MGM Resorts International (MGM) 10-Q 2001 Q1 Quarterly report

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UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission File No. 0-16760

MGM MIRAGE
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	88-0215232 (I.R.S. Employer Identification No.)
3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109
(Address of principal executive offices—Zip Code)
(702) 693-7120 (Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)

    Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes /x/  No / /

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

Class	Outstanding at May 10, 2001
Common Stock, $.01 par value	159,334,736 shares

MGM MIRAGE AND SUBSIDIARIES
FORM 10-Q
I N D E X

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets at March 31, 2001 and December 31, 2000	1
	Consolidated Statements of Income for the Three Months Ended March 31, 2001 and March 31, 2000	2
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and March 31, 2000	3
	Condensed Notes to Consolidated Financial Statements	4-9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10-12
PART II.	OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K	12
	Signatures	13

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

			March 31, 2001			December 31, 2000
			(Unaudited)
ASSETS
Current assets
	Cash and cash equivalents		$	259,382		$	227,968
	Accounts receivable, net			208,786			236,650
	Inventories			86,333			86,279
	Income tax receivable			—			11,264
	Deferred income taxes			146,679			162,934
	Prepaid expenses and other			67,283			70,549
		Total current assets		768,463			795,644
Property and equipment, net				9,034,577			9,064,233
Other assets
	Investment in unconsolidated affiliates			524,360			522,422
	Excess of purchase price over fair market value of net assets acquired, net			50,650			54,281
	Deposits and other assets, net			280,526			298,021
		Total other assets		855,536			874,724
			$	10,658,576		$	10,734,601
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable		$	59,013		$	65,317
	Income taxes payable			3,170			—
	Current portion of long-term debt			413,044			521,308
	Accrued interest on long-term debt			68,122			77,738
	Other			534,938			568,842
		Total current liabilities		1,078,287			1,233,205
Deferred income taxes				1,743,500			1,730,158
Long-term debt				5,337,470			5,348,320
Other long-term obligations				35,206			40,473
Commitments and contingencies
Stockholders' equity
	Common stock, $.01 par value: authorized 300,000,000 shares, issued 163,314,533 and 163,189,205 shares; outstanding 159,255,533 and 159,130,205 shares			1,633			1,632
	Capital in excess of par value			2,042,803			2,041,820
	Treasury stock, at cost (4,059,000 shares)			(83,683	)		(83,683	)
	Retained earnings			511,850			427,956
	Other comprehensive loss			(8,490	)		(5,280	)
		Total stockholders' equity		2,464,113			2,382,445
			$	10,658,576		$	10,734,601

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

1

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

		Three Months Ended March 31,
		2001			2000
Revenues
	Casino	$	575,395		$	285,578
	Rooms		236,983			71,763
	Food and beverage		185,956			51,004
	Entertainment, retail and other		167,271			48,962
	Income from unconsolidated affiliate		11,551			—
			1,177,156			457,307
	Less: promotional allowances		107,649			33,294
			1,069,507			424,013
Expenses
	Casino		309,501			139,129
	Rooms		56,616			21,636
	Food and beverage		102,126			28,017
	Entertainment, retail and other		101,811			26,948
	Provision for doubtful accounts		14,649			5,273
	General and administrative		141,194			58,318
	Preopening expenses and other		875			1,009
	Restructuring costs		—			5,479
	Depreciation and amortization		95,943			40,183
			822,715			325,992
Operating profit			246,792			98,021
Corporate expense			10,824			5,579
Operating income			235,968			92,442
Non-operating income (expense)
	Interest income		2,032			763
	Interest expense, net		(97,536	)		(22,091	)
	Interest expense from unconsolidated affiliate		(817	)		—
	Other, net		(1,145	)		(162	)
			(97,466	)		(21,490	)
Income before income taxes and extraordinary item			138,502			70,952
	Provision for income taxes		(53,830	)		(26,647	)
Income before extraordinary item			84,672			44,305
Extraordinary item
	Loss on early retirement of debt, net of income tax benefit of $419		(778	)		—
Net income		$	83,894		$	44,305
Net income		$	83,894		$	44,305
	Currency translation adjustment		(3,210	)		(906	)
Comprehensive income		$	80,684		$	43,399
Basic income per share of common stock
	Income before extraordinary item	$	0.54		$	0.39
	Extraordinary item—loss on early retirement of debt, net		(0.01	)		—
	Net income per share	$	0.53		$	0.39
Diluted income per share of common stock
	Income before extraordinary item	$	0.53		$	0.38
	Extraordinary item—loss on early retirement of debt, net		(0.01	)		—
	Net income per share	$	0.52		$	0.38

