options and stock appreciation rights exercised during the year ended December 31, 2006, 2005 and 2004 was $166 million, $256 million, and $115 million, respectively. The Company received proceeds from the exercise of employee stock options of $89 million, $146 million and $136 million for the years ended December 31, 2006, 2005 and 2004, respectively. The total income tax benefits from stock option exercises during the year ended December 31, 2006, 2005 and 2004 were $56 million, $89 million and $39 million, respectively. As of December 31, 2006, there was a total of $99 million of unamortized compensation related to stock options and stock appreciation rights, which cost is expectedemployees dedicated to be recognized over a weighted-average period of 2.3 years.
Restricted stock
         
      Weighted 
      Average 
  Shares  Grant-Date 
  (000’s)  Fair Value 
Nonvested at January 1, 2006  834  $17.59 
Granted  —   — 
Vested  (830)  17.59 
Forfeited  (4)  17.62 
        
Nonvested at December 31, 2006  —   — 
        
construction activities. In addition, the Company charges CityCenter for stock-based compensation related to employees dedicated to CityCenter.

71
81

     During the year ended December 31, 2006, restrictions lapsed with respect to 830,000 shares with a total fair value of $15 million. During the year ended December 31, 2005, restrictions lapsed with respect to 852,000 shares with a total fair value of $15 million. In the year ended December 31, 2006 and 2005, certain recipients of restricted shares elected to use a portion of the shares in which restrictions lapsed to pay required withholding taxes. Approximately 280,000 and 261,000 shares, respectively, were surrendered in the years ended December 31, 2006 and 2005. As of December 31, 2006, there was no unamortized compensation related to restricted stock.
Recognition of compensation cost.The following table shows information about compensation cost recognized:
            
             Year Ended December 31, 
 Year Ended December 31,  2008 2007 2006 
 2006 2005 2004  (In thousands) 
 (In thousands) 
Compensation cost:             
Stock options and stock appreciation rights $71,386 $139 $78 
Restricted stock 3,038 7,184 7,092 
Stock options and SARs $37,766  $48,063  $71,386 
Restricted stock and RSUs  4,652   —   3,038 
              
Total compensation cost 74,424 7,323 7,170   42,418   48,063   74,424 
Less: CityCenter reimbursed costs  (6,019)  (796)  — 
Less: Compensation cost capitalized  (798) — —   (122)  (1,589)  (798)
              
Compensation cost recognized as expense 73,626 7,323 7,170   36,277   45,678   73,626 
Less: Related tax benefit  (24,901)  (1,204)  (1,326)  (12,569)  (15,734)  (24,901)
              
Compensation expense, net of tax benefit $48,725 $6,119 $5,844  $23,708  $29,944  $48,725 
              
 
Compensation cost for stock options and stock appreciation rightsSARs was based on the estimated fair value of each award, measured by applying the Black-Scholes model on the date of grant, using the following weighted-average assumptions (assumptions in 2005 were used to compute the pro forma compensation for disclosure purposes only):
             
  Year Ended December 31,
  2006 2005 2004
      (In thousands)    
Expected volatility  33%  37%  42%
Expected term 4.1 years 4.3 years 5.0 years
Expected dividend yield  0%  0%  0%
Risk-free interest rate  4.9%  3.8%  3.4%
Forfeiture rate  4.6%  0%  0%
Weighted-average fair value of options granted $14.50  $12.73  $9.55 
assumptions:
 
             
  Year Ended December 31, 
  2008  2007  2006 
 
Expected volatility  50%  32%  33%
Expected term  4.6 years   4.1 years   4.1 years 
Expected dividend yield  0%  0%  0%
Risk-free interest rate  2.7%  4.4%  4.9%
Forfeiture rate  3.5%  4.6%  4.6%
Weighted-average fair value of options granted $14.49  $25.93  $14.50 
Expected volatility is based in part on historical volatility and in part on implied volatility based on traded options on the Company’s stock. The expected term considers the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate is based on the rates in effect on the grant date for USU.S. Treasury instruments with maturities matching the relevant expected term of the award.
 Pro forma disclosures.Had the Company accounted for these plans during 2005 and 2004 under the fair value method allowed by SFAS 123, the Company’s net income and earnings per share would have been reduced to recognize the fair value of employee stock options, as follows:
NOTE 16 —EMPLOYEE BENEFIT PLANS
         
  Year Ended December 31, 
  2005  2004 
  (In thousands) 
Net income        
As reported $443,256  $412,332 
Incremental stock-based compensation under SFAS 123, net of tax benefit  (47,934)  (22,963)
       
Pro forma $395,322  $389,369 
       
Basic earnings per share        
As reported $1.56  $1.48 
       
Pro forma $1.39  $1.39 
       
Diluted earnings per share        
As reported $1.50  $1.43 
       
Pro forma $1.33  $1.35 
       

72

NOTE 15 — EMPLOYEE BENEFIT PLANS
Employees of the Company who are members of various unions are covered by union-sponsored, collectively bargained, multi-employer health and welfare and defined benefit pension plans. The Company recorded an expense of $192 million in 2008, $194 million in 2007 and $189 million in 2006 $161 million in 2005 and $86 million in 2004 under such plans. The plans’ sponsors have not provided sufficient information to permit the Company to determine its share of unfunded vested benefits, if any.
 
