UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
Form 10-K
   
(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, 2008
or
  For the fiscal year ended December 31, 2008
OR
o
þ		 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period          to          
For the transition period fromto
Commission FileNo. 001-10362

 
MGM MIRAGE
(Exact name of Registrant as specified in its charter)
   
DELAWARE
 88-0215232
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization) (I.R.S. Employer
Identification Number)
3600 Las Vegas Boulevard South, — Las Vegas, Nevada 89109
(Address of principal executive office)   (Zip Code)
(702) 693-7120
(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:þ
Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act (checkAct. (Check one):
Large accelerated filerþAccelerated fileroAcceleratedNon-accelerated fileroNon-accelerated filer oSmaller reporting companyo
(Do not check if a smaller reporting company)
(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, 2008 (based on the closing price on the New York Stock Exchange Composite Tape on June 30, 2008) was $4.2 billion. As of March 9,April 17, 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 2009 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 AND FINANCIAL STATEMENT SCHEDULES.
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 TAXESSCHEDULES
EX-10.3(15)
EX-10.3(16)
EX-10.3(17)
EX-21
EX-23SIGNATURES
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-99.1
EX-99.2

EXPLANATORY NOTE
     
PART I
ITEM 1.  BUSINESS
This Amendment No. 1 to the Annual Report on Form 10-K (this “Amendment No. 1”) of MGM MIRAGE is referred to as(“MGM MIRAGE,” the “Company”“Registrant” or the “Registrant,”“Company” and together with our subsidiaries may also be referred to as “we,” “us” or “our.” ) amends the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 that was originally filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2009 (the “Original Form 10-K”).
     
LiquidityThis Amendment No. 1 is being filed solely to include the information required in Part III (Items 10, 11, 12, 13 and Financial Position
For discussion14) 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 2Form 10-K that was previously omitted from the Original Form 10-K in reliance upon General Instruction G(3) to Form 10-K. General Instruction G(3) to Form 10-K allows such omitted information to be filed as an amendment to the accompanying consolidated financial statements.
Overview
MGM MIRAGE is oneOriginal Form 10-K or incorporated by reference from the Company’s definitive proxy statement which involves the election of directors not later than 120 days after the end of the world’s leading development companiesfiscal year covered by the Original Form 10-K. As of the date of this Amendment No. 1, the Company does not intend to file a definitive proxy statement containing the information required in Part III within such 120-day period. Accordingly, the Company is filing this Amendment No. 1 to include such omitted information as part of the Original Form 10-K.
     This Amendment No. 1 should be read in conjunction with significant gamingthe Original Form 10-K and resort operations. We believe the resorts we own, manage,Company’s other filings with the SEC. This Amendment No. 1 consists solely of the preceding cover page, this explanatory note, Part III (Items 10, 11, 12, 13 and invest in are among14), the world’s finest casino resorts. MGM MIRAGE was organizedsignature page and the certifications required to be filed as MGM Grand, Inc. on January 29, 1986 and is a Delaware corporation. MGM MIRAGE acts largely as a holding company and its operations are conducted through its wholly-owned subsidiaries.
Our strategy is based on developing and maintaining competitive advantages in the following areas:
• 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, seekingexhibits to ensure that we own, invest in and manage resorts in each market segment that are superior to our competitors’ resorts. We also seek to own and invest in superior real estate assets, with a blend of developing these assets on our own, partnering with others, and strategically buying and selling real estate.
Our approach to resort ownership and investment is based on operating the premier resorts in each geographic market and each customer segment in which we operate. We discuss customer segments in the “Resort Operation” section. Regarding our approach to resort locations, we feel it is important to selectively operate in markets with stable regulatory environments. As seen in the table below, this means that a large portion of our resorts are located in Nevada. In addition, we target markets with growth potential. We also believe there is growth potential in investing in and managing non-gaming resorts. See the “Sustainable Growth” and “Leveraging Our Brand and Management Assets” sections for further details on these initiatives.Amendment No. 1.

i

Our Operating Resorts
We have provided below certain information about our resorts as of December 31, 2008. Except as otherwise indicated, we wholly own and operate the resorts shown below.
                 
  Number of
  Approximate
       
  Guestrooms
  Casino Square
     Gaming
 
Name and Location and Suites  Footage  Slots(1)  Tables(2) 
 
Las Vegas Strip, Nevada
                
Bellagio  3,933   160,000   2,320   151 
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   1,966   106 
Luxor  4,405   100,000   1,443   85 
Excalibur  3,981   91,000   1,532   67 
Treasure Island (“TI”)(5)  2,885   87,000   1,620   65 
New York-New York  2,025   84,000   1,724   70 
Monte Carlo  3,002   102,000   1,556   63 
Circus Circus Las Vegas(6)  3,764   126,000   1,986   90 
                 
Subtotal  38,055   1,186,000   18,564   981 
                 
Other Nevada
                
Circus Circus Reno(Reno)
  1,572   70,000   1,091   35 
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   332   5 
                 
Other Operations
                
MGM Grand Detroit(Detroit, Michigan)
  400   196,000   4,102   95 
Beau Rivage(Biloxi, Mississippi)
  1,740   75,000   2,050   93 
Gold Strike(Tunica, Mississippi)
  1,133   50,000   1,381   58 
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  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 1,220 rooms available for rent as of December 31, 2008 at The Signature at MGM Grand.
(4)Includes the Four Seasons Hotel with 424 guest rooms and THEhotel with 1,117 suites.
(5)In December 2008 we entered into an agreement to sell TI; the sale is expected to close no later than March 31, 2009.
(6)IncludesSlots-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.
Investing in Existing Resorts
We believe that ensuring our resorts are the premier resorts in their respective markets requires significant capital investment. We have a track record of reinvesting cash flows into our existing resorts and we have achieved strong returns on these investments in the past. We have made significant investments in our resorts over the past few years, we do not expect to reinvest significantly in our resorts in 2009 or 2010.
For instance, between 2003 and 2006 we invested a significant amount of capital at MGM Grand Las Vegas, with additions such asKÁ, the acclaimed show by Cirque du Soleil; the Skylofts and West Wing room enhancements; two highly acclaimed restaurants by Joël Robuchon; and new poker and race and sports areas. That resort


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earned $290 million of operating income in 2007, a dramatic increase from the $127 million earned in 2002. Similarly, we transformed The Mirage, a resort many market observers credit with changing the face of the Las Vegas Strip. We felt strongly about the allure of the resort, but also believed that customers need fresh, updated experiences. Therefore, we invested significant capital at The Mirage between 2004 and 2006, adding several new restaurants; a category-defining nightclub,Jet; upgraded high-limit gaming areas; and the Beatles-themedLoveshow by Cirque du Soleil. The Mirage earned $108 million of operating income in 2003; in 2007, The Mirage earned $173 million of operating income.
Capital additions have not had the same impact on profitability due to the severe downturn in economic conditions in general and the impact on tourism and travel spending specifically — see “Management’s Discussion and Analysis.” For instance, we invested in new amenities and remodeled the standard rooms at Mandalay Bay in 2007, but operating income did not rise appreciably in 2008. However, we believe these improvements, and improvements at other resorts such as Luxor and New York-New York, still increase our relative market position during times where we and our competitors are trying to draw from a smaller customer base. In addition, we believe such investments will allow us to earn an above — market return when economic conditions improve.
We also actively manage our portfolio of land holdings. We own approximately 700 acres of land on the Las Vegas Strip, with a meaningful portion of those acres undeveloped or considered by us to be under-developed.
Risks Associated with Our Portfolio Strategy
The principal risk factors relating to our current portfolio of resorts are:
• Our limited geographic diversification — our major resorts are concentrated on the Las Vegas Strip and some of our largest competitors operate in more gaming markets than we do;
• 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 are unable to determine to what extent increased competition will affect our future operating results.
Resort OperationPART III
Our operating philosophy is predicated on creating resorts of memorable character, treating our employees well and providing superior service for our guests. We also seek to develop competitive advantages in specific markets and among specific customer groups.
General
We primarily own and operate casino resorts, which includes offering gaming, hotel, dining, entertainment, retail and other resort amenities. Over half of our net revenue is derived from non-gaming activities, a higher percentage than many of our competitors, as our operating philosophy is to provide a complete resort experience for our guests, including non-gaming amenities which command a premium price based on their quality.
As a resort-based company, our operating results are highly dependent on the volume of customers at our resorts, which in turn impacts the price we can charge for our hotel rooms and other amenities. Since we believe that the number of walk-in customers affects the success of our casino resorts, we design our facilities to maximize their attraction to guests of other hotels. We also generate a significant portion of our operating income from the high-end gaming segment, which can cause variability in our results.
Most of our revenue is essentially cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our resorts, like many in the industry, generate significant operating cash flow. Our industry is capital intensive and we rely heavily on the ability of our resorts to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide excess cash for future development.


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Our results of operations do not tend to be seasonal in nature, though a variety of factors can affect the results of any interim period, including the timing of major Las Vegas conventions, the amount and timing of marketing and special events for our high-end customers, and the level of play during major holidays, including New Year and Chinese New Year. Our significant convention and meeting facilities allow us to maximize hotel occupancy and customer volumes during off-peak times such as mid-week or during traditionally slower leisure travel periods, which also leads to better labor utilization. Our results do not depend on key individual customers, though our success in marketing to customer groups — such as convention customers — or the financial health of customer segments — such as business travelers or high-end gaming customers from a particular country or region — can impact our results.
All of our casino resorts operate 24 hours a day, every day of the year, with the exception of Grand Victoria which operates 22 hours a day, every day of the year. At our wholly-owned resorts, our primary casino and hotel operations are owned and managed by us. Other resort amenities may be owned and operated by us, owned by us but managed by third parties for a fee, or leased to third parties. We generally have an operating philosophy that prefers ownership of amenities, since guests have direct contact with staff in these areas and we prefer to control all aspects of the guest experience. However, we do lease space to retail and food and beverage operators in certain situations, particularly for branding opportunities. We also operate many “managed” outlets, utilizing third party management for specific expertise in areas such as restaurants and nightclubs, as well as for branding opportunities.
Customers and Competition
Our casino resorts generally operate in highly competitive environments. We compete against other gaming companies as well as other hospitality and leisure and business travel companies. Our primary methods of competing successfully include:
• Locating our resorts in desirable leisure and business travel markets, and operating at superior sites within those 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.
Our Las Vegas casino resorts compete for customers with a large number of other hotel-casinos in the Las Vegas area, including major hotel-casinos on or near the Las Vegas Strip, major hotel-casinos in the downtown area, which is about five miles from the center of the Strip, and several major facilities elsewhere in the Las Vegas area. Our Las Vegas Strip resorts also compete, in part, with each other. According to the Las Vegas Convention and Visitors Authority, there were approximately 141,000 guestrooms in Las Vegas at December 31, 2008, up 6% from approximately 133,000 rooms at December 31, 2007. Las Vegas visitor volume was 37.5 million in 2008, a decrease of 4% from the 39.2 million reported for 2007.
The principal segments of the Las Vegas gaming market are leisure travel; premium gaming customers; conventions, including small meetings, trade associations, and corporate incentive programs; and tour and travel. Our high-end properties, which include Bellagio, MGM Grand Las Vegas, Mandalay Bay, and The Mirage, appeal to the upper end of each market segment, balancing their business by using the convention and tour and travel segments to fill the mid-week and off-peak periods. Our marketing strategy for TI, New York-New York, Luxor and Monte Carlo is aimed at attracting middle- to upper-middle-income wagerers, largely from the leisure travel and, to a lesser extent, the tour and travel segments. Excalibur and Circus Circus Las Vegas generally cater to the value-oriented and middle-income leisure travel and tour and travel segments.
Outside Las Vegas, our other wholly-owned Nevada operations compete with each other and with many other similar sized and larger operations. A significant portion of our customers at these resorts come from California. We believe the expansion of Native American gaming has had a negative impact on all of our Nevada resorts not located


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on the Las Vegas Strip, and additional expansion in California could have a further adverse effect on these resorts. Our Nevada resorts not located in Las Vegas appeal primarily to the value-oriented leisure traveler and the value-oriented local customer.
Outside Nevada, our wholly-owned resorts mainly compete for customers in local gaming markets, where location is a critical factor to success. In Tunica, Mississippi, one of our competitors is closer to Memphis, the 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 and with Native American casinos in Michigan. In Biloxi, Mississippi we also compete with regional riverboat and land-based casinos in Louisiana, Native American casinos in central Mississippi, the Florida market, and with casinos in the Bahamas.
Our unconsolidated affiliates mainly compete for customers against casino resorts in their respective markets. Much like our wholly-owned resorts, our unconsolidated affiliates compete through the quality of amenities, the value of the experience offered to guests, and the location of their resorts.
Our casino resorts also compete for customers with hotel-casino operations located in other areas of the United States and other parts of the world, and for leisure and business travelers with non-gaming tourist destinations such as Hawaii, Florida and cruise ships. Our gaming operations compete to a lesser extent with state-sponsored lotteries, off-track wagering, card parlors, and other forms of legalized gaming in the United States.
Marketing
We advertise on radio, television and billboards and in newspapers and magazines in selected cities throughout the United States and overseas, as well as on the Internet and by direct mail. We also advertise through our regional marketing offices located in major United States and foreign cities. A key element of marketing to premium gaming customers is personal contact by our marketing personnel. Direct marketing is also important in the convention segment. We maintain Internet websites which inform customers about our resorts and allow our customers to reserve hotel rooms, make restaurant reservations and purchase show tickets. We also operate call centers to allow customer contact by phone to make hotel and restaurant reservations and purchase show tickets.
We utilize our world-class golf courses in marketing programs at our Las Vegas Strip resorts. Our major Las Vegas resorts offer luxury suite packages that include golf privileges at Shadow Creek. In connection with our marketing activities, we also invite our premium gaming customers to play Shadow Creek on a complimentary basis. Additionally, marketing efforts at Beau Rivage benefit from the Fallen Oak golf course just 20 minutes north of Beau Rivage.
Employees and Management
We believe that knowledgeable, friendly and dedicated employees are a key success factor in the casino resort industry. Therefore, we invest heavily in recruiting, training and retaining our employees, as well as seeking to hire and promote the strongest management team possible. We have numerous programs, both at the corporate and business unit level, designed to achieve these objectives. For example, our diversity program extends throughout our Company, and focuses on the unique strengths of our individuals combined with a culture of working together to achieve greater performance. Our diversity program has been widely recognized, including the honor of “Top 50 Best Companies for Diversity” given by DiversityInc magazine. We have also invested heavily in training, and we believe our programs, such as the MGM Grand University and various leadership and management training programs, 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 customers. A large number of the slot machines at our


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resorts 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.
Internal Controls
We have a strong culture of compliance, driven by our history in the highly regulated gaming industry and our belief that compliance is a value-added activity. Our system of internal controls and procedures — including internal control over financial reporting — is designed to ensure reliable and accurate financial records, transparent disclosures, compliance with laws and regulations, and protection of our assets. Our internal controls start at the source of business transactions, and we have rigorous enforcement through controllership at both the business unit and corporate level. Our corporate management also review each of our businesses on a regular basis and we have a corporate internal audit function that performs reviews around gaming compliance, internal controls over financial reporting, and operational areas.
In connection with the supervision of gaming activities at our casinos, we maintain stringent controls on the recording of all receipts and disbursements and other activities, such as cash transaction reporting. These controls include:
• Locked cash boxes on the casino floor;
• Daily cash 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.
Marker play represents a significant portion of the table games volume at Bellagio, MGM Grand Las Vegas, Mandalay Bay and The Mirage. Our other facilities do not emphasize marker play to the same extent, although we offer markers to customers at certain of those casinos as well. We maintain strict controls over the issuance of markers and aggressively pursue collection from those customers who fail to pay their marker balances timely. These collection efforts are similar to those used by most large corporations when dealing with overdue customer accounts, including the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and civil litigation.
In Nevada, Mississippi, Michigan, and Illinois, amounts owed for markers which are not timely paid are enforceable under state laws. All other states are required to enforce a judgment for amounts owed for markers entered into in Nevada, Mississippi, Illinois or Michigan which are not timely paid, pursuant to the Full Faith and Credit Clause of the United States Constitution. Amounts owed for markers which are not timely paid are not legally enforceable in some foreign countries, but the United States assets of foreign customers may be reached to satisfy judgments entered in the United States.
Risks Associated With Our Operating Strategy
The principal risk factors relating to our operating strategy are:
• Our guestroom, dining and entertainment prices are often higher than those of most of our competitors in each market, although we believe that the quality of our facilities and services is also higher;


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• Our hotel-casinos compete to some extent with each other for customers. Bellagio, MGM Grand Las Vegas, Mandalay Bay and The Mirage, in particular, compete for some of the same premium gaming customers; MGM Grand Las Vegas and Mandalay Bay also compete to some extent against each other in the large-scale conference and convention business; and
• 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 GrowthITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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,Our Directors 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


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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.


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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, 2008, we had approximately 46,000 full-time and 15,000 part-time employees. At that date, we had collective bargaining contracts with unions covering approximately 30,000 of our employees. We consider our employee relations to be good. In August 2007, we entered a new five-year collective bargaining agreement covering approximately 21,000 of our Las Vegas Strip employees, not including MGM Grand Las Vegas. The collective bargaining agreement covering approximately 4,000 employees at MGM Grand Las Vegas expired in 2008. We have signed an extension of such agreement and are currently negotiating a new agreement. In addition, in October 2007 we entered into a new four-year agreement covering approximately 2,900 employees at MGM Grand Detroit.
Regulation and Licensing
The gaming industry is highly regulated, and we must maintain our licenses and pay gaming taxes to continue our operations. Each of our casinos is subject to extensive regulation under the laws, rules and regulations of the jurisdiction where it is located. These laws, rules and regulations generally concern the responsibility, financial stability and character of the owners, managers, and persons with financial interest in the gaming operations. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. A more detailed description of the regulations to which we are subject is contained in Exhibit 99.2 to this Annual Report 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.


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Forward-Looking Statements
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
ThisForm 10-K and our 2008 Annual Report to Stockholders contain some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “could,” “might,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, new projects, future performance, the outcome of contingencies such as legal proceedings, and future financial results. From time to time, we also provide oral or written forward-looking statements in 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 2008 Annual Report to Stockholders and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in 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-Q and8-K reports to the Securities and Exchange Commission (“SEC”). Also note that we provide a discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business in Item 1A, “Risk Factors.” This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.
You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility.
Executive Officers of the Registrant
The following table sets forth, as of February 15,April 20, 2009, the name, age and position of each of our executive officers.officers and Directors. Executive officers are elected by, and serve at the pleasure of, theour Board of Directors. Directors are elected by our stockholders and serve until the next annual meeting of stockholders or until his or her respective successor is elected and qualified or until his or her earlier resignation or removal.
       
Name Age Position
James J. Murren  47  Chairman, Chief Executive Officer, PresidentChief Operating Officer, and DirectorPresident
Robert H. Baldwin  58  Chief Design and Construction Officer and Director
Gary N. Jacobs  63  Executive Vice President, General Counsel, Secretary and Director
Aldo Manzini  45  Executive Vice President and Chief Administrative Officer
Daniel J. D’Arrigo  40�� Executive Vice President and Chief Financial Officer
Robert C. Selwood  5354  Executive Vice President and Chief Accounting Officer
Alan Feldman  50  Senior Vice President — President—Public Affairs
Phyllis A. James  5657  Senior Vice President and Senior Counsel
Punam Mathur48Senior Vice President — Corporate Diversity and Community Affairs
John McManus  4142  Senior Vice President, Assistant General Counsel and Assistant Secretary
Shawn T. Sani  43  Senior Vice President — President—Taxes
Cathryn Santoro  4041  Senior Vice President and Treasurer
Willie D. Davis74Director
Kenny C. Guinn72Director
Alexander M. Haig, Jr.84Director
Alexis Herman61Director
Roland Hernandez51Director
Kirk Kerkorian91Director
Anthony Mandekic68Director
Rose McKinney-James57Director
Daniel J. Taylor52Director
Melvin B. Wolzinger88Director


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Mr. Murren has served as Chairman and Chief Executive Officer of the Company since December 2008 and as President since December 1999. He has served as Chief Operating Officer since August 2007. He was Chief Financial Officer from January 1998 to August 2007 and Treasurer from November 2001 to August 2007. Mr. Murren has served as a Director of MGM MIRAGE since 1998. He is also a Director of Delta Petroleum Corporation.
     
Mr. Baldwin has served as Chief Design and Construction Officer since August 2007. He served as Chief Executive Officer of Mirage Resorts from June 2000 to August 2007 and President and Chief Executive Officer of Bellagio, LLC from June 1996 to March 2005. Mr. Baldwin has served as a Director of MGM MIRAGE since 2000.
     
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 wasMr. Jacobs has served as a partner withDirector of MGM MIRAGE since 2000. He is also a Director and Secretary and a member of the law firmExecutive Committee, Nominating Committee, Securities Investment Committee and Strategic Options Committee of Glaser, Weil, Fink, Jacobs, & Shapiro, LLP.the InterGroup Corporation.
     
Mr. Manzini has served as Executive Vice President and Chief Administrative Officer since March 2007. Prior thereto, he served as Senior Vice President of Strategic Planning for the Walt Disney Company and in various senior management positions throughout his tenure from April 1990 to January 2007.

     
Mr. 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 from February 2005 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 — President—Accounting of the Company from February 2005 to August 2007 and as Vice President — 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.
     
Ms. James has served as Senior Vice President and Senior Counsel of the Company since March 2002. From 1994 to 2001 she served as Corporation (General) Counsel and Law Department Director for the City of Detroit. In that capacity she also served on various public and quasi-public boards and commissions on behalf of the City, including the Election Commission, the Detroit Building Authority and the Board of Ethics.
     
Ms. Mathur has served as Senior Vice President — Corporate Diversity and Community Affairs of the Company since May 2004. She served as Vice President — Corporate Diversity and Community Affairs of the Company from December 2001 to May 2004. She served as Vice President — Community Affairs of the Company from November 2000 to December 2001.
Mr. McManus has served as Senior Vice President, Assistant General Counsel and Assistant Secretary of the Company since July 2008. He served as Vice President and General Counsel for 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.
     
Ms. Santoro has served as Senior Vice President and Treasurer since August 2007. She served as Vice President — Treasury of the Company from August 2004 to August 2007. Prior thereto she was a Vice President for Wells Fargo Bank, serving in the gaming division.
     
Available InformationMr. Davis has served as President and director of All-Pro Broadcasting, Inc., an AM and FM radio broadcasting company, for more than the past five years. Mr. Davis has served as a Director of MGM MIRAGE since 1989.
     Mr. Guinn served as Governor of the State of Nevada from 1999 through 2006. He is Chairman of the Board of Directors and a member of the Audit Committee of Service 1st Bank of Nevada. Mr. Guinn has served as a Director of MGM MIRAGE since 2007.
We maintain     Mr. Haig has served as Chairman of Worldwide Associates, Inc., an international business advisory firm, for more than the past five years and as 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 linkconsultant to the SEC’s EDGAR database. Through that link, our filings are availableCompany since 1990. Mr. Haig has served as soona Director of MGM MIRAGE since 1990.
     Ms. Herman has served as reasonably practical after we fileChair and Chief Executive Officer of New Ventures, a corporate consulting company, for more than the documents.past five years. Ms. Herman is a Director, member of the Audit Committee and Chair of the Compensation Committee of Cummins Inc., and a Director, member of the Personnel Committee and Chair of the Governance Committee of Entergy Corp. and a Director and member of the Compensation Committee and Public Issues and Diversity Committee of Coca-Cola Corp. Ms. Herman has served as a Director of MGM MIRAGE since 2002.
     Mr. Hernandez served as Chairman and Chief Executive Officer of Telemundo Group, Inc., a Spanish-language television station company from August 1998 to December 2000 and as President and Chief Executive Officer of Telemundo Group, Inc. from March 1995 to August 1998. He is a Director, Chairman of the Audit Committee and a member of the Finance Committee of The Ryland Group; the Presiding Director and member of the Audit Committee, Nominating Committee and Corporate Governance Committee of Vail Resorts, Inc.; a Director of Lehman Brothers Holdings Inc.; and a Director and member of the Nominating Committee of Sony Corporation. Mr. Hernandez has served as a Director of MGM MIRAGE since 2002.
These filings are also available on     Mr. Kerkorian has been the SEC’s website atwww.sec.gov. In addition,Chief Executive Officer, President and sole Director and shareholder of Tracinda Corporation, a Nevada corporation and 53.8% stockholder of the public may readCompany, for more than the past five years. He has served as a Director of MGM MIRAGE since 1987.
     Mr. Mandekic has served as Secretary and copy any materials that we file withTreasurer of Tracinda for more than the SEC atpast five years. He has served as a Director of MGM MIRAGE since 2006.
     Ms. McKinney-James has been the SEC’s Public Reference Room at 100 F Street, N.E.,Principal of Energy Works Consulting LLC, an energy consulting company, for more than the past five years and has been the Managing Principal of McKinney James & Associates since 2003. She was a Director of Mandalay Resort Group from 1999 until April 2005. She is a Director and member of the Audit Committee and the Governance Committee of Employers Holdings, Inc. and a Director of Toyota Financial Savings Bank and of MGM Grand Detroit, LLC, a subsidiary of the Company. Ms. McKinney-James has served as a Director of MGM MIRAGE since 2005.


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Washington, D.C. 20549     Mr. Taylor has served as an executive of Tracinda since 2007. He served as President of Metro-Goldwyn-Mayer Inc. (“MGM Studios”) from April 2005 to January 2006 and may obtain information on the operationas Senior Executive Vice President and Chief Financial Officer of MGM Studios from June 1998 to April 2005. He is a Director and member of the Public Reference Room by calling the SEC at1-800-SEC-0330.
Our Corporate Governance Policies, the charter of our Audit Committee and ourthe Nominating and Governance Committee of Delta Petroleum Corporation. Mr. Taylor has served as a Director of MGM MIRAGE since 2007.
     Mr. Wolzinger has been the principal owner of various privately held restaurants and gaming establishments in Las Vegas for more than the past five years. He is a Director of Colonial Bank. Mr. Wolzinger has served as a Director of MGM MIRAGE since 2000.
     On September 3, 2008, without admitting or denying the findings of the SEC, Tracinda consented to the entry of an administrative order by the SEC pursuant to Section 21 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The SEC found that Tracinda’s failure to disclosue a plan to sell 28 million shares of General Motors Corporation stock in a November 22, 2006 Schedule 13D amendment and its statement that it might acquire additional shares constituted violations of Section 13(d)2 of the Exchange Act and Rules 12b-20 and 13d-2(a) under the Exchange Act. No penalty was imposed pursuant to the order.
Section 16(a) Beneficial Ownership Reporting Compliance
     Section 16(a) of the Exchange Act requires the Company’s executive officers and directors to file reports of ownership of the Common Stock with the SEC. Executive officers and directors are required to furnish the Company with copies of all Section 16(a) forms that they file. Based upon a review of these filings and representations from the Company’s directors and executive officers that no other reports were required, the Company notes that all reports for the year ended December 31, 2008 were filed on a timely basis.
Corporate Governance Guidelines
     The Board of Directors has adopted corporate governance guidelines for the Company (“Guidelines”) setting forth the general principles governing the conduct of the Company’s business and the role, functions, duties and responsibilities of the Board of Directors, including, but not limited to such matters as (i) composition, (ii) membership criteria, (iii) orientation and continuing education, (iv) committees, (v) compensation, (vi) meeting procedures and (vii) annual evaluation. In addition to the foregoing, the Guidelines provide for management succession planning, communications with the Board and a code of conduct governing all directors, officers and certain employees of the Company. The Company believes that the Guidelines are in compliance with the listing standards adopted in 2003 by the New York Stock Exchange (the “Exchange”). The Guidelines are posted and maintained on the Company’s website at www.mgmmirage.com under the caption “Investor Relations — Investor Information — Corporate Governance — Corporate Governance Policies,” and a copy will be made available to any stockholder who requests it.
Code of Conduct
     The Board of Directors has adopted a Code of Business Conduct and Ethics and Conflict of Interest Policy along(the “Code of Conduct”) that applies to all of the Company’s directors and officers and certain of its employees, including the chief executive officer, the chief financial officer and the chief accounting officer. In addition, the Code of Conduct applies to all personnel of the Company and its operating subsidiaries at the Vice President, division director or more senior level, and to all accounting and finance personnel, and those personnel serving in such other categories as the Company designates from time to time. The Code of Conduct establishes policies and procedures that the Board believes promote the highest standards of integrity, compliance with anythe law and personal accountability. The Company’s Code of Conduct and amendments and waivers thereto are posted on the Company’s website at www.mgmmirage.com under the caption “Investor Relations — Investor Information — Corporate Governance — Code of Business Conduct and Ethics and Conflict of Interest Policy” and is provided to all new directors, new officers and certain new employees and distributed annually to all directors, officers and certain employees of the Company, each of whom is required to acknowledge in writing his or waiversher receipt and understanding thereof and agreement to adhere to the Code, are available on our website underprinciples contained therein. Additionally, the “Investor Relations” link. WeCompany will provide a copy of these documents without chargethe Code of Conduct to any stockholder upon receiptwho requests it.

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Audit Committee
     The current members of the Audit Committee are Roland Hernandez (Chair), Kenny C. Guinn, Alexis Herman and Rose McKinney-James. The Audit Committee’s responsibilities are described in a written request addressed to MGM MIRAGE, Attn:charter adopted by the Board of Directors. The charter is posted on the Company’s website at www.mgmmirage.com under the caption “Investor Relations — Investor Information — Corporate Secretary, 3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109.
Reference in this document to our website address does not constitute incorporation by referenceGovernance — Audit Committee.” The Audit Committee is responsible for providing independent, objective oversight of the information contained onCompany’s financial reporting system. Amongst its various activities, the website.Audit Committee reviews:
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.
 • 1.Our substantial indebtedness and significant financial commitments could adversely affect our operationsThe adequacy of the Company’s internal controls and financial resultsreporting process 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 consentreliability 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;Company’s financial statements;
 
 — 2.limiting our flexibility in planning for, or reacting to, changes in our business and industry;
 — limiting our ability to borrow additional funds;The independence and performance of the Company’s internal auditors and independent registered public accountants; and
 
 — 3.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 inThe Company’s 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 —legal 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:regulatory requirements.
     The Audit Committee also appoints the independent accountants; reviews with such firm the plan, scope and results of such audit, and the fees for the services performed; and periodically reviews their performance and independence from management.
— 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;


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— 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 expirationUnder written guidelines adopted by the Board of Directors in connection with its Code of Conduct, the Audit Committee, or its designated member, is required to review reports of potential conflicts of interest involving directors, the management committee (which is comprised of James J. Murren (Chair), Robert H. Baldwin and Gary N. Jacobs), and to the extent not otherwise determined by the management committee, the other senior executives of the waiver on May 15, 2009, we willCompany. With respect to such reports, it is the Audit Committee’s responsibility to determine whether a conflict exists and whether or not to waive the conflict. In determining whether a conflict of interest exists, the Audit Committee considers the materiality of the relationship between the third party and the Company pursuant to standards set forth in such written guidelines. In determining whether a conflict of interest should be subject to an eventwaived, the Audit Committee considers the effectiveness of default related toany safeguards that may be implemented, the expected noncompliance with financial covenants underfeasibility of the senior credit facility at March 31, 2009. We intend to work with our lenders to obtain additional waivers or amendments prior to May 15, 2009 to address future noncomplianceindividual’s recusal in matters that affect the Company and the third party, and the materiality of lost services for the Company that may result from the recusal.
     The Audit Committee meets regularly in open sessions with the senior credit facility; however, we can provide no assurance that we will be able to secure such waivers or amendments. The lenders holding at least a majority of the principal amount under our senior credit facility could, among other actions, accelerate the obligation to repay borrowings under our senior credit facility in such an event of default. As a result of such event of default, under certain circumstances, cross defaults could occur under our indenturesCompany’s management, independent accountants 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.


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• The ownership and operation of gaming facilities are subject to extensive federal, state and local laws, regulations and ordinances, which are administered by the relevant regulatory agencies in each jurisdiction.  These laws, regulations and ordinances vary from jurisdiction to jurisdiction, but generally concern the responsibility, financial stability and character of the owners and managers of gaming operations as well as persons financially interested or involved in gaming operations. As such, our gaming regulators can require us to disassociate ourselves from suppliers or business partners found unsuitable by the regulators. In addition, unsuitable activity on our part or on the part of our domestic or foreign unconsolidated affiliates in any jurisdiction could have a negative impact on our ability to continue operating in other jurisdictions. For a summary of gaming regulations that affect our business, see “Regulation and Licensing.” The regulatory environment in any particular jurisdiction may change in the future and any such change could have a material adverse effect on our results of operations. In addition, we are subject to various gaming taxes, which are subject to possible increase at any time.
• 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 existed in 2008, and is expected to continue in 2009, has had a negative impact on our results of operations.internal auditors. In addition, the weak housingAudit Committee meets regularly in closed executive sessions with the Company’s management, independent accountants and real estate market — both generallyinternal auditors, and reports its findings to the full Board of Directors.
     The Board of Directors has determined that Mr. Guinn, Mr. Hernandez, Ms. Herman and Ms. McKinney-James meet the current independence and experience requirements of the Exchange’s listing standards. The Board of Directors has determined that each of the members of the Audit Committee is “financially literate” and that Mr. Hernandez qualifies as an “audit committee financial expert,” as defined in Nevada particularly —the Exchange’s listing standards and the Commission’s regulations. In addition, the Board of Directors has negatively impacted CityCenter’sdetermined that the service of Mr. Hernandez on other audit committees, as described earlier in the description of his principal occupation and other directorships under “Our Directors and Executive Officers,” would not impair his 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.


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• 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,effectively serve on the Company’s Audit Committee. The Board of Directors will review such operations in Macau or any future operations in which we may engage in any other foreign territories are subject to risk pertaining to international operations. These may include financial risks, such as foreign economy, adverse tax consequences, and inability to adequately enforce our rights. These may also include regulatory and political risks, such as foreign government regulations, general geopolitical risks such as political and economic instability, hostilities with neighboring counties, and changes in diplomatic and trade relationships.
• Our plans for future construction can be affected by a number of factors, including time delays in obtaining necessary governmental permits and approvals and legal challenges.  We may make changes in project scope, budgets and schedules for competitive, aesthetic or other reasons, and these changes may also result from circumstances beyond our control. These circumstances include weather interference, shortages of materials and labor, work stoppages, labor disputes, unforeseen engineering, environmental or geological problems, and unanticipated cost increases. Any of these circumstances could give rise to delays or cost overruns. Major expansion projects at our existing resorts can also result in disruption of our business during the construction period.
• Claims have been brought against us and our subsidiaries in various legal proceedings, and additional legal and tax claims arise from time to time.  It is possible that our cash flows and results of operations could be affected by the resolution of these claims. Please see the further discussion in Item 3. “Legal Proceedings.”
• Tracinda Corporation beneficially owned approximately 54% of our outstanding common stock as of December 31, 2008.  As a result, Tracinda Corporation has the ability to elect our entire Board of Directors and determine the outcome of other matters submitted to our stockholders, such as the approval of significant transactions.
• A significant portion of our labor force is covered by collective bargaining agreements.  Approximately 30,000 of our 61,000 employees are covered by collective bargaining agreements. A prolonged dispute with the covered employees could have an adverse impact on our operations. In addition, wage and or benefit increases resulting from new labor agreements may be significant and could also have an adverse impact on our results of operations. The collective bargaining agreement covering approximately 4,000 employees at MGM Grand Las Vegas expired in 2008. We have signed an extension of such agreement and are currently negotiating a new agreement.
ITEM 1B.  UNRESOLVED STAFF COMMENTS
None.determination at its meeting following the Annual Meeting of Stockholders, when it makes committee assignments for the coming year.


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ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Roles in Establishing Compensation
Compensation Committee. The Compensation Committee is responsible for establishing, implementing and reviewing the compensation program for our employees, including the executive officers. The compensation for our Named Executives is presented in the tables that follow this Compensation Discussion and Analysis, beginning with the “Summary Compensation Table.” Our “Named Executives” in any fiscal year are defined as any person who served as our Chief Executive Officer or Chief Financial Officer, and our other three most highly compensated executive officers at the end of that fiscal year. Accordingly, in 2008, our Named Executives were James J. Murren, Daniel J. D’Arrigo, Robert H. Baldwin, Gary N. Jacobs, Aldo Manzini, and J. Terrence Lanni, who resigned as Chief Executive Officer in November 2008.
     The Compensation Committee recommends the executive compensation policy to our Board of Directors (the “Board”), determines compensation of our senior executives, determines the performance criteria and incentive awards to be granted pursuant to our Annual Performance-Based Incentive Plan and administers and approves granting of equity-based awards under our 2005 Omnibus Incentive Plan, as amended. The Compensation Committee’s authority and oversight extends to total compensation, including base salaries, bonuses, non-equity incentive awards, equity-based awards and other forms of compensation. The Compensation Committee’s authority is not delegated to others.
     The current members of the Compensation Committee are Anthony Mandekic (Chair), Willie D. Davis, Kenny C. Guinn, Daniel J. Taylor and Melvin B. Wolzinger. Each of the members of the Compensation Committee meets the current independence requirements of the Exchange’s listing standards.
Executive Officers. In carrying out its functions, the Compensation Committee obtains recommendations from senior executives with respect to various elements of compensation, including, but not limited to, determining the employees — other than the management committee — to whom share-based awards are granted and the amount of compensation to be paid to such employees. The Compensation Committee consults with the senior executives to obtain performance results, legal and regulatory guidance, and market and industry data that may be relevant in determining compensation. In addition, the Compensation Committee consults with the Chief Executive Officer regarding our performance goals and the performance of our executive officers. Furthermore, the Chief Executive Officer meets with the Chair of the Compensation Committee and our lead director to discuss the Chief Executive Officer’s performance during the prior year, including with respect to strategic planning, geographical and market expansion, management of new operations, projects and investments, succession planning and interactions and working relations with the Board. Because Mr. Murren was appointed as the Chief Executive Officer in November 2008 following the resignation of Mr. Lanni, a review of Mr. Murren’s performance in his capacity as the Chief Executive Officer was not conducted in 2008 but will be conducted in 2009.
     Other than in connection with negotiating their respective employment agreements and other than with respect to consultation rights our Chief Executive Officer has in connection with determining the performance criteria and target bonus under our Annual Performance-Based Incentive Plan for Executive Officers (the “Incentive Plan”), the executive officers do not participate in determining the amount and type of compensation they are paid. Instead, the Compensation Committee’s assessment of the individual performance of the executive officers is based primarily on the Committee’s independent observation and judgment of the responsibilities, duties, performance and leadership skills of the executive officers as well as our overall performance.
Outside Consultants. The Compensation Committee periodically engages outside consultants on various compensation-related matters. The Compensation Committee has the authority to engage the services of independent legal counsel and consultants to assist the committee in analyzing and reviewing the compensation policies, the elements of compensation, and the aggregate compensation for the executive officers. Recently, the Compensation Committee engaged outside consultants as follows:
During 2006, 2007 and 2008, Deloitte & Touche LLP was engaged by the Compensation Committee to perform certain agreed upon procedures in connection with the Compensation Committee’s review of the achievement of the financial goals set pursuant to the Annual Performance-Based Incentive Plan and the corresponding non-equity incentive awards payable to the Named Executives under such plan.

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•During 2008, Frederic W. Cook & Co., Inc. (“FW Cook”) was engaged by the Compensation Committee to assist the Compensation Committee in determining the appropriate strategy for implementing an exchange offer to employees to exchange certain out-of-the-money stock options and stock appreciation rights (“SARs”) for restricted stock units (“RSUs”) and to assist the Compensation Committee in adopting a policy for annual equity-based compensation for employees.
•During 2008, Semley Brossy Consulting Group, LLC was engaged by the Compensation Committee to assist the Compensation Committee in determining the long-term and short-term compensation strategies for the non-management directors, including evaluating the appropriate peer group companies, the appropriate elements of compensation and the appropriate equity compensation.
•During 2006 and 2007, Hewitt Associates LLC was engaged by the Compensation Committee to assist the Compensation Committee in determining the long-term and short-term compensation strategies for the executive officers, including evaluating the appropriate peer group companies, the appropriate performance measures, the appropriate elements of compensation and the appropriate equity compensation.
•During 2007, Towers Perrin HR Services was engaged by the Compensation Committee to assist the Compensation Committee in assessing the competitiveness of our retirement programs and equity grants to the executive officers as compared to the executive officers of the peer group. In addition, Towers Perrin HR Services reviewed the MGM MIRAGE Hospitality Incentive Plan regarding its relative competitiveness. The MGM MIRAGE Hospitality Incentive Plan is a program limited to key executives of MGM MIRAGE Hospitality, our subsidiary, none of whom are Named Executives.
Objectives of Our Compensation Program
     The Compensation Committee’s primary objectives in setting total compensation and the elements of compensation for each of the Named Executives are to:
•Attract talented and experienced Named Executives and retain their services on a long-term basis;
•Motivate the Named Executives to achieve our annual and long-term strategic goals;
•Align the interests of the Named Executives with our interests and the interests of our stockholders;
•Provide assurances of a minimum level of compensation while providing for a majority of the potential compensation to be dependent on the level of performance we achieve during the relevant year;
•Motivate and reward the Named Executives in connection with ongoing management of development projects;
•Motivate and reward the Named Executives in connection with negotiations of strategic partnerships;
•Through incentive awards based on yearly performance as well as equity awards that vest over a period of time, encourage Named Executives to balance the management of long-terms risks and long-term performance with yearly performance; and
•Ensure favorable tax treatment for us for such compensation.
Certain Factors in Determining Compensation
Employment Agreements. We have entered into employment agreements with each of our Named Executives, including a binding term sheet, in April 2009, which sets forth the principal terms of a new employment agreement with Mr. Murren, our Chief Executive Officer as of December 2008. The Compensation Committee believes these agreements are necessary to retain and ensure the continued availability of the Named Executives to develop and implement our strategic plans throughout the world including, for example, developing CityCenter on the Las Vegas Strip and MGM MIRAGE Hospitality LLC’s development projects. The employment agreements determine the annual base salaries and severance benefits for the Named Executives, in each case, as further described below.

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Annual Performance-Based Incentive Plan for Executive Officers. As further described below, the Compensation Committee adopts performance goals on an annual basis, including specific performance objectives, and establishes computation formulae or methods for determining each participant’s non-equity incentive award for that year under the Incentive Plan. Pursuant to the terms of his employment agreement, Mr. Murren has consultation rights with respect to determining the performance criteria and target annual bonus under our Annual Performance-Based Incentive Plan for Executive Officers. For fiscal 2009, Messrs. Murren, Baldwin, and Jacobs will be the sole Named Executives eligible to participate in the Incentive Plan. The Compensation Committee has no discretion to increase the amount of any participant’s award as determined by the formula, but even if the performance goals are met for any particular year the Compensation Committee may reduce or eliminate any participant’s award if it determines, in its sole and absolute discretion, that such a reduction or elimination is appropriate with respect to the participant’s performance or any other factors material to the goals, purposes, and administration of the Incentive Plan. In any case, no award to any individual under the plan may exceed $8,000,000 in any given year.
     In determining the threshold target and maximum non-equity incentive awards that should be paid to the participants, the Compensation Committee reviews our most recent results of operations, our performance in recent years relative to the corresponding performance measures, the participants’ individual performance, the compensation paid to the participants in the prior years, and, to a lesser extent, the compensation of executive officers at companies within the peer group described below.
     In addition, the Compensation Committee also considers the tax benefits of allocating a certain amount of total compensation as performance-based compensation rather than as base salary. Section 162(m) of the Internal Revenue Code disallows a tax deduction to public companies for compensation over $1 million paid to such company’s chief executive officer and its three other highest paid executive officers other than its chief financial officer. Qualifying performance-based compensation is not subject to the deduction limitation if certain requirements are met. Therefore, the Compensation Committee has determined that a majority of the potential compensation payable to the participants on an annual basis should be based on the achievement of qualified performance-based targets to ensure that, whenever possible, such compensation is tax deductible to us.
Targeted Overall Compensation and Peer Group Review. In order to assess whether our compensation to the executive officers is fair, reasonable and competitive, the Compensation Committee periodically gathers data regarding compensation practices of other public and private companies in our industry. The relevant information for members of the peer group are gathered from publicly-available proxy data, which data generally reflects only the compensation paid by these companies in years prior to their disclosure. In determining the compensation for 2008, the Compensation Committee reviewed the compensation data of the following companies:
•Boyd Gaming Corporation
•Harrah’s Entertainment Inc.
•Hilton Hotels Corporation
•International Game Technology
•Las Vegas Sands Corporation
•Marriott International, Inc.
•Starwood Hotels & Resorts Worldwide, Inc.
•Wynn Resorts, Limited

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     When reviewing the compensation of the Named Executives of the peer group, the Compensation Committee compared the market overlap, results of operations, stockholders’ equity and market capitalization of the peer group with ours. In addition, the Compensation Committee also reviewed the total compensation, as well as the amount and type of each element of such compensation, of the executive officers of the peer group with the compensation of our executive officers with comparable duties and responsibilities. The purpose of reviewing such data regarding the peer group was for the Compensation Committee to determine whether the compensation paid to the executive officers was generally competitive with that paid by the peer group companies to their executive officers. Because we strive to retain the Named Executives in our highly competitive industry, and because the Compensation Committee believes that we require the Named Executives to execute on average more complex and geographically diverse business operations than those required of the Named Executives of many of the other companies in the peer group, the Compensation Committee believes that the Named Executives should generally be compensated at the higher end of the range of the compensation paid by the peer group.
     Although the Compensation Committee believes that it is important to periodically review the compensation policies of the peer group, the Compensation Committee also believes that each company must adopt a compensation policy that incorporates the business objectives and culture of such company. Therefore, while the Compensation Committee reviews the data, including the total and type of compensation paid to executive officers, pertaining to the peer group companies to ensure that the compensation paid to the executive officers remains competitive, the Compensation Committee does not annually adjust the compensation paid to the executive officers based on the compensation policies or activities of the companies in the peer group.
Elements of Compensation
Base Annual Compensation. The Named Executives’ respective employment agreements provide for annual base salaries as described under “Certain Factors in Determining Compensation — Employment Agreements” and “Summary Compensation Table.” In connection with finalizing the employment agreements (including any amendments to such agreements) with the Named Executives, including the binding term sheet setting forth the terms of Mr. Murren’s new employment agreement, the Compensation Committee approved the annual base salaries set forth in such agreements that it believed would be required to retain the services of the Named Executives for the term of the employment agreements and to reflect the minimum annual compensation that is appropriate for each of them based on their past and anticipated contributions to our business. In addition, Mr. Murren’s annual base salary was increased to $2,000,000 from $1,500,000 because of the additional duties and responsibilities attendant to his appointment as Chief Executive Officer and the value and importance of the service that he will provide in the future.
Non-Equity Incentive Awards. Non-equity incentive awards under the Incentive Plan, when appropriate, are determined by the Compensation Committee after the end of the fiscal year. Only individuals who (a) at any time during the taxable year, served as the chief executive officer or acted in such capacity, or (b) is among the four highest compensated executive officers and are designated by the Compensation Committee may participate in the Incentive Plan.
     Within 90 days of the beginning of each calendar year, the Compensation Committee establishes performance goals, including specific performance objectives based on our financial performance targets approved by the Board and computation formulae or methods for determining each participant’s non-equity incentive award under the Incentive Plan for that year. For 2008, the Compensation Committee established performance objectives and a non-equity incentive award pool based on a percentage of “pretax net income.” For 2009, the Compensation Committee established performance objectives based on a percentage of “EBITDA.” As defined by the Compensation Committee for 2008, pretax net income consisted of consolidated net income before taxes, less nonrecurring items, including gains or losses from the sale of discontinued operations and certain asset write-downs. The Compensation Committee also considered whether the budget for the previous year was reasonable and whether our performance expectations had been achieved. The Compensation Committee then set the minimum performance measure to be achieved in order for non-equity incentive awards to be available under the Incentive Plan and, with respect to 2008, the percentage of the pool payable to each participant if the target performance measure is met or, with respect to 2009, the target non-equity incentive grants to be earned.
     For 2008, the Compensation Committee determined that, in order for any grant to be earned under the plan, the minimum performance measure during 2008 must have been at least $830,520,000 (70% of the projected pretax net income). Pursuant to the Incentive Plan, at or after the end of each calendar year, the Compensation Committee is required to certify in writing whether the pre-established performance goals and objectives were satisfied for that year. For 2008, the Compensation Committee performed this step in March 2009. In 2008, the minimum performance measure set by the Compensation Committee was not met. Based on that factor and pursuant to the Incentive Plan, no non-equity incentive awards were awarded under the Incentive Plan. In addition, no discretionary non-equity bonuses were awarded to the Named Executives for 2008.

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     For 2009, the Compensation Committee has determined that, in order for any annual non-equity incentive award to be earned under the Incentive Plan, the minimum EBITDA during 2009 must be at least 70% of the targeted EBITDA for 2009 discussed with management and approved by the Compensation Committee solely for the purposes of the annual non-equity incentive award in 2009 under the plan. The target EBITDA for such purpose was determined based on the Compensation Committee’s assessment of our projected financial performance for 2009 in light of the general economic conditions and other factors beyond the control of the plan participants. As defined by the Compensation Committee for 2009, EBITDA will consist of consolidated net income before extraordinary items, taxes, non-operating income or expenses, depreciation and amortization; as adjusted for nonrecurring items, including gains or losses from the sale of operating properties, gains or losses on insurance proceeds related to asset claims, EBITDA attributable to operations of assets for the period prior to their disposal, certain asset write-downs or write-ups, gains or losses from acquisition, sale, disposition or exchange of our debt securities, and certain legal and advisory fees. In determining the percentage of the targeted EBITDA that is achieved, targeted EBITDA will be adjusted downward to reflect any of our operations disposed of in 2009 (excluding Treasure Island), with the targeted EBITDA reduced by an amount equal to 75% of the budgeted EBITDA for any such operations (other than operations at Treasure Island) disposed of during 2009. In the event that the 70% of the targeted EBITDA is achieved, the participants will be eligible to receive 50% of their target award. Thereafter, the awards will increase on a sliding scale basis so that if, for example, 85% of the targeted EBITDA is achieved, the participants will be eligible to receive 75% of their target award, if 100% of the targeted EBITDA is achieved, the participants will be eligible to receive 100% of their target award, and if 110% of the targeted EBITDA is achieved, the participant will be eligible to receive 125% of their target award; provided, however, that the maximum grant that can be earned under the plan in 2009 is 150% of the target award. The Compensation Committee set the target non-equity incentive award under the plan for 2009 as $3.0 million, $2.4 million, and $1.65 million for Messrs. Murren, Baldwin, and Jacobs, respectively. In determining the minimum performance measure and the target non-equity incentive award for 2009, the Compensation Committee considered the EBITDA projected by management for 2009 in relation to the prior year’s performance, general economic conditions, the competitiveness of our executive compensation within the industry, and the anticipated value of the services to be provided by the participants. Based on the foregoing, the Compensation Committee believed, at the time the performance measure was set for 2009, that the performance goals were attainable.
     In addition, pursuant to his employment agreement, Mr. Murren will be eligible to receive additional cash awards of up to $4.25 million (“Additional Cash Awards”) to be awarded pursuant to the Incentive Plan, with such Additional Cash Awards to be vested 25% each on four six-month periods starting on September 30, 2009. Such Additional Cash Awards will be in addition to any annual awards made to Mr. Murren under the Incentive Plan. In the event that any Additional Cash Awards vest and are earned, such Additional Cash Awards, unlike the awards made under the Incentive Plan, will not be subject to reduction at the discretion of the Compensation Committee. The Compensation Committee determined that, because the awards under the Incentive Plan may be reduced or eliminated at the discretion of the Compensation Committee, ensuring that a portion of Mr. Murren’s cash compensation that is dependent on our performance not be subject to reduction at the discretion of the Compensation Committee was important to assist the Company’s efforts in continuing to retain the services of Mr. Murren and to further align the interest of our Chief Executive Officer with those of our stockholders. Each vested portion of Additional Cash Awards will be deemed earned upon the EBITDA of the Company for the corresponding six-month period being equal to or higher than the target EBITDA set by the Compensation Committee for the purposes of such Additional Cash Award. Any Additional Cash Award that is not earned upon vesting will be deemed earned on any subsequent vesting date in the event that the average EBITDA for the six-month periods beginning on April 1, 2009 and ending on such subsequent vesting date is equal to or greater than such target EBITDA for the corresponding six-month period. The Additional Cash Awards that are vested and earned will become payable on March 31, 2011 and must be paid within 90 days thereafter; provided, however, in the event of a termination by the Company without cause, termination by Mr. Murren with cause, or termination within 90 days after a change of control, the Additional Cash Awards will cease to vest and (i) Additional Cash Awards vested and earned at the time of termination will be paid within 90 days of such termination, and (ii) Additional Cash Awards vested at the time of termination but for which the performance criteria are met after the termination date will be paid within 90 days of the date of satisfaction of such performance criteria. The target EBITDA for the Additional Cash Awards was determined based on a performance standard that the Compensation Committee believed would be attainable. Because Additional Cash Awards will vest over a period of two years starting on September 30, 2009 while the annual non-equity incentive awards are earned on a yearly basis and because the Additional Cash Awards are intended to provide an element of compensation in addition to the annual non-equity incentive award, the performance measure for the Additional Cash Awards during any period may be lower than the corresponding performance measures for the annual non-equity incentive award during the same period.

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     In addition, the Compensation Committee has the ability to grant bonus awards outside of the Incentive Plan in any amount that the Compensation Committee deems appropriate; provided, however, that any such bonus payments may not be entitled to the same beneficial tax treatment provided with respect to the non-equity incentive awards under the Incentive Plan. For example, in 2005, the Compensation Committee approved a bonus to Mr. Jacobs of $700,000 in connection with his work on MGM Grand Macau. Half of his bonus was paid in 2005 when we entered into the agreement to develop MGM Grand Macau, and the remainder was paid in January 2008 after MGM Grand Macau opened for business in December 2007.
Equity-Based Compensation. The Compensation Committee grants equity-based compensation under the MGM MIRAGE 2005 Omnibus Incentive Plan, as amended (the “Omnibus Incentive Plan”), which allows for the issuance of various forms of equity-based compensation, such as stock options, SARs, restricted stock, and RSUs.
     The Compensation Committee administers all aspects of the Omnibus Incentive Plan and is the only authorized body that can grant equity-based awards. When determining the type of equity award to be granted, the Compensation Committee makes its determination based on whether we should award grants that would have some realizable value irrespective of our performance (e.g., restricted stock or RSUs versus stock options or SARs), and the potential dilution to the stockholders. In order to assess the potential dilution to our stockholders, the Compensation Committee may take into account the total outstanding but unexercised equity awards when determining the total number of shares that would be subject to any new equity award. Furthermore, the Compensation Committee may consider the number of             shares that remain subject to outstanding but unvested equity awards in determining whether any additional grants of equity awards should be made. However, the Compensation Committee does not take into account an employee’s holdings of vested but unexercised awards in determining additional awards to such employee, including Named Executives. The Compensation Committee believes that calibrating future awards based on the holdings of previously vested but unexercised awards would create incentives for employees to exercise or sell shares subject to their prior grants. The Compensation Committee also does not take into account the value realized by an employee during a fiscal year from the exercise of equity awards granted during a prior year. The Compensation Committee believes that value realized by an employee from the exercise of any such equity award relates to services provided during the year of the grant or of vesting and not necessarily during the year of exercise. In addition, the equity awards are designed to vest over a period of time to encourage the Named Executives to balance our short-term performance with the management of our long-term risks and long-term performance.
     Prior to the adoption in October 2008 of the new equity-based compensation policy by the Compensation Committee for awards under the Omnibus Incentive Plan (the “Annual Program”), the Compensation Committee granted equity-based awards in connection with milestone events, such as in connection with a new hire, employment contract renewal, significant promotions, and significant corporate transactions. The Compensation Committee may continue to grant, in exceptional circumstances, equity-based awards outside of the Annual Program. For example, concurrently with the execution of the term sheet for his new employment agreement, Mr. Murren was awarded 2,000,000 SARs under the Omnibus Incentive Plan, which SARs will expire seven years from the date of the grant. The Compensation Committee determined that, in light of Mr. Murren’s promotion during 2008 to the title of the Chairman of the Board and Chief Executive Officer and the resulting responsibility that have been assumed and will continue to be assumed by Mr. Murren, a significant equity-based award in connection with his new employment agreement was necessary to sufficiently compensate Mr. Murren, to assist the Company in the continued retention of his services, and to align Mr. Murren’s interest with those of our stockholders. The grant was designed to ensure that a significant portion of the grant would serve primarily to assist us in continuing to retain Mr. Murren’s services while any compensation from the remainder of the grant will be realized only upon material increase in the value of our stockholders’ ownership in our shares. 1,000,000 of the SARs will vest over a period of four years, with 25% vesting each year. 500,000 of the SARS will vest over a period of four years, with 25% vesting each year; provided that none of such SARs will be deemed vested unless the average closing price of our common stock is at least $8.00 during any 20 consecutive days period prior to the expiration of the employment agreement or, if earlier terminated, prior to the end of any vesting of SARs following such termination. The remaining 500,000 of the SARS will vest over a period of four years, with 25% vesting each year; provided that none of such SARs will be deemed vested unless the average closing price of our common stock is at least $17.00 during any 20 consecutive trading days prior to the expiration of the employment agreement or, if earlier terminated, prior to the end of any vesting of such SARs following such termination. As a result of such grant, Mr. Murren will not be eligible to receive additional awards of SARs under the terms of the Omnibus Incentive Plan during 2009. In addition, Mr. Murren’s participation in the Annual Program in 2010 will be at the discretion of the Compensation Committee.

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     Although, in exceptional circumstances, the Compensation Committee may grant equity-based compensation outside the Annual Program, equity-based compensation to our employees, including the Named Executives, will be granted primarily under the Annual Program. The Compensation Committee adopted the Annual Program to reduce unintended discrepancy in equity-based compensation realized resulting from varying exercise price of SARs and stock options, to provide for similar vesting schedule for employees receiving the same type of awards during any given year, and to further align the interest of certain executives of the Company, including Named Executives, with those of the stockholders by including a performance-based component of equity-based awards to such executives. Pursuant to the Annual Program, existing employees with annual base salary equal to or greater than $130,000 (unless excluded on a case-by-case basis by the Compensation Committee) or any other existing employee approved by the Compensation Committee on a case-by-case basis will be eligible to receive equity-based awards annually on the anniversary of the Annual Program’s adoption.
     In connection with the Annual Program, the Compensation Committee reserves on an annual basis a pool of equity-awards comprised of SARs and RSUs based on a number of “SARs-equivalent” awards. In 2008, each grant representing ten “SARs-equivalent” units was made in the form of ten SARs or, subject to adjustments described below, three RSUs. The SARs-equivalent ratio may change or remain the same as determined by the Compensation Committee. With respect to employees with annual base salaries equal to or greater than $250,000, including the Named Executives, 75% of the SARs-equivalent awards will be made in the form of SARs and, subject to adjustment described below, 25% in the form of RSUs. With respect to employees with annual base salaries below $250,000, 50% of the “SARs-equivalent” awards will be made in the form of SARs and 50% in the form of RSUs. In addition, starting with equity-based awards granted in 2009, the number of RSUs actually granted to officers of MGM MIRAGE (including the Named Executives) will be adjustable based on our financial performance (the “Performance Based Equity Awards”). Such financial performance target for the Performance Based Equity Awards awarded in 2008 was determined based on a performance standard that the Compensation Committee believed would be attainable. Because the recipients of the Performance Based Equity Awards include a larger group of officers than the eligible participants for the annual non-equity incentive awards, the financial performance measure for the Performance Based Equity Awards during any period may be lower than the corresponding performance measures for the annual non-equity incentive award during the same period.
     In connection with the establishment of the annual “SARs-equivalent” pool for the corresponding year, the Compensation Committee establishes performance goals, including specific performance objectives based on our financial performance targets approved by the Board of Directors, and computation formulae or methods for determining adjustment factors with respect to RSUs to be granted to such officers of MGM MIRAGE for that year. For 2008, the Compensation Committee established performance objectives for RSUs applicable to the officers on a percentage of “pretax net income.” The Compensation Committee determined that, in order for any RSUs awarded to the officers of MGM MIRAGE in 2008 to vest, the minimum performance measure for the six-months period ending on June 30, 2009 must be at least 50% of the projected pretax net income for the same period. The Compensation Committee has not yet established the minimum performance standards and the applicable adjustment factor for RSUs which may be awarded in 2009.
     In connection with any award of stock options or SARs, the exercise price for such stock options or SARs is established as the closing price of our common stock on the New York Stock Exchange (the “Exchange”) on the day of the Compensation Committee meeting in which such award is approved. With respect to a grant of an equity award to a new employee, although the Compensation Committee may pre-approve the terms of employment — including the proposed equity compensation — offered to a potential new employee prior to the acceptance or commencement of the employment, such grant of stock options or SARs made in connection with such new employment occurs at the next scheduled meeting of the Compensation Committee following the commencement of such employment, and the exercise price of stock options or SARs granted in connection with such employment is established as the closing price of our common stock on the Exchange on the date the Compensation Committee reaffirms such grant. With respect to equity awards granted in connection with the approval by the Compensation Committee of a new or revised employment agreement, such grants are approved and awarded at the regularly scheduled or special meeting of the Compensation Committee during which such employment agreement is approved. The Compensation Committee does not time the issuance or grant of any equity-based awards with the release of material, non-public information. In addition, we do not time the release of material non-public information for the purpose of affecting the value of equity awards. See “Severance Benefits and Change of Control” below for a discussion of the disposition of equity awards held by Named Executives upon termination of employment.

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     The Compensation Committee awarded equity-based compensation to the Named Executives in 2008 as follows:
•RSUs to Messrs. Murren, D’Arrigo, Baldwin, Jacobs, Manzini and Lanni in the amount of 18,750; 3,000; 18,750; 11,250; 3,000; and 26,250, respectively. For these RSUs to vest ratably over four years, our pre-tax income for the six months ending on June 30 of the year following the date of grant must be at least 50% of the pre-tax income for the same period as determined in the budget adopted by the Board of Directors for such period, excluding certain predetermined items.
•SARs with an exercise price of $19.00 to Messrs. Murren, D’Arrigo, Baldwin, Jacobs, Manzini and Lanni in the amount of 187,500; 30,000; 187,500; 112,500; 30,000; and 262,500, respectively. These SARS vest ratably over four years.
     The Compensation Committee believes that these awards of equity-based compensation and exchange of previously out-of-the-money stock options and SARs described below, along with the grants of equity-based compensation in prior years, were sufficient to align the interests of the Named Executives with those of our stockholders.
Exchange Offer. In September 2008, we 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. We consummated the exchange offer because the exercise prices of many of the outstanding options and SARs were significantly in excess of the current trading price of our common stock. The exchange offer was designed to increase the retention and motivational value of awards granted under the Omnibus Incentive Plan for many of our employees. In addition, the Compensation Committee determined that by exchanging options and SARs for RSUs, we will reduce the number of shares of common stock subject to equity awards, thereby reducing potential dilution to stockholders in the event of significant increases in the value of our common stock. The number of RSUs granted in the exchange offer was based on an exchange ratio for each grant determined by the Compensation 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. 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 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. Messrs. D’Arrigo and Manzini received 17,356 and 31,431 RSUs, respectively, in connection with the exchange offer.
Retirement Benefits.As part of our overall benefits program, we have provided nonqualified deferred compensation plans (the “DCP”) and supplemental executive retirement plans (the “SERP”) in addition to a traditional 401(k) plan. These programs have been designed to provide a measure of long-term security to the participants and to provide an additional incentive for the participants to remain with us.
     In December 2007, the Compensation Committee determined that commencing January 1, 2008, no new persons would be added as participants in the SERP. In November 2008, the Compensation Committee approved amendments to the DCP and SERP which suspended our matching contributions to the DCP for periods after January 1, 2009 and our contributions to the SERP for periods after October 1, 2008, as part of our ongoing cost savings measures. In addition, we terminated certain predecessor DCP an SERP plans during 2008. Payments made during 2008 pursuant to the terminated plans to Messrs. Murren, D’Arrigo, Baldwin, Jacobs, and Lanni were $3,118,009, $76,627, $3,272,773, $1,725,104, and $4,516,595, respectively. The amendments also allowed participants to make one-time elections to receive, without penalty, all or a portion of their vested account balances under such plans in a lump sum payment within 60 days of January 1, 2009, consistent with certain transitional relief provided by the Internal Revenue Service pursuant to rules governing nonqualified deferred compensation. Payments made during 2009 pursuant to these elections to Messrs. Murren, D’Arrigo, Baldwin, Jacobs, and Lanni were $3,540,708, $499,760, $1,455,165, $2,915,567, and $5,716,746, respectively.
     Under the DCP, participants are permitted to defer any portion of their salary or non-equity incentive awards on a pre-tax basis and accumulate tax-deferred earnings on their account. Until January 1, 2009, we matched up to 4% of the participants’ base salary, less any amount contributed to the participants’ 401(k) plan, which contribution vests ratably over a three-year period. The contributions made by participants vest immediately. All of the Named Executives are participants in the DCP. In 2008, we contributed the maximum amount of $53,250, $13,250, $53,250, $21,250, $20,000, and $73,250 on behalf of Messrs. Murren, D’Arrigo, Baldwin, Jacobs, Manzini and Lanni, respectively, which contributions reflect 4% of the corresponding executive officer’s salary less a contribution of $6,900 made to each of the participants’ 401(k) plans.

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     Under the SERP, which is a nonqualified plan, we made, until October 1, 2008, an annual contribution that is estimated to provide a retirement benefit up to 65% of the final five-year average annual salary of the participant. However, a participant is not guaranteed any specific amount of benefits upon retirement, but is entitled to only such amount of the vested contributions and earnings on such contributions available in such participant’s account at the time of retirement. All contributions to the SERP are made by us. A portion of such contributions vest over three years of participation in the SERP. The remainder of such contributions vest over the later of five years of participation in the SERP and ten years of continuous service. All of the Named Executives are participants in the SERP. In 2008, we contributed $230,124, $63,928, $374,904, $151,018, $75,241 and $716,956 to the SERP accounts of Messrs. Murren, D’Arrigo, Baldwin, Jacobs, Manzini and Lanni, respectively.
Perquisites and Other Benefits. As an owner and operator of full-service hotels, we are able to provide many perquisites relating to hotel and related services to the Named Executives at little or no additional cost to us. To the extent such products or services are for personal use, the Named Executives reimburse us for the cost of such product or service. We currently provide access to the fitness facilities located in the hotel in which a Named Executive’s office is located and offer certain products and services from our hotels at prices equal to our cost for such products and services. In addition, for our convenience and the convenience of our executive officers, we provide complimentary meals for business purposes at our restaurants to the Named Executives.
     Pursuant to his employment agreement, Mr. Lanni could request, until his retirement in November 2008, the use of aircraft owned by us for commuting between Nevada and California. Additionally, Mr. Lanni could request the use of such aircraft for up to three personal round trips in any calendar year, subject to availability. In 2008, Mr. Lanni reimbursed us in the amount of $232,796 for a portion of the costs associated with such flights. The unreimbursed portion of aggregate incremental cost associated with Mr. Lanni’s aircraft usage was $469,396, which consisted of $340,917 for traveling between Nevada and California and $128,479 for other personal usage.
     Pursuant to his employment agreement and subject to certain conditions, Mr. Murren is permitted to use aircraft owned by us for business purposes. Additionally, Mr. Murren could request the use of such aircraft for up to two personal round trips in any calendar year, subject to availability. In 2008, Mr. Murren reimbursed us in the amount of $68,754 for a portion of the cost associated with personal flights. The unreimbursed portion of aggregate incremental costs associated with Mr. Murren’s aircraft usage was $106,843.
     In addition, the aggregate amount of premiums paid for group life insurance and long term disability insurance on behalf of, and reimbursement for medical expenses and associated taxes to, Messrs. Murren, D’Arrigo, Baldwin, Jacobs, Manzini and Lanni in 2008 was $44,922, $32,453, $25,834, $64,352, $25,081, and $63,207, respectively. Instead of providing medical coverage through a third-party insurance company, we reimburse the Named Executives for medical expenses incurred by them and their dependents for covered procedures. In addition, pursuant to his employment agreement, Mr. Murren will receive an annual $100,000 payment to be applied to his life insurance premiums.
Severance Benefits and Change of Control. In order to assist us in retaining the services of the executive officers, we have agreed to provide them with severance benefits in the event that their employment is terminated without cause (as defined in the respective employment agreements) or in the event of a change of control (as defined in the respective employment agreements). The Compensation Committee believes the services of the Named Executives are extremely marketable, and that it is therefore necessary to provide assurances to the Named Executives that we will not terminate their employment without cause and without providing a certain level of severance benefits. When determining the level of the severance benefits to be offered in the employment agreements, the Compensation Committee considered the period of time it would normally require an executive officer to find comparable employment. Pursuant to the terms of Mr. Lanni’s employment agreement, upon his resignation, which occurred in November 2008, Mr. Lanni was entitled to receive his base salary through the date of such resignation and receive all other benefits vested as of the date of his resignation, including the ability to exercise all equity awards that had vested as of such date. The details of the specific severance benefits available under various termination or change of control scenarios for the other Named Executives are discussed in the “Potential Payments upon termination or Change-in-Control” section below, along with an estimate of the amounts to be paid to each Named Executive under each scenario.

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Summary Compensation Table
     The following table summarizes the compensation of the Named Executives for the years ended December 31, 2008, 2007 and 2006.
                                     
                          Change in    
                  Stock     Pension Value    
                  Appreciation     and    
                  Rights and Non-Equity Nonqualified    
              Stock Option Incentive Plan Deferred All Other  
      Salary Bonus Awards Awards Compensation Compensation Compensation  
Name and title (A) Year (B) (C) (D) (E) (F) Earnings (G) Total
James J. Murren  2008  $1,500,000  $—  $20,982  $1,103,583  $—  $—  $442,039  $3,066,604 
Chairman, Chief  2007   1,500,000   —   —   1,877,844   4,739,681   —   351,269   8,468,794 
Executive Officer,  2006   1,500,000   —   275,229   3,296,472   4,896,493   —   352,321   10,320,515 
President and Chief
Operating Officer		                                    
Daniel J. D’Arrigo  2008  $500,000  $—  $181,834  $795,376  $—  $—  $116,531  $1,593,741 
Executive Vice  2007   390,385   390,000   —   555,793   —   —   96,434   1,432,612 
President and Chief
Financial Officer		                                    
Robert H. Baldwin  2008  $1,500,000  $—  $20,982  $969,862  $—  $—  $460,888  $2,951,732 
Chief Design and  2007   1,500,000   —   —   1,691,250   4,739,681   —   474,552   8,405,483 
Construction Officer  2006   1,500,000   —   275,229   2,997,698   4,896,493   —   474,786   10,144,206 
Gary N. Jacobs  2008  $700,000  $—  $12,589  $633,027  $—  $—  $245,339  $1,590,955 
Executive Vice  2007   700,000   350,000   —   1,077,770   2,210,332   —   235,472   4,573,574 
President,  2006   700,000   —   91,743   1,894,136   2,283,461   —   266,570   5,235,910 
General Counsel and Secretary                                    
Aldo Manzini  2008  $500,000  $—  $177,398  $638,887  $—  $—  $127,366  $1,443,651 
Executive Vice  2007   398,076   940,000   —   715,741   —   —   397,959   2,451,776 
President and Chief
Administrative Officer		                                    
J. Terrence Lanni  2008  $2,000,000  $—  $—  $472,677  $—  $—  $1,342,090  $3,814,767 
Former Chairman  2007   2,000,000   —   —   3,138,028   6,357,553   —   1,244,849   12,740,430 
and Chief Executive  2006   2,000,000   —   550,458   5,481,564   6,567,893   —   1,087,206   15,687,121 
Officer                                    
ITEM 2.  (A)PROPERTIESMr. Murren became Chairman and Chief Executive Officer on December 1, 2008. Mr. Lanni resigned from his position effective November 30, 2008. On August 21, 2007, Mr. D’Arrigo was promoted from his position as Senior Vice President — Finance to the position of Executive Vice President and Chief Financial Officer; Mr. Murren was promoted from his position of President, Chief Financial Officer and Treasurer to the position of President and Chief Operating Officer; and Mr. Baldwin was promoted from his position of President and Chief Executive Officer of Mirage Resorts, Incorporated to the position of Chief Design & Construction Officer of the Company.
(B)On September 16, 2005, we entered into employment agreements with Messrs. Murren, Baldwin, Jacobs and Lanni. Each of the foregoing employment agreements provides for a term through January 4, 2010 and an annual base salary as follows: $1,500,000 for Mr. Murren; $1,500,000 for Mr. Baldwin; $700,000 for Mr. Jacobs; and $2,000,000 for Mr. Lanni. We do not provide additional compensation to the foregoing officers who serve on the Board of Directors; therefore, none of the amounts reflected in this table represent additional compensation for services as directors for those persons. On March 1, 2007, we entered into an employment agreement with Mr. Manzini, and on June 19, 2007, we entered into a letter agreement which amended Mr. Manzini’s employment agreement. Mr. Manzini’s employment agreement provides for an annual base salary of $500,000 and an annual bonus up to a maximum of $750,000. On December 3, 2007, we entered into a new employment agreement with Mr. D’Arrigo. Mr. D’Arrigo’s employment agreement provides for an annual base salary of $500,000 and a bonus of up to a maximum of 100% of Mr. D’Arrigo’s annual base salary. On April 6, 2009 we entered into a binding term sheet for a new employment agreement with Mr. Murren. The new agreement, which will be effective as of December 1, 2008 and expire April 7, 2013, will provide for an annual base salary of $2,000,000, with any shortfall in payment of such base salary from December 1, 2008 until the execution date of the new employment agreement to be paid within 10 days of such execution date. Such shortfall amount for December 2008 would be approximately $42,500.

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(C)In 2005, the Compensation Committee approved a bonus to Mr. Jacobs of $700,000 in connection with his work on MGM Grand Macau. 50% of his bonus was paid in 2005 when we entered into the agreement to develop MGM Grand Macau, and the remainder was paid in January 2008 after MGM Grand Macau opened for business in December 2007. Mr. Manzini’s employment agreement provides for an annual discretionary bonus up to a maximum of $750,000. Mr. D’Arrigo’s employment agreement provides for a bonus of up to a maximum of 100% of Mr. D’Arrigo’s annual base salary. In 2008, Mr. Manzini received a bonus of $625,000 for 2007, and he received a signing bonus in the amount of $315,000 upon execution of his employment agreement on March 1, 2007.
(D)RSUs were granted to all the Named Executives in 2008. In addition, Messrs. D’Arrigo and Manzini participated in the exchange offer and received RSUs in exchange for out-of-the-money stock options. The amounts reflected in the table represent compensation recognized for financial reporting purposes in accordance with Statement of Financial Accounting Standards No. 123, “Share-Based Payment” (“SFAS 123(R)”) except that no forfeiture rate assumption has been applied to the amounts in the table. A detailed list of RSUs previously awarded to the Named Executives and still outstanding is shown in the table below under “Outstanding Equity Awards at Fiscal-Year-End.”
(E)SARs were granted to all the Named Executives in 2008 and to Messrs. D’Arrigo and Manzini during 2007. A detailed list of stock options and SARs previously awarded to the Named Executives and still outstanding is shown in the table below under “Outstanding Equity Awards at Fiscal Year-End.” The amounts reflected in the table represent the amount of compensation recognized for financial reporting purposes in accordance with SFAS 123(R), except that no forfeiture rate assumption has been applied to the amounts in the table. These awards were valued using the Black-Scholes Model with assumptions as described in Note 15 to the Company’s consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed on March 17, 2009.
(F)Under the terms of the Annual Performance–Based Incentive Plan for Executive Officers (the “Incentive Plan”), only Messrs. Murren, Baldwin and Jacobs are eligible to participate in the Incentive Plan in 2009. For 2008, the Compensation Committee approved these individuals and Mr. Lanni for participation in the Incentive Plan. The Incentive Plan provides for payments to be made at the Compensation Committee’s discretion if the Company achieves a certain level of a defined performance measure, generally based on net income adjusted for certain items. The exact amount of the payment was calculated in March 2009, and no payments were made under the Incentive Plan, based on our performance relative to the base target established in 2008 by the Compensation Committee. See also “Compensation Discussion and Analysis” for a further discussion of the Incentive Plan. See also the “Grants of Plan-Based Awards” table for information about the performance-based grants under the Incentive Plan in 2009.
(G)All other compensation for 2008 includes the following:
                                 
  Personal             Insurance      
  Use of             Premiums      
  Company 401(k) DCP SERP and Other Other Total Other
Name Aircraft(1) Match Match(2) Contribution(3) Benefits(4) Benefits Perquisites(5) Compensation
Mr. Murren $106,843  $6,900  $53,250  $230,124  $44,922  $—  $—  $442,039 
Mr. D’Arrigo  —   6,900   13,250   63,928   32,453   —   —   116,531 
Mr. Baldwin  —   6,900   53,250   374,904   25,834   —   —   460,888 
Mr. Jacobs  1,819   6,900   21,250   151,018   64,352   —   —   245,339 
Mr. Manzini  145   6,900   20,000   75,241   25,080   —   —   127,366 
Mr. Lanni  481,776   6,900   73,250   716,956   63,208   —   —   1,342,090 
Our principal executive offices are located at Bellagio. The following table lists our significant land holdings; unless otherwise indicated, all properties are wholly-owned. We also own or lease various other improved and unimproved property in Las Vegas and other locations in the United States and certain foreign countries.
(1)The amounts in this column represent the value of personal use of Company aircraft, which was determined based on the aggregate incremental cost to us and associated taxes. Aggregate incremental cost for all years shown was calculated based on average variable operating cost per flight hour multiplied by flight hours for each Named Executive, less any amounts reimbursed by such Named Executive. The average variable operating cost per hour was calculated based on aggregate variable costs for each year, including fuel, engine reserves, trip-related repair and maintenance costs, travel expenses for flight crew, landing costs, related catering and miscellaneous handling charges, divided by aggregate hours flown. Fixed costs, such as flight crew salaries, wages and other employment costs, training, certain maintenance and inspections, depreciation, hangar rent, utilities, insurance and taxes, are not included in aggregate incremental cost since these expenses are incurred by us irrespective of personal use of aircraft. In accordance with his employment agreement, Mr. Lanni was permitted to use the Company’s aircraft for personal and commuter travel. Further, the Company entered into a time sharing agreement with Mr. Lanni in connection with such personal use of the Company’s aircraft. In 2008, pursuant to the time sharing agreement, Mr. Lanni reimbursed us in the amount of $232,796 for a portion of the costs associated with such flights. The unreimbursed portion of actual direct incremental cost associated with Mr. Lanni’s aircraft usage was $469,396, which consisted of $340,917 for traveling between Nevada and California and $128,479 for personal usage. In 2008, Mr. Murren reimbursed us in the amount of $68,754 for a portion of the cost associated with personal flights. The unreimbursed portion of aggregate incremental costs associated with Mr. Murren’s aircraft usage was $106,843.

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(2)The amounts in this column represent our matching contributions under the Deferred Compensation Plan (“DCP”). The DCP allows participants to defer, on a pre-tax basis, a portion of their salary and bonus and accumulate tax deferred earnings, plus investment earnings on the deferred balances, as deferred tax savings. Until January 1, 2009, participants received 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 ratably over a three-year period.
(3)The amounts in this column represent our contributions under the Supplemental Executive Retirement Plan (“SERP”). The SERP is a nonqualified plan under which we, until October 1, 2008, made quarterly contributions that 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 deferred tax savings. Employees do not make contributions under this plan. A portion of the contributions and investment earnings thereon vests after three years of SERP participation and the remaining portion vests after both five years of SERP participation and ten years of continuous service. The plan provides for defined contributions and the amount of the benefit is not guaranteed.
(4)The amounts in this column represent group life insurance premiums paid for the benefit of the Named Executives, reimbursement of medical expenses and associated taxes, and premiums for long term disability insurance for the benefit of the Named Executives.
(5)As an owner and operator of full-service hotels, we are able to provide many perquisites relating to hotel and hotel-related services to the Named Executives at little or no additional cost to us. To the extent such products or services are for personal use, the Named Executive reimburses us for the cost of such product or service. We currently provide access to the fitness facilities located in the hotel in which a Named Executive’s office is located and offers certain products and services from our hotels at prices equal to our cost for such products and services. In no case did the value of such perquisite, computed based on the incremental cost to us, exceed $10,000 per individual in 2008.

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Grants of Plan-Based Awards
     The table below sets forth certain information regarding plan-based awards granted during 2008 to the Named Executives.
                                             
                              All Other All Other      
                              Stock Option/SAR      
                              Awards: Awards:     Grant Date
                  Estimated Number of Shares Number of Number of Exercise Fair Value
      Estimated Future Payouts Under Non- For Future Payouts Under Equity Shares of Securities Price of of Stock
  Grant Equity Incentive Plan Awards (A) Incentive Plan Awards (B) Stock or Underlying Option/SAR Option/SAR
Name Date Threshold Target Maximum Threshold Target Maximum Units Options Awards Awards (C)
James J. Murren NA $3,179,000  $5,676,000  $8,000,000   18,750   18,750   18,750   —   187,500  $19.00  $1,771,144 
Daniel J. D’Arrigo NA NA  NA  NA   3,000   3,000   3,000   17,356   30,000   19.00   283,383 
Robert H. Baldwin NA  3,179,000   5,676,000   8,000,000   18,750   18,750   18,750   —   187,500   19.00   1,771,144 
Gary N. Jacobs NA  1,482,000   2,647,000   8,000,000   11,250   11,250   11,250   —   112,500   19.00   1,062,686 
Aldo Manzini NA NA  NA  NA   3,000   3,000   3,000   31,431   30,000   19.00   283,383 
J. Terrence Lanni NA NA  NA  NA   26,250   26,250   26,250   —   262,500   19.00   2,479,601 
(A)The Compensation Committee approved the criteria for determining 2008 payouts under and the participants in the Incentive Plan in March 2008. Awards may be made if we achieve a minimum level of pre-tax operating income, defined as income from continuing operations before income taxes, excluding write-downs of long-lived assets and including the results of discontinued operations prior to the date of disposition. The Compensation Committee established a “pool” of 2.3% of pre-tax operating income that could be allocated among the Named Executives, based on the following percentages: Mr. Lanni — 27.9%; Messrs. Murren, and Baldwin — 20.8%; and Mr. Jacobs — 9.7%. For 2008, the threshold amount of pre-tax operating income was set at $830,520,000. In 2008, the threshold amount was not exceeded. Accordingly, no payments were made under the Incentive Plan. See “Compensation Discussion and Analysis — Elements of Compensation — Non-Equity Incentive Awards.”
See “Compensation Discussion and Analysis — Elements of Compensation — Non-Equity Incentive Awards” for target amounts defined in the Incentive Plan. For purposes of the disclosure above, the target amount was calculated based on the corresponding amount of the defined performance measure budgeted for the year ended December 31, 2008. The maximum individual award under the Incentive Plan is $8 million in each case. The Compensation Committee retains full discretion to reduce or eliminate a payment under the Incentive Plan, even if the threshold or target amounts set pursuant to the Incentive Plan are achieved. In March 2009, the Compensation Committee determined that no awards would be made for 2008.
(B)For these awards to vest ratably over four years, our pre-tax income for the six months ending on June 30, 2009 must be at least 50% of the pre-tax income as determined in the budget adopted by the Board of Directors for such period, excluding certain predetermined items.
(C)Represents the fair value of the SARs granted on their respective grant dates. The fair value is calculated in accordance with SFAS 123(R) using the Black-Sholes valuation model. For additional information, refer to Note 15 of the Company’s consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed on March 17, 2009. There can be no assurance that these amounts will correspond to the actual value that will be recognized by the Named Executives.

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Outstanding Equity Awards at Fiscal Year-End
     The table below sets forth certain information regarding outstanding equity awards of the Named Executives at December 31, 2008. At December 31, 2008, there were no securities underlying unexercised unearned options as part of equity incentive plans.
                                 
  Option Awards Stock Awards
                          Equity  
                          Incentive  
                          Plan  
                          Awards:  
                          Number of  
      Number of                 Unearned  
  Number of Securities             Market Shares, Equity Incentive
  Securities Underlying             Value of Units or Plan Awards:
  Underlying Unexercised         Number of Shares or other Market or Payout
  Unexercised Options/ Option/ Option/ Shares or Units of Rights Value of Unearned
  Options / SARS SAR SAR Units of Stock Stock That Have Shares, units or
  SARS Unexercisable Exercise Expiration that Have Not Vested that Have Not Not Vested Other Rights That
Name Exercisable (A) Price Date (B) Vested (B) Have Not Vested
James J. Murren  500,000   —  $11.94   12/13/2009                 
   300,000   —   16.25   5/31/2010                 
   1,000,000   —   12.74   2/27/2013                 
   360,000   240,000   34.05   5/3/2012                 
   60,000   40,000   34.36   5/10/2012                 
   —   187,500   19.00   10/6/2015                 
                           18,750  $258,000 
Daniel J. D’Arrigo  9,000   —   17.08   8/5/2011                 
   18,000   —   17.08   7/5/2010                 
   50,000   —   17.40   9/2/2012                 
   35,000   —   12.74   2/27/2013                 
   60,000   40,000   34.05   5/3/2012                 
   —   30,000   19.00   10/6/2015                 
                   17,356  $238,819         
                           3,000   41,280 
Robert H. Baldwin  567,187   —   12.74   2/27/2013                 
   360,000   240,000   34.05   5/3/2012                 
   —   187,500   19.00   10/6/2015                 
                           18,750   258,000 
Gary N. Jacobs  277,800   —   16.66   6/1/2010                 
   240,000   —   12.74   2/27/2013                 
   240,000   160,000   34.05   5/3/2012                 
   —   112,500   19.00   10/6/2015                 
                           11,250   154,800 
Aldo Manzini  —   30,000   19.00   10/6/2015                 
                   31,431   432,491         
                           3,000   41,280 
J. Terrence Lanni  460,000   —   12.74   2/27/2013                 
   660,000   —   34.05   5/3/2012                 
   60,000   —   34.36   5/10/2012                 
   —   —   19.00   10/6/2015                 
                           26,250   361,200 

18

(A)Outstanding unexercisable options/SARs vest as follows:
                 
  Securities      
  Underlying      
  Unexercised Option/SAR Option/SAR  
  Options/SARs Exercise Expiration  
Name Unexercisable Price Date Vesting
James J. Murren  240,000  $34.05   5/3/2012  120,000 vest 5/3/2009;
              120,000 vest 5/3/2010
   40,000   34.36   5/10/2012  20,000 vest 5/10/2009;
              20,000 vest 5/10/2010
   187,500   19.00   10/6/2015  46,875 vest 10/6/2009;
              46,875 vest 10/6/2010;
              46,875 vest 10/6/2011;
              46,875 vest 10/6/2012
Daniel J. D’Arrigo  40,000   34.05   5/3/2012  20,000 vest 5/3/2009;
              20,000 vest 5/3/2010
   30,000   19.00   10/6/2015  7,500 vest 10/6/2009;
              7,500 vest 10/6/2010;
              7,500 vest 10/6/2011;
              7,500 vest 10/6/2012
Robert H. Baldwin  240,000   34.05   5/3/2012  120,000 vest 5/3/2009;
              120,000 vest 5/3/2010
   187,500   19.00   10/6/2015  46,875 vest 10/6/2009;
              46,875 vest 10/6/2010;
              46,875 vest 10/6/2011;
              46,875 vest 10/6/2012
Gary N. Jacobs  160,000   34.05   5/3/2012  80,000 vest 5/3/2009;
              80,000 vest 5/3/2010
   112,500   19.00   10/6/2015  28,125 vest 10/6/2009;
              28,125 vest 10/6/2010;
              28,125 vest 10/6/2011;
              28,125 vest 10/6/2012
Aldo Manzini  30,000   19.00   10/6/2015  7,500 vest 10/6/2009;
              7,500 vest 10/6/2010;
              7,500 vest 10/6/2011;
              7,500 vest 10/6/2012

19

(B)Outstanding unvested RSUs vest as follows, except for Mr. Lanni’s awards which will not vest :
       
  Approximate
Equity Incentive Plan  
Name and Location AcresNumber of Shares NotesAwards: Number of
 or Units of StockUnearned Shares,Units
that Have Notor other Rights That
Las Vegas, Nevada operations:NameVestedVestingHave Not VestedVesting
James J. Murren18,7504,687 vest 10/6/2009;
4,688 vest 10/6/2010;
4,687 vest 10/6/2011;
4,688 vest 10/6/2012
Daniel J. D’Arrigo17,3563,472 vest 7/1/2009;      
Bellagio76Two 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 Vegas102   
Mandalay Bay  1003,471 vest 9/10/2009;  
The Mirage102Site is shared with TI. Approximately 21 acres will be transferred upon the close of the TI sale.
Luxor60
TINASee The Mirage.
New York-New York20
Excalibur53
Monte Carlo28
Circus Circus Las Vegas69Includes Slots-A-Fun.
Shadow Creek Golf Course240
Other Nevada operations:
      
Circus Circus Reno10A portion of the site is subject to two ground leases, which expire in 2032 and 2033, respectively.
Primm Valley Golf Club448Located in California, four miles from the Primm Valley Resorts.
Gold Strike, Jean, Nevada51   
Railroad Pass, Henderson, Nevada  93,471 vest 9/10/2010;  
Other domestic operations:
      
MGM Grand Detroit27   
Beau Rivage, Biloxi, Mississippi  413,471 vest 9/10/2011;  Includes 10 acres of tidelands leased from the State of Mississippi under a lease that expires (giving effect to our renewal options) in 2066.
Fallen Oak Golf Course,      
Saucier, Mississippi508   
Gold Strike, Tunica, Mississippi  243,471 vest 9/10/2012  
Other land:
      
CityCenter — Support Services  12  Includes approximately 10 acres behind New York-New York, being used for project administration offices and approximately two acres adjacent to New York-New York, being used for the residential sales pavilion. We own this land and these facilities, and we are leasing them to CityCenter on a rent-free basis.
Las Vegas Strip — south  203,000  Located immediately south of Mandalay Bay.750 vest 10/6/2009;
   15  Located across the Las Vegas Strip from Luxor.
Las Vegas Strip — north  34  Located north of Circus Circus.750 vest 10/6/2010;
North Las Vegas, Nevada  66  Located adjacent to Shadow Creek.
Henderson, Nevada  47  Adjacent to Railroad Pass.750 vest 10/6/2011;
Jean, Nevada  116  Located adjacent to, and across I-15 from, Gold Strike.
Sloan, Nevada  89750 vest 10/6/2012
Robert H. Baldwin18,7504,687 vest 10/6/2009;
4,688 vest 10/6/2010;
4,687 vest 10/6/2011;
4,688 vest 10/6/2012
Gary N. Jacobs11,2502,812 vest 10/6/2009;
2,813 vest 10/6/2010;
2,812 vest 10/6/2011;
2,813 vest 10/6/2012
Aldo Manzini31,43112,573 vest 7/1/2009;   
Stateline, California at Primm  125  Adjacent to the Primm Valley Golf Club.
Detroit, Michigan6,286 vest 3/4/2010;  8  Site of former temporary casino.
Tunica, Mississippi  388  We own an undivided 50% interest in this site with another, unaffiliated, gaming company.
Atlantic City, New Jersey6,286 vest 3/4/2011;  152  Approximately 19 acres are leased to Borgata including nine acres under a short-term lease. Of the remaining land, approximately 74 acres are suitable for development.
6,286 vest 3/4/2012
3,000750 vest 10/6/2009;
750 vest 10/6/2010;
750 vest 10/6/2011;
750 vest 10/6/2012
Option/SAR Exercises and Stock Vested
          The following table sets forth option exercises for the Named Executives during 2008.
                 
  Stock Option Awards Stock Awards
  Number of     Number of  
  Shares Value Shares Value
  Acquired Realized Acquired Realized
  on Exercise on Exercise on Vesting on Vesting
Name (#) ($) (#) ($)
James J. Murren  150,000  $7,941,563   —  $— 
Daniel J. D’Arrigo  —   —   —   — 
Robert H. Baldwin  —   —   —   — 
Gary N. Jacobs  —   —   —   — 
Aldo Manzini  —   —   —   — 
J. Terrence Lanni  —   —   —   — 
     For option awards, the value realized is computed as the difference between the market price on the date of exercise and the exercise price, times the number of options exercised.


1620

Nonqualified Deferred Compensation
The land underlying New York-New York, alongfollowing table sets forth information regarding nonqualified deferred compensation for the Named Executives during 2008. See “Compensation Discussion and Analysis — Retirement Benefits” for further discussion of the DCP and SERP plans.
                     
              Aggregate  Aggregate 
  Executive  Company  Aggregate  Withdrawals/  Balance at 
Name Contributions  Contributions(A)  Earnings(B)  Distributions(C)  Year-End(D) 
James J. Murren                    
DCP $548,968  $53,250  $(623,175) $(2,442,023) $2,649,341 
SERP  —   230,124   (244,064)  (675,986)  826,635 
                
Total  548,968   283,374   (867,239)  (3,118,009)  3,475,976 
Daniel J. D’Arrigo                    
DCP  64,000   13,250   (47,038)  (76,627)  229,955 
SERP  —   63,928   5,641   —   282,310 
                
Total  64,000   77,178   (41,397)  (76,627)  512,265 
Robert H. Baldwin                    
DCP  60,000   53,250   (1,169,934)  (2,104,780)  348,155 
SERP  —   374,904   (1,149,661)  (1,167,993)  1,149,223 
                
Total  60,000   428,154   (2,319,595)  (3,272,773)  1,497,378 
Gary N. Jacobs                    
DCP  710,083   21,250   (408,059)  (1,261,521)  2,211,298 
SERP  —   151,018   (241,036)  (463,583)  650,733 
                
Total  710,083   172,268   (649,095)  (1,725,104)  2,862,031 
Aldo Manzini                    
DCP  15,000   20,000   (14,844)  —   39,923 
SERP  —   75,241   (30,957)  —   81,350 
                
Total  15,000   95,241   (45,802)  —   121,273 
J. Terrence Lanni                    
DCP  —   73,250   (2,322)  (1,341,131)  2,004,478 
SERP  —   716,956   4,552   (3,175,464)  3,729,212 
                
Total  —   790,206   2,230   (4,516,595)  5,733,690 
(A)All of these amounts were included as “All Other Compensation” in the Summary Compensation Table.
(B)None of these amounts were included as “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Table.
(C)Distributions in 2008 were made pursuant to termination of predecessor plans. See “Compensation Discussion and Analysis — Retirement Benefits.”
(D)Of these amounts, the following were included in the Summary Compensation Table in the current and previous years:
             
  DCP SERP Total
  Company Company Company
Name Contributions Contributions Contributions
James J. Murren $412,350  $1,556,993  $1,969,343 
Daniel J. D’Arrigo  20,650   113,472   134,122 
Robert H. Baldwin  396,350   2,843,022   3,239,372 
Gary N. Jacobs  176,350   1,155,906   1,332,256 
Aldo Manzini  20,000   112,862   132,862 
J. Terrence Lanni  560,350   5,287,551   5,847,901 

21

Potential Payments upon Termination or Change-in-Control
     We may terminate any of our employment agreements with substantially all the assetsNamed Executives for good cause, which includes termination for death or disability. If the termination is for good cause, as defined in the employment agreements, other than for death or disability, the Named Executive will be entitled to exercise his vested share-based awards in accordance with their terms as of that resort, serve as collateralthe date of termination, but the Company will have no further obligations to the Named Executive. See “Compensation Discussion and Analysis” for our 13% Senior Secured Notes due 2013 issuedfurther description of the binding term sheet entered into in April 2009 with Mr. Murren, which sets forth the terms of a new agreement for Mr. Murren. The description below and the information in the table below are based on the terms of Mr. Murren’s employment agreement in effect on December 31, 2008.
     If an employment agreement with a Named Executive, other than Mr. D’Arrigo and Mr. Manzini, is terminated as a result of death or disability, the Named Executive (or his beneficiary) will be entitled to receive his salary for a 12-month period following such termination and a prorated portion of any bonus attributable to the fiscal year in which the death or disability occurs. Additionally, the Named Executive (or his beneficiary) will be entitled to exercise those of his unexercised share-based awards that would have vested as of the first anniversary of the date of termination, and any shares of restricted stock will immediately vest. If Mr. D’Arrigo’s or Mr. Manzini’s employment agreement is terminated as a result of death or disability, Mr. D’Arrigo and Mr. Manzini (or their respective beneficiaries) will be entitled to receive Mr. D’Arrigo’s or Mr. Manzini’s salary, as applicable, for a three-month period following his termination.
Borgata occupies approximately 46 acres at Renaissance Pointe, including 19 acres     If we leaseterminate any of the employment agreements, other than Mr. D’Arrigo’s or Mr. Manzini’s, for other than good cause, we will pay the Named Executive’s salary for the remaining term of the agreement and his bonus during the 12-month period (or shorter period if the termination occurs within the last year of the term) during which he is restricted from working for or otherwise providing services to Borgata. Borgata owns approximately 27 acresa competitor of ours. Additionally, each of these agreements provide that for the remainder of the term, (i) all unvested share-based awards will vest in accordance with their terms, (ii) we will provide contributions, on the Named Executive’s behalf, to the DCP and SERP and (iii) certain other employee benefits, such as health and life insurance will continue. If Mr. D’Arrigo’s or Mr. Manzini’s employment agreement is terminated without cause, we will pay their salary for the remaining term of their respective agreements and maintain them as a participant in all health and insurance programs in which they or their dependents are usedthen participating for the remaining term of their agreements or until those benefits are provided by another employer. Neither of Mr. D’Arrigo or Mr. Manzini will be eligible for a discretionary bonus or new grants of stock options, SARs or other stock-based compensation but previously granted options, SARs or other stock-based compensation will continue to vest for the shorter of 12 months or the remaining term of their employment agreement. Notwithstanding the foregoing, all compensation and benefits are subject to mitigation if a Named Executive works for or otherwise provides services to a third party.
     If a Named Executive, other than Mr. D’Arrigo or Mr. Manzini, seeks to terminate his employment agreement for good cause, he must give the Company 30 days notice to cure the breach. If such breach is not cured (and we do not invoke our right to arbitration), the termination will be treated as collaterala termination for bank credit facilitiesother than good cause by us as described in the preceding paragraph. However, if we invoke our arbitration right, the Named Executive must continue to work until the matter is resolved, otherwise it becomes a termination by him without cause. If Mr. D’Arrigo or Mr. Manzini seeks to terminate his employment for good cause, he must give us 30 days notice to cure the breach or dispute the fact that good cause exists, in which case the dispute will be resolved by arbitration and the agreement will continue in full force until the matter is resolved. If the agreement is terminated by Mr. D’Arrigo or Mr. Manzini for good cause, they will be entitled to exercise their vested but unexercised stock options to acquire stock, SARs or other stock-based compensation, if any, upon compliance with the terms and conditions required to exercise those options, SARs or other stock-based compensation, but we will have no further obligations to Mr. D’Arrigo or Mr. Manzini.
     If there is a change of control of the Company, all of the Named Executive’s unvested share-based awards will fully vest. In addition, the Named Executive officers, other than Mr. D’Arrigo and Mr. Manzini, may terminate their employment agreement upon delivery of 30 days prior notice to the Company, no later than 90 days following the date of the change of control. In such event, we will pay the Named Executive a lump sum amount equal to the sum of up(x) his unpaid salary through the end of the term of the agreement, and (y) an amount in lieu of his bonus (the calculation of which is further described therein). Additionally, through the end of the term, we will provide contributions, on his behalf, to $850 million. Asthe SERP and DCP in accordance with their terms to extent they are provided to other active executives, and certain employee benefits, such as health and life insurance.

22

     The following table indicates the estimated amounts that would be payable to each Named Executive upon a termination under the scenarios outlined above, excluding termination by the Company for good cause other than death or disability. For all Named Executives, the estimated amounts payable are calculated based on their employment agreements in effect as of December 31, 2008 $741 million was outstanding underand assuming that such termination occurred on December 31, 2008. In addition, we used 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. Asclosing price of our common stock at December 31, 2008 approximately $818 million was outstanding underfor purposes of these calculations. There can be no assurance that these scenarios would produce the bank credit facility. Atsame or similar results as those disclosed herein if any of these events occur in the future. Given these guidelines, we believe the assumptions listed below, which were used to calculate the amounts disclosed in the table, are reasonable for purposes of this disclosure.
                             
      Non-Equity     Vesting of      
      Incentive Plan Pension Stock Options Vesting of    
  Salary (A) Payments (B) Enhancement (C) or SARs (D) RSUs (E) Other (F) Total
Death or Disability
                            
James J. Murren $1,500,000  $—  $—  $—  $64,493  $—  $1,564,493 
Daniel J. D’Arrigo  125,000   —   —   —   —   —   125,000 
Robert H. Baldwin  1,500,000   —   —   —   64,493   —   1,564,493 
Gary N. Jacobs  700,000   —   —   —   38,693   —   738,693 
Aldo Manzini  125,000   —   —   —   —   —   125,000 
                             
Company Terminates Without Good Cause                       
James J. Murren $1,500,000  $—  $—  $—  $64,493  $44,922  $1,609,415 
Daniel J. D’Arrigo  1,346,575   —   —   —   105,856   87,401   1,539,832 
Robert H. Baldwin  1,500,000   —   —   —   64,493   25,834   1,590,327 
Gary N. Jacobs  700,000   —   —   —   38,693   64,352   803,045 
Aldo Manzini  1,082,192   —   —   —   183,324   54,283   1,319,799 
                             
Named Executive Terminates for Good Cause                     
James J. Murren $1,500,000  $—  $—  $—  $64,493  $44,922  $1,609,415 
Daniel J. D’Arrigo  —   —   —   —   —   —   — 
Robert H. Baldwin  1,500,000   —   —   —   64,493   25,834   1,590,327 
Gary N. Jacobs  700,000   —   —   —   38,693   64,352   803,045 
Aldo Manzini  —   —   —   —   —   —   — 
                             
Change of Control
                            
James J. Murren $1,500,000  $—  $—  $—  $258,000  $44,922  $1,802,922 
Daniel J. D’Arrigo  1,346,575   —   —   —   280,099   87,401   1,714,075 
Robert H. Baldwin  1,500,000   —   —   —   258,000   25,834   1,783,834 
Gary N. Jacobs  700,000   —   —   —   154,800   64,352   919,152 
Aldo Manzini  1,082,192   —   —   —   473,771   54,283   1,610,246 
(A)For Named Executives, other than Mr. Manzini and Mr. D’Arrigo, salary is paid for 12 months following the date of death or disability. For Mr. Manzini and Mr. D’Arrigo salary is paid for 3 months following the date of death or disability. Salary is paid for the remaining term of the employment contract upon termination without cause or a change of control. These payments are made at regular payroll intervals; provided, however, that for the executives other than Messrs. D’Arrigo and Manzini, severance is paid in a lump sum if the executive terminates employment in connection with a change in control.
(B)Non-equity incentive plan amounts payable upon death or disability are assumed to be equal to the non-equity incentive plan amounts paid in 2009 for 2008. Such amounts upon termination by us without good cause are based upon a non-discretionary payment for the year in which such termination occurred through the date of termination and for a period of one year after termination based on amounts paid in 2009 for 2008. Non-equity incentive amounts paid upon a change of control are based upon a non-discretionary payment through the remaining term of the employment agreement based on amounts paid in 2009 for 2008.
(C)In November 2008, the Compensation Committee approved amendments to the DCP and SERP which suspended our matching contributions to the DCP for periods after January 1, 2009 and our contributions to the SERP for periods after October 1, 2008, as part of the Company’s ongoing cost savings measures. Therefore no pension enhancement will be paid upon termination or change in control.
(D)As stated above, the value of unvested stock options that would vest under each of these termination scenarios is based on the closing price of our common stock at December 31, 2008. Since the exercise price of all stock options and SARs was less than the closing price at December 31, 2008, no value is reflected in the table for such stock options and SARs.

23

(E)As stated above, the value of RSUs that would vest under each of these termination scenarios is based on the closing price of our common stock at December 31, 2008.
(F)Includes an estimate of group life insurance premiums, reimbursement of medical expenses and associated taxes and premiums for long term disability insurance to be provided under each of the scenarios based on actual amounts paid out in 2008.
Compensation Committee Interlocks and Insider Participation
     Messrs. Mandekic and Taylor are executives of Tracinda. For the year ended December 31, 2008, MGM Grand Paradise Limited obtained a waiverKirk Kerkorian, the sole stockholder of its financial covenantsTracinda, and Trancinda collectively paid us the aggregate amount of $143,000 for hotel services provided by us.
Compensation Committee Report
     The Compensation Committee of the Board of Directors has reviewed and discussed the “Compensation Discussion and Analysis” included in this Annual Report on Form 10-K with management. Based on the Compensation Committee’s review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Amendment No. 1 to the Original Form 10-K.
ANTHONY MANDEKIC, Chair
WILLIE D. DAVIS
KENNY C. GUINN
DANIEL J. TAYLOR
MELVIN B. WOLZINGER
The foregoing report of the Compensation Committee should not be deemed filed or incorporated by reference into any other Company filing under the bank credit facility.Securities Act or the Exchange Act, except to the extent the Company specifically incorporates such report by reference therein.
Director Compensation
The following table sets forth information regarding director compensation during 2008.
                             
                  Change in    
                  Pension    
          Stock     Value and    
          Appreciation     Nonqualified    
  Fees Earned     Rights and Non-Equity Deferred    
  or Paid Stock Option Incentive Plan Compensation All Other  
Name in Cash(A) Awards Awards(B) Compensation Earnings Compensation(C) Total
Directors
                            
Willie D. Davis $89,500  $—  $235,005  $—  $—  $—  $324,505 
Kenny C. Guinn  91,000   —   149,611   —   —   —   240,611 
Alexander M. Haig, Jr.  68,000   —   235,005   —   —   50,000   353,005 
Alexis Herman  102,000   —   235,005   —   —   —   337,005 
Roland Hernandez  143,000   —   235,005   —   —   —   378,005 
Kirk Kerkorian  65,000   —   —   —   —   —   65,000 
Anthony Mandekic  110,000   —   212,308   —   —   —   322,308 
Rose McKinney-James  86,500   —   239,375   —   —   —   325,875 
Daniel J. Taylor  86,500   —   237,310   —   —   —   323,810 
Melvin B. Wolzinger  95,500   —   235,005   —   —   —   330,505 
Former Director
                            
Ronald M. Popeil(D)  24,000   —   71,964   —   —   —   95,964 

24

 
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.
ITEM 3.  LEGAL PROCEEDINGS
Mandalay Bay Ticket Processing Fee Litigation
On July 14, 2008, the Company was served with a putative class action lawsuit filed in Los Angeles Superior Court in California (Jeff Feld v. Mandalay Corp. d/b/a Mandalay Bay Resort & Casino). The action purports to be brought pursuant to 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 did not receive or received inaccurate notice of the processing fee when they purchased the ticket. The plaintiff alleges that our subsidiary advertised event tickets at a specified price and then charged purchasers undisclosed additional fees, specifically a $5 processing fee, and that the foregoing was unlawful, a breach of contract, an unfair business practice, and a violation of California’s Civil Code and Business & Professions Code. The plaintiff was seeking unspecified monetary damages including restitution, injunctive relief, attorneys’ fees and costs. In February 2009, Mandalay Bay reached a satisfactory settlement with the individual plaintiff in this action. The settlement and dismissal of the action against Mandalay Bay and the Company are subject to court approval. No class has been certified in this case.
Other
We and our subsidiaries are also defendants in various other lawsuits, most of which relate to routine matters incidental to our business. We do not believe that the outcome of this other pending litigation, considered in the aggregate, will have a material adverse effect on the Company.
ITEM 4.  (A)SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSDirectors who are compensated as full-time employees of the Company or its subsidiaries receive no additional compensation for service on the Board of Directors or its committees. Each director who is not a full-time employee of the Company or its subsidiaries is paid $50,000 per annum, plus $1,500 for each Board meeting attended (regardless of whether such Board meeting is attended in person or telephonically). The Chair of the Audit Committee receives an annual fee of $25,000 plus a fee of $2,500 per meeting attended. Each other member of the Audit Committee receives $1,500 for each meeting attended. The Chair of the Compensation Committee receives and annual fee of $10,000 plus a fee of $1,500 per meeting attended. Each other member of the Compensation Committee receives $1,000 for each meeting attended. The Chair of the Diversity Committee receives an annual fee of $10,000 plus a fee of $2,500 per meeting attended. Each other member of the Diversity Committee receives $1,500 for each meeting attended. The Presiding Director receives an annual fee of $20,000. Directors are also reimbursed expenses for attendance at Board and Committee meetings. The foregoing fees are paid quarterly. In addition, Ms. McKinney-James receives an annual fee of $5,000 for serving on the Board of Directors of MGM Grand Detroit, LLC, which fee is payable in equal quarterly installments.
(B)The amount reflected in the table is the amount of compensation recognized during the year ended December 31, 2008 for financial reporting purposes in accordance with SFAS 123(R), except that no forfeiture rate assumption has been applied to the amounts in the table. Each of the directors, except Mr. Kerkorian and directors who are full-time employees of the Company or its subsidiaries, received a grant of 20,000 stock appreciation rights in 2008, with a total grant-date fair value of $386,702 for each director who received the grant. All grants to directors were valued using the Black-Scholes Model with assumptions as described in Note 15 to the Company’s Consolidated Financial Statements, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed on March 17, 2009. As of December 31, 2008, the above directors had outstanding option and stock appreciation rights awards as follows: 99,750 for Mr. Davis; 40,000 for Mr. Guinn; 128,000 for Mr. Haig; 85,000 for Ms. Herman; 95,000 for Mr. Hernandez; 60,000 for Mr. Mandekic; 69,000 for Ms. McKinney-James; 60,000 for Mr. Taylor; and 113,000 for Mr. Wolzinger.
(C)Except for Mr. Haig, the amounts in this column represent total perquisites, which individually do not exceed $10,000. The Board has adopted a policy on benefits available to non-employee directors. The policy provides for a limited number of complimentary entertainment tickets for the personal use of directors, as well as complimentary rooms, food and beverages for directors and their spouses or significant others when staying at a Company property on Company business and for complimentary rooms only when not on Company business. The policy further provides for a limited number of discounted rooms, on a space available basis, for friends and family of directors staying at a Company property. During 2008, Mr. Haig rendered consulting services to the Company, for which he received a fee of $50,000.
(D)Mr. Popeil resigned in May 2008.
There were no matters submitted to a vote of our security holders during the fourth quarter of 2008.


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ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
PART IISecurity Ownership of Certain Beneficial Owners, Officers And Directors
     Shown below is certain information as of March 23, 2009 with respect to beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of shares of common stock by the only persons or entities known to the Company to be a beneficial owner of more than five percent of the outstanding shares of common stock, by the Named Executives, as defined under “Item 11. Executive Compensation,” by our directors who are not executive officers and by all directors and executive officers of the Company as a group who held office as of March 23, 2009.
         
  Amount  
Name and Beneficially Percent of
Address(1) Owned(2) Class(3)
Tracinda Corporation
  148,837,330(4)  53.8%
150 South Rodeo Drive, Suite 250
Beverly Hills, California 90212		        
Infinity World (Cayman) L.P.
  26,048,738(5)  9.4%
Emirates Towers, Level 47
Sheikh Zayed Road
Dubai, United Arab Emirates		        
T. Rowe Price Associates, Inc.
  14,097,634(6)  5.1%
100 E. Pratt Street
Baltimore, Maryland 21202		        
James J. Murren  2,605,324(7)(9)  (8)
Daniel J. D’Arrigo  196,256(7)  (8)
Robert H. Baldwin  1,077,887(7)  (8)
Gary N. Jacobs  876,614(7)(10)  (8)
Willie D. Davis  93,396(13)   (8)
Kenny Guinn  18,557(13)   (8)
Alexander Haig, Jr.  93,800(13)   (8)
Alexis Herman  47,800(13)   (8)
Roland Hernandez  60,500(12)(13)  (8)
Kirk Kerkorian  148,837,330(4)  53.8%
Anthony Mandekic  26,000(13)   (8)
Rose McKinney-James  27,100(13)   (8)
Daniel J. Taylor  20,000(13)   (8)
Melvin B. Wolzinger  112,300(13)   (8)
All directors and executive officers as a group (22 persons)  154,593,731(7)(11)(13)  54.8%
ITEM 5.  (1)MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESUnless otherwise indicated, the address for the persons listed is 3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109.
(2)Except as otherwise indicated, and subject to applicable community property and similar laws, the persons listed as beneficial owners of the shares have sole voting and investment power with respect to such shares.
(3)For purposes of calculating the percentage of outstanding shares beneficially owned by any person or group identified in the table above, the number of shares outstanding with respect to each person or group was deemed to be the sum of the total shares outstanding as of March 23, 2009 and the total number of shares subject to stock options and stock appreciation rights exercisable as of March 23, 2009 or that become exercisable within 60 days thereafter held by such person or group. The number of shares of Common Stock outstanding as of March 23, 2009 was 276,557,329.
(4)Based upon a Schedule 13D/A filed February 20, 2009 with the Securities and Exchange Commission (the “SEC) by Tracinda Corporation (“Tracinda”), a Nevada corporation. Tracinda is wholly owned by Kirk Kerkorian.
(5)Based upon a Schedule 13D/A filed March 2, 2009 with the SEC by Infinity World (Cayman) L.P. and its affiliates.

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(6)Based upon a Schedule 13G/A filed February 10, 2009 with the SEC by T. Rowe Price Associates, Inc., an investment advisor under the Investment Advisors Act of 1940, as amended.
(7)Included in these amounts are 2,360,000 shares, 192,000 shares, 1,047,187 shares, 837,800 shares, and 0 shares underlying options that are exercisable as of March 23, 2009 or that become exercisable within 60 days thereafter held by Messrs. Murren, D’Arrigo, Baldwin, Jacobs and Manzini, respectively. Mr. Baldwin disclaims beneficial ownership of 123,397 shares underlying such options which were the subject of a divorce decree.
(8)Less than 1%.
(9)Includes 22,870 shares held by a Grantor Retained Annuity Trust, of which Mr. Murren is Trustee, and 222,454 shares held by the Murren Family Trust, of which Mr. Murren is co-Trustee.
(10)Includes 30,024 shares held by a Grantor Retained Annuity Trust, of which Mr. Jacobs is Trustee.
(11)Also included are 408,750 shares subject to stock options or stock appreciation rights exercisable as of March 23, 2009 or that become exercisable within 60 days thereafter held by non-employee directors and 482,700 shares underlying options that are exercisable as of March 23, 2009 or that become exercisable within 60 days thereafter held by executive officers other than the Named Executives.
(12)Includes 1,000 shares of which are held by the Roland Hernandez SEP Retirement Account, of which Mr. Hernandez is the beneficiary and 1,500 shares of which are held by Mr. Hernandez as custodian pursuant to the California Uniform Transfer to Minors Act in the amounts set forth for the following persons: 500 shares for Katherine Hernandez, 500 shares for Charles Hernandez and 500 shares for Roland Scott Hernandez. Mr. Hernandez disclaims beneficial ownership of such 1,500 shares held as custodian pursuant to the California Uniform Transfer to Minors Act.
(13)Included in these amounts are shares underlying options and stock appreciation rights that are exercisable as of March 23, 2009 or become exercisable within 60 days thereafter, held as follows:
Shares
Underlying
Options
Nameand SARs
Mr. Davis60,750
Mr. Guinn12,000
Mr. Haig89,000
Ms. Herman46,000
Mr. Hernandez56,000
Mr. Mandekic24,000
Ms. McKinney-James27,000
Mr. Taylor20,000
Mr. Wolzinger74,000

27

Stockholder Agreements
Company Stock Purchase and Support Agreement. In August 2007, we entered into a Company Stock Purchase and Support Agreement, as amended in October 2007, with Infinity World Investments LLC, a Nevada limited liability company (“Infinity World”) and an indirect wholly owned subsidiary of Dubai World, a Dubai, United Arab Emirates government decree entity. Under the agreement, in October 2007, we sold Infinity World 14.2 million shares of our Common Stock Informationat a per share price of $84 for a total purchase price of $1.19 billion.
     
OurThe agreement provides that, as long as Infinity World and its affiliates, which we refer to, from time to time, as the “Infinity World group,” beneficially own at least five percent of our outstanding 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 priceswhenever we propose to sell shares of our common stock on(except for shares issued under an employee benefit plan), we will grant a preemptive right (which may be transferred to an affiliate of Infinity World) to acquire that number of shares needed to maintain the New York Stock Exchange Composite Tape.percentage ownership of the Infinity World group as calculated at the time we propose to sell shares. Infinity World has agreed that the Infinity World group will not acquire beneficial ownership of more than 20% of our outstanding shares, subject to certain exceptions.
     
                 
  2008  2007 
  High  Low  High  Low 
 
First quarter $84.92  $57.26  $75.28  $56.40 
Second quarter  62.90   33.00   87.38   61.17 
Third quarter  38.49   21.65   91.15   63.33 
Fourth quarter  27.70   8.00   100.50   80.50 
There were approximately 4,198 record holdersThe agreement also provides that as long as the Infinity World group owns at least five percent of our outstanding common stock and the joint venture agreement contemplated by the agreement has not been terminated, Infinity World will have the right, subject to applicable regulatory approvals, to designate one nominee for election to our Board of Directors. If the Infinity World group beneficially owns at least 12% of our outstanding common stock, Infinity World will have the right to designate that number of nominees for election to our Board of Directors equal to the product (rounded down to the nearest whole number) of (x) the percentage of outstanding shares owned by the Infinity World group multiplied by (y) the total number of directors then authorized to serve on our Board of Directors. Currently, the Infinity World group owns 26,048,738 shares of our common stock, or approximately 9.3% of the outstanding shares. Infinity World has not, as of March 9, 2009.
We have not paid dividends on our common stock in the last two fiscal years. Asyet, designated a holding company with no independent operations, our ability to pay dividends will depend upon the receipt of dividends and other payments from our subsidiaries. Furthermore, our senior credit facility contains financial covenants that could restrict our ability to pay dividends. Our Board of Directors periodically reviews our policy with respect to dividends, and any determination to pay dividends in the future will be at the sole discretion ofnominee for the Board of Directors.
     
Share Repurchases
Our share repurchases are only conducted under repurchase programs approved by our Board of Directors and publicly announced. We did not repurchaseStockholder Support Agreement. In August 2007, Infinity World also entered into a Stockholder Support Agreement with Tracinda. Under this agreement, Tracinda has agreed to vote its shares of our common stock duringin favor of Infinity World’s nominee(s) to the quarter ended December 31, 2008. The maximum numberBoard of shares available for repurchase under our May 2008 repurchase program was 20 million as of December 31, 2008.
Directors, subject to applicable regulatory approvals.
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 
             
  Number of securities Weighted average Number of securities
  to be issued upon per share exercise remaining available
  exercise of price of outstanding for future issuance
  outstanding options, options, warrants under equity
  warrants and rights and rights compensation plans
  (in thousands, except per share data)
Equity compensation plans approved by security holders  26,264  $26.98   17,648 


1828

ITEM 6.  13.SELECTED FINANCIAL DATACERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
                     
  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 
     Certain Relationships and Related Transactions
The following events/     Glaser, Weil, Fink, Jacobs, Howard & Shapiro, LLP, a law firm the predecessor of which Gary N. Jacobs was formerly of counsel, has performed extensive legal services for the Company. Such services related to litigation, sales of securities, financing transactions, affectacquisitions and dispositions of certain assets and operations, tax matters and other business transactions, contracts and agreements. For the year-to-year comparabilityyear ended December 31, 2008, the Company paid legal fees [and costs] to Glaser, Weil, Fink, Jacobs, Howard & Shapiro, LLP in the amount of $9,700,000. Mr. Jacobs was a senior partner of the selected financial data presented above:firm until June 2000 when he became employed by the Company. He was of counsel to the law firm until March 2009.
     
Discontinued OperationsRobert H. Baldwin is a director of the Keep Memory Alive Foundation. For the year ended December 31, 2008, the Company made a contribution of cash, goods and services to the Keep Memory Alive Foundation in the aggregate amount of $113,000, and the Keep Memory Alive Foundation purchased goods and services from the Company and its subsidiaries in the amount of $756,000.
     James J. Murren was a founder of, and currently serves as a director of, the Nevada Cancer Institute, a non-profit organization. Gary N. Jacobs serves as a director of the Nevada Cancer Institute, and Mr. Murren’s wife, Heather Hay Murren, serves as Chairman of the Board of the Nevada Cancer Institute. For the year ended December 31, 2008, the Company made contributions of cash, goods and services to the Nevada Cancer Institute in the amount of $81,000, and the Nevada Cancer Institute purchased goods and services from the Company and its subsidiaries in the amount of $283,000.
     Gary N. Jacobs serves as a director of the Smith Center for Performing Arts in Las Vegas, Nevada. In 2007, the Company pledged a $1,000,000 contribution to the Smith Center for Performing Arts. The Company made a payment of $135,000 and $200,000 in 2008 and 2007, respectively. Company will make additional payments of $135,000 per year over the next five years.
     For the year ended December 31, 2008, Kirk Kerkorian, the sole stockholder of Tracinda, and Tracinda collectively paid the Company the aggregate amount of $143,000 for hotel services provided by the Company.
     In connection with the Company’s sales of condominium units at its 50% owned CityCenter project on the Las Vegas Strip, certain of the directors and Named Executives and its principal stockholder and their immediate family members have entered into purchase agreements and paid deposits in 2006, 2007 and 2008. The prices paid pursuant to these purchase agreements were consistent with prices charged to unrelated third parties. In 2008, the only transactions were deposits received from Sean Lanni and Patrick Lanni, the adult sons of Mr. Lanni, in the amount of $77,000 each.
     Mandalay Resort Group, a subsidiary of the Company, entered into time sharing agreements with J. Terrence Lanni, our former Chairman and Chief Executive Officer, in connection with his personal use of the Company’s aircraft. Under the time sharing agreements, Mr. Lanni could lease the Company’s aircraft, including crew and flight services, for up to a maximum of three (3) personal flights annually. Mr. Lanni paid a time sharing fee based on the Company’s cost of the flight, which is limited by an FAA regulatory-imposed maximum and, at the Company’s discretion, to the Standard Industry Fare Levels, as established by the Internal Revenue Service for purposes of determining taxable fringe benefits. Such agreements were terminated upon Mr. Lanni’s retirement in November 2008.

29

Review, Approval or Ratification of Transactions
     Our Board has approved separate written guidelines under the Company’s Code of Conduct for the reporting, review and approval of potential conflicts of interest (the “Conflict of Interest Guidelines”). Each potential conflict of interest that is reportable under the Conflict of Interest Guidelines is reviewed internally on a case by case basis. Any such reportable potential conflict of interest involving a director or a member of the management committee, any of their respective spouses, minor children or other dependents, must be reviewed by the Audit Committee, or a designated member thereof. Furthermore, all such reportable potential conflicts of interest involving other senior executives who are not members of the management committee, or other employees, or their respective spouses, minor children or other dependent, are reviewed by the Company’s internal legal department or its management committee.
     Because the Conflict of Interest Guidelines were designed to implement a procedure by which we can review and take action with respect to potential conflicts of interest, the criteria for determining which proposed transactions are reportable under the Conflict of Interest Guidelines are based on various factors designed to determine the materiality of such transaction with respect to the corresponding employee or director, including the size of the transaction or investment, the nature of the investment or transaction, the nature of the relationship between the third party and us, the nature of the relationship between the third-party and the director or employee, and the net worth of the employee or director, and are not based on the threshold set forth in Item 404(a) of Regulation S-K. Furthermore, the Conflict of Interest Guidelines are not applicable to any stockholder of the Company who is not otherwise an employee or a director of the Company. Therefore, while certain transactions that are reportable under Item 404(a) of Regulation S-K might be reportable under the Conflict of Interest Guidelines, none of the transactions reported above under the “— Description of Transactions” sub-section above was reported or reviewed pursuant to the Conflict of Interest Guidelines. Nevertheless, each of such transactions reported above was reported to, and reviewed and approved by, one or more of the disinterested members of the management committee pursuant to an informal procedure. The contribution to the Smith Center for Performing Arts was approved by the full Board of Directors, with Mr. Jacobs abstaining from voting.
New York Stock Exchange Listing Standards
     The Corporate Governance Rules of the [Exchange] were adopted in 2003. Certain provisions of such rules are not applicable to “controlled companies,” defined by such rules to be companies of which more than 50 percent of the voting power is held by an individual, a group or another company. We currently are a “controlled company” under this definition by virtue of the ownership by Tracinda in excess of 50 percent of the voting power of the common stock and the ability to elect the entire Board of Directors. Accordingly, we have chosen to take advantage of certain of the exemptions provided in such rules, specifically, the exemptions to the requirements that listed companies have: (i) a majority of independent directors, although a majority of our directors are independent; (ii) a nominating/governance committee composed entirely of independent directors; and (iii) a compensation committee that is composed entirely of independent directors and operates under a written charter, although our Compensation Committee is composed entirely of independent directors and operates under a written charter.
Director Independence
     Pursuant to the Corporate Governance Rules of the Exchange, the Board assesses each director’s independence annually by reviewing any potential conflicts of interest and outside affiliations, based on the standards set forth below. Using these standards and based upon information provided by each director, the Board of Directors has determined that Ms. Herman, Ms. McKinney-James and Messrs. Davis, Guinn, Haig, Hernandez, Kerkorian, Mandekic, Taylor and Wolzinger, who constitute a majority of the Board, are independent within the meaning of the rules of the Exchange.
     Under the standards of independence adopted by the Board, a director is deemed to be independent only if the Board determines that such director satisfies each of the criteria set forth below:
•In January 2004, we soldNo Material Relationship. The director does not have any material relationship with the Golden Nugget Las Vegas and the Golden Nugget Laughlin including substantially allCompany. Material relationships do not take into consideration a director’s status as a stockholder of the assets and liabilities of those resorts (the “Golden Nugget Subsidiaries”)Company (including status as a majority stockholder).
 
• •Employment. The director is not, and has not been at any time in the past three years, an employee of the Company. In July 2004, we soldaddition, no member of the subsidiaries that owned and operated MGM Grand Australia.director’s immediate family is, or has been in the past three years, an executive officer of the Company.

30

•Other Compensation. The director or immediate family member has not received more than $100,000 in direct compensation from the Company during any 12-month period within the past three years, other than in the form of director fees, pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service. Compensation received by a director for former service as an interim Chairman, CEO or other executive officer or compensation received by an immediate family member for services as an employee (other than an executive officer) of the Company need not be considered in determining independence under this standard.
 
• In April 2007, we sold•Auditor Affiliation. The director is not a current partner or employee of the Primm Valley Resorts.Company’s internal or external auditors; no member of the director’s immediate family is a current partner of the Company’s internal or external auditors or a current employee of such auditors who participates in such firm’s audit, assurance or tax compliance (but not tax planning) practice; and the director or an immediate family member has not been within the past three years a partner or employee of the Company’s internal or external auditors and has not personally worked on the Company’s audit within that time.
 
• In June 2007, we sold•Interlocking Directorships. The director or an immediate family member is not, and has not been within 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 closedpast three years, employed as an executive officer by another entity where any of the Company’s present executive officers at the same time serves or served on April 25, 2005.
Other
• Beau Rivage was closed from August 2005 to August 2006 due to Hurricane Katrina.that entity’s compensation committee.
 
• Beginning January 1, 2006, we began to recognize stock-based compensation in accordance with Statement•Business Transactions. The director is not an employee, or an immediate family member is not an executive officer, of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”). Foranother entity that, during any one of the past three fiscal years, ended December 31, 2008, 2007 and 2006, incremental expense, before tax, resultingreceived payments 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 relatedCompany, or made payments to the Monte Carlo fire.
• InCompany, for property or services that exceed the fourth quartergreater of 2008, we recognized a $1.2 billion non-cash impairment charge related to goodwill and indefinite-lived intangible assets recognized in$1 million or 2% of the Mandalay acquisition.other entity’s annual consolidated gross revenues.
     For the purposes of determining whether a director who is a member of the Audit Committee is independent, we apply additional independence standards, including those set forth in Rule 10A-3 of the Exchange Act, and the Corporate Governance Rules of the Exchange applicable to audit committee composition.


1931

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
Liquidity and Financial Position
We have significant indebtedness and significant financial commitments in 2009. As of December 31, 2008, we had approximately $13.5 billion of total long-term debt. In late February 2009, we borrowed $842 million under our senior credit facility, which amount represented — after giving effect to $93 million in outstanding letters of credit — the total amount of unused borrowing capacity available under our $7.0 billion senior credit facility In connection with the waiver and amendment described below, on March 17, 2009 we repaid $300 million under the senior credit facility, which amount is not available for reborrowing without the consent of the lenders. We have no other existing sources of borrowing availability, except to the extent we pay down further amounts outstanding under the senior credit facility.
In addition to commitments under employment, entertainment and other operational agreements, our financial commitments and estimated capital expenditures in 2009, as of December 31, 2008, totaled approximately $2.8 billion — see “Liquidity and Capital Resources — Commitments and Contractual Obligations” — and consisted of:
• 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


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specified amounts (though we believe the limitation is in excess of the amounts expected to be required through May 15, 2009); and the CityCenter senior secured credit facility has not been accelerated.
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, 2008, our operations consisted of 17 wholly-owned casino resorts and 50% investments in four other casino resorts, including:
ITEM 14. 
Las Vegas, Nevada:Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, TI, New York-New
York, Excalibur, Monte Carlo, Circus Circus Las Vegas and Slots-A-Fun.
Other:Circus Circus Reno and Silver Legacy (50% owned) in Reno, Nevada; Gold Strike in
Jean, Nevada; Railroad Pass in Henderson, Nevada; MGM Grand Detroit; Beau Rivage in
Biloxi, Mississippi and Gold Strike Tunica in Tunica, Mississippi; Borgata (50% owned) in
Atlantic City, New Jersey; Grand Victoria (50% owned) in Elgin, Illinois; and MGM Grand
Macau (50% owned).		PRINCIPAL ACCOUNTANT FEES AND SERVICES
     
Other operations include the Shadow Creek golf course in North Las Vegas; the Primm Valley Golf Club at the California state line; and Fallen Oak golf course in Saucier, Mississippi. In December 2008, we entered into an agreement to sell TI for $775 million; the sale is expected to close by June 30, 2009.


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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.
Key Performance Indicators
Our primary business is the ownership and operation of casino resorts, which includes offering gaming, hotel, dining, entertainment, retail and other resort amenities. Over half of our net revenue is derived from non-gaming activities, a higher percentage than many of our competitors, as our operating philosophy is to provide a complete resort experience for our guests, including non-gaming amenities which command above market prices based on their quality. Our significant convention and meeting facilities allow us to maximize hotel occupancy and customer volumes during off-peak times such as mid-week or during traditionally slower leisure travel periods, which also leads to better labor utilization. We believe that we own several of the premier casino resorts in the world and have continually reinvested in our resorts to maintain our competitive advantage.
As a resort-based company, our operating results are highly dependent on the volume of customers at our resorts, which in turn impacts the price we can charge for our hotel rooms and other amenities. We also generate a significant portion of our operating income from the high-end gaming customers, which can cause variability in our results. Key performance indicators related to revenue are:
• Gaming revenue indicators — table games drop and slots handle (volume indicators); “win” or “hold” percentage, which is not fully controllable by us. Our normal table games win percentage is in the range of 18% to 22% of table games drop and our normal slots win percentage is in the range of 6.5% to 7.5% of slots handle;
• Hotel revenue indicators — hotel occupancy (volume indicator); average daily rate (“ADR”, price indicator); revenue per available room (“REVPAR”), a summary measure of hotel results, combining ADR and occupancy rate.
Most of our revenue is essentially cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our resorts, like many in the industry, generate significant operating cash flow. Our industry is capital intensive and we rely heavily on the ability of our resorts to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide excess cash for future development.
We generate a majority of our net revenues and operating income from our resorts in Las Vegas, Nevada, which exposes us to certain risks outside of our control, such as increased competition from new or expanded Las Vegas resorts, and the impact from expansion of gaming in California. We are also exposed to risks related to tourism and the general economy, including national and global economic conditions and terrorist attacks or other global events.
Our results of operations do not tend to be seasonal in nature, though a variety of factors may affect the results of any interim period, including the timing of major Las Vegas conventions, the amount and timing of marketing and special events for our high-end customers, and the level of play during major holidays, including New Year and Chinese New Year. We market to different customer segments to manage our hotel occupancy, such as targeting large conventions to ensure mid-week occupancy. Our results do not depend on key individual customers, though our success in marketing to customer groups, such as convention customers, or the financial health of customer segments, such as business travelers or high-end gaming customers from a particular country or region, can impact our results.


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Impact of Current Economic Conditions and Credit Markets on Results of Operations
The current state of the United States economy has negatively impacted our results of operations during 2008 and we expect these impacts to continue in 2009. The decrease in liquidity in the credit markets which began in late 2007 and accelerated in late 2008 has significantly impacted our Company.
We believe recent economic conditions and our customers’ inability to access near-term credit has led to a shift in spending from discretionary items to fundamental costs like housing, as witnessed in broader indications of consumer behavior such as the declining sales trends in automobile and other retail sales and other discretionary spending in sectors like restaurants. We believe these factors have impacted our customers’ willingness to plan vacations and conventions and their level of spending while at our resorts. Other conditions currently or recently present in the economic environment are conditions which tend to negatively impact our results, such as:
• 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 have increasingly focused on managing costs. For example, we have reduced our salaried management positions; we did not pay discretionary bonuses in 2008 due to not meeting our internal profit targets; we suspended Company contributions to certain nonqualified deferred compensation plans; and we have been managing staffing levels across all our resorts. For the full year of 2008, the average number of full-time equivalents at our resorts decreased 7%. We continue to review costs at the corporate and operating levels to identify further opportunities for cost reductions.
Additionally, our results of operations are impacted by decisions we make related to our capital allocation, our access to capital, and our cost of capital; all of which are impacted by the uncertain state of the global economy and the continued instability in the capital markets. For example:
• 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;


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• 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 credit and equity markets; and 3) current cash flow forecasts for the Mandalay resorts.
Other Items Affecting Future Operating Results
Our Las Vegas Strip resorts require ongoing capital investment to maintain their competitive advantages. We believe the investments we have made in the past several years in additional non-gaming amenities relative to our competitors enhances our ability to maintain visitor volume and allows us to charge higher prices for our amenities relative to our competitors. In 2008, we completed many improvements at our Las Vegas strip resorts, including:
• A remodel of approximately 2,700 standard rooms at The Mirage, approximately 2,700 standard rooms at TI, approximately 1,100 rooms at Gold Strike Tunica, and approximately 900 rooms at Excalibur.
• A new Cirque du Soleil production show,Believe featuring Criss Angel, at 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.
• A complete re-design and refurbishment of the casino floor at New York-New York.
In addition, the following items are relevant to our overall outlook:
• 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.
Financial Statement Impact of Hurricane Katrina and the Monte Carlo Fire
We maintain insurance covering both property damage and business interruption relating to catastrophic events, such as Hurricane Katrina affecting Beau Rivage in August 2005 and the rooftop fire at Monte Carlo in January 2008. Business interruption coverage covered lost profits and other costs incurred during the construction period and up to six months following the reopening of the facility.
Non-refundable insurance recoveries received in excess of the net book value of damaged assets,clean-up and demolition costs, and post-event costs are recognized as income in the period received or committed based on our estimate of the total claim for property damage (recorded as “Property transactions, net”) and business interruption (recorded as a reduction of “General and administrative” expenses) compared to the recoveries received at that time. All post-event costs and expected recoveries are recorded net within “General and administrative” expenses, except for depreciation of non-damaged assets, which is classified as “Depreciation and amortization.”


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Insurance recoveries are classified in the statement of cash flows based on the coverage to which they relate. Recoveries related to business interruption are classified as operating cash flows and recoveries related to property damage are classified as investing cash flows. We classify insurance recoveries as being related to property damage until the full amount of damaged assets and demolition costs are recovered, and classify additional recoveries up to the amount of post-event costs incurred as being related to business interruption. Insurance recoveries beyond that amount are classified as operating or investing cash flows based on our estimated allocation of the total claim.
Hurricane Katrina.  By December 31, 2007, we had reached final settlement agreements with our insurance carriers and received insurance recoveries of $635 million which exceeded the $265 million of net book value of damaged assets and post-storm costs incurred. During the year ended December 31, 2007, we recognized $284 million of insurance recoveries in income, of which $217 million was recorded within “Property transactions, net” and $67 million was recorded within “General and administrative expense.” The remaining $86 million previously recognized in income was recorded within “Property transactions, net” in 2006.
During 2007, we received $280 million in insurance recoveries, of which $207 million was classified as investing cash flows and $73 million was classified as operating cash flows. During 2006, we received $309 million in insurance recoveries related to Hurricane Katrina, of which $210 million was classified as investing cash flows and $99 million was classified as operating cash flows.
Monte Carlo.  As of December 31, 2008, we had received $50 million of proceeds from our insurance carriers related to the Monte Carlo fire and recognized $19 million of insurance recoveries in income, of which $10 million was recorded within “Property transactions, net” and $9 million was recorded within “General and administrative expenses.” Also, in 2008, we recorded a write-down of $4 million related to the net book value of damaged assets, demolition costs of $7 million, and operating costs of $21 million related to the fire.
Results of OperationsFees Paid To Auditors
     
Summary Financial Results
The following table summarizes our financial results:
                 
  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 


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On a consolidated basis, the most significant events and trends contributingsets forth fees paid to our performance over the last three years have been:
• The economic factors discussed in “Impact of Current Economic Conditions and Credit Markets on Results of Operations.”
• The rooftop fire at Monte Carlo in January 2008, which caused the closure of the resort for several weeks and reduced the number of rooms available at Monte Carlo for the remainder of 2008.
• Recognition of a $1.2 billion impairment charge in the fourth quarter of 2008 related to goodwill and indefinite-lived intangible assets recognized in the Mandalay acquisition in 2005. This non-cash charge is recorded in “Property transactions, net” in the accompanying consolidated statement of operations.
• Recognition of a $1.03 billion gain in 2007 related to the contribution of the CityCenter assets to a joint venture.
• The closure of Beau Rivage in August 2005 after Hurricane Katrina and subsequent reopening in August 2006, and income related to insurance recoveries. Operating income at Beau Rivage includes income from insurance recoveries of $284 million in 2007 and $86 million in 2006.
• Recognition of our share of profits from the closings of condominium units of The Signature at MGM Grand, which were complete as of December 31, 2007. The venture recorded revenue and cost of sales as units closed. In 2007, we recognized income of approximately $84 million related to our share of the venture’s profits and $8 million of deferred profit on land contributed to the venture. In 2006, we recognized income of approximately $102 million related to our share of the 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 operations.
• Recognition of an $88 million pre-tax gain on the repurchase of certain of our outstanding senior notes and redemption of our 7% debentures in the fourth quarter of 2008, which was recorded within “Other, net” in the accompanying consolidated statement of operations.
Net revenues decreased 6% in 2008 compared to 2007 due to the market conditions described above. On a comparable basis, operating income decreased 30% in 2008 compared to 2007, excluding the goodwill and indefinite-lived intangible impairment charge, the CityCenter gain, insurance recoveries, property transactions, preopening andstart-up expenses, and profits from The Signature. Our operating margin decreased to 15% from 22% in the prior year on a comparable basis. The 44% decrease in corporate expense in 2008 was mainly attributable to cost reduction efforts implemented throughout the year, including the elimination of annual bonuses due to not meeting internal profit targets. Also, corporate expense in the prior year included severance costs, costs associated with our CityCenter joint venture transaction, and development costs associated with our planned MGM Grand Atlantic City project. Depreciation and amortization expense increased 11% in 2008 on top of an 11% increase in 2007 due to the significant capital investments in our resorts over the past few years.
Excluding Beau Rivage, net revenues in 2007 increased 4% over 2006, largely due to strength in hotel room rates and other non-gaming revenues. Operating income in 2007 compared to 2006 decreased 5% on a comparable basis, excluding the CityCenter gain, Hurricane Katrina insurance recoveries, operations at Beau Rivage, profits from The Signature at MGM Grand, preopening andstart-up expenses, and property transactions. The decrease in operating income in 2007 on a comparable basis mainly related to higher depreciation and amortization expense and higher corporate expense.


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Operating Results — Detailed Revenue Information
The following table presents detail of our net revenues:
                 
  Year Ended December 31, 
     Percentage
    Percentage
   
  2008  Change 2007  Change 2006 
  (In thousands) 
 
Casino revenue, net:                
Table games $1,078,897  (12)% $1,228,296  (2)% $1,251,304 
Slots  1,795,226  (5)%  1,897,610  7%  1,770,176 
Other  101,557  (10)%  113,148  4%  108,958 
                 
Casino revenue, net  2,975,680  (8)%  3,239,054  3%  3,130,438 
                 
Non-casino revenue:                
Rooms  1,907,093  (10)%  2,130,542  7%  1,991,477 
Food and beverage  1,582,367  (4)%  1,651,655  11%  1,483,914 
Entertainment, retail and other  1,419,055  3%  1,376,417  16%  1,190,904 
                 
Non-casino revenue  4,908,515  (5)%  5,158,614  11%  4,666,295 
                 
   7,884,195  (6)%  8,397,668  8%  7,796,733 
Less: Promotional allowances  (675,428) (4)%  (706,031) 14%  (620,777)
                 
  $7,208,767  (6)% $7,691,637  7% $7,175,956 
                 
Table games revenue decreased 12% in 2008 mainly due to a decrease in volumes. The table games hold percentage was near the mid-point of the range for both years. In 2007, table games revenue decreased 7% excluding Beau Rivage, with volumes essentially flat and a slightly lower hold percentage in 2007.
Volume decreases mainly at our Las Vegas Strip resorts in 2008 led to a 5% decrease in slots revenue. Slots revenue at Bellagio and Mandalay Bay decreased 4% while the majority of our other Las Vegas Strip resorts experienced year-over-year decreases in the low double digits. Slots revenue increased 7% at MGM Grand Detroit and 5% at Gold Strike Tunica. In 2007, slots revenue was flat, excluding Beau Rivage. Slots revenue was strong in 2007 at many of our Las Vegas Strip Resorts, including Bellagio and MGM Grand Las Vegas — each up 8% over 2006 — and The Mirage and Mandalay Bay — each up 5% over 2006.
Hotel revenue decreased 10% in 2008 due to decreased occupancy and lower average room rates leading to a 10% decrease in REVPAR. Average room rates decreased 7% at our Las Vegas Strip resorts with a decrease in occupancy from 96% to 93%. In 2007, hotel revenue increased 5% excluding Beau Rivage, with a 7% increase in company-wide REVPAR. Strength in demand and room pricing in 2007 on the Las Vegas Strip led to a 5% increase in ADR.
Food and beverage, entertainment, and retail revenues in 2008 were all impacted by lower customer spending and decreased occupancy at our resorts. In 2007, increases in food and beverage revenue were a result of investments in new restaurants and nightclubs. In 2008, entertainment revenues benefited from the addition ofBelieveat Luxor. In 2007, entertainment revenues benefited fromLove, the Beatles-themed Cirque du Soleil show at The Mirage, which opened July 2006. Other revenues from continuing operations in 2008 increased 18% mainly due to reimbursed cost from CityCenter recognized as other revenue with corresponding amounts recognized as other expense.
Operating Results — Details of Certain Charges
Stock compensation expense is recorded within the department of the recipient of the stock compensation award. The following table shows the amount of compensation expense related to employee stock-based awards:


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  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, 
  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 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 in 2007 and 2006 related to our share of that venture’s preopening costs.
Property transactions, net consisted of the following:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Goodwill and other indefinite-lived intangible assets impairment charge $1,179,788  $—  $— 
Other write-downs and impairments  52,170   33,624   40,865 
Demolition costs  9,160   5,665   348 
Insurance recoveries  (9,639)  (217,290)  (86,016)
Other net (gains) losses on asset sales or disposals  (20,730)  (8,312)  3,823 
             
  $1,210,749  $ (186,313) $  (40,980)
             
See discussion of goodwill and other indefinite-lived intangible assets impairment charge and insurance recoveries in the “Executive overview” section. Other write-downs and impairments in 2008 included $30 million related to land and building assets of Primm Valley Golf Club. The 2008 period also includes demolition costs associated with various room remodel projects and a gain on the sale of an aircraft of $25 million. Insurance recoveries relate to the Monte Carlo fireauditors, Deloitte & Touche LLP, in 2008 and Hurricane Katrina in 2007 for audit and 2006. See further discussion in “Executive Overview” section.non-audit services.
         
  2008  2007 
Audit fees $2,984,000  $2,921,000 
Audit-related fees  123,000   303,000 
Tax fees  499,000   312,000 
All other fees  —   — 
       
Total $3,606,000  $3,536,000 
       
     
Write-downsThe category of “Audit Fees” includes fees for our annual audit and impairments in 2007 included write-offs related to discontinued construction projectsquarterly reviews, the attestation reports on the Company’s internal control over financial reporting, statutory audits required by gaming regulators 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.assistance with SEC filings.
     
Write-downs and impairments in 2006 included $22 million related to the write-offThe category 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“Audit-Related Fees” includes employee benefit plan audits, accounting consultations, due diligence in connection with several capital projects.

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Non-operating Resultsacquisitions and internal control reviews not associated with the attestation reports on the Company’s internal control over financial reporting.
     The category of “Tax Fees” includes tax consultation and planning fees and tax compliance services.
The following table summarizes informationPre-Approved Policies and Procedures
     Our current Audit Committee Charter contains our policies related to interest on our long-term debt:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Total interest incurred $773,662  $930,138  $900,661 
Interest capitalized  (164,376)  (215,951)  (122,140)
Interest allocated to discontinued operations  —   (5,844)  (18,160)
             
  $609,286  $708,343  $760,361 
             
Cash paid for interest, net of amounts capitalized $622,297  $731,618  $778,590 
Weighted average total debt balance $12.8 billion  $13.0 billion  $12.7 billion 
End-of-year ratio of fixed-to-floating debt  58/42   71/29   66/34 
Weighted average interest rate  6.0%   7.1%   7.1% 
In 2008, gross interest costs decreased compared to 2007 mainly due to lower interest rates on our variable rate borrowings. Capitalized interest decreased in 2008 due to less capitalized interest related to CityCenter and cessationpre-approval of capitalized interest related to our investment in MGM Grand Macau upon opening in November 2007. The amounts presented above exclude non-cash gross interest and corresponding capitalized interest related to our CityCenter delayed equity contribution — see Note 8 to the accompanying consolidated financial statements for further discussion.
Gross interest costs increased in 2007 compared to 2006 due to higher average debt balances during the year up until the significant reduction in debt in the fourth quarter resulting from the $2.47 billion received upon the close of the CityCenter joint venture transaction and the $1.2 billion received from our sale of common stock to Infinity World Investments, a wholly-owned subsidiary of Dubai World. Higher capitalized interest in 2007 resulted from the ongoing construction of CityCenter, MGM Grand Detroit, and MGM Grand Macau.
The following table summarizes information related to our income taxes:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Income (loss) from continuing operations before income tax $(668,988) $2,158,428  $977,926 
Income tax provision  186,298   757,883   341,930 
Effective income tax rate  NM   35.1%   35.0% 
Cash paid for income taxes $437,874  $391,042  $369,450 
The write-down of goodwill in 2008, which is treated as a permanently non-deductible item in our federal income tax provision, caused us to incur a provision for income tax expense even though our pre-tax result was a loss for the year. Excluding the impact of the goodwill write-down, the effective tax rate from continuing operations for 2008 was 37.3%. This is higher than the 2007 rate due to the impact of the CityCenter transaction on the 2007 rate, which greatly minimized the impact of permanent and other tax items, and due to the deduction taken in 2007 for domestic production activities resulting primarily from the CityCenter transaction. The effective income tax rate in 2006 benefited from a reversal of tax reserves that were no longer required, primarily due to guidance issuedservices provided by the Internal Revenue Service related toindependent auditor. The Audit Committee, or the deductibilityChair of certain complimentaries.
Cash taxes were paid in 2008 despite the pre-tax operating loss due to the non-deductible goodwill write-down and cash taxes paid on the CityCenter gain in 2008. Since the CityCenter gain was realized in the fourth quarter of 2007, the associated income taxes were paid in 2008. Absent the cash taxes paid on the CityCenter gain, cash taxes were approximately $250 million less in 2008 than in 2007. In addition, cash taxes for 2007 were only slightly higher than 2006 despite significantly higher pre-tax income due to the deferral of taxes on the CityCenter gain into 2008.


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Liquidity and Capital Resources
Cash Flows — Summary
Our cash flows consisted of the following:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Net cash provided by operating activities $753,032  $994,416  $1,231,952 
             
Investing cash flows:            
Purchases of property and equipment  (781,754)  (2,917,409)  (1,758,795)
Proceeds from contribution of CityCenter  —   2,468,652   — 
Proceeds from disposals of discontinued operations, net  —   578,873   — 
Purchase of convertible note  —   (160,000)  — 
Investments in and advances to unconsolidated affiliates  (1,279,462)  (31,420)  (103,288)
Property damage insurance recoveries  21,109   207,289   209,963 
Other  58,667   63,316   9,693 
             
Net cash provided by (used in) investing activities  (1,981,440)  209,301   (1,642,427)
             
Financing cash flows:            
Net borrowings (repayments) under bank credit facilities  2,480,450   (1,152,300)  (393,150)
Issuance of long-term debt  698,490   750,000   1,500,000 
Repayment of long-term debt  (789,146)  (1,402,233)  (444,500)
Issuance of common stock  —   1,192,758   — 
Issuance of common stock upon exercise of stock awards  14,116   97,792   89,113 
Purchases of common stock  (1,240,857)  (826,765)  (246,892)
Other  (40,971)  100,211   5,453 
             
Net cash provided by (used in) financing activities  1,122,082   (1,240,537)  510,024 
             
Net increase (decrease) in cash and cash equivalents $(106,326) $(36,820) $99,549 
             
Cash Flows — Operating Activities
Trends in our operating cash flows tend to follow trends in our operating income, excluding gains and losses from investing activities and net property transactions, since our business is primarily cash-based. Cash flow from operations decreased 26% in 2008 partially due to a decrease in operating income. The 2008 period also included a significant tax payment, approximately $300 million, relating to the 2007 CityCenter transaction. Cash flow from operations decreased 19% in 2007 over 2006, due in part to an additional $135 million of net cash outflows related to real estate under development expenditures partially offset by residential sales deposits when CityCenter was wholly owned.
At December 31, 2008 and 2007, we held cash and cash equivalents of $296 million and $416 million, respectively. We require a certain amount of cash on hand to operate our resorts. Beyond our cash on hand, we utilize a company-wide cash management system to minimize the amount of cash held in banks. Funds are swept from accounts at our resorts daily into central bank accounts, and excess funds are invested overnight or are used to repay borrowings under our bank credit facilities.


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Cash Flows — Investing Activities
Capital expenditures consisted of the following:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In millions) 
 
Development and expansion projects:            
CityCenter $58  $962  $520 
MGM Grand Detroit  19   336   262 
Beau Rivage  —   63   446 
Las Vegas Strip land  —   584   — 
MGM Grand Atlantic City  24   —   — 
Capitalized interest on development and expansion projects  43   191   101 
             
   144   2,136   1,329 
             
Other:            
Room remodel projects  230   205   39 
Corporate aircraft  —   102   48 
Other  408   474   343 
             
   638   781   430 
             
  $782  $2,917  $1,759 
             
In 2008, we and Dubai World each made loans to CityCenter of $500 million and equity contributions of $653 million. The insurance recoveries classified as investing cash flows relate to Monte Carlo in 2008 and Hurricane Katrina in 2007 and 2006 as discussed earlier in the “Executive Overview” section.
In 2007, we received net proceeds of $579 million from the sale of the Primm Valley Resorts and the Laughlin Properties. Also in 2007, we purchased a $160 million convertible note issued by The M Resort LLC, which is developing a casino resort on Las Vegas Boulevard, 10 miles south of Bellagio. The note is convertible, with certain restrictions, into a 50% equity position in The M Resort LLC. Investments in unconsolidated affiliates in 2006 primarily represented investments in MGM Grand Macau.
Cash Flows — Financing Activities
We borrowed net debt of $2.4 billion in 2008, including $2.5 billion under our senior credit facility. Also in 2008, we issued $750 million of 13% senior secured notes due 2013 at a discount to yield 15%. The senior secured notes require that upon consummation of an asset sale, such as the proposed sale of TI, we either a) reinvest the net after-tax proceeds, which can include committed capital expenditures; or b) make an offer to repurchase a corresponding amount of senior secured notes at par plus accrued interest. We repaid the following senior and senior subordinated notes at maturity during 2008:
• $180.4 million of 6.75% senior notes; and
• $196.2 million of 9.5% senior notes.
In October 2008, our Board of Directors authorized the purchase of up to $500 million of our public debt securities. In 2008, we repurchased $345 million of principal amounts of our outstanding senior notes at a purchase price of $263 million in open market repurchases as follows:
• $230 million of our 6% senior notes due 2009;
• $43 million of our 8.5% senior notes due 2010;
• $3.7 million of our 6.375% senior notes due 2011;
• $5.4 million of our 6.75% senior notes due 2012;
• $15.8 million of our 6.75% senior notes due 2013;
• $16.1 million of our 5.875% senior notes due 2014;


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• $7.1 million of our 6.875% senior notes due 2016;
• $17.3 million of our 7.5% senior notes due 2016; and
• $7 million of our 7.625% senior notes due 2017.
Also in the fourth quarter of 2008, we redeemed at par $149.4 million of the principal amount of our 7% debentures due 2036 pursuant to a one-time put option by the holders of such debentures.
We repaid net debt of $1.8 billion in 2007, including $1.2 billion under our senior credit facility. In 2007, we issued $750 million of 7.5% senior notes maturing in 2016 and we repaid the following senior and senior subordinated notes at their scheduled maturity: $710 million of 9.75% senior subordinated notes; $200 million of 6.75% senior notes; and $492.2 million of 10.25% senior subordinated notes.
In 2007, we received approximately $1.2 billion from the sale of 14.2 million shares of our common stock to Infinity World Investments at a price of $84 per share. We received $14 million, $98 million and $89 million in proceeds from the exercise of employee stock options in the years ended December 31, 2008, 2007 and 2006, respectively.
In 2006, we borrowed net debt of $662 million, due to the level of capital expenditures, share repurchases and investments in unconsolidated affiliates. We repaid at their scheduled maturity our $200 million 6.45% senior notes and our $245 million 7.25% senior notes, and we issued $1.5 billion of senior notes at various times throughout the year, with interest rates ranging from 6.75% to 7.625% and maturities ranging from 2013 to 2017.
Our share repurchases are only conducted under repurchase programs approved by our Board of Directors and publicly announced. In May 2008, our Board of Directors approved a 20 million share authorization which is still fully available at December 31, 2008. Our share repurchase activity was as follows:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
July 2004 authorization (8 million and 6.5 million shares purchased) $—  $659,592  $246,892 
December 2007 authorization (18.1 million and 1.9 million shares purchased)  1,240,856   167,173   — 
             
  $1,240,856  $826,765  $246,892 
             
Average price of shares repurchased $68.36  $83.92  $37.98 
Principal Debt Arrangements
Our long-term debt consists of publicly held senior, senior secured, and senior subordinated notes and our senior credit facility. We pay fixed rates of interest ranging from 5.875% to 13% on the senior, senior secured, and subordinated notes. We pay variable interest based on LIBOR or a base rate on our senior credit facility. Our current senior credit facility has a total capacity of $7.0 billion, matures in 2011, and consists of a $4.5 billion revolving credit facility and a $2.5 billion term loan facility. As of December 31, 2008, we had approximately $1.2 billion of available liquidity under our senior credit facility. After giving effect to our February 2009 borrowing, we have borrowed the entire amount of available borrowings under the senior credit facility.
All of our principal debt arrangements are guaranteed by each of our material subsidiaries, excluding MGM Grand Detroit, LLC and our foreign subsidiaries. MGM Grand Detroit is a guarantor under the senior credit facility, but only to the extent that MGM Grand Detroit, LLC borrows under such facilities. At December 31, 2008, the outstanding amount of borrowings related to MGM Grand Detroit, LLC was $404 million. Substantially all of the assets of New York-New York serve as collateral for the 13% senior secured notes issued in 2008; otherwise, none of our assets serve as collateral for our principal debt arrangements.


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Other Factors Affecting Liquidity
Amendment to senior credit facility.  In September 2008, we amended our senior credit facility to increase the maximum total leverage ratio (debt to EBITDA, as defined) to 7.5:1.0 beginning with the fiscal quarter ending December 31, 2008, which will remain in effect through December 31, 2009, with step downs thereafter. The amendment modified drawn and undrawn pricing levels as well as revised certain definitions and limitations on secured indebtedness. Our drawn pricing levels over LIBOR remain unchanged when the maximum total leverage ratio is less than 5.0:1. When the maximum total leverage ratio exceeds that level, the drawn pricing levels over LIBOR range from 1.25% to 2.00%.
Request to borrow remaining available funds under the senior credit facility.  In February 2009, we submitted a borrowing request for $842 million, the remaining amount of available funds (other than outstanding letters of credit) under our senior credit facility. The borrowing request was fully funded as of February 26, 2009. For further discussion of this event and its impact on our liquidity and financial position, see “Executive Overview — Liquidity and Financial Position.”
Long-term debt payable in 2009.  We have $226 million of principal of senior notes due in July 2009 and $820 million of principal of senior notes due in October 2009.
Sale of TI.  In December 2008, we entered into a purchase agreement pursuant to which we have agreed to sell TI to Ruffin Acquisition, LLC (“Ruffin Acquisition”) for a purchase price of $775 million. The purchase price is to be paid at closing as follows: $500 million in cash and $275 million in secured notes bearing interest at 10%, with $100 million payable not later than 175 days after closing and $175 million payable not later than 24 months after closing. The notes, to be issued by Ruffin Acquisition, will be secured by the assets of TI and will be senior to any other financing. In March 2009, we entered into an amendment to the purchase agreement which a) extends the maturity of the $175 million note to 36 months, and b) offers Ruffin Acquisition a $20 million discount on the purchase price effected through a reduction in principal of the notes if they are paid in full by April 30, 2009. The transaction is subject to customary closing conditions contained in the purchase agreement, including receipt of all gaming and other regulatory approvals. In addition, the ability of Ruffin Acquisition to obtain financing is not a closing condition. We anticipate that the transaction will be completed by March 31, 2009, and we expect to report a substantial gain on the sale. Under the terms of our 13% senior secured notes, within 360 days of the receipt of the proceeds from the TI sale we must either invest such proceeds in qualifying investments, which includes capital expenditures, or offer to repurchase the senior notes at par.
MGM Grand Atlantic City development.  In October 2007, we announced plans for a multi-billion dollar resort complex on 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.
Mashantucket Pequot Tribal Nation.  We have entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Mashantucket, Connecticut. Under the strategic alliance, a new casino resort owned and operated by MPTN located adjacent to the existing Foxwoods casino resort carries the “MGM Grand” brand name. The resort opened in May 2008. We are receiving a brand licensing and consulting fee in connection with this agreement. We have also formed a jointly owned company with MPTN — Unity Gaming, LLC — to acquire or develop future gaming and non-gaming enterprises. Under certain circumstances, we will provide a loan of up to $200 million to finance a portion of MPTN’s investment in joint projects.
Kerzner/Istithmar joint venture.  In September 2007, we entered into a definitive agreement with Kerzner International and Istithmar forming a joint venture to develop a multi-billion dollar integrated resort to be located on the southwest corner of Las Vegas Boulevard and Sahara Avenue. In September 2008, we and our partners agreed to defer additional design and pre-construction activities and amended the joint venture agreement accordingly. In the event the joint venture partners agree that the resort will be developed, we will contribute 40 acres of land, valued at $20 million per acre, for fifty percent of the equity in the joint venture. Kerzner International and Istithmar will contribute cash totaling $600 million, of which $200 million will be distributed to us, for the other 50% of the equity.


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Off Balance Sheet Arrangements
Investments in unconsolidated affiliates.  Our off balance sheet arrangements consist primarily of investments in unconsolidated affiliates, which currently consist primarily of our investments in CityCenter, Borgata, Grand Victoria, Silver Legacy, and MGM Grand Macau. We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions. Our unconsolidated affiliate investments allow us to realize the proportionate benefits of owning a full-scale resort in a manner that minimizes our initial investment. We have not historically guaranteed financing obtained by our investees, and there are no other provisions of the venture agreements which we believe are unusual or subject us to risks to which we would not be subjected if we had full ownership of the resort.
CityCenter.  In October 2008, CityCenter closed on a $1.8 billion senior secured bank credit facility. The credit facility can be increased up to $3 billion and consists of a $250 million revolver with the remaining amount being in the form of term loans. The credit facility matures in April 2013 and is secured by substantially all of the assets of CityCenter. The credit facility is initially priced at LIBOR plus 3.75% through the construction period.
Through December 31, 2008, we and Infinity World had each made loans of $925 million to CityCenter, which are subordinate to the credit facility. During the fourth quarter of 2008, $425 million of each 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, 2008, we had outstanding letters of credit totaling $92 million, of which $50 million support bonds issued by the Economic Development Corporation of the City of Detroit and maturing in 2009. These bonds are recorded as a liability in our consolidated balance sheets. This obligation was undertaken to secure our right to develop a permanent casino in Detroit.
Commitments and Contractual Obligations
The following table summarizes our scheduled contractual obligations as of December 31, 2008:
                         
  2009  2010  2011  2012  2013  Thereafter 
  (In millions) 
 
Long-term debt $1,048  $1,081  $6,240  $545  $1,384  $3,216 
Estimated interest payments on long-term debt(1)  783   666   653   409   302   520 
Capital leases  2   2   2   1   —   — 
Operating leases  14   11   9   8   6   44 
Tax liabilities(2)  1   —   —   —   —   — 
Long-term liabilities(3)  77   18   1   1   —   6 
CityCenter funding commitments(4)  731   319   —   —   —   — 
Other purchase obligations:                        
Construction commitments  54   3   1   —   —   — 
Employment agreements  113   65   21   3   —   — 
Entertainment agreements(5)  127   26   4   —   —   — 
Other(6)  86   16   15   9   1   — 
                         
  $3,036  $2,207  $6,946  $  976  $1,693  $3,786 
                         
(1)Estimated interest payments on long-term debt are based on principal amounts outstanding at December 31, 2008 and forecasted LIBOR rates for our bank credit facility.


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(2)Approximately $118 million of tax liabilities related to unrecognized tax benefits are excluded from the table as we cannot reasonably estimate when examination and other activity related to these amounts will conclude.
(3)Includes our obligation to support $50 million of bonds issued by the Economic Development Corporation of the City of Detroit as part of our development agreement with the City. The bonds mature in 2009.
(4)As of December 31, 2008 we were committed to fund equity contributions of $731 million to CityCenter during 2009. In addition, we are committed to fund up to $600 million under a partial completion guarantee. Based on current forecasted expenditures we estimate that we will be required to fund $319 million for such guarantee during 2010, excluding the benefit of proceeds to be received from residential closing.
(5)Our largest entertainment commitments consist of minimum contractual payments to Cirque du Soleil, which performs shows at several of our resorts. We are generally contractually committed for a period of 12 months based on our ability to exercise certain termination rights; however, we expect these shows to continue for longer periods.
(6)The amount for 2009 includes approximately $58 million of open purchase orders. Other commitments are for various contracts, including advertising, maintenance and other service agreements.
See “Executive Overview — Liquidity and Financial Position” for discussion of the impacts of the above contractual obligations on our liquidity and financial position.
Critical Accounting Policies and Estimates
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 ofto whom such authority was delegated by the Board of Directors have reviewedAudit Committee, must pre-approve all services provided by the disclosures included herein about our critical accounting estimates, and have reviewedindependent auditor. Any such pre-approval by the processes to determine those estimates.
Allowance for Doubtful Casino Accounts Receivable
Marker play represents a significant portion of the table games volume at Bellagio, MGM Grand Las Vegas, Mandalay Bay and The Mirage. Our other facilities do not emphasize marker playChair must be presented to the same extent, although we offer markers to customersAudit Committee at those casinos as well. We maintain strict controls over the issuance of markers and aggressively pursue collection from those customers who fail to pay their marker balances timely. These collection efforts are similar to those used by most large corporations when dealing with overdue customer accounts, including the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and civil litigation. Markers are generally legally enforceable instruments in the United States. At December 31, 2008 and 2007, approximately 52% and 47%, respectively, of our casino accounts receivable was owed by customers from the United States. Markers are not legally enforceable instruments in some foreign countries, but the United States assets of foreign customers may be reached to satisfy judgments entered in the United States. At December 31, 2008 and 2007, approximately 34% and 38%, respectively, of our casino accounts receivable was owed by customers from the Far East.
We maintain an allowance, or reserve, for doubtful casino accounts at all of our operating casino resorts. The provision for doubtful accounts, an operating expense, increases the allowance for doubtful accounts. We regularly evaluate the allowance for doubtful casino accounts. At resorts where marker play is not significant, the allowance is generally established by applying standard reserve percentages to aged account balances. At resorts where marker play is significant, we apply standard reserve percentages to aged account balances under a specified dollar amount and specifically analyze the collectibility of each account with a balance over the specified dollar amount, based on the age of the account, the 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.its next scheduled meeting.


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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, 
  2008  2007  2006 
     (In thousands)    
 
Casino accounts receivable $243,600  $266,059  $248,044 
Allowance for doubtful casino accounts receivable  92,278   76,718   83,327 
Allowance as a percentage of casino accounts receivable  38%   29%   34% 
Median age of casino accounts receivable  36 days   28 days   46 days 
Percentage of casino accounts outstanding over 180 days  21%   18%   21% 
The allowance for doubtful accounts as a percentage of casino accounts receivable has increased in the current year due to an increase in aging of accounts. At December 31, 2008, a 100 basis-point change in the allowance for doubtful accounts as a percentage of casino accounts receivable would change net income by $2 million, or less than $0.01 per share.
Fixed Asset Capitalization and Depreciation Policies
Property and equipment are stated at cost. For the majority of our property and equipment, cost has been determined based on estimated fair values in connection with the April 2005 Mandalay acquisition and the May 2000 Mirage Resorts acquisition. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. We account for construction projects in accordance with Statement of Financial Accounting Standards No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.” When we construct assets, we capitalize direct costs of the project, including fees paid to architects and contractors, property taxes, and certain costs of our design and construction subsidiaries.
We must make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered a maintenance expense or a capital asset is a matter of judgment. When constructing or purchasing assets, we must determine whether existing assets are being replaced or otherwise impaired, which also may be a matter of judgment. Our depreciation expense is highly dependent on the assumptions we make about our assets’ estimated useful lives. We determine the estimated useful lives based on our experience with similar assets, engineering studies, and our estimate of the usage of the asset. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.
In accordance with Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”), interest cost associated with major development and construction projects is capitalized as part of the cost of the project. Interest is typically capitalized on amounts expended on the project using the weighted-average cost of our outstanding borrowings, since we typically do not borrow funds directly related to a development project. Capitalization of interest starts when construction activities, as defined in SFAS 34, begin and ceases when construction is substantially complete or development activity is suspended for more than a brief period.
Impairment of Long-lived Assets, Goodwill and Indefinite-lived Intangible Assets
We evaluate our property and equipment and other long-lived assets for impairment in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” For assets to be disposed of, we recognize the asset at the lower of carrying value or fair market value less costs of disposal, as estimated based on comparable asset sales, offers received, or a discounted cash flow model. For assets to be held and used, we review for impairment whenever indicators of impairment exist. We then compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is recorded based on the fair value of the asset, typically


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measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets to be disposed of or assets to be held and used, are recorded as operating expenses.
There are several estimates, assumptions and decisions in measuring impairments of long-lived assets. First, management must determine the usage of the asset. To the extent management decides that an asset will be sold, it is more likely that an impairment may be recognized. Assets must be tested at the lowest level for which identifiable cash flows exist. This means that some assets must be grouped, and management has some discretion in the grouping of assets. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates.
On a quarterly basis, we review our major long-lived assets to determine if events have occurred or circumstances exist that indicate a potential impairment. We estimate future cash flows using our internal budgets. When appropriate, we discount future cash flows using our weighted-average cost of capital, developed using a standard capital asset pricing model.
We review goodwill and indefinite-lived intangible assets for impairment in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” Goodwill represents the excess of purchase price over fair market value of net assets acquired in business combinations. Goodwill and indefinite-lived intangible assets must be reviewed for impairment at least annually and between annual test dates in certain circumstances. We perform our annual impairment test for goodwill and indefinite-lived intangible assets in the fourth quarter of each fiscal year. Goodwill for relevant reporting units is tested for impairment using a discounted cash flow analysis based on our budgeted future results discounted using our weighted average cost of capital and market indicators of terminal year capitalization rates. Indefinite-lived intangible assets consist primarily of license rights, which are tested for impairment using a discounted cash flow approach, and trademarks; which are tested for impairment using the relief-from-royalty method. See Note 3 and Note 9 to the accompanying consolidated financial statements for further discussion related to goodwill and indefinite-lived intangible assets.
There are several estimates inherent in evaluating these assets for impairment. In particular, future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. In addition, the determination of capitalization rates and the discount rates used in the goodwill impairment test are highly judgmental and dependent in large part on expectations of future market conditions.
See “Results of Operations” for discussion of write-downs and impairments of long-lived assets recorded in 2008, 2007 and 2006. In 2006, we entered into agreements to sell Primm Valley Resorts and Laughlin Properties. The fair value less costs to sell exceeded the carrying value, therefore no impairment was indicated. See “Goodwill Impairment” for discussion of impairment of goodwill recorded in 2008. Other than the above items, we are not aware of events or circumstances through December 31, 2008 that would cause us to review any material long-lived assets, goodwill or indefinite-lived intangible assets for impairment.
Income Taxes
We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied. Except for certain New Jersey state net operating losses, certain other New Jersey state deferred tax assets, a foreign tax credit carryforward and certain foreign deferred tax assets, we believe that it is more likely than not that our deferred tax assets are fully realizable because of the future reversal of existing taxable temporary differences and future projected taxable income.
Our income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities. Positions taken in tax returns are sometimes subject to uncertainty in the tax laws and may not ultimately be accepted by the IRS or other tax authorities.
Effective January 1, 2007, we adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 requires


37

that tax positions be assessed using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. As required by the standard, we review uncertain tax positions at each balance sheet date. Liabilities we record as a result of this analysis are recorded separately from any current or deferred income tax accounts, and are classified as current (“Other accrued liabilities”) or long-term (“Other long-term liabilities”) based on the time until expected payment. Additionally, we recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense, a policy that did not change as a result of the adoption of FIN 48.
We file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the taxes paid in foreign jurisdictions are not material. As of December 31, 2008, we were no longer subject to examination of our U.S. federal income tax returns filed for years ended prior to 2003. While the IRS examination of the 2001 and 2002 tax years closed during the first quarter of 2007, the statute of limitations for assessing tax for such years has been extended in order for us to appeal issues related to a land sale transaction that were not agreed upon at the closure of the examination. The appeals discussions continue, and the Company has requested to enter into appeals mediation procedures with the IRS. Consequently, we believe that it is reasonably possible to settle these issues within the next twelve months. The IRS is currently examining our federal income tax returns for the 2003 and 2004 tax years and one of our subsidiaries for the 2004 through 2006 tax years. Tax returns for subsequent years are also subject to examination. In addition, during the first quarter of 2009, the IRS initiated an examination of the federal income tax return of Mandalay Resort Group for the pre-acquisition year ended April 25, 2005. The statute of limitations for assessing tax for the Mandalay Resort Group federal income tax return for the year ended January 31, 2005 has been extended but such return is not currently under examination by the IRS.
As of December 31, 2008, we are no longer subject to examination for our various state and local tax returns filed for years ended prior to 2003. A Mandalay Resort Group subsidiary return for the pre-acquisition year ended April 25, 2005 is under examination by the City of Detroit. During the first quarter of 2008, the state of Mississippi settled an examination of returns filed by subsidiaries of MGM MIRAGE and Mandalay Resort Group for the 2004 through 2006 tax years. This settlement resulted in a payment of additional taxes and interest of less than $1 million. No other state or local income tax returns are currently under exam.
Stock-based Compensation
We account for stock-based compensation in accordance with SFAS 123(R). For stock options and stock appreciation rights (“SARs”) we measure fair value using the Black-Scholes model. For restricted stock units, compensation expense is calculated based on the fair market value of our stock on the date of grant. There are several management assumptions required to determine the inputs into the Black-Scholes model. Our volatility and expected term assumptions can significantly impact the fair value of stock options and SARs. The extent of the impact will depend, in part, on the extent of awards in any given year. In 2008, we granted 4.9 million SARs with a total fair value of $72 million. In 2007, we granted 2.6 million SARs with a total fair value of $68 million. In 2006, we granted 1.9 million stock options and SARs with a total fair value of $28 million.
For 2008 awards, a 10% change in the volatility assumption (50% for 2008; for sensitivity analysis, volatility was assumed to be 45% and 55%) would have resulted in a $5.5 million, or 8%, change in fair value. A 10% change in the expected term assumption (4.6 years for 2008; for sensitivity analysis, expected term was assumed to be 4.1 years and 5.1 years) would have resulted in a $3.3 million, or 5%, change in fair value. These changes in fair value would have been recognized over the five-year vesting period of such awards. It should be noted that a change in the expected term would cause other changes, since the risk-free rate and volatility assumptions are specific to the term; we did not attempt to adjust those assumptions in performing the sensitivity analysis above.


38

Recently Issued Accounting Standards
Accounting for Business Combinations and Non-Controlling Interests
In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(R), “Business Combinations,” (“SFAS 141R”) and SFAS No. 160 “Non-controlling interests in Consolidated Financial Statements — an amendment of ARB No. 51,” (“SFAS 160”). These standards amend the requirements for accounting for business combinations, including the recognition and measurement of additional assets and liabilities at their fair value, expensing of acquisition-related costs which are currently capitalizable under existing rules, treatment of adjustments to deferred taxes and liabilities subsequent to the measurement period, and the measurement of non-controlling interests, previously commonly referred to as minority interests, at fair value. SFAS 141R also includes additional disclosure requirements with respect to the methodologies and techniques used to determine the fair value of assets and liabilities recognized in a business combination. SFAS 141R and SFAS 160 apply prospectively to fiscal years beginning on or after December 15, 2008, except for the treatment of deferred tax adjustments which apply to deferred taxes recognized in previous business combinations. These standards became effective for us on January 1, 2009. We do not believe the adoption of SFAS 141R and SFAS 160 will have a material impact on our consolidated financial statements.
Transfers of Financial Assets and Interests in Variable Entities
In December 2008, the FASB issued 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 enhances disclosures required by FIN 46(R) to include a discussion of significant judgments made in determining whether a variable interest entity (“VIE”) should be consolidated, as well as the nature of the risks and how its involvement with a VIE affects the financial position of the entity. The FSP is effective for us for the fiscal year ended December 31, 2008. The adoption of the FSP did not have a material impact on our consolidated financial statements.
Equity Method Investment Accounting Considerations
In November 2008, the Emerging Issues Task Force (“EITF”) of the FASB ratified its consensus on 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 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 became effective for us on January 1, 2009. We do not believe the adoption ofEITF 08-6 will have a material impact on our consolidated financial statements.
Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed rate borrowings and short-term borrowings under our bank credit facilities.
As of December 31, 2008, long-term fixed rate borrowings represented approximately 58% of our total borrowings. Based on December 31, 2008 debt levels, an assumed 100 basis-point change in LIBOR would cause our annual interest cost to change by approximately $57 million.


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PART IV
ITEM 7A.  15.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
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 52 to 88 of thisForm 10-K.
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGEXHIBITS AND FINANCIAL DISCLOSURESTATEMENT SCHEDULES .
None.
ITEM 9A.  CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of December 31, 2008. This conclusion is based on an evaluation conducted under the supervision and participation of the principal executive officer and principal financial officer along with company management. Disclosure controls and procedures are those controls and procedures which ensure that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported in a timely manner and in accordance with Securities and Exchange Commission rules and regulations.
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 50 of thisForm 10-K.
Attestation Report of the Independent Registered Public Accounting Firm
The Independent Registered Public Accounting Firm’s Attestation Report on our internal control over financial reporting referred to in Item 15(a)(1) of thisForm 10-K, is included at page 51 of this Form10-K.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2008, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to affect, our internal control over financial reporting.
ITEM 9B.  OTHER INFORMATION
None.