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

2

MGM MIRAGE AND SUBIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

				Three Months Ended March 31,
				2001			2000
Cash flows from operating activities
	Net income			$	83,894		$	44,305
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			95,943			40,183
		Amortization of debt discount and issuance costs			10,698			490
		Provision for doubtful accounts			14,649			5,273
		Loss on early retirement of debt			1,197			—
		Restructuring costs			—			5,479
		Income from unconsolidated affiliate			(10,734	)		—
		Distributions from unconsolidated affiliate			11,500			—
		Deferred income taxes			29,597			11,984
	Change in assets and liabilities:
		Accounts receivable			13,450			(7,133	)
		Inventories			(230	)		2,837
		Income taxes receivable and payable			14,434			10,704
		Prepaid expenses			3,266			2,964
		Accounts payable, accrued liabilities and other			(50,195	)		(44,649	)
			Net cash provided by operating activities		217,469			72,437
Cash flows from investing activities
	Purchase of property and equipment				(65,462	)		(62,401	)
	Disposition of property and equipment				11,719			198
	Change in construction payable				3,198			(2,472	)
	Other				(4,529	)		1,552
			Net cash used in investing activities		(55,074	)		(63,123	)
Cash flows from financing activities
	Net borrowing (repayment) under bank credit facilities				(519,958	)		25,179
	Issuance of long-term debt				400,000			—
	Debt issuance costs				(4,000	)		—
	Purchase of treasury stock				—			(52,579	)
	Cash dividend paid				—			(11,327	)
	Issuance of common stock				984			7,290
	Other				(8,007	)		(1,319	)
			Net cash used in financing activities		(130,981	)		(32,756	)
Cash and cash equivalents
	Net increase (decrease) for the period				31,414			(23,442	)
	Balance, beginning of period				227,968			121,522
	Balance, end of period			$	259,382		$	98,080
Supplemental cash flow disclosures
	Interest paid, net of amounts capitalized			$	96,454		$	31,553
	State and federal income taxes paid				5,007			3,645

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

3

MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION

    MGM MIRAGE (the "Company"), formerly known as MGM Grand, Inc., is a Delaware corporation, incorporated on January 29, 1986. As of March 31, 2001, approximately 58.5% of the outstanding shares of the Company's common stock were owned by Kirk Kerkorian and Tracinda Corporation, a Nevada corporation wholly owned by Kirk Kerkorian.

    On May 31, 2000, the Company completed the acquisition (the "Mirage Acquisition") of Mirage Resorts, Incorporated ("Mirage") (see Note 2). Mirage, through wholly owned subsidiaries, owns and operates the following hotel, casino and entertainment resorts: Bellagio, a European-style luxury resort; The Mirage, a tropically-themed destination resort; Treasure Island at The Mirage, a Caribbean-themed hotel and casino resort; and the Holiday Inn® Casino Boardwalk, all of which are located on the Las Vegas Strip. Mirage also owns a 50% interest in the joint venture that owns and operates the Monte Carlo Resort & Casino, a palatial-style hotel and casino also located on the Las Vegas Strip. Mirage owns and operates Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip properties. Mirage also owns and operates the Golden Nugget, a hotel and casino in downtown Las Vegas, the Golden Nugget-Laughlin, located in Laughlin, Nevada, and Beau Rivage, a beachfront resort located in Biloxi, Mississippi. The Company is developing the Borgata, a hotel and casino resort on 27 acres in the Marina area of Atlantic City, New Jersey, through a limited liability company owned 50-50 with Boyd Gaming Corporation. The Company also owns approximately 95 acres adjacent to the Borgata site which is available for future development.