The Company is self-insured for most health care benefits for its non-union employees. The liability for claims filed and estimates of claims incurred but not reported – $24— $22 million and $28$25 million at December 31, 20062008 and 2005,2007, respectively –— is included in “Other accrued liabilities” in the accompanying consolidated balance sheets.
 
The Company has retirement savings plans under Section 401(k) of the Internal Revenue Code for eligible employees. The plans allow employees to defer, within prescribed limits, up to 30% of their income on a pre-tax basis through contributions to the plans. The Company matches, within prescribed limits, a portion of eligible employees’ contributions. In the case of certain union employees, the Company contributions to the plan are based on hours worked. The Company recorded charges for 401(k) contributions of $25 million in 2008 and $27 million in 2006, $19 million in 20052007 and $12 million in 2004.2006.
 
The Company maintains a nonqualified deferred retirement planplans for certain key employees. The plan allowsplans allow participants to defer, on a pre-tax basis, a portion of their salary and bonus and accumulate tax deferred earnings, plus investment earnings on the deferred balances, as a retirement fund. Participants receivedeferred tax savings. Through December 31, 2008 participants earned a Company match of up to 4% of salary, net of any Company match received under the Company’s 401(k) plan. All employee deferrals vest immediately. The Company matching contributions vest


82

ratably over a three-year period. The Company recorded charges for matching contributions of $1 million in 2008 and 2007, and $2 million in 2006 and 2005 and $1 million in 2004.2006.
 
The Company implemented aalso maintains nonqualified supplemental executive retirement planplans (“SERP”) for certain key employees effective January 1, 2001. The SERP is a nonqualified plan under whichemployees. Until September 30, 2008, the Company makesmade quarterly contributions which are intended to provide a retirement benefit that is a fixed percentage of a participant’s estimated final five-year average annual salary, up to a maximum of 65%. Company contributions and investment earnings on the contributions are tax-deferred and accumulate as a retirement fund.deferred tax savings. Employees do not make contributions under this plan.these plans. A portion of the Company contributions and investment earnings thereon vestsvest after three years of SERP participation and the remaining portion vests after both five years of SERP participation and 10 years of continuous service. The Company recorded expense under this plan of $4 million in 2008 and $7 million in 2006, $6 million in 20052007 and $5 million in 2004.
NOTE 16 — RESTRUCTURING COSTS2006.
 Restructuring costs (credit) consisted
Pursuant to the amendments of the following:
             
  Year Ended December 31, 
  2006  2005  2004 
  (In thousands) 
Contract termination costs $—  $—  $3,693 
Other  1,035   (59)  1,932 
          
  $1,035  $(59) $5,625 
          
     There were no material restructuring activities in 2006nonqualified deferred retirement plans and 2005. AtSERP plans during 2008, and consistent with certain transitional relief provided by the Internal Revenue Service pursuant to rules governing nonqualified deferred compensation, the Company permitted participants under the plans to make a one-time election to receive, without penalty, all or a portion of their respective vested account balances. Based on elections made, the Company made payments to participants of $62 million subsequent to December 31, 2006, there were no material restructuring accruals as all material restructuring costs have been fully paid or otherwise resolved.2008. In 2004, restructuring costs include $3addition, the Company made payments of $57 million for contract termination coststo participants in 2008 related to previous versions of these plans that were terminated during the Aqua restaurant at Bellagio and $2 million of workforce reduction costs at MGM Grand Detroit as a result of the Company’s efforts to minimize the impact of a gaming tax increase in Michigan.

73

NOTE 17 — PROPERTY TRANSACTIONS, NETyear.
 
NOTE 17 —PROPERTY TRANSACTIONS, NET
Property transactions, net consisted of the following:
             
  Year Ended December 31, 
  2006  2005  2004 
  (In thousands) 
Impairment of assets to be disposed of $40,865  $22,651  $473 
Write-off of abandoned capital projects  —   5,971   — 
Demolition costs  348   5,362   7,057 
Insurance recoveries  (86,016)  —   — 
Other net losses on asset sales or disposals  3,823   3,037   704 
          
  $(40,980) $37,021  $8,234 
          
             
  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)
             
 Impairments
See discussion of goodwill and other indefinite-lived intangible assets impairment charge in Note 9. 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.
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 smaller capital projects, primarily at MGM Grand Las Vegas, Mandalay Bay and The Mirage, as well as the $4 million write-off of Luxor’s investment in theHairsprayshow. projects.
Insurance recoveries in 2006 relate2008 related to the interiminsurance recoveries received related to property damage from the Monte Carlo fire in excess of the book value of the damaged assets and post-fire costs incurred. Insurance recoveries in 2007 and 2006 related to the insurance recoveries received related to property damage from Hurricane Katrina in excess of the book value of the damaged assets and post-storm costs incurred.