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PART III
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We incorporate by reference the information appearing under “Executive Officers of the Registrant” in Item 1 of thisForm 10-K and under “Election of Directors” and “Corporate Governance” in our definitive Proxy Statement for our 2009 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about April 3, 2009 (the “Proxy Statement”).
ITEM 11.  EXECUTIVE COMPENSATION
We incorporate by reference the information appearing under “Executive and Director Compensation and Other Information” and “Corporate Governance — Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the Proxy Statement.
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
We incorporate by reference the information appearing under “Equity Compensation Plan Information” in Item 5 of thisForm 10-K, and under “Principal Stockholders” and “Election of Directors” in the Proxy Statement.
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We incorporate by reference the information appearing under “Transactions with Related Persons” and “Corporate Governance” in the Proxy Statement.
ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
We incorporate by reference the information appearing under “Selection of Independent Registered Public Accounting Firm” in the Proxy Statement.
PART IV
ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1). Financial Statements.(3) Exhibits
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.


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(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”)).
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 December 4, 2007 (incorporated by reference to Exhibit 3 to the Company’s Current Report onForm 8-K dated December 4, 2007).
4(1)Indenture dated July 21, 1993, by and between Mandalay and First Interstate Bank of Nevada, N.A., as Trustee with respect to $150 million aggregate principal amount of 7.625% Senior Subordinated Debentures due 2013 (incorporated by reference to Exhibit 4(a) to 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 199610-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).
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 $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 (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)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(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(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 200010-K).
4(15)Second Supplemental Indenture, dated as of December 31, 2000, among the Company, MGM Grand Hotel & Casino Merger Sub, LLC and U.S. Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4(17) to the 200010-K).
4(16)Indenture, dated as of January 23, 2001, among the Company, as issuer, the Subsidiary Guarantors parties thereto, as guarantors, and United States Trust Company of New York, as trustee, with respect to $400 million aggregate principal amount of 8.375% Senior Subordinated Notes due 2011 (incorporated by reference to Exhibit 4 to the Company’s Current Report onForm 8-K dated January 18, 2001).
4(17)Indenture dated as of December 20, 2001 by and among Mandalay and The Bank of New York, with respect to $300 million aggregate principal amount of 9.375% Senior Subordinated Notes due 2010 (incorporated by reference to Exhibit 4.1 to Mandalay’sForm S-4 Registration StatementNo. 333-82936).
4(18)Indenture dated as of March 21, 2003 by and among Mandalay and The Bank of New York with respect to $400 million aggregate principal amount of Floating Rate Convertible Senior Debentures due 2033 (incorporated by reference to Exhibit 4.44 to Mandalay’s Annual Report onForm 10-K for the fiscal year ended January 31, 2003).
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(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(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(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(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

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).
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(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(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(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(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(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 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(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(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(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(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(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(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(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(14)Guarantee (Mirage Resorts, Incorporated 7.25% Debentures due 2017), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of Wells Fargo Bank Northwest, National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.17 to the September 200510-Q).

45

Exhibit
Number
Description
10.1(15)Guarantee (Mandalay Resort Group 9.375% Senior Subordinated Notes due 2010), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.20 to the September 200510-Q).
10.1(16)Guarantee (Mandalay Resort Group 6.70% Senior Notes due 2096), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as successor in interest to First Interstate Bank of Nevada, N.A., as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.21 to the September 200510-Q).
10.1(17)Guarantee (Mandalay Resort Group 7.0% Senior Notes due 2036), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.22 to the September 200510-Q).
10.1(18)Guarantee (Mandalay Resort Group Floating Rate Convertible Senior Debentures due 2033), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.24 to the September 200510-Q).
10.1(19)Guarantee (Mandalay Resort Group 6.5% Senior Notes due 2009), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.25 to the September 200510-Q).
10.1(20)Guarantee (Mandalay Resort Group 6.375% Senior Notes due 2011), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.26 to the September 200510-Q).
10.1(21)Fifth Amended and Restated Loan Agreement dated as of October 3, 2006, by and among MGM MIRAGE, as borrower; MGM Grand Detroit, LLC, as co-borrower; the Lenders and Co-Documentation Agents named therein; Bank of America, N.A., as Administrative Agent; the Royal Bank of Scotland PLC, as Syndication Agent; Bank of America Securities LLC and The Royal Bank of Scotland PLC, as Joint Lead Arrangers; and Bank of America Securities LLC, The Royal Bank of Scotland PLC, J.P. Morgan Securities Inc., Citibank North America, Inc. and Deutsche Bank Securities Inc. as Joint Book Managers (incorporated by reference to Exhibit 10 to the Company’s Current Report onForm 8-K dated October 3, 2006).
10.1(22)Amendment No. 1 to the Fifth Amended and Restated Loan Agreement dated as of October 3, 2006, by and among MGM MIRAGE, as borrower; MGM Grand Detroit, LLC, as co-borrower; the Lenders and Co-Documentation Agents named therein; Bank of America, N.A., as Administrative Agent; the Royal Bank of Scotland PLC, as Syndication Agent; Bank of America Securities LLC and The Royal Bank of Scotland PLC, as Joint Lead Arrangers; and Bank of America Securities LLC, The Royal Bank of Scotland PLC, J.P. Morgan Securities Inc., Citibank North America, Inc. and Deutsche Bank Securities Inc. as Joint Book Managers (incorporated by reference to Exhibit 10 to the Company’s Current Report onForm 8-K dated October 6, 2008).
10.1(23)Sponsor Contribution Agreement, dated October 31, 2008, by and among MGM MIRAGE, as sponsor, CityCenter Holdings, LLC, as borrower, and Bank of America, N.A., as Collateral Agent (incorporated by reference to Exhibit 10 to the Company’s Current Report onForm 8-K dated November 6, 2008).
10.1(24)Sponsor Completion Guarantee, dated October 31, 2008, by and among MGM MIRAGE, as completion guarantor, CityCenter Holdings, LLC, as borrower, and Bank of America, N.A., as Collateral Agent (incorporated by reference to Exhibit 10 to the 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. 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. 33-4475) onForm S-1).
10.2(3)Public Trust Tidelands Lease, dated February 4, 1999, between the State of Mississippi and Beau Rivage Resorts, Inc. (without exhibits) (incorporated by reference to Exhibit 10.73 to the Annual Report 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(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(6)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(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(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).
*10.3(9)Amendment No. 1 to the Deferred Compensation Plan II, dated as of July 10, 2007 (incorporated by reference to Exhibit 10.3(11) to the 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(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(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(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(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(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 December 13, 2008, by and among The Mirage Casino-Hotel, as seller, and Ruffin Acquisition, LLC, as purchaser (incorporated by reference to the Company’s Amendment No. 1 to Current Report onForm 8-K/A dated January 9, 2009).
21List of subsidiaries of the Company.
23Consent 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.
99.1Description of our Operating Resorts.
99.2Description of Regulation and Licensing.
 
*Management contract or compensatory plan or arrangement.
**Exhibits 32.1 and 32.2 shall not be deemed filed with the Securities and Exchange Commission, nor shall they be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or the Securities Act of 1933, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

49

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.
Management’s Evaluation
Management has evaluated the Company’s internal control over financial reporting using the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation as of December 31, 2008, management believes that the 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 year ended December 31, 2008 and issued their report thereon, which is included in this annual report. Deloitte & Touche LLP has also issued an attestation report on the effectiveness of the Company’s internal control over financial reporting and such report is also included in this annual report.


50

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of MGM MIRAGE
We have audited the internal control over financial reporting of MGM MIRAGE and subsidiaries (the “Company”) as of December 31, 2008, based on criteria established inInternal 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, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A 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, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established inInternal 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, 2008. Our report dated March 17, 2009 expressed an unqualified opinion on those financial statements and financial statement schedule and included (a) an explanatory paragraph expressing substantial doubt about the Company’s ability to continue as a going concern; and (b) an explanatory paragraph regarding the adoption of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
March 17, 2009


51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of MGM MIRAGE
We have audited the accompanying consolidated balance sheets of MGM MIRAGE and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule of Valuation and Qualifying Accounts included in Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the 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, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company believes it will not be in compliance with the financial covenants under its senior credit facility during 2009 and there is uncertainty regarding the 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, 2007, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 17, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
March 17, 2009


52

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
         
  At December 31, 
  2008  2007 
 
ASSETS
Current assets
        
Cash and cash equivalents $295,644  $416,124 
Accounts receivable, net  303,416   412,933 
Inventories  111,505   126,941 
Income tax receivable  64,685   — 
Deferred income taxes  63,153   63,453 
Prepaid expenses and other  155,652   106,364 
Assets held for sale  538,975   — 
         
Total current assets  1,533,030   1,125,815 
         
         
Property and equipment, net
  16,289,154   16,870,898 
         
Other assets
        
Investments in and advances to unconsolidated affiliates  4,642,865   2,482,727 
Goodwill  86,353   1,262,922 
Other intangible assets, net  347,209   362,098 
Deposits and other assets, net  376,105   623,226 
         
Total other assets  5,452,532   4,730,973 
         
  $23,274,716  $22,727,686 
         
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
        
Accounts payable $142,693  $220,495 
Construction payable  45,103   76,524 
Income taxes payable  —   284,075 
Current portion of long-term debt  1,047,614   — 
Accrued interest on long-term debt  187,597   211,228 
Other accrued liabilities  1,549,296   932,365 
Liabilities related to assets held for sale  30,273   — 
         
Total current liabilities  3,002,576   1,724,687 
         
Deferred income taxes
  3,441,198   3,416,660 
Long-term debt
  12,416,552   11,175,229 
Other long-term obligations
  440,029   350,407 
         
Commitments and contingencies (Note 13)
        
Stockholders’ equity
        
Common stock, $.01 par value: authorized 600,000,000 shares; issued 369,283,995 and 368,395,926 shares; outstanding 276,506,968 and 293,768,899 shares  3,693   3,684 
Capital in excess of par value  4,018,410   3,951,162 
Treasury stock, at cost (92,777,027 and 74,627,027 shares)  (3,355,963)  (2,115,107)
Retained earnings  3,365,122   4,220,408 
Accumulated other comprehensive income (loss)  (56,901)  556 
         
Total stockholders’ equity  3,974,361   6,060,703 
         
  $23,274,716  $22,727,686 
         
The accompanying notes are an integral part of these consolidated financial statements.


53

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
             
  Year Ended December 31, 
  2008  2007  2006 
 
Revenues
            
Casino $2,975,680  $3,239,054  $3,130,438 
Rooms  1,907,093   2,130,542   1,991,477 
Food and beverage  1,582,367   1,651,655   1,483,914 
Entertainment  546,310   560,909   459,540 
Retail  261,053   296,148   278,695 
Other  611,692   519,360   452,669 
             
   7,884,195   8,397,668   7,796,733 
Less: Promotional allowances  (675,428)  (706,031)  (620,777)
             
   7,208,767   7,691,637   7,175,956 
             
Expenses
            
Casino  1,618,914   1,646,883   1,586,448 
Rooms  533,559   542,289   513,522 
Food and beverage  930,716   947,475   870,683 
Entertainment  384,822   395,611   330,439 
Retail  168,859   187,386   177,479 
Other  397,504   307,914   236,486 
General and administrative  1,278,501   1,251,952   1,169,271 
Corporate expense  109,279   193,893   161,507 
Preopening andstart-up expenses
  23,059   92,105   36,362 
Restructuring costs  443   —   1,035 
Property transactions, net  1,210,749   (186,313)  (40,980)
Gain on CityCenter transaction  —   (1,029,660)  — 
Depreciation and amortization  778,236   700,334   629,627 
             
   7,434,641   5,049,869   5,671,879 
             
Income from unconsolidated affiliates
  96,271   222,162   254,171 
             
Operating income (loss)
  (129,603)  2,863,930   1,758,248 
             
Non-operating income (expense)
            
Interest income  16,520   17,210   11,192 
Interest expense, net  (609,286)  (708,343)  (760,361)
Non-operating items from unconsolidated affiliates  (34,559)  (18,805)  (16,063)
Other, net  87,940   4,436   (15,090)
             
   (539,385)  (705,502)  (780,322)
             
Income (loss) from continuing operations before income taxes
  (668,988)  2,158,428   977,926 
Provision for income taxes  (186,298)  (757,883)  (341,930)
             
Income (loss) from continuing operations
  (855,286)  1,400,545   635,996 
             
Discontinued operations
            
Income from discontinued operations  —   10,461   18,473 
Gain on disposal of discontinued operations  —   265,813   — 
Provision for income taxes  —   (92,400)  (6,205)
             
   —   183,874   12,268 
             
Net income (loss)
 $(855,286) $1,584,419  $648,264 
             
Basic income (loss) per share of common stock
            
Income (loss) from continuing operations $(3.06) $4.88  $2.25 
Discontinued operations  —   0.64   0.04 
             
Net income (loss) per share $(3.06) $5.52  $2.29 
             
Diluted income (loss) per share of common stock
            
Income (loss) from continuing operations $(3.06) $4.70  $2.18 
Discontinued operations  —   0.61   0.04 
             
Net income (loss) per share $(3.06) $5.31  $2.22 
             
The accompanying notes are an integral part of these consolidated financial statements.


54

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
             
  Year Ended December 31, 
  2008  2007  2006 
 
Cash flows from operating activities
            
Net income (loss) $(855,286) $1,584,419  $648,264 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:            
Depreciation and amortization  778,236   700,334   653,919 
Amortization of debt discounts, premiums and issuance costs  10,620   4,298   (3,096)
Provision for doubtful accounts  80,293   32,910   47,950 
Stock-based compensation  36,277   45,678   73,626 
Business interruption insurance — lost profits  (9,146)  (66,748)  — 
Business interruption insurance — cost recovery  (27,883)  (5,962)  (46,581)
Property transactions, net  1,210,749   (186,313)  (41,135)
Gain on early retirements of long-term debt  (87,457)  —   — 
Gain on CityCenter transaction  —   (1,029,660)  — 
Gain on disposal of discontinued operations  —   (265,813)  — 
Income from unconsolidated affiliates  (40,752)  (162,217)  (229,295)
Distributions from unconsolidated affiliates  70,546   211,062   212,477 
Deferred income taxes  79,516   32,813   59,764 
Changes in current assets and liabilities:            
Accounts receivable  20,500   (82,666)  (65,467)
Inventories  12,366   (8,511)  (10,431)
Income taxes receivable and payable  (346,878)  315,877   (129,929)
Prepaid expenses and other  14,983   10,937   (21,921)
Accounts payable and accrued liabilities  (187,858)  32,720   111,559 
Real estate under development  —   (458,165)  (89,724)
Residential sales deposits  —   247,046   13,970 
Business interruption insurance recoveries  28,891   72,711   98,786 
Other  (34,685)  (30,334)  (50,784)
             
Net cash provided by operating activities  753,032   994,416   1,231,952 
             
Cash flows from investing activities
            
Capital expenditures, net of construction payable  (781,754)  (2,917,409)  (1,758,795)
Proceeds from contribution of CityCenter  —   2,468,652   — 
Proceeds from disposals of discontinued operations, net  —   578,873   — 
Purchase of convertible note  —   (160,000)  — 
Investments in and advances to unconsolidated affiliates  (1,279,462)  (31,420)  (103,288)
Property damage insurance recoveries  21,109   207,289   209,963 
Dispositions of property and equipment  85,968   47,571   11,375 
Other  (27,301)  15,745   (1,682)
             
Net cash provided by (used in) investing activities  (1,981,440)  209,301   (1,642,427)
             
Cash flows from financing activities
            
Net borrowings (repayments) under bank credit facilities — maturities of 90 days or less  2,760,450   (402,300)  756,850 
Borrowings under bank credit facilities — maturities longer than 90 days  8,170,000   6,750,000   7,000,000 
Repayments under bank credit facilities — maturities longer than 90 days  (8,450,000)  (7,500,000)  (8,150,000)
Issuance of long-term debt  698,490   750,000   1,500,000 
Retirement of senior notes  (789,146)  (1,402,233)  (444,500)
Debt issuance costs  (48,700)  (5,983)  (28,383)
Issuance of common stock  —   1,192,758   — 
Issuance of common stock upon exercise of stock awards  14,116   97,792   89,113 
Purchases of common stock  (1,240,856)  (826,765)  (246,892)
Excess tax benefits from stock-based compensation  9,509   102,479   47,330 
Other  (1,781)  3,715   (13,494)
             
Net cash provided by (used in) financing activities  1,122,082   (1,240,537)  510,024 
             
Cash and cash equivalents
            
Net increase (decrease) for the year  (106,326)  (36,820)  99,549 
Cash related to assets held for sale  (14,154)  —   (24,538)
Balance, beginning of year  416,124   452,944   377,933 
             
Balance, end of year $295,644  $416,124  $452,944 
             
Supplemental cash flow disclosures
            
Interest paid, net of amounts capitalized $622,297  $731,618  $778,590 
State, federal and foreign income taxes paid, net of refunds  437,874   391,042   369,450 
Non-cash investing and financing activities
            
Carrying value of net assets contributed to joint venture $—  $2,773,612  $— 
CityCenter partial completion guarantee and delayed equity contributions  1,111,837   —   — 
The accompanying notes are an integral part of these consolidated financial statements.


55

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
For the Years Ended December 31, 2008, 2007 and 2006
                                 
                    Accumulated Other
    
  Common Stock  Capital in
           Comprehensive
  Total
 
  Shares
  Par
  Excess of
  Deferred
  Treasury
  Retained
  Income
  Stockholders’
 
  Outstanding  Value  Par Value  Compensation  Stock  Earnings  (Loss)  Equity 
 
Balances, January 1, 2006
  285,070  $3,573  $2,586,587  $(3,618) $(1,338,394) $1,987,725  $(801) $3,235,072 
Net income  —   —   —   —   —   648,264   —   648,264 
Currency translation adjustment  —   —   —   —   —   —   1,213   1,213 
Other comprehensive income from unconsolidated affiliate, net  —   —   —   —   —   —   3   3 
                                 
Total comprehensive income                              649,480 
Stock-based compensation  —   —   71,186   3,238   —   —   —   74,424 
Tax benefit from stock-based compensation  —   —   60,033   —   —   —   —   60,033 
Cancellation of restricted stock  (4)  —   —   70   (70)  —   —   — 
Issuance of common stock upon exercise of stock options  5,623   56   89,057   —   —   —   —   89,113 
Purchases of treasury stock  (6,500)  —   —   —   (246,892)  —   —   (246,892)
Restricted shares turned in for tax withholding  (280)  —   —   —   (11,764)  —   —   (11,764)
Other  —   —   (227)  310   —   —   —   83 
                                 
Balances, December 31, 2006
  283,909   3,629   2,806,636   —   (1,597,120)  2,635,989   415   3,849,549 
Net income  —   —   —   —   —   1,584,419   —   1,584,419 
Currency translation adjustment  —   —   —   —   —   —   583   583 
Other comprehensive loss from unconsolidated affiliate, net  —   —   —   —   —   —   (442)  (442)
                                 
Total comprehensive income                              1,584,560 
Stock-based compensation  —   —   48,063   —   —   —   —   48,063 
Tax benefit from stock-based compensation  —   —   115,439   —   —   —   —   115,439 
Issuance of common stock  14,200   —   883,980   —   308,778   —   —   1,192,758 
Issuance of common stock upon exercise of stock options and stock appreciation rights  5,510   55   96,691   —   —   —   —   96,746 
Purchases of treasury stock  (9,850)  —   —   —   (826,765)  —   —   (826,765)
Other  —   —   353   —   —   —   —   353 
                                 
Balances, December 31, 2007
  293,769   3,684   3,951,162   —   (2,115,107)  4,220,408   556   6,060,703 
Net income (loss)  —   —   —   —   —   (855,286)  —   (855,286)
Currency translation adjustment  —   —   —   —   —   —   (3,190)  (3,190)
Valuation adjustment to M Resort convertible note, net of taxes  —   —   —   —   —   —   (54,267)  (54,267)
                                 
Total comprehensive income (loss)                              (912,743)
Stock-based compensation  —   —   42,418   —   —   —   —   42,418 
Tax benefit from stock-based compensation  —   —   10,494   —   —   —   —   10,494 
Issuance of common stock upon exercise of stock options and stock appreciation rights  888   9   14,107   —   —   —   —   14,116 
Purchases of treasury stock  (18,150)  —   —   —   (1,240,856)  —   —   (1,240,856)
Other  —   —   229   —   —   —   —   229 
                                 
Balances, December 31, 2008
  276,507  $3,693  $4,018,410  $—  $(3,355,963) $3,365,122  $(56,901) $3,974,361 
                                 
The accompanying notes are an integral part of these consolidated financial statements.


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MGM MIRAGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 —ORGANIZATION
MGM MIRAGE (the “Company”) is a Delaware corporation, incorporated on January 29, 1986. As of December 31, 2008, approximately 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.
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 Signature at MGM Grand Las Vegas, a condominium-hotel consisting of three towers. Other Nevada operations include Circus Circus Reno, Gold Strike in Jean, and Railroad Pass in Henderson. The Company has a 50% investment in Silver Legacy in Reno, which is adjacent to Circus Circus Reno. The Company also owns Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip resorts, and Primm Valley Golf Club at the California/Nevada state line.
In December 2008, the Company entered into an agreement to sell TI for $775 million; the sale is expected to close by March 31, 2009. In April 2007, the Company completed the sale of Buffalo Bill’s, Primm Valley, and Whiskey Pete’s casino resorts (the “Primm Valley Resorts”), not including the Primm Valley Golf Club, with net proceeds to the Company of approximately $398 million. In June 2007, the Company completed the sale of the Colorado Belle and Edgewater in Laughlin (the “Laughlin Properties”), with net proceeds to the Company of approximately $199 million.
The Company is a 50% owner of CityCenter, a mixed-use development on the Las Vegas Strip, between Bellagio and Monte Carlo. CityCenter will feature a 4,000-room casino resort designed by world-famous architect Cesar Pelli; two 400-room non-gaming boutique hotels, one of which will be managed by luxury hotelier Mandarin Oriental; approximately 425,000 square feet of retail shops, dining and entertainment venues; and approximately 2.1 million square feet of residential space in approximately 2,400 luxury condominium and condominium-hotel units in multiple towers. CityCenter is expected to open in late 2009, except CityCenter postponed the opening of The Harmon Hotel & Spa until late 2010 and cancelled the development of approximately 200 residential units originally planned. The other 50% of CityCenter is owned by Infinity World Development Corp. (“Infinity World”), a wholly-owned subsidiary of Dubai World, a Dubai, United Arab Emirates government decree entity. The Company is managing the development of CityCenter and, upon completion of construction, will manage the operations of CityCenter for a fee. Construction costs for the major components of CityCenter are covered by guaranteed maximum price contracts (“GMPs”) totaling $6.9 billion, which have been fully executed. Including the cancellation of The Harmon residential component, the Company anticipates total cost savings of approximately $0.5 billion which would reduce the $6.9 billion in GMP construction costs. In addition, by postponing The Harmon Hotel & Spa by one year the Company expects to defer $0.2 billion of construction costs necessary to complete the interior fit out. Additional budgeted cash expenditures include $1.8 billion of construction costs not included in the GMPs, $0.2 billion of preopening costs, and $0.3 billion of financing costs.
The Company and its local partners own and operate MGM Grand Detroit in Detroit, Michigan. The 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


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other 50% of MGM Grand Macau. Grand Victoria is a riverboat in Elgin, Illinois — an affiliate of Hyatt Gaming owns the other 50% of Grand Victoria and also operates the resort. Borgata is a casino resort located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation owns the other 50% of Borgata and also operates the resort.
The Company owns additional land adjacent to Borgata, a portion of which consists of common roads, landscaping and master plan improvements, a portion of which is being utilized for an expansion of Borgata, and a portion of which is planned for a wholly-owned development, MGM Grand Atlantic City. The Company has made extensive progress in design and other pre-development activities. However, current economic conditions and the impact of the credit market environment have caused the Company to reassess timing for this project. Accordingly, the Company has postponed additional development activities. The Company has also postponed further design and pre-construction activities for its planned North Las Vegas Strip project with Kerzner International and Istithmar — see Note 13 for further discussion.
NOTE 2 — LIQUIDITY AND FINANCIAL POSITION
The Company has significant indebtedness and significant financial commitments in 2009. As of December 31, 2008, the Company had approximately $13.5 billion of total long-term debt. In late February 2009, the Company borrowed $842 million under the senior credit facility, which amount represented — after giving effect to $93 million in outstanding letters of credit — the total amount of unused borrowing capacity available under its $7.0 billion senior credit facility. In connection with the waiver and amendment described below, on March 17, 2009 the Company repaid $300 million under the senior credit facility, which amount is not available for reborrowing without the consent of the lenders. The Company has no other existing sources of borrowing availability, except to the extent it pays down further amounts outstanding under the senior credit facility.
In addition to commitments under employment, entertainment and other operational agreements, the 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 Variable Interest Entities — an Interpretation of ARB No. 51” (“FIN 46(R)”), are accounted for under the


59

equity method. All significant intercompany balances and transactions have been eliminated in consolidation. The 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 maintains insurance for both property damage and business interruption relating to catastrophic events, such as Hurricane Katrina affecting Beau Rivage in August 2005 and the rooftop fire at Monte Carlo in January 2008. Business interruption coverage covers lost profits and other costs incurred during the closure period and up to six months following re-opening.
Non-refundable insurance recoveries received in excess of the net book value of damaged assets,clean-up and demolition costs, and post-event costs are recognized as income in the period received or committed based on the Company’s estimate of the total claim for property damage (recorded as “Property transactions, net”) and business interruption (recorded as a reduction of “General and administrative” expenses) compared to the recoveries received at that time. All post-event costs and expected recoveries are recorded net within “General and administrative” expenses, except for depreciation of non-damaged assets, which is classified as “Depreciation and amortization.”
Insurance recoveries are classified in the statement of cash flows based on the coverage to which they relate. Recoveries related to business interruption are classified as operating cash flows and recoveries related to property damage are classified as investing cash flows. However, the Company’s insurance policy includes undifferentiated coverage for both property damage and business interruption. Therefore, the Company classifies insurance recoveries as being related to property damage until the full amount of damaged assets and demolition costs are recovered, and classifies additional recoveries up to the amount of post-event costs incurred as being related to business interruption. Insurance recoveries beyond that amount are classified as operating or investing cash flows based on the Company’s estimated allocation of the total claim.
The following table shows the net pre-tax impact on the statements of operations for insurance recoveries from Hurricane Katrina and the Monte Carlo fire:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
Reduction of general and administrative expenses:            
Hurricane Katrina $—  $66,748  $— 
Monte Carlo fire  9,146   —   — 
             
  $  9,146  $66,748  $— 
             
Reduction of property transactions, net:            
Hurricane Katrina $—  $217,290  $ 86,016 
Monte Carlo fire  9,639   —   — 
             
  $9,639  $217,290  $86,016 
             
The following table shows the cash flow statement impact of insurance proceeds from Hurricane Katrina and the Monte Carlo fire:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
Cash flows from operating activities:            
Hurricane Katrina $—  $72,711  $98,786 
Monte Carlo fire  28,891   —   — 
             
  $ 28,891  $72,711  $98,786 
             
Cash flows from investing activities:            
Hurricane Katrina $—  $207,289  $209,963 
Monte Carlo fire  21,109   —   — 
             
  $21,109  $207,289  $209,963 
             


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Hurricane Katrina.  The Company reached final settlement agreements with its insurance carriers related to Hurricane Katrina in late 2007. In total, the Company received insurance recoveries of $635 million, which exceeded the $265 million net book value of damaged assets and post-storm costs incurred. The Company recognized the $370 million of excess insurance recoveries in income in 2007 and 2008.
Monte Carlo fire.  As of December 31, 2008, the Company received $50 million of proceeds from its insurance carriers related to the Monte Carlo fire. Through December 31, 2008, the Company recorded a write-down of $4 million related to the net book value of damaged assets, demolition costs of $7 million, and operating costs of $21 million. As of December 31, 2008, the Company had a receivable of approximately $1 million from its insurance carriers.
Cash and cash equivalents.  Cash and cash equivalents include investments and interest bearing instruments with maturities of three months or less at the date of acquisition. Such investments are carried at cost which approximates market value. Book overdraft balances resulting from the Company’s cash management program are recorded as accounts payable, construction payable, or other accrued liabilities, as applicable.
Accounts receivable and credit risk.  Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino accounts receivable. The Company issues markers to approved casino customers following background checks and investigations of creditworthiness. At December 31, 2008, a substantial portion of the 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, 2008, no significant concentrations of credit risk existed for which an allowance had not already been recorded.
Real estate under development.  Until November 2007, the Company capitalized costs of wholly-owned real estate projects to be sold, which consisted entirely of condominium and condominium-hotel developments at CityCenter. Subsequent to the contribution of CityCenter to a joint venture — See Note 5 — the Company no longer has real estate under development.
Inventories.  Inventories consist of food and beverage, retail merchandise and operating supplies, and are stated at the lower of cost or market. Cost is determined primarily by the average cost method for food and beverage and supplies and the retail inventory or specific identification methods for retail merchandise.
Property and equipment.  Property and equipment are stated at cost. Gains or losses on dispositions of property and equipment are included in the determination of income. Maintenance costs are expensed as incurred. Property and equipment are generally depreciated over the following estimated useful lives on a straight-line basis:
Buildings and improvements30 to 45 years
Land improvements10 to 20 years
Furniture and fixtures3 to 10 years
Equipment3 to 20 years
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, the Company recognizes the asset to be sold at the lower of carrying value or estimated fair value less costs of disposal. Fair value for assets to be disposed of is estimated based on comparable asset sales, offers received, or a discounted cash flow model.
For assets to be held and used, the Company reviews fixed assets for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the Company compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying


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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 assets.  Goodwill represents the excess of purchase price over fair market value of net assets acquired in business combinations. Goodwill and indefinite-lived intangible assets must be reviewed for impairment at least annually and between annual test dates in certain circumstances. The Company performs its annual impairment tests in the fourth quarter of each fiscal year. No impairments were indicated as a result of the annual impairment review for goodwill and indefinite-lived intangible assets in 2007 and 2006. See Note 9 for results of our 2008 annual impairment tests.
Goodwill for relevant reporting units is tested for impairment using a discounted cash flow analysis based on the estimated future results of the Company’s reporting units discounted using the Company’s weighted average


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cost of capital and market indicators of terminal year capitalization rates. The implied fair value of a reporting units goodwill is compared to the carrying value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to its assets and liabilities and the amount remaining, if any, is the implied fair value of goodwill. If the implied fair value of the goodwill is less than its carrying value then it must be written down to its implied fair value. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss must be recognized equal to the difference.
Revenue recognition and promotional allowances.  Casino revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs (“casino front money”) and for chips in the customers’ possession (“outstanding chip liability”). Hotel, food and beverage, entertainment and other operating revenues are recognized as services are performed. Advance deposits on rooms and advance ticket sales are recorded as accrued liabilities until services are provided to the customer.
Gaming revenues are recognized net of certain sales incentives, including discounts and points earned in point-loyalty programs. The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenue and then deducted as promotional allowances. The estimated cost of providing such promotional allowances is primarily included in casino expenses as follows:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Rooms $91,292  $96,183  $91,799 
Food and beverage  288,522   303,900   296,866 
Other  30,742   33,457   34,439 
             
  $410,556  $433,540  $423,104 
             
Reimbursed expenses.  The Company recognizes costs reimbursed pursuant to management services as revenue in the period it incurs the costs. Reimbursed costs related mainly to the Company’s management of CityCenter and totaled $47 million for 2008 and $5 million for 2007, and are classified as other revenue and other operating expenses in the accompanying consolidated statements of operations.
Point-loyalty programs.  The 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, 2008 and 2007, the total company-wide liability for point-loyalty programs was $52 million and $56 million, respectively, including amounts classified as liabilities related to assets held for sale.
Advertising.  The Company expenses advertising costs the first time the advertising takes place. Advertising expense of continuing operations, which is generally included in general and administrative expenses, was $122 million, $141 million and $119 million for 2008, 2007 and 2006, respectively.
Corporate expense.  Corporate expense represents unallocated payroll and aircraft costs, professional fees and various other expenses not directly related to the 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


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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 operations. See Note 17 for a detailed discussion of these amounts.
Income per share of common stock.  The weighted-average number of common and common equivalent shares used in the calculation of basic and diluted earnings per share consisted of the following:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Weighted-average common shares outstanding used in the calculation of basic earnings per share  279,815   286,809   283,140 
Potential dilution from stock options, stock appreciation rights and restricted stock  —   11,475   8,607 
             
Weighted-average common and common equivalent shares used in the calculation of diluted earnings per share  279,815   298,284   291,747 
             
The Company had a loss from continuing operations in 2008. Therefore, approximately 26 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share because inclusion would be anti-dilutive. In 2007 and 2006, shares underlying outstanding stock-based awards excluded from the diluted share calculation were not material.
Currency translation.  The Company accounts for currency translation in accordance with Statement of Financial Accounting Standards No. 52, “Foreign Currency Translation.” Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments resulting from this process are charged or credited to other comprehensive income.
Comprehensive income.  Comprehensive income includes net income (loss) and all other non-stockholder changes in equity, or other comprehensive income. Elements of the Company’s other comprehensive income are reported in the accompanying consolidated statements of stockholders’ equity, and the cumulative balance of these elements consisted of the following:
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Other comprehensive income (loss) from unconsolidated affiliates $—  $    (305)
Valuation adjustment to M Resort convertible note, net of taxes  (54,267)  — 
Currency translation adjustments  (2,634)  861 
         
  $(56,901) $556 
         
Reclassifications.  The consolidated financial statements for prior years reflect certain reclassifications, which have no effect on previously reported net income, to conform to the current year presentation. Substantially all of the prior year reclassifications relate to the classification of meals provided free to employees as a “General and administrative” expense, while in past periods the cost of these meals was charged to each operating department. The total amount reclassified to general and administrative expenses for the years ending 2007 and 2006 was $112 million and $98 million, respectively.
Fair value measurement.  The Company adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”) for financial assets and liabilities on January 1, 2008. SFAS 157 establishes a framework for measuring the fair value of financial assets and liabilities and requires certain disclosures about fair value. The framework utilizes a fair value hierarchy consisting of the following: “Level 1” inputs, which are observable inputs for identical assets, such as quoted prices in an active market; “Level 2” inputs,


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which are observable inputs for similar assets; and “Level 3” inputs, which are unobservable inputs. The Company’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.


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NOTE 4 —ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
The asset and liabilities of TI are classified as held for sale as of December 31, 2008. However, the results of its operations have not been classified as discontinued operations because the Company expects to continue to receive significant cash flows from customer migration.
The following table summarizes the assets held for sale and liabilities related to assets held for sale in the accompanying consolidated balance sheets:
     
  December 31,
 
  2008 
  (In thousands) 
 
Cash $14,154 
Accounts receivable, net  9,962 
Inventories  3,069 
Prepaid expenses and other  3,459 
     
Total current assets  30,644 
Property and equipment, net  494,807 
Goodwill  7,781 
Other assets, net  5,743 
     
Total assets  538,975 
     
Accounts payable  4,162 
Other current liabilities  26,111 
     
Total current liabilities  30,273 
Other long-term obligations  — 
     
Total liabilities  30,273 
     
Net assets $508,702 
     
The sale of the Primm Valley Resorts in April 2007 resulted in a pre-tax gain of $202 million and the sale of the Laughlin Properties in June 2007 resulted in a pre-tax gain of $64 million. The results of the Laughlin Properties and Primm Valley Resorts are classified as discontinued operations in the accompanying consolidated statements of operations for the years ended 2007 and 2006. The cash flows of discontinued operations are included with the cash flows of continuing operations in the accompanying consolidated statements of cash flows.
Other information related to discontinued operations is as follows:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Net revenues of discontinued operations $     —  $128,619  $412,032 
Interest allocated to discontinued operations (based on the ratio of net assets of discontinued operations to total consolidated net assets and debt)       —   5,844   18,160 
NOTE 5 —CITYCENTER TRANSACTION
In August 2007, the Company and Dubai World agreed to form a50/50 joint venture for the CityCenter development. The joint venture, CityCenter Holdings, LLC, is owned equally by the Company and Infinity World. In November 2007 the Company contributed the CityCenter assets which the parties valued at $5.4 billion, subject to certain adjustments. Infinity World contributed $2.96 billion in cash. At the close of the transaction, the Company received a cash distribution of $2.47 billion, of which $22 million was repaid in 2008 to CityCenter as a result of a post-closing adjustment. The Company will continue to serve as developer of CityCenter and, upon completion of construction, will manage CityCenter for a fee.
The initial contribution of the CityCenter assets was accounted for as a partial sale of real estate. As a partial sale, profit can be recognized when a seller retains an equity interest in the assets, but only to the extent of the outside equity interests, and only if the following criteria are met: 1) the buyer is independent of the seller;


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2) collection of the sales price is reasonably assured; and 3) the seller will not be required to support the operations of the property to an extent greater than its proportionate retained interest.
The transaction met criteria 1 and 3, despite the 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, 
  2008  2007 
  (In thousands) 
 
Casino $243,600  $266,059 
Hotel  112,985   181,983 
Other  46,437   50,815 
         
   403,022   498,857 
Less: Allowance for doubtful accounts  (99,606)  (85,924)
         
  $303,416  $412,933 
         


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NOTE 7 —PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Land $7,449,254  $7,728,488 
Buildings, building improvements and land improvements  8,806,135   8,724,339 
Furniture, fixtures and equipment  3,435,886   3,231,725 
Construction in progress  407,440   552,667 
         
   20,098,715   20,237,219 
Less: Accumulated depreciation and amortization  (3,809,561)  (3,366,321)
         
  $16,289,154  $16,870,898 
         
NOTE 8 —INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
. Investments in and advances to unconsolidated affiliates consisted of the following:
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
CityCenter Holdings, LLC — CityCenter (50)% $ 3,581,188  $ 1,421,480 
Marina District Development Company — Borgata (50)%  474,171   453,277 
Elgin Riverboat Resort-Riverboat Casino — Grand Victoria (50)%  296,746   297,328 
MGM Grand Paradise Limited — Macau (50)%  252,060   258,298 
Circus and Eldorado Joint Venture — Silver Legacy (50)%  27,912   35,152 
Turnberry/MGM Grand Towers — The Signature at MGM Grand (50)%  3,309   5,651 
Other  7,479   11,541 
         
  $4,642,865  $2,482,727 
         
Through December 31, 2008, the Company and Infinity World had each made loans of $925 million to CityCenter, which are subordinate to the credit facility, to fund construction costs. During the fourth quarter of 2008, $425 million of each partner’s loan funding was converted to equity and each partner provided additional equity contributions of $228 million. Under the terms of the credit facility described below, the Company and Infinity World were each required to make additional equity commitments of up to $731 million as of December 31, 2008, which requirement would be reduced by future qualifying financing obtained by CityCenter. During the fourth quarter of 2008, the Company recorded a liability equal to the present value of the required future equity contributions, classified as “Other accrued liabilities” in the accompanying consolidated balance sheet, and a corresponding increase to its investment balance. Subsequent to December 31, 2008, each partner made additional contributions of $237 million each.
In October 2008, CityCenter closed on a $1.8 billion senior secured bank credit facility. The credit facility requires the Company and Infinity World to provide subordinated loans and equity contributions which will be used to fund construction costs prior to amounts being drawn under the credit facility. In conjunction with the CityCenter credit facility, the Company and Infinity World have entered into partial completion guarantees on a several basis — see Note 13.
During the year ended December 31, 2008 and 2007, the Company incurred $46 million and $5 million, respectively, of costs reimbursable by CityCenter, which was comprised primarily of employee compensation, residential sales costs, and certain allocated costs. Such costs are recorded as “Other” operating expenses, and the reimbursement of such costs is recorded as “Other” revenue in the accompanying consolidated statements of operations.


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During 2007, sales of units at The Signature at MGM Grand were completed and the joint venture essentially ceased sales operations. During the fourth quarter of 2007, the Company purchased the remaining 88 units in Towers B and C from the joint venture for $39 million. These units have been recorded as property, plant and equipment in the accompanying consolidated balance sheets.
The Company recognized the following related to its share of profit from condominium sales, based on when sales were closed in 2007 and 2006.
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Income from joint venture $     —  $ 83,728  $102,785 
Gain on land previously deferred  —   8,003   14,524 
Other income (loss)  —   776   (108)
             
  $—  $92,507  $117,201 
             
The Company’s investment in unconsolidated affiliates does not equal the venture-level equity due to various basis differences. Basis differences related to depreciable assets are being amortized based on the useful lives of the related assets and liabilities and basis differences related to non-depreciable assets are not being amortized. Differences between the Company’s venture-level equity and investment balances are as follows:
         
  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 
         
(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.


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The Company recorded its share of the results of operations of the unconsolidated affiliates as follows:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Income from unconsolidated affiliates $96,271  $222,162  $254,171 
Preopening andstart-up expenses
  (20,960)  (41,140)  (8,813)
Non-operating items from unconsolidated affiliates  (34,559)  (18,805)  (16,063)
             
  $40,752  $162,217  $229,295 
             
Summarized balance sheet information of the unconsolidated affiliates is as follows:
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Current assets $555,615  $676,746 
Property and other assets, net  11,546,361   7,797,343 
Current liabilities  945,412   817,208 
Long-term debt and other liabilities  3,908,088   2,015,631 
Equity  7,248,476   5,641,250 
Summarized results of operations of the unconsolidated affiliates are as follows:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Net revenues $2,445,835  $1,884,504  $2,020,523 
Operating expenses, except preopening expenses  (2,258,033)  (1,447,749)  (1,536,253)
Preopening andstart-up expenses
  (41,442)  (79,879)  (12,285)
             
Operating income  146,360   356,876   471,985 
Interest expense  (81,878)  (47,618)  (37,898)
Other non-operating income (expense)  (5,660)  5,194   2,462 
             
Net income $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)
         


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NOTE 9 —GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consisted of the following:
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Goodwill:        
Mirage Resorts acquisition (2000) $39,648  $47,186 
Mandalay Resort Group acquisition (2005)  45,510   1,214,297 
Other  1,195   1,439 
         
  $86,353  $ 1,262,922 
         
Indefinite-lived intangible assets:        
Detroit development rights $98,098  $98,098 
Trademarks, license rights and other  235,672   247,346 
         
   333,770   345,444 
Other intangible assets, net  13,439   16,654 
         
  $   347,209  $362,098 
         
Changes in the 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. Goodwill 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 annual impairment test of indefinite-lived intangible assets, the Company recognized a non-cash impairment charge of $12 million in the fourth quarter of 2008 — included in “Property transactions, net” in the accompanying consolidated statement of 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.
The Company’s remaining 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.


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NOTE 10 —OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
         
  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 11 —LONG-TERM DEBT
Long-term debt consisted of the following:
         
  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 
         
At December 31, 2007, amounts due within one year of the balance sheet date were classified as long-term in the accompanying consolidated balance sheets because the Company had both the intent and ability to repay these amounts with available borrowings under its senior credit facility. As discussed in Note 2, the senior credit facility was 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


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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 and matures in 2011. The Company has the ability to solicit additional lender commitments to increase the capacity to $8 billion. The components of the senior credit facility include a term loan facility of $2.5 billion and a revolving credit facility of $4.5 billion. The weighted average interest rate on outstanding borrowings under the senior credit facility at December 31, 2008 was 3.4%. At December 31, 2008, the Company had approximately $1.2 billion of available borrowing capacity under the senior credit facility. After giving effect to the events described in Note 2, the Company has borrowed the entire amount of available borrowings under the senior credit facility as of February 28, 2009.
In November 2008, the Company issued $750 million in aggregate principal amount of 13% senior secured notes due 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 aggregate outstanding principal amount of its 7% debentures due 2036 pursuant to a one-time put option by the holders of such debentures. The Company recognized a $6 million gain on the redemption of these debentures, included within “Other, net” in the accompanying consolidated statement of operations.
In October 2008, the Company’s Board of Directors authorized the purchase of up to $500 million of the Company’s public debt securities. In 2008, the Company repurchased $345 million of principal amounts of its outstanding senior notes at a purchase price of $263 million in open 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.


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The Company recognized an $82 million gain on the repurchase of the above senior notes, included in “other, net” in the accompanying consolidated statement of operations.
In February 2008, the Company repaid the $180.4 million of 6.75% senior notes at maturity using borrowings under the senior credit facility. In August 2008, the Company repaid the $196.2 million of 9.5% senior notes at maturity using borrowings under the senior credit facility.
In May 2007, the Company issued $750 million of 7.5% senior notes due 2016. In June 2007, the Company repaid the $710 million of 9.75% senior subordinated notes at maturity. In August 2007, the Company repaid the $200 million of 6.75% senior notes and the $492.2 million of 10.25% senior subordinated notes at maturity using borrowings under the senior credit facility.
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. 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.
The Company’s long-term debt obligations contain customary covenants, including requiring the Company to maintain certain financial ratios. In September 2008, the Company amended its senior credit facility to increase the maximum total leverage ratio (debt to EBITDA, as defined) to 7.5:1.0 beginning with the fiscal quarter ending December 31, 2008, which will remain in effect through December 31, 2009, with step downs thereafter. The Company is also required to maintain a minimum coverage ratio (EBITDA to interest charges, as defined) of 2.0:1.0. At December 31, 2008, the Company’s leverage and interest coverage ratios were 6.7:1.0 and 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, 2008 are as follows:
     
  (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, 2008 was approximately $8.5 billion, versus its book value of $13.5 billion. At December 31, 2007, the estimated fair value of the Company’s long-term debt was approximately $10.9 billion, versus its book value of $11.2 billion. The estimated fair value of the Company’s senior and senior subordinated notes was based on quoted market prices on or about December 31, 2008 and 2007; the fair value of the Company’s senior credit facility is based on estimated amounts.
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.


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The income tax provision attributable to continuing operations and discontinued operations is as follows:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Continuing operations $186,298  $757,883  $341,930 
Discontinued operations  —   92,400   6,205 
             
  $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, 
  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, 
  2008  2007  2006 
 
Federal income tax statutory rate  (35.0)%  35.0%  35.0%
State income tax (net of federal benefit)  0.8   0.1   0.4 
Goodwill write-down  61.1   —   — 
Reversal of reserves for prior tax years  —   (0.2)  (0.8)
Losses of unconsolidated foreign affiliates  1.0   2.0   — 
Domestic Production Activity deduction  —   (1.8)  — 
Tax credits  (1.0)  (0.3)  (0.6)
Permanent and other items  0.9   0.3   1.0 
             
   27.8%  35.1%  35.0%
             


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The major tax-effected components of the Company’s net deferred tax liability are as follows:
         
  At December 31, 
  2008  2007 
  (In thousands) 
 
Deferred tax assets — federal and state        
Bad debt reserve $41,452  $38,144 
Deferred compensation  35,978   48,439 
Net operating loss carryforward  1,204   1,054 
Preopening andstart-up costs
  4,928   4,278 
Accruals, reserves and other  69,321   70,350 
Stock-based compensation  50,677   37,059 
Tax credits  2,491   2,491 
         
   206,051   201,815 
Less: Valuation allowance  (4,197)  (4,047)
         
  $201,854  $197,768 
         
Deferred tax liabilities — federal and state        
Property and equipment $(3,455,987) $(3,420,115)
Long-term debt  (6,500)  (1,479)
Investments in unconsolidated affiliates  (15,709)  (26,643)
Intangibles  (101,703)  (102,738)
         
   (3,579,899)  (3,550,975)
         
Deferred taxes — foreign  2,034   2,214 
Less: Valuation allowance  (2,034)  (2,214)
         
Net deferred tax liability $(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 New Jersey net operating loss carryforwards of $21 million, which equates to a deferred tax asset of $1 million, after federal tax effect, and before valuation allowance. The New Jersey net operating loss carryforwards will expire at various dates from 2009 through 2015 if not utilized.
At December 31, 2008, there is a $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.


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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 Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the taxes paid in foreign jurisdictions are not material. As of December 31, 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 2001 and 2002 tax years closed during the first quarter of 2007, the statute of limitations for assessing tax for such years has been extended in order for the Company to 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, the Company believes that it is reasonably possible to settle these issues within the next twelve months. The IRS is currently examining the Company’s federal income tax returns for the 2003 and 2004 tax years and a subsidiary of the Company for the 2004 through 2006 tax years. Tax returns for subsequent years of the Company are also subject to examination. In addition, during the first quarter of 2009, the IRS initiated an examination of the federal income tax return of Mandalay Resort Group for the pre-acquisition year ended April 25, 2005. The statute of limitations for assessing tax for the Mandalay Resort Group federal income tax return for the year ended January 31, 2005 has been extended but such return is not currently under examination by the IRS.
As of December 31, 2008, 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 and 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 expectation that the appeal of the 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 range of $0 to $8 million during the year ended December 31, 2008, primarily on the expectation that the appeal of the 2001 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 increased the amount of certain other unrecognized tax benefits during 2008 based upon a reassessment of the measurement of such tax benefits during the year.


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NOTE 13 —COMMITMENTS AND CONTINGENCIES
Leases.  The Company leases real estate and various equipment under operating and, to a lesser extent, capital lease arrangements. Certain real estate leases provide for escalation of rent based upon a specified price indexand/or based upon periodic appraisals.
At December 31, 2008, the Company was obligated under non-cancelable operating leases and capital leases to make future minimum lease payments as follows:
         
  Operating
  Capital
 
  Leases  Leases 
  (In thousands) 
 
Years ending December 31,        
2009 $13,626  $1,887 
2010  10,844   1,859 
2011  8,974   1,670 
2012  7,901   1,204 
2013  5,884   37 
Thereafter  44,052   — 
         
Total minimum lease payments $91,281   6,657 
         
Less: Amounts representing interest      (212)
         
Total obligations under capital leases      6,445 
Less: Amounts due within one year      (1,685)
         
Amounts due after one year     $4,760 
         
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 for December 31, 2008 and $36 million for each of the years ended December 31, 2007 and 2006.
Mashantucket Pequot Tribal Nation.  The Company entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in 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 will provide a loan of up to $200 million to finance a portion of MPTN’s investment in joint projects.
Kerzner/Istithmar Joint Venture.  In September 2007, the Company entered into a definitive agreement with Kerzner International and Istithmar forming a joint venture to develop a multi-billion dollar integrated resort to be located on the southwest corner of Las Vegas Boulevard and Sahara Avenue. In September 2008, the Company and its partners agreed to 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 contribute 40 acres of land, valued at $20 million per acre, for fifty percent of the equity in the joint venture. Kerzner International and Istithmar will contribute cash totaling $600 million, of which $200 million will be distributed to the Company, for the other 50% of the equity.
CityCenter completion guarantee.  As discussed in Note 8, the Company and Infinity World have entered into partial completion guarantees in conjunction with the CityCenter credit facility. The partial completion guarantees provide for additional contingent funding of construction costs in the event such funding is necessary to complete the project, up to a maximum amount of $600 million from each partner. During the fourth quarter of 2008, the Company recorded a liability of $205 million, classified as “Other long-term obligations” in the accompanying consolidated balance 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.”


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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, 2008, the Company had provided $92 million of total letters of credit, including $50 million to support bonds issued by the Economic Development Corporation of the City of Detroit, which are recorded as a liability of the Company. 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.
Sales and use tax on complimentary meals.  In March 2008, the Nevada Supreme Court ruled, in a case involving another casino company, that food and non-alcoholic beverages purchased for use in providing complimentary meals to customers and to employees were exempt from sales and use tax. The Company had previously paid use tax on these items and has generally filed for refunds for the periods from January 2001 to February 2008 related to this matter. The amount subject to these refunds, including amounts related to the Mandalay Resort Group properties prior to the Company’s 2005 acquisition of Mandalay Resort Group, is approximately $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 Supreme Court case in any 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 —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 sale.  On October 18, 2007, the Company completed the sale of 14.2 million shares of common stock to Infinity World Investments, a wholly-owned subsidiary of Dubai World, at a price of $84 per share for total proceeds of approximately $1.2 billion. These shares were previously held by the Company as treasury stock. Proceeds from the sale were used to reduce amounts outstanding under the senior credit facility.
Stock repurchases.  Share repurchases are only conducted under repurchase programs approved by the Board of Directors and publicly announced. At December 31, 2008, the Company had 20 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 


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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 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 
                 


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As 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:
             
  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 2008, the Company issued RSUs for 0.7 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 the 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 recognizes the estimated fair value of stock options and SARs granted under the Company’s omnibus plan based on the estimated fair value of these awards measured at the date of grant using the Black-Scholes model. For restricted stock units, compensation cost is calculated based on the fair market value of our stock on the date of grant. For stock options awards granted prior to adoption, the unamortized expense is being recognized on an accelerated basis, since this was the method used for disclosure purposes prior to the adoption of SFAS 123(R). For all awards granted after adoption, such expense is being recognized on a straight-line basis over the vesting period of the awards. Forfeitures are estimated at the time of grant, with such estimate updated periodically and with actual forfeitures recognized currently to the extent they differ from the estimate. The Company capitalizes stock-based compensation related to employees dedicated to construction activities. In addition, the Company charges CityCenter for stock-based compensation related to employees dedicated to CityCenter.


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The following table shows information about compensation cost recognized:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Compensation cost:            
Stock options and SARs $37,766  $48,063  $71,386 
Restricted stock and RSUs  4,652   —   3,038 
             
Total compensation cost  42,418   48,063   74,424 
Less: CityCenter reimbursed costs  (6,019)  (796)  — 
Less: Compensation cost capitalized  (122)  (1,589)  (798)
             
Compensation cost recognized as expense  36,277   45,678   73,626 
Less: Related tax benefit  (12,569)  (15,734)  (24,901)
             
Compensation expense, net of tax benefit $23,708  $29,944  $48,725 
             
Compensation cost for stock options and SARs 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:
             
  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 U.S. Treasury instruments with maturities matching the relevant expected term of the award.
NOTE 16 —EMPLOYEE BENEFIT PLANS
Employees of the Company who are members of various unions are covered by union-sponsored, collectively bargained, multi-employer health and welfare and defined benefit pension plans. The Company recorded an expense of $192 million in 2008, $194 million in 2007 and $189 million in 2006 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 — $22 million and $25 million at December 31, 2008 and 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 2007 and 2006.
The Company maintains nonqualified deferred retirement plans for certain key employees. The plans 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 deferred 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


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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.
The Company also maintains nonqualified supplemental executive retirement plans (“SERP”) for certain key employees. Until September 30, 2008, the Company made quarterly contributions 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 deferred tax savings. Employees do not make contributions under these plans. A portion of the Company contributions and investment earnings thereon vest 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 2007 and 2006.
Pursuant to the amendments of the nonqualified deferred retirement plans and SERP 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, 2008. In addition, the Company made payments of $57 million to participants in 2008 related to previous versions of these plans that were terminated during the year.
NOTE 17 —PROPERTY TRANSACTIONS, NET
Property transactions, net consisted of the following:
             
  Year Ended December 31, 
  2008  2007  2006 
  (In thousands) 
 
Goodwill and other indefinite-lived intangible assets impairment charge $1,179,788  $—  $— 
Other write-downs and impairments  52,170   33,624   40,865 
Demolition costs  9,160   5,665   348 
Insurance recoveries  (9,639)  (217,290)  (86,016)
Other net (gains) losses on asset sales or disposals  (20,730)  (8,312)  3,823 
             
  $1,210,749  $(186,313) $(40,980)
             
See discussion of goodwill and other indefinite-lived intangible assets impairment charge 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 capital projects.
Insurance recoveries in 2008 related to the insurance 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.


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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 $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, 2008, CityCenter owes the Company $5 million for unreimbursed development services costs.
Borgata leases 10 acres from the Company on a long-term basis for use in its current operations and for its expansion, and nine acres from the Company on a short-term basis for surface parking. Total payments received from Borgata under these lease agreements were $6 million in each of the years ended December 31, 2008, 2007 and 2006.
The Company paid legal fees to a firm that was affiliated with the Company’s general counsel. Payments to the firm totaled $10 million, $11 million, and $8 million for the years ended December 31, 2008, 2007, and 2006, respectively. At December 31, 2008 and 2007, the Company owed the firm $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.
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 2006 were not material.


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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. Separate condensed consolidating financial statement information for the subsidiary guarantors and non-guarantors as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006 is as follows:
                     
  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 


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  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)


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  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 


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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 
Because income per share amounts are calculated using the weighted average number of common and dilutive common equivalent shares outstanding during each quarter, the sum of the per share amounts for the four quarters may not equal the total income per share amounts for the year.
As discussed in Note 9, the Company recorded a $1.18 billion impairment charge related to goodwill and indefinite-lived intangible assets recognized in the Mandalay acquisition in 2005. The impairment was recorded in the fourth quarter of 2008, and 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 discussed in Note 5, the Company recorded a $1.03 billion pre-tax gain on the contribution of the CityCenter assets to a joint venture. The gain was recorded in the fourth quarter of 2007, and resulted in a $2.23 impact on fourth quarter 2007 diluted earnings per share and a $2.28 impact on full year 2007 diluted earnings per share.
As discussed in Note 1, Beau Rivage closed in August 2005 due to damage sustained from Hurricane Katrina and re-opened one year later. During 2007, we recorded pre-tax income from insurance recoveries of $284 million with an annual impact on diluted earnings per share of $0.62. We recorded $135 million in the third quarter of 2007 and $149 million in the fourth quarter of 2007, with corresponding impacts on diluted earnings per share of $0.30 and $0.32, respectively.


88

SIGNATURES
     
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the RegistrantCompany has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MGM MIRAGE

Date: April 24, 2009 By:  /s/ JAMES J. MURREN  
By: 
/s/  James J. Murren
James J. Murren Chairman,
  Chief Executive Officer, President, Chief
  Operating Officer, and President
(PrincipalChairman of the Board
  (Principal Executive Officer)
Date: April 24, 2009 /s/ DANIEL J. D’ARRIGO  
By: 
/s/  Daniel J. D’Arrigo
Daniel J. D’Arrigo
   Executive Vice President and Chief Financial Officer
(Principal
   (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.
  
SignatureTitleDate
/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 DirectorMarch 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

34

SignatureTitleDate
/s/  Kirk Kerkorian

Kirk Kerkorian		DirectorMarch 17, 2009
/s/  Anthony Mandekic

Anthony Mandekic		DirectorMarch 17, 2009
/s/  Rose McKinney-James

Rose McKinney-James		DirectorMarch 17, 2009
/s/  Daniel J. Taylor

Daniel J. Taylor		DirectorMarch 17, 2009
/s/  Melvin B. Wolzinger

Melvin B. Wolzinger		DirectorMarch 17, 2009


90

MGM MIRAGE
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
                     
           Deductions
    
  Balance at
  Provision for
  Write-offs
  Related to
  Balance at
 
  Beginning of
  Doubtful
  net of
  Discontinued
  End of
 
Description 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 


91