    Through wholly owned subsidiaries, the Company owns and operates the MGM Grand Hotel and Casino ("MGM Grand Las Vegas"), a hotel, casino and entertainment complex, and New York-New York Hotel and Casino, a destination resort, both located on the Las Vegas Strip. The Company, through wholly owned subsidiaries, also owns and operates three resorts located in Primm, Nevada at the California/Nevada state line: Whiskey Pete's, Buffalo Bill's and the Primm Valley Resort (the "Primm Properties"), as well as two championship golf courses located near the Primm Properties.

    The Company, through its wholly owned subsidiary, MGM Grand Detroit, Inc., and its local partners in Detroit, Michigan formed MGM Grand Detroit, LLC, to develop a hotel, casino and entertainment complex ("MGM Grand Detroit"). The plans for MGM Grand Detroit call for an 800-room hotel, a 100,000 square-foot casino, signature restaurants and retail outlets, a showroom and other entertainment venues. On July 28, 1999, the Michigan Gaming Control Board issued a casino license to MGM Grand Detroit, LLC to conduct gaming operations in its interim facility ("MGM Grand Detroit Casino"), which commenced operations on July 29, 1999. The MGM Grand Detroit Casino is located directly off of the John C. Lodge Expressway in downtown Detroit.

    Through its wholly owned subsidiary, MGM Grand Australia Pty Ltd., the Company owns and operates the MGM Grand Hotel and Casino in Darwin, Australia ("MGM Grand Australia"), which is located on 18 acres of beachfront property on the north central coast of Australia.

    Through its wholly owned subsidiary, MGM Grand South Africa, Inc., the Company manages two permanent casinos and one interim casino in two provinces of the Republic of South Africa. The Company managed an interim facility in Nelspruit from October 15, 1997 to November 17, 1999, at which time a permanent casino began operations and the temporary operations ceased. The interim casino in Witbank began operations on March 10, 1998, and the interim casino in Johannesburg operated from September 28, 1998 through November 26, 2000, at which time the permanent facility, the Montecasino, began operations and the temporary operations ceased. The Company receives management fees from its partner, Tsogo Sun Gaming & Entertainment ("Tsogo Sun"), which is

4

responsible for providing all project costs. Tsogo Sun has been granted additional licenses for Durban and East London, and the Company anticipates interim casinos will be opened in those locations in 2001.

    As permitted by the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2000.

    In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company's financial position as of March 31, 2001, and the results of its operations for the three month periods ended March 31, 2001 and 2000. The results of operations for such periods are not necessarily indicative of the results to be expected for the full year.

    Certain reclassifications have been made to the 2000 financial statements to conform to the 2001 presentation, which have no effect on previously reported net income. In addition, the accompanying financial statements reflect certain adjustments to amounts related to other comprehensive income. The adjustments reduce previously reported comprehensive income by $4.7 million for the three months ended March 31, 2000, but have no effect on previously reported net income.

NOTE 2—MIRAGE ACQUISITION

    On May 31, 2000, the Company completed the Mirage Acquisition whereby Mirage shareholders received $21 per share in cash. The acquisition had a total equity value of approximately $4.4 billion. In addition, the Company assumed approximately $2.0 billion of Mirage's outstanding debt, of which approximately $1.0 billion was refinanced and $950 million remains outstanding. The transaction was accounted for as a purchase and, accordingly, the purchase price was preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition. The estimated fair value of assets acquired and liabilities assumed (net of the debt refinanced at the time of the acquisition) were $8.1 billion and $2.7 billion, respectively. The operating results for Mirage are included in the Consolidated Statements of Income from the date of acquisition.

    The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the Mirage Acquisition had occurred on January 1, 2000:

Three months ended March 31,	2000
(In thousands, except per share amounts)
Net Revenues	$	1,066,767
Operating Income	$	217,069
Net Income	$	71,596
Basic Earnings per Share	$	0.45
Weighted Average Basic Shares Outstanding		159,319
Diluted Earnings per Share	$	0.44
Weighted Average Diluted Shares Outstanding		161,938

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    This unaudited pro forma consolidated financial information is not necessarily indicative of what the Company's actual results would have been had the acquisition been completed on January 1, 2000, or of future results..