83

NOTE 18 —RELATED PARTY TRANSACTIONS
The Company and CityCenter have entered into agreements whereby the Company will be responsible for oversight and management of the design, planning, development and construction of CityCenter and will manage the operations of CityCenter for a fee upon completion of construction. The Company is being reimbursed for certain costs in performing the development services. During the years ended December 31, 2008 and 2007, the Company incurred as$46 million and $5 million, respectively of costs reimbursable by the joint venture, primarily for employee compensation and certain allocated costs. As of December 31, 2006. See Note 2 under “Financial statement impact of Hurricane Katrina”2008, CityCenter owes the Company $5 million for further discussion.unreimbursed development services costs.
 In 2005, recognized impairments relate primarily to assets removed from service in connection with new capital projects at several resorts, including Bellagio, TI, The Mirage and Mandalay Bay. The amount of the impairments was based on the net book value of the disposed assets. Demolition costs related primarily to room remodel activity at MGM Grand Las Vegas and the new showroom at The Mirage.
     Demolition costs in 2004 primarily relate to the Bellagio room remodel and expansion projects and theKÀtheatre at MGM Grand Las Vegas.
NOTE 18 — RELATED PARTY TRANSACTIONS
Borgata leases 10 acres from the Company on a long-term basis for use in its current operations and for its expansion, and nine acres from the Company on a short-term basis for surface parking. Total payments received from Borgata under these lease agreements were $6 million $4 million, and $1 million forin each of the years ended December 31, 2006, 2005,2008, 2007 and 2004, respectively.2006.
 Prior to the Mandalay merger the Company made payments to Monte Carlo for lost business as a result of closing the tram between Bellagio and Monte Carlo in preparation for the Bellagio expansion. These payments totaled $1 million and $4 million in 2005 and 2004, respectively.
The Company payspaid legal fees to a firm that was affiliated with the Company’s general counsel. Payments to the firm totaled $8$10 million, $13$11 million, and $4$8 million for the years ended December 31, 2006, 2005,2008, 2007, and 2004,2006, respectively. At December 31, 2006,2008 and 2007, the Company owed the firm $5 million.$4 million and $3 million, respectively.
 
The Company has occasionally chartered aircraft from its majority shareholder, Tracinda, and pays Tracinda at market rates. No payments were made to Tracinda in 2008 or 2007. Payments to Tracinda for the use of its aircraft totaled $2 million for the year ended December 31, 2006;2006.
Members of the Company’s Board of Directors, senior management, and Tracinda signed contracts in 2006 and 2007 for the purchase of condominium units at CityCenter, at prices consistent with prices charged to unrelated third parties, when CityCenter was a wholly-owned development. The Company collected $6 million of deposits related to such purchases in 2007; amounts collected in 2005 and 20042006 were not material.

74
84

NOTE 19 —CONDENSED CONSOLIDATING FINANCIAL INFORMATION
NOTE 19 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The Company’s subsidiaries (excluding MGM Grand Detroit, LLC and certain minor subsidiaries) have fully and unconditionally guaranteed, on a joint and several basis, payment of the senior credit facility, and the senior and senior subordinated notes of the Company and its subsidiaries. The guarantor subsidiaries are 100% owned. Separate condensed consolidating financial statement information for the subsidiary guarantors and non-guarantors as of December 31, 20062008 and 20052007 and for the years ended December 31, 2006, 20052008, 2007 and 20042006 is as follows:
                     
  As of and for the Year Ended December 31, 2006 
      Guarantor  Non-Guarantor       
  Parent  Subsidiaries  Subsidiaries  Elimination  Consolidated 
  (In thousands) 
Balance Sheet
                    
Current assets $95,361  $1,369,711  $49,679  $—  $1,514,751 
Real estate under development  —   188,433   —   —   188,433 
Property and equipment, net  —   16,797,263   456,569   (11,972)  17,241,860 
Investments in subsidiaries  16,563,917   300,560   —   (16,864,477)  — 
Investments in unconsolidated affiliates  —   792,106   300,151   —   1,092,257 
Other non-current assets  94,188   1,911,362   103,387   —   2,108,937 
                
  $16,753,466  $21,359,435  $909,786  $(16,876,449) $22,146,238 
                
                     
Current liabilities $227,743  $1,364,472  $55,885  $—  $1,648,100 
Intercompany accounts  (1,478,207)  1,339,654   138,553   —   — 
Deferred income taxes  3,441,157   —   —   —   3,441,157 
Long-term debt  10,712,047   2,173,972   108,850   —   12,994,869 
Other long-term obligations  1,177   161,458   49,928   —   212,563 
Stockholders’ equity  3,849,549   16,319,879   556,570   (16,876,449)  3,849,549 
                
  $16,753,466  $21,359,435  $909,786  $(16,876,449) $22,146,238 
                
                     
Statement of Income
                    
Net revenues $—  $6,714,659  $461,297  $—  $7,175,956 
Equity in subsidiaries earnings  1,777,144   167,262   —   (1,944,406)  — 
Expenses:                    
Casino and hotel operations  19,251   3,543,026   251,109   —   3,813,386 
General and administrative  20,713   993,732   56,497   —   1,070,942 
Corporate expense  40,151   121,356   —   —   161,507 
Preopening and start-up expenses  523   32,526   3,313   —   36,362 
Restructuring costs  —   1,035   —   —   1,035 
Property transactions, net  10,872   (51,853)  1   —   (40,980)
Depreciation and amortization  2,398   611,045   16,184   —   629,627 
                