NOTE 3—LONG-TERM DEBT

    Long-term debt consisted of the following:

	March 31, 2001			December 31, 2000
	(In thousands)
$2.0 Billion Revolving Credit Facility	$	1,941,500		$	1,634,500
$1.3 Billion Term Loan		—			461,000
$1.0 Billion Revolving Credit Facility		457,500			810,000
$300 Million 6.95% Senior Notes, due 2005, net of discount		296,778			296,568
$200 Million 6.875% Senior Notes, due 2008, net of discount		197,995			197,922
$200 Million 6.625% Senior Notes, due 2005, net of discount		182,394			181,442
$250 Million 7.25% Senior Notes, due 2006, net of discount		226,120			225,313
$200 Million 6.75% Senior Notes, due 2007, net of discount		173,845			173,093
$200 Million 6.75% Senior Notes, due 2008, net of discount		172,168			171,446
$100 Million 7.25% Senior Debentures, due 2017, net of discount		79,579			79,450
$710 Million 9.75% Senior Subordinated Notes, due 2007, net of discount		702,263			701,949
$850 Million 8.50% Senior Notes, due 2010, net of discount		845,230			845,103
$400 Million 8.375% Senior Subordinated Notes, due 2011		400,000			—
MGM Grand Detroit, LLC Credit Facility, due 2003		53,000			65,000
Australian Bank Facility, due 2004 (U.S.$)		20,809			25,468
Other Notes		1,333			1,374
		5,750,514			5,869,628
Less Current Portion		(413,044	)		(521,308	)
	$	5,337,470		$	5,348,320

    Total interest incurred for the three month periods ended March 31, 2001 and 2000 was $122 million and $24 million, respectively, of which $24 million and $2 million, respectively, was capitalized.

    On January 23, 2001, the Company issued under its shelf registration statement $400 million of senior subordinated notes, which carry a coupon of 8.375% and are due on February 1, 2011. These senior subordinated notes contain covenants consistent with the Company's other senior subordinated notes. Remaining capacity under the shelf registration statement after issuance of these notes is $790 million. Any future offering of securities under the shelf registration statement will only be made by means of a prospectus supplement.

    The Company's $1.3 billion term loan was fully repaid during the first quarter of 2001, principally through proceeds from the January 23, 2001 senior subordinated note offering. The Company recognized an extraordinary loss of $0.8 million, net of income tax benefit, relating to the early extinguishment of this loan, reflecting the write-off of unamortized debt issuance costs.

    On April 6, 2001, the Company entered into an amendment to its $1.0 billion revolving credit facility whereby the maturity date was extended to April 5, 2002 and the lending commitment was reduced to $800 million.

6

NOTE 4—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:

Three months ended March 31,	2001	2000
	(In thousands)
Weighted-average common shares outstanding (used in the calculation of basic earnings per share)	159,219	112,819
Potential dilution from the assumed exercise of common stock options	2,101	2,619
Weighted-average common and common equivalent shares (used in the calculation of diluted earnings per share)	161,320	115,438

NOTE 5—CONSOLIDATING CONDENSED 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 $2.0 billion and $1.0 billion (subsequently amended to $800 million) revolving credit facilities, the senior notes and debentures and the senior subordinated notes. Separate condensed financial statement information for the subsidiary guarantors and non-guarantors as of March 31, 2001 and December 31, 2000 and for the three month periods ended March 31, 2001 and 2000 is as follows:

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

	As of March 31, 2001
	Parent		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Elimination			Consolidated
	(In thousands)
Current assets	$	103,108	$	670,900		$	61,015	$	(66,560	)	$	768,463
Property and equipment, net		11,903		8,869,508			165,138		(11,972	)		9,034,577
Investment in subsidiaries		6,789,698		86,588			—		(6,876,286	)		—
Investment in unconsolidated affiliates		127,902		738,623			—		(342,165	)		524,360
Intercompany note receivable		589,432		(589,432	)		—		—			—
Other non-current assets		50,386		254,519			26,271		—			331,176
	$	7,672,429	$	10,030,706		$	252,424	$	(7,296,983	)	$	10,658,576
Current liabilities	$	649,707	$	733,627		$	50,458	$	(355,505	)	$	1,078,287
Deferred income taxes		124,343		1,521,304			2,771		95,082			1,743,500
Long-term debt		4,434,266		835,225			67,979		—			5,337,470
Other non-current liabilities		—		34,570			636		—			35,206
Stockholders' equity		2,464,113		6,905,980			130,580		(7,036,560	)		2,464,113
	$	7,672,429	$	10,030,706		$	252,424	$	(7,296,983	)	$	10,658,576

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	As of December 31, 2000
	Parent		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Elimination			Consolidated
	(In thousands)
Current assets	$	135,645	$	680,020		$	67,237	$	(87,258	)	$	795,644
Property and equipment, net		12,459		8,892,985			170,761		(11,972	)		9,064,233
Investment in subsidiaries		6,568,338		66,355			—		(6,634,693	)		—
Investment in unconsolidated affiliates		127,902		736,685			—		(342,165	)		522,422
Intercompany note receivable		762,209		(762,209	)		—		—			—
Other non-current assets		53,903		268,548			29,851		—			352,302
	$	7,660,456	$	9,882,384		$	267,849	$	(7,076,088	)	$	10,734,601
Current liabilities	$	747,026	$	788,396		$	71,181	$	(373,398	)	$	1,233,205
Deferred income taxes		98,368		1,521,304			3,949		106,537			1,730,158
Long-term debt		4,432,617		831,903			83,800		—			5,348,320
Other non-current liabilities		—		39,775			698		—			40,473
Stockholders' equity		2,382,445		6,701,006			108,221		(6,809,227	)		2,382,445
	$	7,660,456	$	9,882,384		$	267,849	$	(7,076,088	)	$	10,734,601

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

		For the Three Months Ended March 31, 2001
		Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated
		(In thousands)
Net revenues		$	—		$	972,684		$	96,823		$	—		$	1,069,507
Equity in subsidiaries' earnings			221,532			25,903			—			(247,435	)		—
Expenses:
	Casino and hotel operations		—			523,058			46,996			—			570,054
	Provision for doubtful accounts		—			14,420			229			—			14,649
	General and administrative		—			132,178			9,016			—			141,194
	Depreciation and amortization		242			88,963			6,738			—			95,943
	Preopening expenses and other non-recurring expenses		—			875			—			—			875
	Corporate expense		5,970			4,854			—			—			10,824
			6,212			764,348			62,979			—			833,539
Operating income			215,320			234,239			33,844			(247,435	)		235,968
Interest expense, net			(77,674	)		(13,415	)		(5,232	)		—			(96,321	)
Other, net			295			(1,370	)		(70	)		—			(1,145	)
Income before income taxes and extraordinary item			137,941			219,454			28,542			(247,435	)		138,502
Provision for income taxes			(53,269	)		7			(568	)		—			(53,830	)
Income before extraordinary item			84,672			219,461			27,974			(247,435	)		84,672
Extraordinary item			(778	)		—			—			—			(778	)
Net income		$	83,894		$	219,461		$	27,974		$	(247,435	)	$	83,894

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		For the Three Months Ended March 31, 2000
		Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated
		(In thousands)
Net revenues		$	—		$	313,827		$	110,186		$	—		$	424,013
Equity in subsidiaries' earnings			78,411			18,451			—			(96,862	)		—
Expenses:
	Casino and hotel operations		—			161,358			54,372			—			215,730
	Provision for doubtful accounts		—			4,800			473			—			5,273
	General and administrative		—			43,424			14,894			—			58,318
	Depreciation and amortization		348			30,425			9,516			(106	)		40,183
	Preopening expenses and other non-recurring expenses		—			380			629			—			1,009
	Restructuring costs		—			3,897			1,582			—			5,479
	Corporate expense		5,579			—			—			—			5,579
			5,927			244,284			81,466			(106	)		331,571
Operating income			72,484			87,994			28,720			(96,756	)		92,442
Interest expense, net			(2,194	)		(11,486	)		(7,648	)		—			(21,328	)
Other, net			(12	)		(150	)		—			—			(162	)
Income before income taxes			70,278			76,358			21,072			(96,756	)		70,952
Provision for income taxes			(25,973	)		—			(674	)		—			(26,647	)
Net income		$	44,305		$	76,358		$	20,398		$	(96,756	)	$	44,305

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

	For the Three Months Ended March 31, 2001
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	(44,151	)	$	276,761		$	12,258		$	(27,399	)	$	217,469
Net cash provided by (used in) investing activities		(2,780	)		(240,542	)		(4,219	)		192,467			(55,074	)
Net cash provided by (used in) financing activities		68,781			(28,843	)		(13,494	)		(157,425	)		(130,981	)