   93,908   5,250,867   327,104   —   5,671,879 
                
Income from unconsolidated affiliates  —   218,063   36,108   —   254,171 
                
Operating income  1,683,236   1,849,117   170,301   (1,944,406)  1,758,248 
Interest expense, net  (708,902)  (40,407)  140   —   (749,169)
Other, net  (1,978)  (29,962)  787   —   (31,153)
                
Income from continuing operations before income taxes  972,356   1,778,748   171,228   (1,944,406)  977,926 
Provision for income taxes  (312,288)  (25,676)  (3,966)  —   (341,930)
                
Income from continuing operations  660,068   1,753,072   167,262   (1,944,406)  635,996 
Discontinued operations  (11,804)  24,072   —   —   12,268 
                
Net income $648,264  $1,777,144  $167,262  $(1,944,406) $648,264 
                
                     
Statement of Cash Flows
                    
Net cash provided by (used in) operating activities $(896,346) $1,984,375  $153,923  $—  $1,241,952 
Net cash provided by (used in) investing activities  5,300   (1,369,878)  (283,241)  (4,608)  (1,652,427)
Net cash provided by (used in) financing activities  874,485   (503,801)  134,732   4,608   510,024 
                     
  At December 31, 2008 
     Guarantor
  Non-Guarantor
       
  Parent  Subsidiaries  Subsidiaries  Elimination  Consolidated 
  (In thousands) 
 
Balance Sheet
                    
Current assets $126,009  $1,346,094  $60,927  $—  $1,533,030 
Property and equipment, net  —   15,564,669   736,457   (11,972)  16,289,154 
Investments in subsidiaries  18,920,844   625,790   —   (19,546,634)  — 
Investments in and advances to unconsolidated affiliates  —   4,389,058   253,807   —   4,642,865 
Other non-current assets  194,793   500,717   114,157   —   809,667 
                     
  $19,241,646  $22,426,328  $1,165,348  $(19,558,606) $23,274,716 
                     
                     
Current liabilities $1,683,932  $1,282,641  $36,003  $—  $3,002,576 
Intercompany accounts  (1,501,070)  1,451,897   49,173   —   — 
Deferred income taxes  3,441,198   —   —   —   3,441,198 
Long-term debt  11,320,620   692,332   403,600   —   12,416,552 
Other long-term obligations  322,605   66,642   50,782   —   440,029 
Stockholders’ equity  3,974,361   18,932,816   625,790   (19,558,606)  3,974,361 
                     
  $ 19,241,646  $ 22,426,328  $  1,165,348  $(19,558,606) $ 23,274,716 
                     
                     
  For The Year Ended December 31, 2008 
     Guarantor
  Non-Guarantor
       
  Parent  Subsidiaries  Subsidiaries  Elimination  Consolidated 
  (In thousands) 
 
Statement of Operations
                    
Net revenues $—  $  6,623,068  $    585,699  $—  $  7,208,767 
Equity in subsidiaries earnings  (262,825)  49,450   —   213,375   — 
Expenses:                    
Casino and hotel operations  14,173   3,688,837   331,364   —   4,034,374 
General and administrative  9,485   1,160,754   108,262   —   1,278,501 
Corporate expense  13,869   94,958   452   —   109,279 
Preopening andstart-up expenses
  —   22,924   135   —   23,059 
Restructuring costs  —   443   —   —   443 
Property transactions, net  —   1,204,721   6,028   —   1,210,749 
Depreciation and amortization  —   724,556   53,680   —   778,236 
                     
   37,527   6,897,193   499,921   —   7,434,641 
                     
Income from unconsolidated affiliates  —   84,942   11,329   —   96,271 
                     
Operating income  (300,352)  (139,733)  97,107   213,375   (129,603)
Interest expense, net  (517,971)  (58,468)  (16,327)  —   (592,766)
Other, net  140,968   (61,466)  (26,121)  —   53,381 
                     
Income (loss) from continuing operations before income taxes  (677,355)  (259,667)  54,659   213,375   (668,988)
Provision for income taxes  (177,931)  (3,158)  (5,209)  —   (186,298)
                     
Income (loss) from continuing operations  (855,286)  (262,825)  49,450   213,375   (855,286)
                     
Net income (loss) $  (855,286) $(262,825) $49,450  $    213,375  $(855,286)
                     
                     
Statement of Cash Flows
                    
Net cash provided by (used in) operating activities $(982,489) $1,658,238  $77,283  $—  $753,032 
Net cash provided by (used in) investing activities  —   (1,970,738)  (4,721)  (5,981)  (1,981,440)
Net cash provided by (used in) financing activities  962,756   230,120   (76,775)  5,981   1,122,082 

75
85

                     
  At December 31, 2007 
     Guarantor
  Non-Guarantor
       
  Parent  Subsidiaries  Subsidiaries  Elimination  Consolidated 
  (In thousands) 
 
Balance Sheet
                    
Current assets $81,379  $983,836  $60,600  $—  $1,125,815 
Property and equipment, net  —   16,091,836   791,034   (11,972)  16,870,898 
Investments in subsidiaries  19,169,892   484,047   —   (19,653,939)  — 
Investments in and advances to unconsolidated affiliates  —   2,224,429   258,298   —   2,482,727 
Other non-current assets  244,857   1,892,685   110,704   —   2,248,246 
                     
  $19,496,128  $21,676,833  $1,220,636  $(19,665,911) $22,727,686 
                     
                     
                     
Current liabilities $459,968  $1,217,506  $47,213  $—  $1,724,687 
Intercompany accounts  125,094   (396,080)  270,986   —   — 
Deferred income taxes  3,416,660   —   —   —   3,416,660 
Long-term debt  9,347,527   1,467,152   360,550   —   11,175,229 
Other long-term obligations  86,176   209,554   54,677   —   350,407 
Stockholders’ equity  6,060,703   19,178,701   487,210   (19,665,911)  6,060,703 
                     
  $ 19,496,128  $ 21,676,833  $  1,220,636  $(19,665,911) $ 22,727,686
 
                     
  For The Year Ended December 31, 2007 
     Guarantor
  Non-Guarantor
       
  Parent  Subsidiaries  Subsidiaries  Elimination  Consolidated 
  (In thousands) 
 
Net revenues $—  $7,204,278  $487,359  $—  $7,691,637 
Equity in subsidiaries earnings  2,982,008   34,814   —   (3,016,822)  — 
Expenses:                    
Casino and hotel operations  14,514   3,738,593   274,451   —   4,027,558 
General and administrative  11,455   1,167,233   73,264   —   1,251,952 
Corporate expense  35,534   158,359   —   —   193,893 
Preopening andstart-up expenses
  731   28,264   63,110   —   92,105 
Property transactions, net  —   (186,313)  —   —   (186,313)
Gain on CityCenter transaction  —   (1,029,660)  —   —   (1,029,660)
Depreciation and amortization  1,497   667,015   31,822   —   700,334 
                     
   63,731   4,543,491   442,647   —   5,049,869 
                     
Income from unconsolidated affiliates  —   222,162   —   —   222,162 
                     
Operating income  2,918,277   2,917,763   44,712   (3,016,822)  2,863,930 
Interest expense, net  (599,178)  (86,473)  (5,482)  —   (691,133)
Other, net  575   (14,890)  (54)  —   (14,369)
                     
Income from continuing operations before income taxes  2,319,674   2,816,400   39,176   (3,016,822)  2,158,428 
Provision for income taxes  (731,456)  (22,065)  (4,362)  —   (757,883)
                     
Income from continuing operations  1,588,218   2,794,335   34,814   (3,016,822)  1,400,545 
Discontinued operations  (3,799)  187,673   —   —   183,874 
                     
Net income $1,584,419  $2,982,008  $     34,814  $(3,016,822) $1,584,419 
                     
                     
Statement of Cash Flows
                    
Net cash provided by (used in) operating activities $(1,098,889) $2,008,888  $84,417  $—  $994,416 
Net cash provided by (used in) investing activities  —   621,727   (407,745)  (4,681)  209,301 
Net cash provided by (used in) financing activities  1,108,286   (2,675,119)  321,615   4,681   (1,240,537)
                     
  As of and for the Year Ended December 31, 2005 
      Guarantor  Non-Guarantor       
  Parent  Subsidiaries  Subsidiaries   Elimination Consolidated 
  (In thousands) 
Balance Sheet
                    
Current assets $89,153  $885,991  $43,439  $—  $1,018,583 
Property and equipment, net  7,113   16,373,113   173,397   (11,972)  16,541,651 
Investments in subsidiaries  14,569,623   183,208   —   (14,752,831)  — 
Investments in unconsolidated affiliates  127,902   904,138   241,279   (342,165)  931,154 
Other non-current assets  86,011   2,018,809   103,212   —   2,208,032 
                
  $14,879,802  $20,365,259  $561,327  $(15,106,968) $20,699,420 
                
 
Current liabilities $345,195  $1,148,306  $41,067  $—  $1,534,568 
Intercompany accounts  (1,794,833)  1,726,415   68,418   —   — 
Deferred income taxes  3,378,371   —   —   —   3,378,371 
Long-term debt  9,713,754   2,641,679   —   —   12,355,433 
Other long-term obligations  2,243   143,733   50,000   —   195,976 
Stockholders’ equity  3,235,072   14,705,126   401,842   (15,106,968)  3,235,072 
                
  $14,879,802  $20,365,259  $561,327  $(15,106,968) $20,699,420 
                
                     
Statement of Income
                    
Net revenues $—  $5,687,750  $441,093  $—  $6,128,843 
Equity in subsidiaries earnings  1,228,651   152,107   —   (1,380,758)  — 
Expenses:                    
Casino and hotel operations  —   3,082,987   233,883   —   3,316,870 
General and administrative  —   834,166   55,640   —   889,806 
Corporate expense  13,797   116,836   —   —   130,633 
Preopening and start-up expenses  —   15,249   503   —   15,752 
Restructuring costs (credit)  —   (59)  —   —   (59)
Property transactions, net  —   36,587   434   —   37,021 
Depreciation and amortization  2,390   531,586   26,650   —   560,626 
                
   16,187   4,617,352   317,110   —   4,950,649 
                
Income from unconsolidated affiliates  —   120,330   31,541   —   151,871 
                
Operating income  1,212,464   1,342,835   155,524   (1,380,758)  1,330,065 
Interest expense, net  (517,617)  (112,506)  1,402   —   (628,721)
Other, net  (14,293)  (20,005)  39   —   (34,259)
                
Income before income taxes  680,554   1,210,324   156,965   (1,380,758)  667,085 
Provision for income taxes  (227,374)  —   (4,345)  —   (231,719)
                
Income from continuing operations  453,180   1,210,324   152,620   (1,380,758)  435,366 
Discontinued operations  (9,924)  17,814   —   —   7,890 
                
Net income $443,256  $1,228,138  $152,620  $(1,380,758) $443,256 
                
                     
Statement of Cash Flows
                    
Net cash provided by (used in) operating activities $(449,590) $1,471,372  $161,014  $—  $1,182,796 
Net cash provided by (used in) investing activities  (4,587,820)  (618,007)  (93,687)  (3,303)  (5,302,817)
Net cash provided by (used in) financing activities  5,043,152   (732,145)  (251,484)  3,303   4,062,826 

76
86

                     
  For The Year Ended December 31, 2006 
     Guarantor
  Non-Guarantor
       
  Parent  Subsidiaries  Subsidiaries  Elimination  Consolidated 
  (In thousands) 
 
Statement of Operations
                    
Net revenues $—  $6,714,659  $461,297  $—  $7,175,956 
Equity in subsidiaries earnings  1,777,144   167,262   —   (1,944,406)  — 
Expenses:                    
Casino and hotel operations  19,251   3,444,697   251,109   —   3,715,057 
General and administrative  20,713   1,092,061   56,497   —   1,169,271 
Corporate expense  40,151   121,356   —   —   161,507 
Preopening andstart-up expenses
  523   32,526   3,313   —   36,362 
Restructuring costs  —   1,035   —   —   1,035 
Property transactions, net  10,872   (51,853)  1   —   (40,980)
Depreciation and amortization  2,398   611,045   16,184   —   629,627 
                     
   93,908   5,250,867   327,104   —   5,671,879 
                     
Income from unconsolidated affiliates  —   218,063   36,108   —   254,171 
                     
Operating income  1,683,236   1,849,117   170,301   (1,944,406)  1,758,248 
Interest income (expense), net  (708,902)  (40,407)  140   —   (749,169)
Other, net  (1,978)  (29,962)  787   —   (31,153)
                     
Income from continuing operations before income taxes  972,356   1,778,748   171,228   (1,944,406)  977,926 
Provision for income taxes  (312,288)  (25,676)  (3,966)  —   (341,930)
                     
Income from continuing operations  660,068   1,753,072   167,262   (1,944,406)  635,996 
Discontinued operations  (11,804)  24,072   —   —   12,268 
                     
Net income $648,264  $1,777,144  $167,262  $(1,944,406) $648,264 
                     
                     
Statement of Cash Flows
                    
Net cash provided by (used in) operating activities $(896,346) $1,974,375  $153,923  $—  $1,231,952 
Net cash provided by (used in) investing activities  5,300   (1,359,878)  (283,241)  (4,608)  (1,642,427)
Net cash provided by (used in) financing activities  874,485   (503,801)  134,732   4,608   510,024 
                     
  For the Year Ended December 31, 2004 
      Guarantor  Non-Guarantor       
  Parent  Subsidiaries  Subsidiaries   Elimination Consolidated 
  (In thousands) 
Statement of Income
                    
Net revenues $—  $3,579,862  $421,942  $—  $4,001,804 
Equity in subsidiaries earnings  948,143   117,686   —   (1,065,829)  — 
Expenses:                    
Casino and hotel operations  —   1,927,258   211,386   —   2,138,644 
General and administrative  —   505,662   59,725   —   565,387 
Corporate expense  11,988   65,922   —   —   77,910 
Preopening and start-up expenses  129   10,147   —   —   10,276 
Restructuring costs  —   4,118   1,507   —   5,625 
Property transactions, net  (1,521)  9,400   355   —   8,234 
Depreciation and amortization  1,039   351,457   30,277   —   382,773 
                
   11,635   2,873,964   303,250   —   3,188,849 
                
Income from unconsolidated affiliates  —   119,658   —   —   119,658 
                
Operating income  936,508   943,242   118,692   (1,065,829)  932,613 
Interest expense, net  (311,825)  (49,129)  (966)  —   (361,920)
Other, net  162   (22,092)  47   —   (21,883)
                
Income from continuing operations before income taxes  624,845   872,021   117,773   (1,065,829)  548,810 
Provision for income taxes  (203,900)  —   299   —   (203,601)
                
Income from continuing operations  420,945   872,021   118,072   (1,065,829)  345,209 
Discontinued operations  (8,613)  17,317   58,419   —   67,123 
                
Net income $412,332  $889,338  $176,491  $(1,065,829) $412,332 
                
                     
Statement of Cash Flows
                    
Net cash provided by (used in) operating activities $(351,000) $1,038,957  $141,290  $—  $829,247 
Net cash provided by (used in) investing activities  (20,325)  (448,995)  125,856   (4,289)  (347,753)
Net cash provided by (used in) financing activities  381,467   (599,480)  (112,248)  4,289   (325,972)

77
87

NOTE 20 —SELECTED QUARTERLY FINANCIAL RESULTS (UNAUDITED)
NOTE 20 — SELECTED QUARTERLY FINANCIAL RESULTS (UNAUDITED)
                     
  Quarter 
  First  Second  Third  Fourth  Total 
  (In thousands, except per share amounts) 
 
2008
                    
Net revenues $1,893,391  $1,905,333  $1,785,531  $1,624,512  $7,208,767 
Operating income (loss)  341,288   333,784   241,557   (1,046,232)  (129,603)
Income (loss) from continuing operations  118,346   113,101   61,278   (1,148,011)  (855,286)
Net income (loss)  118,346   113,101   61,278   (1,148,011)  (855,286)
Basic income (loss) per share:                    
Income (loss) from continuing operations $.41  $.41  $.22  $(4.15) $(3.06)
Net income (loss)  .41   .41   .22   (4.15)  (3.06)
Diluted income (loss) per share:                    
Income (loss) from continuing operations $.40  $.40  $.22  $(4.15) $(3.06)
Net income (loss)  .40   .40   .22   (4.15)  (3.06)
                     
2007
                    
Net revenues $1,929,435  $1,936,416  $1,897,070  $1,928,716  $7,691,637 
Operating income  445,133   468,973   464,613   1,485,211   2,863,930 
Income from continuing operations  163,010   182,898   183,863   870,774   1,400,545 
Net income  168,173   360,172   183,863   872,211   1,584,419 
Basic income per share:                    
Income from continuing operations $.57  $.64  $.65  $2.96  $4.88 
Net income  .59   1.27   .65   2.96   5.52 
Diluted income per share:                    
Income from continuing operations $.55  $.62  $.62  $2.85  $4.70 
Net income  .57   1.22   .62   2.85   5.31 
                     
  Quarter
  First Second Third Fourth Total
  (In thousands, except per share amounts)
2006
                    
Net revenues $1,774,368  $1,760,508  $1,795,042  $1,846,038  $7,175,956 
Operating income  413,353   417,422   419,397   508,076   1,758,248 
Income from continuing operations  139,762   143,341   153,765   199,128   635,996 
Net income  144,037   146,394   156,262   201,571   648,264 
Basic income per share:                    
Income from continuing operations $0.49  $0.50  $0.55  $0.70  $2.25 
Net income  0.51   0.51   0.55   0.71   2.29 
Diluted income per share                    
Income from continuing operations $0.48  $0.49  $0.53  $0.68  $2.18 
Net income  0.49   0.50   0.54   0.69   2.22 
                     
2005
                    
Net revenues $1,145,067  $1,624,474  $1,700,802  $1,658,500  $6,128,843 
Operating income  290,109   369,488   330,578   339,890   1,330,065 
Income from continuing operations  110,919   137,891   89,932   96,624   435,366 
Net income  111,079   141,168   93,210   97,799   443,256 
Basic income per share:                    
Income from continuing operations $0.39  $0.48  $0.31  $0.34  $1.53 
Net income  0.39   0.49   0.33   0.34   1.56 
Diluted income per share:                    
Income from continuing operations $0.38  $0.46  $0.30  $0.33  $1.47 
Net income  0.38   0.48   0.31   0.33   1.50 
 
Because income per share amounts are calculated using the weighted average number of common and dilutive common equivalent shares outstanding during each quarter, the sum of the per share amounts for the four quarters may not equal the total income per share amounts for the year. Quarterly financial results for
As discussed in Note 9, the first, second, and third quarters of 2006 and all four quarters in 2005 have been restated to reflect discontinued operationsCompany recorded a $1.18 billion impairment charge related to goodwill and indefinite-lived intangible assets recognized in the pending salesMandalay acquisition in 2005. The impairment was recorded in the fourth quarter of Primm Valley Resorts2008, and the Laughlin Properties.resulted in a $4.25 impact on fourth quarter 2008 diluted loss per share and a $4.20 impact on full year 2008 diluted loss per share.
 
As discloseddiscussed in Note 2,5, the Company recorded a $1.03 billion pre-tax gain on the contribution of the CityCenter assets to a joint venture. The gain was recorded in the fourth quarter of 2007, and resulted in a $2.23 impact on fourth quarter 2007 diluted earnings per share and a $2.28 impact on full year 2007 diluted earnings per share.
As discussed in Note 1, Beau Rivage closed in August 2005 due to damage sustained from Hurricane Katrina and re-opened one year later. In addition,During 2007, we recorded pre-tax income from insurance recoveries of $86$284 million pre-tax,with an annual impact on diluted earnings per share of $0.62. We recorded $135 million in the third quarter of 2007 and $149 million in the fourth quarter of 2006. The impact2007, with corresponding impacts on diluted net incomeearnings per share of the insurance recoveries was $0.19 for the fourth quarter$0.30 and full year of 2006.
NOTE 21 — SUBSEQUENT EVENT
     In February 2007, the Company entered into an operating agreement to form a 50/50 joint venture with Jeanco Realty Development, LLC. The venture will master plan and develop a mixed-use community in Jean, Nevada. The Company will contribute the Jean Properties and surrounding land to the joint venture. Nevada Landing is expected to close in April 2007.$0.32, respectively.

78
88

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MGM MIRAGE
By: 
/s/  James J. Murren
James J. Murren, Chairman, Chief Executive Officer and President
(Principal Executive Officer)
By: 
/s/  Daniel J. D’Arrigo
Daniel J. D’Arrigo, Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
By: 
/s/  Robert C. Selwood
Robert C. Selwood, Executive Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Dated: March 17, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
     
MGM MIRAGESignature 
Title Date
By:/s/ J. Terrence Lanni
J. Terrence Lanni, Chairman and
Chief Executive Officer
(Principal Executive Officer)
By:/s/ James J. Murren
James J. Murren, President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Dated: February 28, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SignatureTitleDate
/s/ J. Terrence Lanni
J. Terrence Lanni
Chairman and Chief Executive Officer
(Principal Executive Officer)		February 28, 2007
/s/ James J. Murren
James J. Murren
President, Chief Financial Officer, Treasurer and Director (Principal Financial and Accounting Officer)February 28, 2007
/s/ John T. RedmondPresident and Chief Executive Officer —February 28, 2007
John T. Redmond
 MGM Grand Resorts, LLC and Director
/s/ Robert H. BaldwinPresident and Chief Executive Officer —February 28, 2007
Robert H. Baldwin
 Mirage Resorts, Incorporated, President— CityCenter and Director 
     
/s/  James J. Murren

James J. Murren		Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer)March 17, 2009
/s/  Robert H. Baldwin

Robert H. Baldwin		Chief Construction and Design Officer and DirectorMarch 17, 2009
/s/  Gary N. Jacobs

Gary N. Jacobs		 Executive Vice President, General Counsel, Secretary and Director February 28, 2007March 17, 2009
    
/s/  Willie D. Davis

Willie D. Davis		DirectorMarch 17, 2009
/s/  Kenny G. Guinn

Kenny G. Guinn		DirectorMarch 17, 2009
/s/  Alexander M. Haig, Jr.

Alexander M. Haig, Jr.		DirectorMarch 17, 2009
/s/  Alexis M. Herman

Alexis M. Herman		DirectorMarch 17, 2009
/s/  Roland Hernandez

Roland Hernandez		DirectorMarch 17, 2009


89

SignatureTitleDate
 
     
/s/  Kirk Kerkorian

James D. AljianKirk Kerkorian		 Director 

79

SignatureTitleDateMarch 17, 2009
     
/s/  Willie D. DavisAnthony Mandekic

Anthony Mandekic		 Director February 28, 2007
Willie D. Davis
March 17, 2009
     
/s/  Alexander M. Haig, Jr.Rose McKinney-James

Rose McKinney-James		 Director February 28, 2007
Alexander M. Haig, Jr.
March 17, 2009
     
/s/  Alexis M. HermanDaniel J. Taylor

Daniel J. Taylor		 Director February 28, 2007
Alexis M. Herman
March 17, 2009
     
/s/  Roland Hernandez
DirectorFebruary 28, 2007
Melvin B. Wolzinger
Roland Hernandez
/s/ Kirk KerkorianDirectorFebruary 28, 2007
Kirk Kerkorian
/s/ Anthony MandekicDirectorFebruary 28, 2007
Anthony Mandekic
/s/ Rose McKinney-JamesDirectorFebruary 28, 2007
Rose McKinney-James
/s/ Ronald M. PopeilDirectorFebruary 28, 2007
Ronald M. Popeil
/s/ Melvin B. Wolzinger Director February 28, 2007
Melvin B. Wolzinger
March 17, 2009

80
90

MGM MIRAGE
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
                                            
 Additions Deductions         Deductions
   
 Balance at Provision for from Write-offs, related to Balance at Balance at
 Provision for
 Write-offs
 Related to
 Balance at
 
 Beginning of Doubtful Mandalay net of Discontinued End of Beginning of
 Doubtful
 net of
 Discontinued
 End of
 
Description Period Accounts Acquisition Recoveries Operations Period Period Accounts Recoveries Operations Period 
Allowance for Doubtful Accounts                     
Year Ended December 31, 2008 $85,924  $80,293  $(66,611) $—  $99,606 
Year Ended December 31, 2007  90,024   32,910   (37,010)  —   85,924 
Year Ended December 31, 2006 $77,270 $47,950 $— $(34,658) $(538) $90,024   77,270   47,950   (34,658)  (538)  90,024 
Year Ended December 31, 2005 59,760 25,846 14,423  (22,759) — 77,270 
Year Ended December 31, 2004 79,087  (3,629) —  (15,698) — 59,760 

81
91

INDEX TO EXHIBITS
Exhibit
NumberDescription
10.1(28)Guaranty Agreement, dated July 19, 2006, by MGM MIRAGE in favor of Bank of America, N.A., as Administrative Agent for the benefit of the Lenders from time to time party to a Construction Loan Agreement with the Borrower, Turnberry/MGM Grand Tower C, LLC.
10.4(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).
21List of subsidiaries of the Company.
23Consent of Deloitte & Touche LLP.
31.1Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a – 14(a) and Rule 15d – 14(a).
31.2Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a – 14(a) and Rule 15d – 14(a).
**32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
**32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
99Description 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.