	For the Three Months Ended March 31, 2000
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	(7,826	)	$	45,708		$	35,827		$	(1,272	)	$	72,437
Net cash provided by (used in) investing activities		(960	)		(44,342	)		(18,731	)		910			(63,123	)
Net cash provided by (used in) financing activities		25,505			(33,762	)		(24,856	)		357			(32,756	)

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

    The May 31, 2000 acquisition of Mirage Resorts, Incorporated had a significant impact on our operating results for the three months ended March 31, 2001. The acquisition added four wholly owned and one joint venture resort on the Las Vegas Strip, as well as resorts in downtown Las Vegas and Laughlin, Nevada and Biloxi, Mississippi. Net revenues for the three months ended March 31, 2001 totaled $1.07 billion, an increase of $645 million, or 152%, over the prior-year first quarter. The Mirage properties generated $677 million of net revenues in the first quarter of 2001, while same store net revenues at the MGM properties declined by $32 million, or 8%, to $392 million.

    The decrease in revenues at the MGM properties was concentrated in the casino area. Consolidated casino revenues for the first quarter of 2001 were $575 million, an increase of $290 million, or 101%, over the prior-year first quarter. The Mirage properties generated casino revenues of $330 million in the 2001 quarter, while casino revenues at the MGM properties declined by $40 million, or 14%, to $245 million. This decline was principally the result of declines of $18 million, $11 million and $8 million at MGM Grand Las Vegas, MGM Grand Detroit and the Primm Properties, respectively. The decrease at MGM Grand Las Vegas was attributable almost entirely to a lower table game hold percentage, as table games volume and revenues from slots and other casino games were relatively flat with the prior-year quarter. The decline at MGM Grand Detroit resulted from decreased gaming volumes, as a competitor opened the third and final Detroit casino in November 2000. The decrease at the Primm Properties was also attributable to reduced gaming volumes, reflecting increased competition from Native American casinos, as well as higher gasoline and utility costs in California.

    Consolidated room revenues for the three months ended March 31, 2001 were $237 million, an increase of $165 million, or 230%, over the first quarter of 2000. The Mirage properties generated room revenues of $158 million in the 2001 quarter, and the MGM properties achieved an increase of $7 million, or 10%, to $79 million. This increase was generated at MGM Grand Las Vegas and New York-New York. MGM Grand Las Vegas achieved a 13% increase in room revenues, resulting principally from an 11% growth in average daily rate. Occupancy and average daily rate each grew at New York-New York, resulting in a 9% increase in room revenues.

    Consolidated food and beverage, entertainment, retail and other revenues were $353 million for the first quarter of 2001, an increase of $253 million, or 253%, over the prior-year first quarter. The addition of the Mirage properties accounted for $251 million of this increase. The remaining $2 million was attributable primarily to increased food and beverage revenues at MGM Grand Las Vegas.

    Consolidated operating expenses (before preopening expense, restructuring costs and corporate expense) were $822 million during the first quarter of 2001, an increase of $502 million, or 157%, over the $320 million recorded in the first quarter of 2000. The Mirage properties generated $513 of operating expenses, while operating expenses at the MGM properties declined by $11 million, or 3%, to $309 million. The expense reduction at the MGM properties was principally the result of lower expenses at MGM Grand Detroit, which enabled that property to achieve an improvement in operating margin despite the decline in its operating revenues.

    Corporate expense was $11 million in the 2001 first quarter, an increase of $5 million over the first quarter of 2000. This increase was primarily attributable to the Mirage acquisition, reflecting higher corporate operating expenses related to a larger corporate structure and higher airplane costs due to the operation of two corporate airplanes in the current year compared to only one in the prior year.

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    Interest expense, net of amounts capitalized, was $98 million for the first quarter of 2001, versus $22 million in the prior-year quarter. This increase reflected substantial increases both in interest cost and interest capitalized, each as a result of the Mirage acquisition. Interest cost was $122 million in the 2001 first quarter versus $24 million in the prior-year quarter, as our total debt increased from $1.31 billion at December 31, 1999 to $5.87 billion at December 31, 2000. This increase is reflective of the debt issued and assumed in connection with the Mirage acquisition. Interest capitalized increased to $24 million from the $2 million recorded in the prior-year quarter. A substantial majority of the interest capitalized in the 2001 first quarter related to development projects in the Marina area of Atlantic City, on development sites acquired in the Mirage acquisition.

Liquidity and Capital Resources

    As of March 31, 2001 and December 31, 2000, we held cash and cash equivalents of $259 million and $228 million respectively. Cash provided by operating activities for the first three months of 2001 was $217 million, compared with $72 million for the comparable period of 2000.

    Capital expenditures for the first quarter of 2001 were $65 million. These expenditures related to general property improvements at our resorts, including the recently completed convention/exhibit hall project at The Mirage, as well as pre-construction activities associated with ongoing development projects, including capitalized interest, principally in Atlantic City.

    On January 23, 2001, we issued $400 million of senior subordinated notes, which carry a coupon of 8.375% and are due on February 1, 2011. These senior subordinated notes were issued under our shelf registration statement, leaving remaining capacity of $790 million. Any future offering of securities under the shelf registration statement will only be made by means of a prospectus supplement. We repaid the remaining $461 million balance under the $1.3 million term loan during the first quarter of 2001, principally through proceeds from the senior subordinated note offering. We also reduced the outstanding balances under our other bank credit facilities by $62 million, bringing total net reductions in debt during the quarter to $119 million.

    On April 6, 2001, we entered into an amendment to our $1.0 billion revolving credit facility whereby the maturity date was extended to April 5, 2002 and the lending commitment was reduced to $800 million.

    We intend to focus on utilizing available free cash flow to reduce indebtedness, as well as to finance our ongoing operations. We expect to finance operations, capital expenditures and existing debt obligations through cash flow from operations, cash on hand, bank credit facilities and, depending on market conditions, public offerings of securities under the shelf registration statement.

Safe Harbor Provision

    The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this report contains statements that are forward-looking, such as statements relating to plans for future expansion and other business development activities, as well as other capital spending, financing sources, the effects of regulation (including gaming and tax regulations) and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to competition, development and construction activities, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), domestic or international economic conditions

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(including sensitivity to fluctuations in foreign currencies), pending or future legal proceedings, changes in federal or state tax laws or the administration of such laws, changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions) and application for licenses and approvals under applicable jurisdictional laws and regulations (including gaming laws and regulations).

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits.
	4	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. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K filed on January 23, 2001.
	10.1	Casino Operator's Agreement, dated March 12, 2001, between Timothy Denney Baldwin, Minister for Racing, Gaming and Licensing, Diamond Leisure Pty. Limited and MGM Grand Australia Pty Ltd.
	10.2	Amended and Restated 364-Day Loan Agreement, dated as of April 6, 2001, among the Company, as Borrower, MGM Grand Atlantic City, Inc. and MGM Grand Detroit, LLC, as Co-Borrowers, the Banks, Syndication Agent, Documentation Agents and Co-Documentaton Agents therein named and Bank of America, N.A., as Administrative Agent, and Banc of America Securities LLC, as Lead Arranger and Sole Book Manager.
	10.3	Third Amendment Agreement, dated as of April 6, 2001, among the Company, as Borrower, MGM Grand Atlantic City, Inc. and MGM Grand Detroit, LLC, as Co-Borrowers, the Banks therein named and Bank of America, N.A., as Administrative Agent.
(b)	Reports on Form 8-K.
	The Company filed the following Current Reports on Form 8-K during the quarter ended March 31, 2001.
	1.	Current Report on Form 8-K, dated January 18, 2001, filed by the Company on January 23, 2001 in which events under Item 5, Other Events and Item 7, Financial Statements and Exhibits were reported.
	2.	Current Report on Form 8-K, dated February 7, 2001, filed by the Company on February 8, 2001 in which events under Item 5, Other Events were reported.

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SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MGM MIRAGE
Date: May 11, 2001	By:	/s/ J. TERRENCE LANNI   J. Terrence Lanni Chairman and Chief Executive Officer (Principal Executive Officer)
Date: May 11, 2001	By:	/s/ JAMES J. MURREN   James J. Murren President and Chief Financial Officer (Principal Financial and Accounting Officer)

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QuickLinks

FORM 10-Q
MGM MIRAGE AND SUBSIDIARIES FORM 10-Q I N D E X
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES