e10vk
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
(Mark One)
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 2007
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period __________ to __________
Commission File No. 001-10362
 
MGM MIRAGE
(Exact name of Registrant as specified in its charter)
     
DELAWARE
(State or other jurisdiction of
incorporation or organization)
  88-0215232
(I.R.S. Employer
Identification Number)
3600 Las Vegas Boulevard South — Las Vegas, Nevada 89109
(Address of principal executive office) (Zip Code)
(702) 693-7120
(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. Yes þ No o
     Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ No o
     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: þ
      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer þ    Accelerated filer o    Non-accelerated filer   o
(Do not check if a smaller reporting company)
  Smaller Reporting Company o 
     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes o No þ
     The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant as of June 30, 2007 (based on the closing price on the New York Stock Exchange Composite Tape on June 30, 2007) was $10.3 billion. As of February 25, 2008, 293,845,623 shares of Registrant’s Common Stock, $.01 par value, were outstanding.
     Portions of the Registrant’s definitive Proxy Statement for its 2008 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.
 
 

 


TABLE OF CONTENTS

PART I
ITEM 1. BUSINESS
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
EM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND&n RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
EXHIBIT 10.3(11)
EXHIBIT 10.3(12)
EXHIBIT 10.3(13)
EXHIBIT 10.3(14)
EXHIBIT 10.3(20)
EXHIBIT 10.3(21)
EXHIBIT 21
EXHIBIT 23
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2
EXHIBIT 99.1
EXHIBIT 99.2


Table of Contents

PART I
ITEM 1. BUSINESS
     MGM MIRAGE is referred to as the “Company” or the “Registrant,” and together with our subsidiaries may also be referred to as “we,” “us” or “our.”
Overview
     MGM MIRAGE is one of the world’s leading development companies with significant gaming and resort operations. We believe the resorts we own, manage, and invest in are among the world’s finest casino resorts. MGM MIRAGE was organized as MGM Grand, Inc. on January 29, 1986 and is a Delaware corporation. MGM MIRAGE acts largely as a holding company and its operations are conducted through its wholly-owned subsidiaries.
     Our strategy is based on developing and maintaining competitive advantages in the following areas:
    Developing and maintaining a strong portfolio of resorts;
 
    Operating our resorts to ensure excellent customer service and maximize revenue and profit;
 
    Executing a sustainable growth strategy;
 
    Leveraging our brand and management assets.
Resort Portfolio
     We execute our strategy through a portfolio approach, seeking to ensure that we own, invest in and manage resorts in each market segment that are superior to our competitors’ resorts. We also seek to own and invest in superior real estate assets, with a blend of developing these assets on our own, partnering with others, and strategically buying and selling real estate.
     Our approach to resort ownership and investment is based on operating the premier resorts in each geographic market and each customer segment in which we operate. We discuss customer segments in the “Resort Operation” section. Regarding our approach to resort locations, we feel it is important to selectively operate in markets with stable regulatory environments. As seen in the table below, this means that a large portion of our resorts are located in Nevada. In addition, we target markets with growth potential. Currently, we believe that international markets, particularly in Asia, offer the most attractive growth opportunities. We also believe there is growth potential in investing in and managing non-gaming resorts. See the “Sustainable Growth” and “Leveraging Our Brand and Management Assets” sections for further details on these initiatives.
  Our Operating Resorts
     We have provided below certain information about our resorts as of December 31, 2007. Except as otherwise indicated, we wholly own and operate the resorts shown below.
                                 
    Number of   Approximate            
    Guestrooms   Casino Square           Gaming
Name and Location   and Suites   Footage   Slots (1)   Tables (2)
Las Vegas Strip, Nevada
                               
Bellagio
    3,933       155,000       2,328       140  
MGM Grand Las Vegas (3)
    6,340       156,000       2,530       176  
Mandalay Bay (4)
    4,328       160,000       2,025       115  
The Mirage
    3,044       118,000       2,008       106  
Luxor
    4,396       100,000       1,393       87  
Excalibur
    3,980       91,000       1,755       68  
Treasure Island (“TI”)
    2,885       90,000       1,637       67  
New York-New York
    2,024       84,000       1,774       69  
Monte Carlo
    3,002       102,000       1,531       74  
Circus Circus Las Vegas (5)
    3,764       126,000       2,354       92  
 
                               
Subtotal
    37,696       1,182,000       19,335       994  
 
                               

1


Table of Contents

                                 
    Number of   Approximate            
    Guestrooms   Casino Square           Gaming
Name and Location   and Suites   Footage   Slots (1)   Tables(2)
Other Nevada
                               
Circus Circus Reno (Reno)
    1,572       70,000       1,165       44  
Silver Legacy – 50% owned (Reno)
    1,710       87,000       1,161       68  
Gold Strike (Jean)
    810       37,000       821       9  
Railroad Pass (Henderson)
    120       13,000       330       6  
 
                               
Other Operations
                               
MGM Grand Detroit (Detroit, Michigan)
    400       100,000       4,376       95  
Beau Rivage (Biloxi, Mississippi)
    1,740       72,000       2,048       93  
Gold Strike (Tunica, Mississippi)
    1,131       50,000       1,350       58  
MGM Grand Macau – 50% owned (Macau) (6)
    424       270,000       882       382  
Borgata – 50% owned (Atlantic City, New Jersey)
    1,971       137,000       4,068       178  
Grand Victoria – 50% owned (Elgin, Illinois)
          34,000       1,150       29  
 
                               
 
                               
Grand Total
    47,574       2,052,000       36,686       1,956  
 
                               
 
(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 1,296 rooms available for rent at The Signature at MGM Grand.
 
(4)   Includes the Four Seasons Hotel with 424 guest rooms and THEhotel with 1,117 suites.
 
(5)   Includes Slots-a-Fun.
 
(6)   Total number of rooms, suites, and villas planned for the property is 593.
     Further, more detailed information about each of our operating resorts can be found in Exhibit 99.1 to this Annual Report on Form 10-K, which Exhibit is incorporated herein by reference.
  Investing in Existing Resorts
     We believe that ensuring our resorts are the premier resorts in their respective markets requires significant capital investment. We have a track record of reinvesting cash flows into our existing resorts and we have achieved strong returns on these investments in the past.
     For instance, between 2003 and 2006 we invested a significant amount of capital at MGM Grand Las Vegas, with additions such as KÁ, the acclaimed show by Cirque du Soleil; the Skylofts and West Wing room enhancements; two highly acclaimed restaurants by Joël Robuchon; and new poker and race and sports areas. That resort earned $290 million of operating income in 2007, a dramatic increase from the $127 million earned in 2002. Similarly, we transformed The Mirage, a resort many market observers credit with changing the face of the Las Vegas Strip. We felt strongly about the allure of the resort, but also believed that customers need fresh, updated experiences. Therefore, we invested significant capital at The Mirage between 2004 and 2006, adding several new restaurants; a category-defining nightclub, Jet; upgraded high-limit gaming areas; and the Beatles-themed Love show by Cirque du Soleil. The Mirage earned $108 million of operating income in 2003; in 2007, The Mirage earned $173 million of operating income.
     We expect to continue this strategy for the foreseeable future. We have made, and continue to make, investments in Mandalay Bay, Luxor and Excalibur and will continue to analyze the needs for similar investments in our other resorts.
     In addition, we have actively managed our portfolio of land holdings. We own approximately 700 acres of land on the Las Vegas Strip, with a meaningful portion of those acres undeveloped or considered by us to be under-developed. In 2007, we purchased 34 acres of land on the Las Vegas Strip adjacent to our Circus Circus Las Vegas resort. See discussion of recent projects announced for certain of our land holdings in Las Vegas and Atlantic City in the “Sustainable Growth” section.
  Risks Associated with Our Portfolio Strategy
     The principal risk factors relating to our current portfolio of resorts are:
    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.

2


Table of Contents

Resort Operation
     Our operating philosophy is predicated on creating resorts of memorable character, treating our employees well and providing superior service for our guests. We also seek to develop competitive advantages in specific markets and among specific customer groups.
  General
     We operate primarily in one segment, the ownership and operation of casino resorts, which includes offering gaming, hotel, dining, entertainment, retail and other resort amenities. Over half of our net revenue is derived from non-gaming activities, a higher percentage than many of our competitors, as our operating philosophy is to provide a complete resort experience for our guests, including non-gaming amenities which command a premium price based on their quality.
     As a resort-based company, our operating results are highly dependent on the volume of customers at our resorts, which in turn impacts the price we can charge for our hotel rooms and other amenities. Since we believe that the number of walk-in customers affects the success of our casino resorts, we design our facilities to maximize their attraction to guests of other hotels. We also generate a significant portion of our operating income from the high-end gaming segment, which can cause variability in our results.
     Most of our revenue is essentially cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our resorts, like many in the industry, generate significant operating cash flow. Our industry is capital intensive and we rely heavily on the ability of our resorts to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide excess cash for future development.
     Our results of operations do not tend to be seasonal in nature, though a variety of factors can affect the results of any interim period, including the timing of major Las Vegas conventions, the amount and timing of marketing and special events for our high-end customers, and the level of play during major holidays, including New Year and Chinese New Year. Our significant convention and meeting facilities allow us to maximize hotel occupancy and customer volumes during off-peak times such as mid-week or during traditionally slower leisure travel periods, which also leads to better labor utilization. Our results do not depend on key individual customers, though our success in marketing to customer groups, such as convention customers, or the financial health of customer segments, such as business travelers or high-end gaming customers from a particular country or region, can impact our results.
     All of our casino resorts operate 24 hours a day, every day of the year, with the exception of Grand Victoria which operates 22 hours a day, every day of the year. At our wholly-owned resorts, our primary casino and hotel operations are owned and managed by us. Other resort amenities may be owned and operated by us, owned by us but managed by third parties for a fee, or leased to third parties. We generally have an operating philosophy that prefers ownership of amenities, since guests have direct contact with staff in these areas and we prefer to control all aspects of the guest experience. However, we do lease space to retail and food and beverage operators in certain situations, particularly for branding opportunities. We also operate many “managed” outlets, utilizing third party management for specific expertise in areas such as restaurants and nightclubs, as well as for branding opportunities.
  Customers and Competition
     Our casino resorts generally operate in highly competitive environments. We compete against other gaming companies as well as other hospitality and leisure and business travel companies. Our primary methods of competing successfully include:
    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 133,000 guestrooms in Las Vegas at December 31, 2007, up slightly from approximately 132,600 rooms at December 31, 2006. Las Vegas visitor volume was 39.2 million in 2007, up slightly from the 38.9 million reported for 2006.

3


Table of Contents

     The principal segments of the Las Vegas gaming market are leisure travel; premium gaming customers; conventions, including small meetings and corporate incentive programs; and tour and travel. Our high-end properties, which include Bellagio, MGM Grand Las Vegas, Mandalay Bay, and The Mirage, appeal to the upper end of each market segment, balancing their business by using the convention and tour and travel segments to fill the mid-week and off-peak periods. Our marketing strategy for TI, New York-New York, Luxor and Monte Carlo is aimed at attracting middle- to upper-middle-income wagerers, largely from the leisure travel and, to a lesser extent, the tour and travel segments. Excalibur and Circus Circus Las Vegas generally cater to the value-oriented and middle-income leisure travel and tour and travel segments.
     Outside Las Vegas, our other wholly-owned Nevada operations compete with each other and with many other similar sized and larger operations. A significant portion of our customers at these resorts come from California. We believe the expansion of Native American gaming has had a negative impact on all of our Nevada resorts not located on the Las Vegas Strip, and additional expansion in California could have a further adverse effect on these resorts. Our Nevada resorts not located in Las Vegas appeal primarily to middle-income customers attracted by room, food and beverage and entertainment prices that are lower than those offered by major Las Vegas hotel-casinos. Our target customer for these resorts is the value-oriented leisure traveler and the value-oriented local customer.
     Outside Nevada, our wholly-owned resorts mainly compete for customers in local gaming markets, where location is a critical factor to success. In Tunica, Mississippi, one of our competitors is closer to Memphis, the 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, and in some cases against our wholly-owned operations. Much like our wholly-owned resorts, our unconsolidated affiliates compete through the quality of amenities, the value of the experience offered to guests, and the location of their resorts.
     Our casino resorts also compete for customers with hotel-casino operations located in other areas of the United States and other parts of the world, and for leisure and business travelers with non-gaming tourist destinations such as Hawaii, Florida and cruise ships. Our gaming operations compete to a lesser extent with state-sponsored lotteries, off-track wagering, card parlors, and other forms of legalized gaming in the United States.
  Marketing
     We advertise on radio, television and billboards and in newspapers and magazines in selected cities throughout the United States and overseas, as well as on the Internet and by direct mail. We also advertise through our regional marketing offices located in major United States and foreign cities. A key element of marketing to premium gaming customers is personal contact by our marketing personnel. Direct marketing is also important in the convention segment. We maintain Internet websites which inform customers about our resorts and allow our customers to reserve hotel rooms, make restaurant reservations and purchase show tickets. We also operate call centers to allow customer contact by phone to make hotel and restaurant reservations and purchase show tickets.
     We utilize our world-class golf courses in marketing programs at our Las Vegas Strip resorts. Our major Las Vegas resorts offer luxury suite packages that include golf privileges at Shadow Creek. In connection with our marketing activities, we also invite our premium gaming customers to play Shadow Creek on a complimentary basis. We use Primm Valley Golf Club for marketing purposes at our Las Vegas resorts, including offering room and golf packages at special rates. Additionally, marketing efforts at Beau Rivage benefit from the Fallen Oak golf course just 20 minutes north of Beau Rivage.
  Employees and Management
     We believe that knowledgeable, friendly and dedicated employees are a key success factor in the casino resort industry. Therefore, we invest heavily in recruiting, training and retaining our employees, as well as seeking to hire and promote the strongest management team possible. We have numerous programs, both at the corporate and business unit level, designed to achieve these objectives. For example, our diversity program extends throughout our Company, and focuses on the unique strengths of our individuals combined with a culture of working together to achieve greater performance. Our diversity program has been widely recognized, including the honor of “Top 50 Best Companies for Diversity” given by DiversityInc magazine. We have also invested heavily in training, and we believe our programs, such as the MGM Grand University and MGM MIRAGE leadership programs, are best-in-class among our industry peers.

4


Table of Contents

  Technology
     We utilize technology to maximize revenue and efficiency in our operations. Our Players Club program links our major resorts, and consolidates all slots and table games activity for customers with a Players Club account. Customers qualify for benefits across all of the participating resorts, regardless of where they play. We believe that our Players Club enables us to more effectively market to our customers. A large number of the slot machines at our resorts operate with International Game Technology’s EZ-Pay™ cashless gaming system. We believe that this system enhances the customer experience and increases the revenue potential of our slot machines.
     Technology is a critical part of our strategy in non-gaming and administrative operations as well. Our hotel systems include yield management modules which allow us to maximize occupancy and room rates. Additionally, these systems capture charges made by our customers during their stay, including allowing customers of our resorts to charge meals and services at certain other MGM MIRAGE resorts to their hotel accounts. We implemented a new hotel management system at most of our major resorts in 2007, which we expect will enhance our guest service and improve our yield management across our portfolio of resorts.
  Internal Controls
     We have a strong culture of compliance, driven by our history in the highly regulated gaming industry and our belief that compliance is often a value-added activity. Our system of internal controls and procedures – including internal control over financial reporting – is designed to ensure reliable and accurate financial records, transparent disclosures, compliance with laws and regulations, and protection of our assets. Our internal controls start at the source of business transactions, and we have rigorous enforcement through controllership at both the business unit and corporate level. Our corporate management also review each of our businesses on a regular basis and we have a corporate internal audit function that performs reviews around gaming compliance, internal controls over financial reporting, and operational areas.
     In connection with the supervision of gaming activities at our casinos, we maintain stringent controls on the recording of all receipts and disbursements and other activities, such as cash transaction reporting. These controls include:
    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;
 
    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.

5


Table of Contents

     Sustainable Growth
     In allocating capital, our financial strategy is focused on managing a proper mix of investing in existing resorts, spending on new resorts or initiatives, repaying long-term debt, and returning capital to shareholders. We have actively allocated capital to each of these areas historically, and expect to continue to do so. We believe there are reasonable investments for us to make in new initiatives that will provide returns in excess of the other options. Primarily, we feel these opportunities are in the areas of large-scale, mixed-use development in established gaming markets, international opportunities for gaming expansion – particularly in Asia – and expansion into non-gaming operations.
     The following sections discuss certain of our current and potential development opportunities. We regularly evaluate possible expansion and acquisition opportunities in both the domestic and international markets, but cannot determine the likelihood of proceeding with specific development opportunities. Opportunities we evaluate may include the ownership, management and operation of gaming and other entertainment facilities in Nevada or in states other than Nevada or outside of the United States. We may undertake these opportunities either alone or in cooperation with one or more third parties.
  CityCenter
     We and our joint venture partner are developing CityCenter located on a 67-acre site on the Las Vegas Strip, between Bellagio and Monte Carlo. CityCenter will feature a 4,000-room casino resort designed by world-famous architect Cesar Pelli; two 400-room non-gaming boutique hotels, one of which will be managed by luxury hotelier Mandarin Oriental; approximately 425,000 square feet of retail shops, dining and entertainment venues; and approximately 2.3 million square feet of residential space in approximately 2,700 luxury condominium and condominium-hotel units in multiple towers. CityCenter is expected to open in late 2009. Until November 15, 2007, we owned 100% of CityCenter. At that time, we completed a transaction with a wholly-owned subsidiary of Dubai World, a Dubai, United Arab Emirates government decree entity, to form a 50/50 joint venture for the CityCenter development. We will continue to serve as developer of CityCenter and will receive additional consideration of up to $100 million if the project is completed on time and actual development costs, net of residential proceeds, are within specified parameters. Upon completion of construction, we will manage CityCenter for a fee.
  Atlantic City, New Jersey
     We own approximately 130 acres on Renaissance Pointe in Atlantic City, New Jersey. We lease ten acres to Borgata under long-term leases for use in its current operations and for its expansion. Of the remaining 120 acres, approximately 72 acres are suitable for development. We lease nine of these developable acres to Borgata on a short-term basis for surface parking and a portion of the remaining acres consists of common roads, landscaping and master plan improvements which we designed and developed as required by our agreement with Boyd. We own an additional 15 developable acres in the Marina District near Renaissance Pointe.
     In October 2007 we announced the development of MGM Grand Atlantic City which will be located at the 72-acre site. The proposed resort would include three towers with more than 3,000 total rooms and suites, approximately 5,000 slot machines, 200 table games, 500,000 square-feet of retail, an extensive convention center and other typical resort amenities.
  Kerzner/Istithmar Joint Venture
     In September 2007, the Company entered into a definitive agreement with Kerzner International and Istithmar forming a joint venture to develop a multi-billion dollar integrated resort to be located on the southwest corner of Las Vegas Boulevard and Sahara Avenue. The Company will contribute 40 acres of land, which is being valued at $20 million per acre, for fifty percent of the equity in the joint venture. Kerzner International and Istithmar will contribute cash totaling $600 million and each will obtain twenty-five percent of the equity in the joint venture.
  Jean Properties
     We have entered into an operating agreement to form a 50/50 joint venture with Jeanco Realty Development, LLC, a venture owned by American Nevada Corporation. The venture will master plan and develop a mixed-use community in Jean, Nevada. We will contribute Gold Strike and the surrounding land to the joint venture. The value of this contribution per the operating agreement will be $150 million. We expect to receive a distribution of $55 million upon contribution of the assets to the venture, which is subject to the venture obtaining necessary regulatory and other approvals, and $20 million no later than August 2008.

6


Table of Contents

  Risks Associated With Our Growth Strategy
     The principal risk factors relating to our growth strategy are:
    Development and operation of gaming facilities in new or existing jurisdictions are subject to many contingencies. Several of these contingencies are outside of our control and may include the passage of appropriate gaming legislation, the issuance of necessary permits, licenses and approvals, the availability of appropriate financing and the satisfaction of other conditions;
 
    Expansion projects involve risks and uncertainties. For instance, the design, timing and costs of the projects may change and are subject to risks attendant to large-scale projects.
Leveraging Our Brand and Management Assets
     We also seek to leverage our management expertise and well recognized brands through strategic partnerships and international expansion opportunities. We feel that several of our brands, particularly the “MGM Grand” brand, are well suited to new projects in both gaming and non-gaming developments. The recently opened MGM Grand Macau, the planned MGM Grand Atlantic City, the recently announced MGM Grand Abu Dhabi, and the MGM Grand branded resort currently under construction adjacent to Foxwoods, are all part of our brand expansion strategy.
     In 2007, we formed MGM MIRAGE Hospitality, LLC (“Hospitality”). The purpose of this entity is to source strategic resort investment and management opportunities, both gaming and non-gaming. Hospitality will have a particular focus on international opportunities, where we feel future growth opportunities are greatest. We have strategically hired senior operating and development personnel with established backgrounds in hospitality management and international operations to maximize the profit potential of Hospitality’s operations.
  Mubadala Development Company
     In November 2007, we announced plans to develop MGM Grand Abu Dhabi, a multi-billion dollar, large-scale, mixed-use development that will serve as an incoming gateway to Abu Dhabi, a United Arab Emirate, located at a prominent downtown waterfront site on Abu Dhabi Island. The project will be wholly owned by Mubadala; we will serve as developer of the project and manage the development for a fee. The initial phase will utilize 50 acres and consist of an MGM Grand hotel, two additional MGM branded luxury hotels, and a variety of luxury residential offerings. Additionally, the development will feature a major entertainment facility, high-end retail shops, and world-class dining and convention facilities.
  Mashantucket Pequot Tribal Nation
     The Company entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Ledyard, Connecticut. Under the strategic alliance, we are consulting with MPTN in the development of a new $700 million casino resort currently under construction adjacent to the existing Foxwoods casino resort. The new resort will utilize the “MGM Grand” brand name and is scheduled to open in May 2008. The Company and MPTN have also formed a jointly owned company – Unity Gaming, LLC – to acquire or develop future gaming and non-gaming enterprises. The Company will provide a loan of up to $200 million to finance a portion of MPTN’s investment in joint projects. Unity Gaming, LLC, along with its minority partners, have applied to develop and manage a resort in Kansas, the Chisholm Creek Casino Resort. Other entities have also applied to develop and operate casinos in Kansas and no assurances can be given that the application we are part of will be selected or approved.
  China
     We have signed a definitive agreement with the Diaoyutai State Guesthouse in Beijing, People’s Republic of China, to form a joint venture to develop luxury non-gaming hotels and resorts globally, initially targeting prime locations, including Beijing, in the People’s Republic of China.

7


Table of Contents

  Risks Associated With Our Brand and Management Strategy
     The principal risk factors relating to our brand and management strategy are:
    Management of non-gaming resorts is a somewhat new business for us. Whenever a company enters into a new venture, it is possible that existing management and personnel will not have the requisite expertise in the new venture and will not be able to compete effectively;
 
    Operations in which we may engage in foreign territories are subject to risk pertaining to international operations. These may include financial risks: Foreign currency, adverse tax consequences, inability to adequately enforce our rights; or regulatory and political risks: Foreign government regulations, general geopolitical risks such as political and economic instability, hostilities with neighboring countries, and changes in diplomatic and trade relationships.
     In addition, to the extent we become involved with development projects as an owner or investor, we are subject to similar risks as described in the “Sustainable Growth” section.
Employees and Labor Relations
     As of December 31, 2007, we had approximately 54,700 full-time and 12,700 part-time employees. At that date, we had collective bargaining contracts with unions covering approximately 31,300 of our employees. We consider our employee relations to be good. In August 2007, we entered a new five-year collective bargaining agreement covering approximately 21,000 of our Las Vegas Strip employees. This does not include the collective bargaining agreement covering employees at MGM Grand Las Vegas, which expires in 2008. In addition, in October 2007 we entered into a new four year agreement covering approximately 2,900 employees at MGM Grand Detroit.
Regulation and Licensing
     The gaming industry is highly regulated, and we must maintain our licenses and pay gaming taxes to continue our operations. Each of our casinos is subject to extensive regulation under the laws, rules and regulations of the jurisdiction where it is located. These laws, rules and regulations generally concern the responsibility, financial stability and character of the owners, managers, and persons with financial interest in the gaming operations. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. A more detailed description of the regulations to which we are subject is contained in Exhibit 99.2 to this Annual Report on Form 10-K, which Exhibit is incorporated herein by reference.
     Our businesses are subject to various federal, state and local laws and regulations in addition to gaming regulations. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities could adversely affect our operating results.
Forward-Looking Statements
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
     This Form 10-K and our 2007 Annual Report to Stockholders contain some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “could,” “might,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, new projects, future performance, the outcome of contingencies such as legal proceedings, and future financial results. From time to time, we also provide oral or written forward-looking statements in our Forms 10-Q and 8-K, as well as press releases and other materials we release to the public. Any or all of our forward-looking statements in this Form 10-K, in our 2007 Annual Report to Stockholders and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in this Form 10-K — for example, government regulation and the competitive environment — will be important in determining our future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may differ materially.

8


Table of Contents

     We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-K, 10-Q and 8-K reports to the Securities and Exchange Commission (“SEC”). Also note that we provide a discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business in Item 1A, “Risk Factors.” This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.
     You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility.
Executive Officers of the Registrant
     The following table sets forth, as of February 15, 2008, the name, age and position of each of our executive officers. Executive officers are elected by and serve at the pleasure of the Board of Directors.
             
Name   Age   Position
J. Terrence Lanni
    64     Chairman and Chief Executive Officer
James J. Murren
    46     President, Chief Operating Officer and Director
Robert H. Baldwin
    57     Chief Design and Construction Officer and Director
Gary N. Jacobs
    62     Executive Vice President, General Counsel, Secretary and Director
Aldo Manzini
    44     Executive Vice President and Chief Administrative Officer
Daniel J. D’Arrigo
    39     Executive Vice President and Chief Financial Officer
Robert C. Selwood
    52     Executive Vice President and Chief Accounting Officer
Alan Feldman
    49     Senior Vice President—Public Affairs
Bruce Gebhardt
    59     Senior Vice President—Global Security
Phyllis A. James
    55     Senior Vice President and Senior Counsel
Punam Mathur
    47     Senior Vice President—Corporate Diversity and Community Affairs
Cynthia Kiser Murphey
    50     Senior Vice President—Human Resources
Shawn T. Sani
    42     Senior Vice President—Taxes
Cathryn Santoro
    39     Senior Vice President and Treasurer
Bryan L. Wright
    44     Senior Vice President, Assistant General Counsel and Assistant Secretary
     Mr. Lanni has served as Chairman of the Company since July 1995. He served as Chief Executive Officer of the Company from June 1995 to December 1999, and since March 2001.
     Mr. Murren has served as President of the Company since December 1999 and as Chief Operating Officer since August 2007. He was Chief Financial Officer from January 1998 to August 2007 and Treasurer from November 2001 to August 2007.
     Mr. Baldwin has served as Chief Design and Construction Officer since August 2007. He served as Chief Executive Officer of Mirage Resorts from June 2000 to August 2007 and President and Chief Executive Officer of Bellagio, LLC from June 1996 to March 2005.
     Mr. Jacobs has served as Executive Vice President and General Counsel of the Company since June 2000 and as Secretary since January 2002. Prior thereto, he was a partner with the law firm of Christensen, Glaser, Fink, Jacobs, Weil & Shapiro, LLP, and is currently of counsel to that firm.
     Mr. Manzini has served as Executive Vice President and Chief Administrative Officer since March 2007. Prior thereto, he served as Senior Vice President of Strategic Planning for the Walt Disney Company and in various senior management positions throughout his tenure from April 1990 to January 2007.
     Mr. D’Arrigo has served as Executive Vice President and Chief Financial Officer since August 2007. He served as Senior Vice President—Finance of the Company from February 2005 to August 2007 and as Vice President—Finance of the Company from December 2000 to February 2005.
     Mr. Selwood has served as Executive Vice President and Chief Accounting Officer since August 2007. He served as Senior Vice President—Accounting of the Company from February 2005 to August 2007 and as Vice President—Accounting of the Company from December 2000 to February 2005.
     Mr. Feldman has served as Senior Vice President—Public Affairs of the Company since September 2001. He served as Vice President — Public Affairs of the Company from June 2000 to September 2001.

9


Table of Contents

     Mr. Gebhardt has served as Senior Vice President—Global Security of the Company since November 2004. Prior thereto, he served as a Special Agent of the Federal Bureau of Investigation for over 30 years, and was the FBI’s Deputy Director for two years prior to his retirement in October 2004.
     Ms. James has served as Senior Vice President and Senior Counsel of the Company since March 2002. From 1994 to 2001 she served as Corporation (General) Counsel and Law Department Director for the City of Detroit. In that capacity she also served on various public and quasi-public boards and commissions on behalf of the City, including the Election Commission, the Detroit Building Authority and the Board of Ethics.
     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.
     Ms. Murphey has served as Senior Vice President—Human Resources of the Company since November 2000.
     Mr. Sani has served as Senior Vice President—Taxes of the Company since July 2005. He served as Vice President—Taxes of the Company from June 2002 to July 2005. Prior thereto he was a partner in the Transaction Advisory Services practice of Arthur Andersen LLP, having served that firm in various other capacities since 1988.
     Ms. Santoro has served as Senior Vice President and Treasurer since August 2007. She served as Vice President – Treasury of the Company from August 2004 to August 2007. Prior thereto she was a Vice President for Wells Fargo Bank, serving in the gaming division.
     Mr. Wright has served as Senior Vice President and Assistant General Counsel of the Company since March 2005. He served as Vice President and Assistant General Counsel of the Company from July 2001 to March 2005. He has served as Assistant Secretary of the Company since January 2002. Prior to joining the Company, Mr. Wright served as Vice President and Assistant General Counsel of Boyd Gaming Corporation and in other legal capacities for Boyd Gaming Corporation from September 1993 to July 2001.
Available Information
     We maintain a website, www.mgmmirage.com, which includes financial and other information for investors. We provide access to our SEC filings on our website, free of charge, through a link to the SEC’s EDGAR database. Through that link, our filings are available as soon as reasonably practical after we file the documents.
     These filings are also available on the SEC’s website at www.sec.gov. In addition, the public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
     Our Corporate Governance Policies, the charter of our Audit Committee and our Code of Business Conduct and Ethics and Conflict of Interest Policy, along with any amendments or waivers to the Code, are available on our website under the “Investor Relations” link. We will provide a copy of these documents without charge to any stockholder upon receipt of a written request addressed to MGM MIRAGE, Attn: Corporate Secretary, 3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109.
     Reference in this document to our website address does not constitute incorporation by reference of the information contained on the website.
ITEM 1A. RISK FACTORS
     You should be aware that the occurrence of any of the events described in this section and elsewhere in this report or in any other of our filings with the SEC could have a material adverse effect on our business, financial position, results of operations and cash flows. In evaluating us, you should consider carefully, among other things, the risks described below.
  We have significant indebtedness. At December 31, 2007, we had approximately $11.2 billion of indebtedness. The interest rate on a large portion of our long-term debt will be subject to fluctuation based on changes in short-term interest rates and the level of debt-to-EBITDA (as defined) under the provisions of our senior credit facility. Our current senior credit facility and the indentures governing our debt securities do not prohibit us from borrowing additional funds in the future. Our interest expense could increase as a result of these factors. Additionally, our indebtedness could increase our vulnerability to general adverse economic and industry conditions, limit our flexibility in planning for or reacting to changes in our business and industry, limit our ability to borrow additional funds, and place us at a competitive disadvantage compared to other less leveraged competitors. Our ability to reduce our outstanding debt will be subject to our future cash flows, other capital requirements and other factors, some of which are not within our control.

10


Table of Contents

  Our casinos in Las Vegas and elsewhere are destination resorts that compete with other destination travel locations throughout the United States and the world. We do not believe that our competition is limited to a particular geographic area, and gaming operations in other states or countries could attract our customers. To the extent that new casinos enter our markets or hotel room capacity is expanded by others in major destination locations, competition will increase. Major competitors, including new entrants, have either recently expanded their hotel room capacity or are currently expanding their capacity or constructing new resorts in Las Vegas. Also, the recent growth of gaming in areas outside Las Vegas, including California, has increased the competition faced by our operations in Las Vegas and elsewhere. In particular, as large scale gaming operations in Native American tribal lands increase, competition will increase.
 
  The expansion of Native American gaming in California has already impacted our operations. According to the California Gambling Control Commission, more than 60 compacts with tribes had been approved by the federal government as of December 31, 2007, with more than 50 of the tribes legally operating casinos in California in accordance with these compacts. Additional expansion of gaming in California could have an adverse impact on our results of operations.
 
  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 could cause a reduction in visitation to our resorts, which would adversely affect our operating results. For example, the current downturn in the real estate market in Nevada, and the broader housing and credit market issues in the United States, could have a negative impact on our CityCenter joint venture’s ability to sell residential units on the Las Vegas Strip and could negatively impact our customers visitation and spending patterns.
 
  Certain of our casino properties are located in areas that may be subject to extreme weather conditions, including, but not limited to, hurricanes. Such extreme weather conditions may interrupt our operations, damage our properties, and reduce the number of customers who visit our facilities in such areas. Although we maintain both property and business interruption insurance coverage for certain extreme weather conditions, such coverage is subject to deductibles and limits on maximum benefits, including limitation on the coverage period for business interruption, and we cannot assure you that we will be able to fully insure such losses or fully collect, if at all, on claims resulting from such extreme weather conditions. Furthermore, such extreme weather conditions may interrupt or impede access to our affected properties and may cause visits to our affected properties to decrease for an indefinite period. For example, in August 2005, Hurricane Katrina caused significant damage to our Beau Rivage resort, which remained closed for a year. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Statement Impact of Hurricane Katrina.”
 
  We are a large consumer of electricity and other energy. Accordingly, increases in energy costs, such as those experienced recently, may have a negative impact on our operating results. Additionally, higher energy and gasoline prices which affect our customers may result in reduced visitation to our resorts and a reduction in our revenues.
 
  Many of our customers travel by air. As a result, the cost and availability of air service and the impact of any events which disrupt air travel can affect our business. Additionally, there is one principal interstate highway between Las Vegas and Southern California, where a large number of our customers reside. Capacity constraints of that highway or any other traffic disruptions may affect the number of customers who visit our facilities.

11


Table of Contents

  Leisure and business travel, especially travel by air, are particularly susceptible to global geopolitical events, such as terrorist attacks or acts of war or hostility, which can create economic and political uncertainties that could adversely impact our business levels. Furthermore, although we have been able to purchase some insurance coverage for certain types of terrorist acts, insurance coverage against loss or business interruption resulting from war and some forms of terrorism continues to be unavailable.
 
  Our joint venture in Macau S.A.R. involves significant risks. The operations of MGM Grand Macau, 50% owned by us, are subject to unique risks, including risks related to: (a) Macau’s regulatory framework; (b) our ability to adapt to the different regulatory and gaming environment in Macau while remaining in compliance with the requirements of the gaming regulatory authorities in the jurisdictions in which we currently operate, as well as other applicable federal, state, or local laws in the United States and Macau; (c) potential political or economic instability; and (d) the extreme weather conditions in the region.
 
    Furthermore, such operations in Macau or any future operations in which we may engage in any other foreign territories are subject to risk pertaining to international operations. These may include financial risks: Foreign economy, adverse tax consequences, inability to adequately enforce our rights; or regulatory and political risks: Foreign government regulations, general geopolitical risks such as political and economic instability, hostilities with neighboring counties, and changes in diplomatic and trade relationships.
 
  Our plans for future construction can be affected by a number of factors, including time delays in obtaining necessary governmental permits and approvals and legal challenges. We may make changes in project scope, budgets and schedules for competitive, aesthetic or other reasons, and these changes may also result from circumstances beyond our control. These circumstances include weather interference, shortages of materials and labor, work stoppages, labor disputes, unforeseen engineering, environmental or geological problems, and unanticipated cost increases. Any of these circumstances could give rise to delays or cost overruns. Major expansion projects at our existing resorts can also result in disruption of our business during the construction period.
 
  Claims have been brought against us and our subsidiaries in various legal proceedings, and additional legal and tax claims arise from time to time. It is possible that our cash flows and results of operations could be affected by the resolution of these claims. We believe that the ultimate disposition of current matters will not have a material impact on our financial condition or results of operations. Please see the further discussion under “Legal Proceedings.”
 
  Tracinda Corporation beneficially owned approximately 52% of our outstanding common stock as of December 31, 2007. As a result, Tracinda Corporation has the ability to elect our entire Board of Directors and determine the outcome of other matters submitted to our stockholders, such as the approval of significant transactions.
 
  A significant portion of our labor force is covered by collective bargaining agreements. Approximately 31,300 of our 67,400 employees are covered by collective bargaining agreements. A prolonged dispute with the covered employees could have an adverse impact on our operations. In addition, wage and or benefit increases resulting from new labor agreements may be significant and could also have an adverse impact on our results of operations. For example, in August 2007, we entered a new five-year collective bargaining agreement covering approximately 21,000 of our Las Vegas Strip employees. This does not include the collective bargaining agreement covering employees at MGM Grand Las Vegas, which expires in 2008. The new agreement is retroactive to May 31, 2007 and provides for average annual increases in wages and benefits of approximately 4%. In addition, in October 2007 we entered into a new four-year labor agreement covering approximately 2,900 employees at MGM Grand Detroit which provides for average annual increases in wages and benefits of approximately 6%.
ITEM 1B. UNRESOLVED STAFF COMMENTS
     None.

12


Table of Contents

ITEM 2. PROPERTIES
     Our principal executive offices are located at Bellagio. The following table lists our significant land holdings. Unless otherwise indicated, all properties are wholly-owned. We also own or lease various other improved and unimproved property in Las Vegas and other locations in the United States and certain foreign countries.
                 
        Approximate    
    Name and Location   Acres   Notes
Las Vegas, Nevada operations:            
 
  Bellagio     82     Two acres of the site are subject to two ground leases that expire (giving effect to our renewal options) in 2019 and 2073. Approximately five acres are leased to CityCenter under a long-term lease.
 
  MGM Grand Las Vegas     102      
 
  Mandalay Bay     100      
 
  The Mirage     102     Site is shared with TI.
 
  Luxor     60      
 
  TI   NA   See The Mirage.
 
  New York-New York     20      
 
  Excalibur     53      
 
  Monte Carlo     28      
 
  Circus Circus Las Vegas     69     Includes Slots-a-Fun. Six acres of this land will be contributed to our planned Kerzner joint venture.
 
  Shadow Creek Golf Course     240      
 
               
Other Nevada operations:            
 
  Circus Circus Reno     10     A portion of the site is subject to two ground leases, which expire in 2032 and 2033, respectively.
 
  Primm Valley Golf Club     448     Located in California, four miles from the Primm Valley Resorts.
 
  Gold Strike, Jean, Nevada     51      
 
  Railroad Pass, Henderson, Nevada     9      
 
               
Other domestic operations:            
 
  MGM Grand Detroit     27      
 
  Beau Rivage, Biloxi, Mississippi     41     Includes 10 acres of tidelands leased from the State of Mississippi under a lease that expires (giving effect to our renewal options) in 2049.
 
  Fallen Oak Golf Course, Saucier, Mississippi     508      
 
  Gold Strike, Tunica, Mississippi     24      
 
               
Other land:            
 
  CityCenter-Support     12     Includes approximately 10 acres behind New York-New York, being used for project administration offices and approximately two acres adjacent to New York-New York, being used for the residential sales pavilion. We own this land and these facilities, and we are leasing them to CityCenter on a rent free basis.
 
  Las Vegas Strip — south     20     Located immediately south of Mandalay Bay.
 
        15     Located across the Las Vegas Strip from Luxor.
 
  Las Vegas Strip — north     34     Located north of Circus Circus. We will contribute this land to
 
              our planned joint venture with Kerzner International and Istithmar.
 
  North Las Vegas, Nevada     66     Located adjacent to Shadow Creek.
 
  Other Las Vegas     9     Warehouse located a few miles from the Las Vegas Strip.
 
  Henderson, Nevada     47     Adjacent to Railroad Pass.
 
  Jean, Nevada     116     Located adjacent to, and across 1-15 from, Gold Strike. We will contribute this land to our planned joint venture with Jean Realty Development, LLC.
 
  Sloan, Nevada     89      
 
  Stateline, California at Primm     125     Adjacent to the Primm Valley Golf Club.
 
  Detroit, Michigan     8     Site of former temporary casino.
 
  Tunica, Mississippi     388     We own an undivided 50% interest in this site with another, unaffiliated, gaming company.
 
  Atlantic City, New Jersey     153     Approximately 19 acres are leased to Borgata including nine acres under a short-term lease. Of the remaining land, approximately 78 acres are suitable for development.

13


Table of Contents

     Borgata occupies approximately 46 acres at Renaissance Pointe, including 19 acres we lease to Borgata. Borgata owns approximately 27 acres which are used as collateral for bank credit facilities in the amount of up to $850 million. As of December 31, 2007, $723 million was outstanding under the bank credit facility.
     MGM Grand Macau occupies an approximately 10 acre site which it possesses under a 25 year land use right agreement with the Macau government. MGM Grand Paradise Limited’s interest in the land use right agreement is used as collateral for MGM Grand Paradise Limited’s bank credit facility. As of December 31, 2007, approximately $700 million was outstanding under the bank credit facility.
     Silver Legacy occupies approximately five acres in Reno, Nevada, adjacent to Circus Circus Reno. The site is used as collateral for Silver Legacy’s senior credit facility and 10.125% mortgage notes. As of December 31, 2007, $160 million of principal of the 10.125% mortgage notes were outstanding.
     CityCenter occupies approximately 67 acres of land between Bellagio and Monte Carlo, five acres of which are leased from Bellagio under a long-term lease. We expect that the site will be used as collateral for the permanent CityCenter financing.
     Other than as described above, none of our other assets serve as collateral.
ITEM 3. LEGAL PROCEEDINGS
Fair and Accurate Credit Transaction Act Litigation
     On June 22, 2007, the Company was served with a purported nationwide class action lawsuit filed in federal district court in Nevada (Lety Ramirez v. MGM MIRAGE, Inc., et al.) for alleged willful violations of the Fair and Accurate Credit Transactions Act (“FACTA”). The lawsuit asserts that the Company failed to comply timely with FACTA’s directive that merchants who accept credit and/or debit cards not display more than the last 5 digits of the card number or the card expiration date on electronically-generated receipts provided to customers at the point of sale. FACTA’s compliance deadline for electronic machines that were first put into service before January 1, 2005 was December 4, 2006, while electronic machines put into use on or after January 1, 2005 required immediate compliance.
     Although the complaint does not assert that the plaintiff sustained any actual damage, the plaintiff seeks on behalf of herself and all similarly situated putative class members throughout the United States statutory damages of $100 (minimum) to $1,000 (maximum) for each transaction violation, attorneys’ fees, costs, punitive damages and a permanent injunction.
     By order entered December 3, 2007 the district court denied the Company’s motion to dismiss the complaint in its entirety but granted the motion to strike from the complaint plaintiff’s request for injunctive relief. The Company then filed an answer to the complaint on December 20, 2007. No discovery has been propounded on the plaintiff or the Company. On February 11, 2008, the court granted the parties’ stipulation to stay this case pending issuance of a decision by the Ninth Circuit Court of Appeals on review of the order of a California federal district court denying class certification in a FACTA case.
     We believe that plaintiff Ramirez’s claims for class certification and other relief are unjustified, and we will continue to vigorously defend our position in this case.
Other
     We and our subsidiaries are also defendants in various other lawsuits, most of which relate to routine matters incidental to our business. We do not believe that the outcome of this other pending litigation, considered in the aggregate, will have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     There were no matters submitted to a vote of our security holders during the fourth quarter of 2007.

14


Table of Contents

PART II
ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock Information
     Our common stock is traded on the New York Stock Exchange under the symbol “MGM” – formerly our stock trading symbol was “MGG.” The following table sets forth, for the calendar quarters indicated, the high and low sale prices of our common stock on the New York Stock Exchange Composite Tape.
                                 
    2007   2006
    High   Low   High   Low
First quarter
  $ 75.28     $ 56.40     $ 43.43     $ 35.26  
Second quarter
    87.38       61.17       46.15       38.14  
Third quarter
    91.15       63.33       40.92       34.20  
Fourth quarter
    100.50       80.50       59.51       39.82  
     There were approximately 3,929 record holders of our common stock as of February 15, 2008.
     We have not paid dividends on our common stock in the last two fiscal years. We intend to retain our earnings to fund the operation of our business, to service and repay our debt, to make strategic investments in high return growth projects at our proven resorts, to repurchase shares of common stock and to reserve our capital to raise our capacity to capture investment opportunities overseas and in emerging domestic markets. Furthermore, as a holding company with no independent operations, our ability to pay dividends will depend upon the receipt of dividends and other payments from our subsidiaries. Our senior credit facility contains financial covenants that could restrict our ability to pay dividends. Our Board of Directors periodically reviews our policy with respect to dividends, and any determination to pay dividends in the future will be at the sole discretion of the Board of Directors.
Share Repurchases
     Our share repurchases are only conducted under repurchase programs approved by our Board of Directors and publicly announced. The following table includes information about our share repurchases for the quarter ended December 31, 2007:
                                 
                    Shares Purchased     Maximum  
    Total     Average     As Part of a     Shares Still  
    Shares     Price Per     Publicly-Announced     Available for  
    Purchased     Share     Program     Repurchase  
October 1 – October 31, 2007
        $             5,500,000 (1)
November 1 – November 30, 2007
    5,080,000       87.92       5,080,000       420,000 (1)
December 1 – December 31, 2007
    2,270,000       90.48       2,270,000       18,150,000 (1)(2)
 
                           
 
    7,350,000               7,350,000          
 
                           
 
(1)   Shares were repurchased under a July 2004 authorization from the Board of Directors for the repurchase of up to 20 million shares, with no expiration.
 
(2)   In December 2007, the Board of Directors approved a new stock repurchase program authorizing the Company to purchase up to 20 million shares, with no expiration.
     In February 2008, we and a wholly-owned subsidiary of Dubai World completed a joint tender offer to purchase 15 million shares of our common stock at a price of $80 per share. We purchased 8.5 million shares at a total purchase price of $680 million.
Equity Compensation Plan Information
     The following table includes information about our equity compensation plans at December 31, 2007:
                         
    Number of securities           Number of securities
    to be issued upon   Weighted average per   remaining available
    exercise of   share exercise price of   for future issuance
    outstanding options,   outstanding options,   under equity
    warrants and rights   warrants and rights   compensation plans
    (in thousands, except per share data)
Equity compensation plans approved by security holders
    26,674     $ 31.90       3,073  

15


Table of Contents

ITEM 6.   SELECTED FINANCIAL DATA
                                         
    For the Years Ended December 31,
    2007   2006   2005   2004   2003
    (In thousands, except per share data)
Net revenues
  $ 7,691,637     $ 7,175,956     $ 6,128,843     $ 4,001,804     $ 3,657,662  
Operating income
    2,863,930       1,758,248       1,330,065       932,613       684,879  
Income from continuing operations
    1,400,545       635,996       435,366       345,209       226,719  
Net income
    1,584,419       648,264       443,256       412,332       243,697  
 
                                       
Basic earnings per share
                                       
Income from continuing operations
  $ 4.88     $ 2.25     $ 1.53     $ 1.24     $ 0.76  
Net income per share
    5.52       2.29       1.56       1.48       0.82  
 
                                       
Weighted average number of shares
    286,809       283,140       284,943       279,325       297,861  
 
                                       
Diluted earnings per share
                                       
Income from continuing operations
  $ 4.70     $ 2.18     $ 1.47     $ 1.19     $ 0.75  
Net income per share
    5.31       2.22       1.50       1.43       0.80  
 
                                       
Weighted average number of shares
    298,284       291,747       296,334       289,333       303,184  
 
                                       
At year-end
                                       
Total assets
  $ 22,727,686     $ 22,146,238     $ 20,699,420     $ 11,115,029     $ 10,811,269  
Total debt, including capital leases
    11,182,003       12,997,927       12,358,829       5,463,619       5,533,462  
Stockholders’ equity
    6,060,703       3,849,549       3,235,072       2,771,704       2,533,788  
Stockholders’ equity per share
  $ 20.63     $ 13.56     $ 11.35     $ 9.87     $ 8.85  
Number of shares outstanding
    293,769       283,909       285,070       280,740       286,192  
 
    The following events/transactions affect the year-to-year comparability of the selected financial data presented above:
          Discontinued Operations
    In January 2004, we sold the Golden Nugget Las Vegas and the Golden Nugget Laughlin including substantially all of the assets and liabilities of those resorts (the “Golden Nugget Subsidiaries”).
 
    In July 2004, we sold the subsidiaries that owned and operated MGM Grand Australia.
 
    In April 2007, we completed the sale of the Primm Valley Resorts.
 
    In June 2007, we completed the sale of the Colorado Belle and Edgewater resorts in Laughlin, Nevada (the “Laughlin Properties”).
 
      The results of the above operations are classified as discontinued operations for all periods presented.
          Acquisitions
    The Mandalay acquisition closed on April 25, 2005.
          Other
    Beau Rivage was closed from August 2005 to August 2006 due to Hurricane Katrina.
 
    Beginning January 1, 2006, we began to recognize stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”). For the years ended December 31, 2007 and 2006, incremental expense, before tax, resulting from the adoption of SFAS 123(R) was $46 million and $70 million, respectively.
 
    During 2007 and 2006, we recognized our share of profits from the sale of condominium units at The Signature at MGM Grand. We recognized $93 million and $117 million (pre-tax) of such income in 2007 and 2006, respectively.
 
    During 2007 and 2006, we recognized $284 million and $86 million, respectively, of pre-tax income for insurance recoveries related to Hurricane Katrina.
 
    During 2007, we recognized a $1.03 billion pre-tax gain on the contribution of CityCenter to a joint venture.

16


Table of Contents

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
Current Operations
     At December 31, 2007, our operations consisted of 17 wholly-owned casino resorts and 50% investments in four other casino resorts, including:
         
 
  Las Vegas, Nevada:   Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, TI, New York-New York, Excalibur, Monte Carlo, Circus Circus Las Vegas and Slots-A-Fun.
 
       
 
  Other:   Circus Circus Reno and Silver Legacy (50% owned) in Reno, Nevada; Gold Strike in Jean, Nevada; Railroad Pass in Henderson, Nevada; MGM Grand Detroit; Beau Rivage in Biloxi, Mississippi and Gold Strike Tunica in Tunica, Mississippi; Borgata (50% owned) in Atlantic City, New Jersey; Grand Victoria (50% owned) in Elgin, Illinois; and MGM Grand Macau (50% owned).
     Other operations include the Shadow Creek golf course in North Las Vegas; two golf courses south of Primm, Nevada at the California state line; and Fallen Oak golf course in Saucier, Mississippi.
     In April 2007, we closed the sale of the Primm Valley Resorts (Whiskey Pete’s, Buffalo Bill’s and Primm Valley Resort in Primm, Nevada), not including the two golf courses. In June 2007, we closed the sale of the Laughlin Properties (Colorado Belle and Edgewater). See “Results of Operations – Discontinued Operations.” In February 2007, we entered into an agreement to contribute Gold Strike and Nevada Landing (the “Jean Properties”) and surrounding land to a joint venture, and we closed Nevada Landing in March 2007. See “Liquidity and Capital Resources – Other Factors Affecting Liquidity.”
CityCenter Joint Venture Transaction
     We and our joint venture partner are developing CityCenter located on a 67-acre site on the Las Vegas Strip, between Bellagio and Monte Carlo. CityCenter will feature a 4,000-room casino resort designed by world-famous architect Cesar Pelli; two 400-room non-gaming boutique hotels, one of which will be managed by luxury hotelier Mandarin Oriental; approximately 425,000 square feet of retail shops, dining and entertainment venues; and approximately 2.3 million square feet of residential space in approximately 2,700 luxury condominium and condominium-hotel units in multiple towers. CityCenter is expected to open in late 2009.
     In November 2007, we completed a transaction with Dubai World, a Dubai, United Arab Emirates government decree entity, to form a 50/50 joint venture for the CityCenter development. The joint venture, CityCenter Holdings, LLC (“CityCenter”), is owned equally by us and Infinity World Development Corp., a wholly-owned subsidiary of Dubai World. We contributed the CityCenter assets which the parties valued at $5.4 billion, subject to certain adjustments. Dubai World contributed cash of $2.96 billion. At the close of the transaction, we received a cash distribution of $2.47 billion, of which $22 million will be repaid to CityCenter as a result of a post-closing adjustment. The joint venture retained approximately $492 million to fund near-term construction costs. We will continue to serve as developer of CityCenter and will receive additional consideration of up to $100 million if the project is completed on time and actual development costs, net of residential proceeds, are within specified parameters. Upon completion of construction, we will manage CityCenter for a fee. We recognized a $1.03 billion pre-tax gain as a result of the transaction.
Key Performance Indicators
     We operate primarily in one segment, the operation of casino resorts, which includes offering gaming, hotel, dining, entertainment, retail and other resort amenities. Over half of our net revenue is derived from non-gaming activities, a higher percentage than many of our competitors, as our operating philosophy is to provide a complete resort experience for our guests, including non-gaming amenities which command a premium price based on their quality. Our significant convention and meeting facilities allow us to maximize hotel occupancy and customer volumes during off-peak times such as mid-week or during traditionally slower leisure travel periods, which also leads to better labor utilization. We believe that we own several of the premier casino resorts in the world, and a main focus of our strategy is to continually reinvest in these resorts to maintain our competitive advantage.
     As a resort-based company, our operating results are highly dependent on the volume of customers at our resorts, which in turn impacts the price we can charge for our hotel rooms and other amenities. We also generate a significant portion of our operating income from the high-end gaming customers, which can cause variability in our results. Key performance indicators related to revenue are:

17


Table of Contents

    Gaming revenue indicators – table games drop and slots handle (volume indicators); “win” or “hold” percentage, which is not fully controllable by us. Our normal table games win percentage is in the range of 18% to 22% of table games drop and our normal slots win percentage is in the range of 6.5% to 7.5% of slots handle;
    Hotel revenue indicators – hotel occupancy (volume indicator); average daily rate (“ADR”, price indicator); revenue per available room (“REVPAR”), a summary measure of hotel results, combining ADR and occupancy rate.
     Most of our revenue is essentially cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our resorts, like many in the industry, generate significant operating cash flow. Our industry is capital intensive and we rely heavily on the ability of our resorts to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide excess cash for future development.
     We generate a majority of our net revenues and operating income from our resorts in Las Vegas, Nevada, which exposes us to certain risks outside of our control, such as increased competition from new or expanded Las Vegas resorts, and the impact from expansion of gaming in California. We are also exposed to risks related to tourism and the general economy, including national and global economic conditions and terrorist attacks or other global events.
     Our results of operations do not tend to be seasonal in nature, though a variety of factors may affect the results of any interim period, including the timing of major Las Vegas conventions, the amount and timing of marketing and special events for our high-end customers, and the level of play during major holidays, including New Year and Chinese New Year. We market to different customer segments to manage our hotel occupancy, such as targeting large conventions to ensure mid-week occupancy. Our results do not depend on key individual customers, though our success in marketing to customer groups, such as convention customers, or the financial health of customer segments, such as business travelers or high-end gaming customers from a particular country or region, can impact our results.
Overall Outlook
     We believe that economic conditions in the United States, including the downturn in the housing market and credit concerns, during the latter half of 2007 and into 2008 have had, and could continue to have, a negative impact on our operating results. The impact is currently most noticeable at our mid-market resorts, particularly those outside of Las Vegas. Offsetting these macroeconomic conditions is the continued expected strength of Las Vegas as a tourist destination. We also believe that we will continue to benefit from recent and ongoing strategic capital investments at our resorts. Our Las Vegas Strip resorts require ongoing capital investment to maintain their competitive advantages. We believe these investments in additional non-gaming amenities have enhanced our ability to generate increased visitor volume and allow us to charge premium prices for our amenities. In 2007, we completed many improvements at our Las Vegas strip resorts, including:
    A remodel of approximately 400 of Bellagio’s suites; a complete remodel of the approximately 3,200 standard rooms at Mandalay Bay; and a remodel of over 1,000 of the standard rooms at Excalibur.
 
    Nightclub amenities including The Bank nightclub at Bellagio; Eyecandy sound lounge and bar at Mandalay Bay; and CatHouse ultra lounge and restaurant and LAX nightclub, both located at Luxor.
 
    New restaurants and bars such as Diablo’s Cantina at Monte Carlo; Dick’s Last Resort at Excalibur; and Company American Bistro at Luxor.
 
    Other resort facilities, including a complete upgrade to Mandalay Bay’s pool area – including adding a casino, restaurant and luxury cabanas – and a significant remodel to the spa and salon at The Mirage.
     These improvements, along with other amenities and improvements projected to open in 2008, are expected to lead to increased customer volumes in gaming areas, restaurants, shops, entertainment venues and our other resort amenities. In addition, the following items are relevant to our overall outlook:
    The all-new MGM Grand Detroit hotel and casino complex opened on October 2, 2007. The new casino has approximately 4,400 slot machines, 95 table games, 400 hotel rooms, and a variety of food and beverage offerings. The interim facility closed on September 30, 2007 and had significantly fewer gaming positions and no hotel. Based on the increased gaming capacity and extent of resort amenities, we expect significantly higher revenues at MGM Grand Detroit in 2008. In addition, now that the permanent casino is open the gaming tax rate decreased, retroactive to October 2, from 26% to 21%.
 
    We own 50% of MGM Grand Macau, which opened on December 18, 2007. Our share of income from MGM Grand Macau will positively impact our results for 2008.
 
    In August 2007, we entered a new five-year collective bargaining agreement covering approximately 21,000 of our Las Vegas Strip employees. This does not include the collective bargaining agreement covering employees at MGM Grand Las Vegas, which expires in 2008. The new agreement is retroactive to May 31, 2007 and provides for increases in wages and benefits of approximately 4% annually. In addition, in October 2007 we entered into a new four-year labor agreement covering approximately 2,900 employees at MGM Grand Detroit which provides for average annual increases in wages and benefits of approximately 6%.

18


Table of Contents

Financial Statement Impact of Hurricane Katrina
     Beau Rivage closed in late August 2005 due to significant damage sustained as a result of Hurricane Katrina and re-opened in August 2006. We maintained insurance covering both property damage and business interruption as a result of the storm. The deductible under this coverage was approximately $15 million, based on the amount of damage incurred. Business interruption coverage covered lost profits and other costs incurred during the construction period and up to six months following the reopening of the facility.
     As of December 31, 2007, we had reached final settlement agreements with our insurance carriers and received insurance recoveries of $635 million which exceeded the $265 million of net book value of damaged assets and post-storm costs incurred. All post-storm costs and expected recoveries have been recorded net within “General and administrative” expenses in the accompanying consolidated statements of income, except for depreciation of non-damaged assets, which is classified as “Depreciation and amortization.” During the year ended December 31, 2007, we recognized $284 million of insurance recoveries in income, of which $217 million was recorded within “Property transactions, net” and $67 million was recorded within “General and administrative expense.” The remaining $86 million previously recognized in income was recorded within “Property transactions, net” in 2006.
     Cash received for insurance recoveries are classified as cash flows from investing activities if the recoveries relate to property damage, and cash flows from operations if the recoveries relate to business interruption. During 2007, we received $280 million in insurance recoveries, of which $207 million was classified as investing cash flows and $73 million was classified as operating cash flows. During 2006, we received $309 million in insurance recoveries, of which $210 million was classified as investing cash flows and $99 million was classified as operating cash flows. During 2005, we received $46 million in insurance recoveries, all of which was classified as investing cash flows.
Results of Operations
Summary Financial Results
     The following table summarizes our financial results:
                                         
    Year Ended December 31,
            Percentage           Percentage    
    2007   Change   2006   Change   2005
            (In thousands, except per share data)                
Net revenues
  $ 7,691,637       7 %   $ 7,175,956       17 %   $ 6,128,843  
Operating income
    2,863,930       63 %     1,758,248       32 %     1,330,065  
Income from continuing operations
    1,400,545       120 %     635,996       46 %     435,366  
Net income
    1,584,419       144 %     648,264       46 %     443,256  
Diluted income from continuing operations per share
  $ 4.70       116 %   $ 2.18       48 %   $ 1.47  
Diluted net income per share
    5.31       140 %     2.22       48 %     1.50  
     References to same-store results in our analysis for 2006 compared to 2005 exclude the resorts acquired in our April 25, 2005 acquisition of Mandalay Resort Group (“Mandalay”), Monte Carlo and Beau Rivage. We owned 50% of Monte Carlo prior to the Mandalay acquisition. On a consolidated basis, the most important factors and trends contributing to our performance over the last three years have been:
    During the fourth quarter of 2007 we recognized a $1.03 billion gain related to the contribution of the CityCenter assets to a joint venture.
 
    The addition of Mandalay’s resorts on April 25, 2005.
 
    Our ongoing capital investments in our resorts, which we believe is allowing us to market more effectively to visitors, capture a greater share of our visitors’ increased travel budgets, and generate premium pricing for our resorts’ rooms and other amenities.
 
    The closure of Beau Rivage in August 2005 after Hurricane Katrina and subsequent reopening in August 2006, and income related to insurance recoveries. Operating income at Beau Rivage was $321 million, $104 million, and $40 million in 2007, 2006 and 2005, respectively, which includes income from insurance recoveries of $284 million in 2007 and $86 million in 2006.
 
    Recognition of our share of profits from the closings of condominium units of The Signature at MGM Grand, which were complete as of December 31, 2007. The venture recorded revenue and cost of sales as units closed. In 2007, we recognized income of approximately $84 million related to our share of the 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 income.
 
    The adoption of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123(R)”). We recorded $46 million and $70 million of additional stock compensation expense in 2007 and 2006, respectively, as a result of adopting SFAS 123(R). Prior to January 1, 2006, we did not recognize expense for employee stock options.

19


Table of Contents

Operating Results
     The following table includes key information about our operating results:
                                         
    Year Ended December 31,  
            Percentage             Percentage        
    2007     Change     2006     Change     2005  
                    (In thousands)                  
Net revenues
  $ 7,691,637       7 %   $ 7,175,956       17 %   $ 6,128,843  
Operating expenses:
                                       
Casino and hotel operations
    4,139,147       9 %     3,813,386       15 %     3,316,870  
General and administrative
    1,140,363       6 %     1,070,942       20 %     889,806  
Corporate expense
    193,893       20 %     161,507       24 %     130,633  
Preopening and restructuring
    92,105       146 %     37,397       138 %     15,693  
Property transactions, net
    (186,313 )   NM       (40,980 )   NM       37,021  
CityCenter gain
    (1,029,660 )   NM                    
Depreciation and amortization
    700,334       11 %     629,627       12 %     560,626  
 
                                 
 
    5,049,869       (11 %)     5,671,879       15 %     4,950,649  
 
                                 
Income from unconsolidated affiliates
    222,162       (13 %)     254,171       67 %     151,871  
 
                                 
Operating income
  $ 2,863,930       63 %   $ 1,758,248       32 %   $ 1,330,065  
 
                                 
     Net revenues in 2007 included a full year of results for Beau Rivage. Excluding Beau Rivage, net revenues increased 4%, largely due to strength in hotel room rates and other non-gaming revenues. Operating income increased 63% in 2007 over 2006 and included the CityCenter gain, higher Hurricane Katrina insurance recoveries income, and a full year of operations at Beau Rivage. These increases were partially offset by lower profits recognized from the sale of units at The Signature at MGM Grand and higher preopening expenses, primarily related to the openings of MGM Grand Macau and MGM Grand Detroit. Excluding the impact from these items, operating income for 2007 decreased approximately 5% compared to 2006 mainly related to higher depreciation and amortization expense related to our continued capital investments and higher corporate expense. Corporate expense increased 20% in 2007 over 2006. The increase in corporate expense is partially due to severance costs, costs associated with our CityCenter joint venture transaction, and development costs associated with our planned MGM Grand Atlantic City project.
     The 2006 and 2005 increase in net revenues resulted primarily from the addition of Mandalay. Net revenues for 2006 included a full year of operations for Mandalay resorts and 2005 included approximately 8 months of operations for Mandalay resorts. On a same-store basis, net revenues increased 5% in 2006. Operating income for 2006 increased 32% over 2005; same store operating income increased 15%, partially due to the increases in revenues discussed above with continued strong operating margins. In addition, we recognized income of $102 million from our share of profits from The Signature at MGM Grand along with a $15 million gain on land contributed to the venture. Partially offsetting these items was the $70 million of incremental stock-based compensation expense. Excluding these items, same store operating income increased 10%, with an operating margin of 22% in 2006 compared to 21% in 2005. Corporate expense increased 24%, almost entirely due to $30 million of stock-based compensation.
Operating Results – Detailed Revenue Information
     The following table presents detail of our net revenues:
                                         
    Year Ended December 31,  
            Percentage             Percentage        
    2007     Change     2006     Change     2005  
                    (In thousands)                  
Casino revenue, net:
                                       
Table games
  $ 1,228,296       (2 %)   $ 1,251,304       13 %   $ 1,107,337  
Slots
    1,897,610       7 %     1,770,176       13 %     1,563,485  
Other
    113,148       4 %     108,958       16 %     93,724  
 
                                 
Casino revenue, net
    3,239,054       3 %     3,130,438       13 %     2,764,546  
 
                                 
Non-casino revenue:
                                       
Rooms
    2,130,542       7 %     1,991,477       22 %     1,634,588  
Food and beverage
    1,651,655       11 %     1,483,914       17 %     1,271,650  
Entertainment, retail and other
    1,376,417       16 %     1,190,904       17 %     1,018,813  
 
                                 
Non-casino revenue
    5,158,614       11 %     4,666,295       19 %     3,925,051  
 
                                 
 
    8,397,668       8 %     7,796,733       17 %     6,689,597  
Less: Promotional allowances
    (706,031 )     14 %     (620,777 )     11 %     (560,754 )
 
                                 
 
  $ 7,691,637       7 %   $ 7,175,956       17 %   $ 6,128,843  
 
                                 

20


Table of Contents

     Table games revenue decreased 7% in 2007 excluding Beau Rivage, as volumes were essentially flat. The table games hold percentage was slightly lower in 2007, though in the normal range for both years. In 2006, table games revenue increased 7% over 2005 on a same store basis, with strong baccarat volume – up 4% – and a somewhat higher hold percentage, but within the normal range in both periods.
     Excluding Beau Rivage, slots revenue was flat in 2007. Slots revenue was strong at many of our Las Vegas Strip Resorts, including Bellagio and MGM Grand Las Vegas – each up 8% – and The Mirage and Mandalay Bay – each up 5%. These increases in slot revenues at our high-end Las Vegas Strip resorts were offset by lower revenues at our mid-market resorts. In 2006, slots revenue increased 3% on a same store basis, as a result of increases at MGM Grand Las Vegas and TI.
     Hotel revenue increased 5% in 2007 excluding Beau Rivage, with a 7% increase in company–wide REVPAR. Strength in demand and room pricing on the Las Vegas Strip led to a 5% increase in ADR and a slight increase in occupancy percentage to 93%. In 2006, hotel revenue increased 4% over 2006 on a same-store basis, due to strong room pricing, leading to a 7% increase in same-store REVPAR.
     The increases in food and beverage revenue in 2007 and 2006 are the result of investments in new restaurants and nightclubs. In particular, in 2007 we opened several new outlets at Excalibur, Mandalay Bay and Luxor – including the LAX nightclub. Also, we opened several restaurants and the Jet nightclub at The Mirage throughout 2006. The strength in the business travel segment has also contributed to revenue growth at many of our high-end restaurants and in catering operations.
     Entertainment revenues in 2007 and 2006 benefited from Love, the Beatles-themed Cirque du Soleil show at The Mirage, which opened July 2006. In addition, in 2007 we saw improved results in our production shows generally, with higher occupancy at several shows compared to 2006.
     In 2007, we generated 58% of net revenues from non-gaming activities compared to 56% in 2006 and 55% in 2005. We expect this trend to continue in 2008, as we continue to invest in new non-gaming amenities at our resorts and the MGM Grand Detroit hotel will be open for a full year.
Operating Results – Details of Certain Charges
     Stock compensation expense is recorded within the department of the recipient of the stock compensation award. In periods prior to January 1, 2006, such expense consisted only of restricted stock amortization and expense associated with stock options granted to non-employees. Beginning January 1, 2006, stock compensation expense includes the cost of all stock-based awards to employees under SFAS 123(R). The following table shows the amount of incremental compensation related to employee stock-based awards included within each income statement expense caption:
                 
    Year Ended December 31,  
    2007     2006  
    (In thousands)  
Casino
  $ 11,513     $ 13,659  
Other operating departments
    3,180       5,319  
General and administrative
    12,143       19,722  
Corporate expense and other
    19,707       30,421  
Discontinued operations
    (865 )     1,267  
 
           
 
  $ 45,678     $ 70,388  
 
           
     Preopening and start-up expenses consisted of the following:
                         
    Year Ended December 31,  
    2007     2006     2005  
    (In thousands)  
CityCenter
  $ 24,169     $ 9,429     $ 5,173  
MGM Grand Macau
    36,853       5,057       1,914  
MGM Grand Detroit
    26,257       3,313       503  
The Signature at MGM Grand
    1,130       8,379       1,437  
Love at The Mirage
          3,832        
Other
    3,696       6,352       6,725  
 
                 
 
  $ 92,105     $ 36,362     $ 15,752  
 
                 
     Preopening and start-up expenses for CityCenter will continue to increase as the project nears its expected completion in late 2009. However, since we completed the CityCenter joint venture transaction in November 2007 we will only recognize our 50% share of these preopening costs in the future. MGM Grand Macau preopening and start-up expenses relate to our share of that venture’s preopening costs. Preopening and start-up expenses for The Signature at MGM Grand relate to our costs associated with preparing the towers for rental operations.

21


Table of Contents

     Property transactions, net consisted of the following:
                         
    Year Ended December 31,  
    2007     2006     2005  
            (In thousands)          
Write-downs and impairments
  $ 33,624     $ 40,865     $ 28,622  
Demolition costs
    5,665       348       5,362  
Insurance recoveries
    (217,290 )     (86,016 )      
Other net losses on asset sales or disposals
    (8,312 )     3,823       3,037  
 
                 
 
  $ (186,313 )   $ (40,980 )   $ 37,021  
 
                 
     Write-downs and impairments in 2007 included write-offs related to discontinued construction projects and a write-off of the carrying value of the Nevada Landing building assets due to its closure in March 2007. The 2007 period also includes demolition costs primarily related to the Mandalay Bay room remodel.
     Write-downs and impairments in 2006 included $22 million related to the write-off of the tram connecting Bellagio and Monte Carlo, including the stations at both resorts, in preparation for construction of CityCenter. Other impairments related to assets being replaced in connection with several capital projects, as well as the $4 million write-off of Luxor’s investment in the Hairspray show.
     Write-downs and impairments in 2005 related primarily to assets removed from service in connection with capital projects at several resorts. Demolition costs related primarily to room remodel activity at MGM Grand Las Vegas and the new showroom at The Mirage.
     Insurance recoveries in 2007 and 2006 related to the insurance recoveries received related to property damage from Hurricane Katrina in excess of the book value of the damaged assets and post-storm costs incurred.
Non-operating Results
     The following table summarizes information related to interest on our long-term debt:
                         
For the periods ended December 31,   2007     2006     2005  
            (In thousands)          
Total interest incurred
  $ 930,138     $ 900,661     $ 685,552  
Interest capitalized
    (215,951 )     (122,140 )     (29,527 )
Interest allocated to discontinued operations
    (5,844 )     (18,160 )     (15,267 )
 
                 
 
  $ 708,343     $ 760,361     $ 640,758  
 
                 
 
                       
Cash paid for interest, net of amounts capitalized
  $ 731,618     $ 778,590     $ 588,587  
Weighted average total debt balance
  $13.0 billion     $12.7 billion     $10.1 billion  
End-of-year ratio of fixed-to-floating debt
    71/29       66/34       61/39  
Weighted average interest rate
    7.1 %     7.1 %     6.8 %
     Gross interest costs increased in 2007 compared to 2006 due to higher average debt balances during the year up until the significant reduction in debt in the fourth quarter resulting from the $2.47 billion received upon the close of the CityCenter joint venture transaction and the $1.2 billion received from our sale of common stock to a wholly-owned subsidiary of Dubai World. Net interest expense decreased due to increased capitalized interest from the ongoing construction of CityCenter, MGM Grand Detroit, and MGM Grand Macau.
     Interest costs increased in 2006 over 2005 due to higher average outstanding debt resulting from a full year of debt outstanding related to the Mandalay acquisition, incremental borrowings in 2006 to fund capital investments, and a slightly higher average interest rate. Capitalized interest increased in 2006 as we continued to capitalize interest on the CityCenter construction and our investment in MGM Grand Macau. The increase in our weighted average interest rate was due to slightly higher market rates, which affects our variable rate debt.
     The following table summarizes information related to our income taxes:
                         
    Year Ended December 31,  
    2007   2006   2005
            (In thousands)        
Income from continuing operations before income tax
  $ 2,158,428     $ 977,926     $ 667,085  
Income tax provision
    757,883       341,930       231,719  
Effective income tax rate
    35.1 %     35.0 %     34.7 %
Cash paid for income taxes
  $ 391,042     $ 369,450     $ 75,776  
     The effective tax rate in 2007 was slightly higher than the statutory rate and the prior year rate. The 2007 effective tax rate would have been higher except for the CityCenter gain, which greatly minimized the impact of permanent and other tax items. Additionally in 2007, a benefit for a deduction related to domestic production activities, resulting primarily from the CityCenter transaction, was offset by nondeductible losses from unconsolidated foreign affiliates during the year.

22


Table of Contents

     The effective income tax rate in 2006 benefited from a reversal of tax reserves that were no longer required, primarily due to guidance issued by the Internal Revenue Service related to the deductibility of certain complimentaries. The 2006 rate was still higher than the 2005 rate, however, as such reversal was less than the one-time tax benefit recognized in 2005 due to a tax benefit realized from the repatriation of foreign earnings from Australia as a result of the provisions of the American Jobs Creation Act of 2004.
     Cash paid for income taxes increased only slightly in 2007 over 2006, despite significantly higher pre-tax income. Since the CityCenter gain was realized in the fourth quarter of 2007, the associated income taxes will be paid in 2008. Cash paid for income taxes increased significantly in 2006 due primarily to the payment of taxes on the gain on Mandalay’s sale of MotorCity Casino, taxable income associated with the sales of units at the Signature at MGM Grand, and an increase in pre-tax income resulting from the Mandalay merger and continued improvements in operating results.
Liquidity and Capital Resources
Cash Flows – Summary
     Our cash flows consisted of the following:
                         
    Year Ended December 31,  
    2007     2006     2005  
            (In thousands)          
Net cash provided by operating activities
  $ 994,416     $ 1,231,952     $ 1,182,796  
 
                 
 
                       
Investing cash flows:
                       
Purchases of property and equipment
    (2,917,409 )     (1,758,795 )     (719,146 )
Proceeds from contribution of CityCenter
    2,468,652              
Acquisition of Mandalay Resort Group, net
                (4,420,990 )
Proceeds from disposals of discontinued operations, net
    578,873              
Purchase of convertible note
    (160,000 )            
Hurricane Katrina insurance recoveries
    207,289       209,963       46,250  
Investments in unconsolidated affiliates
          (86,000 )     (183,000 )
Other
    31,896       (7,595 )     (25,931 )
 
                 
Net cash provided by (used in) investing activities
    209,301       (1,642,427 )     (5,302,817 )
 
                 
 
                       
Financing cash flows:
                       
Net borrowings (repayments) under bank credit facilities
    (1,152,300 )     (393,150 )     4,725,000  
Issuance of long-term debt
    750,000       1,500,000       880,156  
Repayment of long-term debt
    (1,402,233 )     (444,500 )     (1,408,992 )
Issuance of common stock
    1,192,758              
Issuance of common stock upon exercise of stock options
    97,792       89,113       145,761  
Purchases of common stock
    (826,765 )     (246,892 )     (217,316 )
Other
    100,211       5,453       (61,783 )
 
                 
Net cash provided by (used in) financing activities
    (1,240,537 )     510,024       4,062,826  
 
                 
 
Net increase (decrease) in cash and cash equivalents
  $ (36,820 )   $ 99,549     $ (57,195 )
 
                 
Cash Flows – Operating Activities
     Trends in our operating cash flows tend to follow trends in our operating income, excluding gains and losses from investing activities and net property transactions, since our business is primarily cash-based. Cash flow from operations decreased 18% in 2007, partially the result of trends in operating income, excluding the CityCenter gain, Katrina-related income and other similar items. In addition, the Company’s net cash outflows related to CityCenter residential sales – construction expenditures and customer deposits – increased by $135 million. Cash flow from operations increased in 2006 over 2005 as a result of higher operating income, offset by higher interest and tax payments – tax payments in particular increased to $369 million in 2006 versus $76 million in 2005.
     At December 31, 2007 and 2006, we held cash and cash equivalents of $412 million and $453 million, respectively. We require a certain amount of cash on hand to operate our resorts. Beyond our cash on hand, we utilize a company-wide cash management system to minimize the amount of cash held in banks. Funds are swept from accounts at our resorts daily into central bank accounts, and excess funds are invested overnight or are used to repay borrowings under our bank credit facilities.

23


Table of Contents

Cash Flows – Investing Activities
     Capital expenditures consisted of the following:
                         
    Twelve Months Ended  
    December 31,  
    2007     2006     2005  
            (In millions)          
Development and expansion projects:
                       
CityCenter
  $ 962     $ 520     $ 79  
MGM Grand Detroit
    336       262       90  
Beau Rivage
    63       446       44  
Las Vegas Strip land
    584              
Capitalized interest on development and expansion projects
    191       101       20  
 
                 
 
    2,136       1,329       233  
 
                 
 
                       
Other
                       
Room remodel projects
    205       39       64  
Corporate aircraft
    102       48        
Other
    474       343       422  
 
                 
 
    781       430       486  
 
                 
 
  $ 2,917     $ 1,759     $ 719  
 
                 
     The CityCenter proceeds and Hurricane Katrina insurance recoveries were discussed earlier in the “Executive Overview” section. In 2007, we received net proceeds of $579 million from the sale of the Primm Valley Resorts and the Laughlin Properties. Also in 2007, we purchased a $160 million convertible note issued by The M Resort LLC, which is developing a casino resort on Las Vegas Boulevard, 10 miles south of Bellagio. The note is convertible, with certain restrictions, into a 50% equity position in The M Resort LLC. Investments in unconsolidated affiliates in 2006 and 2005 primarily represented investments in MGM Grand Macau.
Cash Flows – Financing Activities
     We repaid net debt of $1.8 billion in 2007, including $1.2 billion under our senior credit facility. In 2007, we issued $750 million of 7.5% senior notes maturing in 2016 and we repaid the following senior and senior subordinated notes at their scheduled maturity: $710 million of 9.75% senior subordinated notes; $200 million of 6.75% senior notes; and $492.2 million of 10.25% senior subordinated notes.
     In 2007, we received approximately $1.2 billion from the sale of 14.2 million shares of our common stock to Infinity World Investments, a wholly-owned subsidiary of Dubai World, at a price of $84 per share. We received $98 million, $89 million and $146 million in proceeds from the exercise of employee stock options in the years ended December 31, 2007, 2006 and 2005, respectively.
     In 2006, we borrowed net debt of $662 million, due to the level of capital expenditures, share repurchases and investments in unconsolidated affiliates. We repaid at their scheduled maturity our $200 million 6.45% senior notes and our $245 million 7.25% senior notes, and we issued $1.5 billion of senior notes at various times throughout the year, with interest rates ranging from 6.75% to 7.625% and maturities ranging from 2013 to 2017.
     Our primary financing activities in 2005 related to the Mandalay acquisition. The cash purchase price of Mandalay was funded from borrowings under our senior credit facility. We also issued $875 million of fixed rate debt in various issuances.
     In 2005, we repaid at their scheduled maturity two issues of senior notes – $176.4 million of 6.625% senior notes and $300 million of 6.95% senior notes – and redeemed one issue of senior notes due in 2008 – $200 million of 6.875% senior notes. The redemption of the 2008 senior notes resulted in a loss on early retirement of debt of $20 million, which is classified as “Other, net” in the accompanying consolidated statements of income. In addition, in the second quarter of 2005 we initiated a tender offer for several issuances of Mandalay’s senior notes and senior subordinated notes totaling $1.5 billion. Holders of $155 million of Mandalay’s senior notes and senior subordinated notes redeemed their holdings. Holders of Mandalay’s floating rate convertible senior debentures with a principal amount of $394 million had the right to redeem the debentures for $566 million through June 30, 2005. $388 million of principal of the convertible debentures were tendered for redemption and redeemed for $558 million.

24


Table of Contents

     Our share repurchases are only conducted under repurchase programs approved by our Board of Directors and publicly announced. In December 2007, our Board of Directors approved a 20 million share authorization. At December 31, 2007, we had 18.2 million shares available for repurchase under the December 2007 authorization. Our share repurchase activity was as follows:
                         
    Year Ended December 31,  
    2007     2006     2005  
            (In thousands)          
July 2004 authorization (8 million, 6.5 million, and 5.5 million shares purchased)
  $ 659,592     $ 246,892     $ 217,316  
December 2007 authorization (1.9 million shares purchased)
    167,173              
 
                 
 
  $ 826,765     $ 246,892     $ 217,316  
 
                 
 
                       
Average price of shares repurchased
  $ 83.92     $ 37.98     $ 39.51  
  Principal Debt Arrangements
     Our long-term debt consists of publicly held senior and subordinated notes and our senior credit facility. We pay fixed rates of interest ranging from 5.875% to 9.5% on the senior and subordinated notes. We pay variable interest based on LIBOR on our senior credit facility. Our current senior credit facility has a total capacity of $7.0 billion, matures in 2011, and consists of a $4.5 billion revolving credit facility and a $2.5 billion term loan facility. As of December 31, 2007, we had approximately $3.7 billion of available liquidity under our senior credit facility.
     All of our principal debt arrangements are guaranteed by each of our material subsidiaries, excluding MGM Grand Detroit, LLC and our foreign subsidiaries. MGM Grand Detroit is a guarantor under the senior credit facility, but only to the extent that MGM Grand Detroit, LLC borrows under such facilities. At December 31, 2007, the outstanding amount of borrowings related to MGM Grand Detroit, LLC was $361 million. None of our assets serve as collateral for our principal debt arrangements.
  Other Factors Affecting Liquidity
     Taxes on CityCenter gain. In addition to our typical cash tax payments, in the first quarter of 2008 we will make a federal income tax payment of approximately $300 million related to the CityCenter gain.
     Long-term debt payable in 2008. We repaid $180 million of senior notes at maturity in February 2008. We have a total of $196 million in senior notes that we expect to repay at maturity in the third quarter of 2008.
     Tender offer. In February 2008, we and a wholly-owned subsidiary of Dubai World completed a joint tender offer for 15 million shares of our common stock at a tender price of $80.00 per share. We purchased 8.5 million shares at a total purchase price of $680 million.
     MGM Grand Atlantic City development. In October 2007, we announced plans for a multi-billion dollar resort complex on our 72-acre site in Atlantic City. The new resort, MGM Grand Atlantic City, is preliminarily estimated to cost approximately $4.5 to $5.0 billion, not including land and associated costs. The proposed resort would include three towers with more than 3,000 total rooms and suites, approximately 5,000 slot machines, 200 table games, 500,000 square-feet of retail, an extensive convention center, and other typical resort amenities.
     Mashantucket Pequot Tribal Nation. We have entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Ledyard, Connecticut. Under the strategic alliance, we are consulting with MPTN in the development of a new $700 million casino resort currently under construction adjacent to the existing Foxwoods casino resort. The new resort will utilize the “MGM Grand” brand name and is scheduled to open in Spring 2008. We have also formed a jointly owned company with MPTN — Unity Gaming, LLC — to acquire or develop future gaming and non-gaming enterprises. We will provide a loan of up to $200 million to finance a portion of MPTN’s investment in joint projects.
     Jean Properties. We have entered into an operating agreement to form a 50/50 joint venture with Jeanco Realty Development, LLC. The venture will master plan and develop a mixed-use community in Jean, Nevada. We will contribute the Gold Strike and surrounding land to the joint venture. The value of this contribution per the operating agreement will be $150 million. We expect to receive a distribution of $55 million upon contribution of the assets to the venture, which is subject to the venture obtaining necessary regulatory and other approvals, and $20 million no later than August 2008.

25


Table of Contents

  Off Balance Sheet Arrangements
     Investments in unconsolidated affiliates. Our off balance sheet arrangements consist primarily of investments in unconsolidated affiliates, which currently consist primarily of our investments in CityCenter, Borgata, Grand Victoria, Silver Legacy and MGM Grand Macau. We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions. Our unconsolidated affiliate investments allow us to realize the proportionate benefits of owning a full-scale resort in a manner that minimizes our initial investment. We have not historically guaranteed financing obtained by our investees, and there are no other provisions of the venture agreements which we believe are unusual or subject us to risks to which we would not be subjected if we had full ownership of the resort.
     CityCenter. The estimated net project budget for CityCenter is $8.0 billion, after net residential proceeds of $2.7 billion. The gross project budget consists of $8.7 billion of construction costs, including capitalized interest, $1.7 billion of land, $0.2 billion of preopening expenses, and $0.1 billion of intangible assets. The construction costs, land and intangible assets reflect the impact of $1.3 billion of positive valuation adjustments upon the contribution of the CityCenter assets to the joint venture.
     The joint venture expects to spend approximately $2.5 billion in construction costs in 2008. As of December 31, 2007, the joint venture had $207 million of cash. In February 2008, MGM MIRAGE and Dubai World each loaned $100 million to the joint venture to fund near-term construction costs. The joint venture is currently negotiating with its lenders to obtain project financing to fund remaining construction spending. The joint venture anticipates that project financing will include requirements to utilize the project assets as security for the financing. The other potential source of project financing is additional contributions from MGM MIRAGE and Dubai World, which require approval of the joint venture’s Board of Directors.
     Letters of credit. At December 31, 2007, we had outstanding letters of credit totaling $85 million, of which $50 million support bonds issued by the Economic Development Corporation of the City of Detroit. These bonds are recorded as a liability in our consolidated balance sheets. This obligation was undertaken to secure our right to develop a permanent casino in Detroit.
  Commitments and Contractual Obligations
     The following table summarizes our scheduled contractual commitments as of December 31, 2007:
                                                 
    2008     2009     2010     2011     2012     Thereafter  
    (In millions)  
Long-term debt
  $ 378     $ 1,278     $ 1,124     $ 3,763     $ 551     $ 4,060  
Estimated interest payments on long-term debt (1)
    684       674       592       477       306       1,029  
Capital leases
    2       2       2       1       1        
Operating leases
    14       9       8       7       6       41  
Tax liabilities (2)
    3                                
Long-term liabilities (3)
    139       71       21       5       3       22  
Other purchase obligations:
                                               
Construction commitments
    166       2       2       3              
Employment agreements
    128       78       26       3              
Entertainment agreements (4)
    131       19                          
Other (5)
    183       21       16       14       10        
 
                                   
 
  $ 1,828     $ 2,154     $ 1,791     $ 4,273     $ 877     $ 5,152  
 
                                   
 
(1)   Estimated interest payments on long-term debt are based on principal amounts outstanding at December 31, 2007 and forecasted LIBOR rates for our bank credit facility.
 
(2)   Approximately $84 million of tax liabilities related to unrecognized tax benefits are excluded from the table as we cannot reasonably estimate when examination and other activity related to these amounts will conclude.
 
(3)   Includes our obligation to support $50 million of bonds issued by the Economic Development Corporation of the City of Detroit as part of our development agreement with the City. The bonds mature in 2009. Also includes the estimated payments of obligations under our deferred compensation and supplemental executive retirement plans, based on balances as of December 31, 2007 and assumptions of retirement based on plan provisions.
 
(4)   Our largest entertainment commitments consist of minimum contractual payments to Cirque du Soleil, which performs shows at several of our resorts. We are generally contractually committed for a period of 12 months based on our ability to exercise certain termination rights; however, we expect these shows to continue for longer periods.
 
(5)   The amount for 2008 includes approximately $141 million of open purchase orders. Other commitments are for various contracts, including corporate aircraft purchases, maintenance and other service agreements and advertising commitments.

26


Table of Contents

  Summary of Expected Sources and Uses of Funds
     We plan to fund our contractual obligations and other estimated spending through a combination of operating cash flow, available borrowings under our senior credit facility and potential issuances of fixed rate long-term debt. We generated over $1.0 billion in operating cash flow in 2007, which included deductions for interest payments, tax payments and certain contractually committed payments reflected in the above table, including operating leases, employment agreements and entertainment agreements.
Critical Accounting Policies and Estimates
     Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements. To prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, we must make estimates and assumptions that affect the amounts reported in the consolidated financial statements. We regularly evaluate these estimates and assumptions, particularly in areas we consider to be critical accounting estimates, where changes in the estimates and assumptions could have a material impact on our results of operations, financial position or cash flows. Senior management and the Audit Committee of the Board of Directors have reviewed the disclosures included herein about our critical accounting estimates, and have reviewed the processes to determine those estimates.
  Allowance for Doubtful Casino Accounts Receivable
     Marker play represents a significant portion of the table games volume at Bellagio, MGM Grand Las Vegas, Mandalay Bay and The Mirage. Our other facilities do not emphasize marker play to the same extent, although we offer markers to customers at those casinos as well.
     We maintain strict controls over the issuance of markers and aggressively pursue collection from those customers who fail to pay their marker balances timely. These collection efforts are similar to those used by most large corporations when dealing with overdue customer accounts, including the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and civil litigation. Markers are generally legally enforceable instruments in the United States. At December 31, 2007 and 2006, approximately 47% and 48%, respectively, of our casino accounts receivable was owed by customers from the United States. Markers are not legally enforceable instruments in some foreign countries, but the United States assets of foreign customers may be reached to satisfy judgments entered in the United States. At December 31, 2007 and 2006, approximately 38% and 37%, respectively, of our casino accounts receivable was owed by customers from the Far East.
     We maintain an allowance, or reserve, for doubtful casino accounts at all of our operating casino resorts. The provision for doubtful accounts, an operating expense, increases the allowance for doubtful accounts. We regularly evaluate the allowance for doubtful casino accounts. At resorts where marker play is not significant, the allowance is generally established by applying standard reserve percentages to aged account balances. At resorts where marker play is significant, we apply standard reserve percentages to aged account balances under a specified dollar amount and specifically analyze the collectibility of each account with a balance over the specified dollar amount, based on the age of the account, the 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.
     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,
    2007   2006   2005
    (In thousands)
Casino accounts receivable
  $ 266,059     $ 248,044     $ 221,873  
Allowance for doubtful casino accounts receivable
    76,718       83,327       68,768  
Allowance as a percentage of casino accounts receivable
    29 %     34 %     31 %
Median age of casino accounts receivable
  28 days   46 days   39 days
Percentage of casino accounts outstanding over 180 days
    18 %     21 %     19 %
     The allowance for doubtful accounts as a percentage of casino accounts receivable has decreased in the current year due to a decrease in aging of accounts. At December 31, 2007, a 100 basis-point change in the allowance for doubtful accounts as a percentage of casino accounts receivable would change net income by $2.7 million, or less than $0.01 per share.

27


Table of Contents

  Fixed asset capitalization and depreciation policies
     Property and equipment are stated at cost. For the majority of our property and equipment, cost has been determined based on estimated fair values in connection with the April 2005 Mandalay acquisition and the May 2000 Mirage Resorts acquisition. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. We account for construction projects in accordance with Statement of Financial Accounting Standards No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.” When we construct assets, we capitalize direct costs of the project, including fees paid to architects and contractors, property taxes, and certain costs of our design and construction subsidiaries.
     We must make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered a maintenance expense or a capital asset is a matter of judgment. When constructing or purchasing assets, we must determine whether existing assets are being replaced or otherwise impaired, which also may be a matter of judgment. Our depreciation expense is highly dependent on the assumptions we make about our assets’ estimated useful lives. We determine the estimated useful lives based on our experience with similar assets, engineering studies, and our estimate of the usage of the asset. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.
     In accordance with Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”), interest cost associated with major development and construction projects is capitalized as part of the cost of the project. Interest is typically capitalized on amounts expended on the project using the weighted-average cost of our outstanding borrowings, since we typically do not borrow funds directly related to a development project. Capitalization of interest starts when construction activities, as defined in SFAS 34, begin and ceases when construction is substantially complete or development activity is suspended for more than a brief period.
  Impairment of Long-lived Assets
     We evaluate our property and equipment and other long-lived assets for impairment in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” For assets to be disposed of, we recognize the asset at the lower of carrying value or fair market value less costs of disposal, as estimated based on comparable asset sales, offers received, or a discounted cash flow model. For assets to be held and used, we review for impairment whenever indicators of impairment exist. We then compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets to be disposed of or assets to be held and used, are recorded as operating expenses.
     There are several estimates, assumptions and decisions in measuring impairments of long-lived assets. First, management must determine the usage of the asset. To the extent management decides that an asset will be sold, it is more likely that an impairment may be recognized. Assets must be tested at the lowest level for which identifiable cash flows exist. This means that some assets must be grouped, and management has some discretion in the grouping of assets. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates.
     On a quarterly basis, we review our major long-lived assets to determine if events have occurred or circumstances exist that indicate a potential impairment. We estimate future cash flows using our internal budgets. When appropriate, we discount future cash flows using our weighted-average cost of capital, developed using a standard capital asset pricing model.
     See “Results of Operations” for discussion of write-downs and impairments recorded in 2007, 2006 and 2005. In 2006, we entered into agreements to sell Primm Valley Resorts and Laughlin Properties. The fair value less costs to sell exceeded the carrying value, therefore no impairment was indicated. Other than the above items, we are not aware of events or circumstances through December 31, 2007 that would cause us to review any material long-lived assets for impairment.
  Income taxes
     We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied. Except for certain New Jersey state net operating losses, certain other New Jersey state deferred tax assets, a foreign tax credit carryforward and certain foreign deferred tax assets, we believe that it is more likely than not that our deferred tax assets are fully realizable because of the future reversal of existing taxable temporary differences and future projected taxable income.

28


Table of Contents

     Our income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities. While positions taken in tax returns are sometimes subject to uncertainty in the tax laws, we do not take such positions unless we have “substantial authority” to do so under the Internal Revenue Code and applicable regulations. We may take positions on our tax returns based on substantial authority that are not ultimately accepted by the IRS.
     Effective January 1, 2007, we adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 requires that tax positions be assessed using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. As required by the standard, we review uncertain tax positions at each balance sheet date. Liabilities we record as a result of this analysis are recorded separately from any current or deferred income tax accounts, and are classified as current (“Other accrued liabilities”) or long-term (“Other long-term liabilities”) based on the time until expected payment. Additionally, we recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense, a policy that did not change as a result of the adoption of FIN 48.
     We file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the taxes paid in foreign jurisdictions are not material. We are no longer subject to examination of our U.S. federal income tax returns filed for years ended prior to 2003. While the IRS examination of the 2001 and 2002 tax years closed during the first quarter of 2007, the statute of limitations for assessing tax for such years has been extended in order for us to complete the appeals process for issues that were not agreed upon at the closure of the examination. It is reasonably possible that this appeal may be settled in the next 12 months. The IRS is currently examining our federal income tax returns for the 2003 and 2004 tax years. Tax returns for subsequent years are also subject to examination.
     We are no longer subject to examination of our various state and local tax returns filed for years ended prior to 2003. During 2007, the City of Detroit initiated an examination of a Mandalay Resort Group subsidiary return for the pre-acquisition year ended April 25, 2005. Also during 2007, the state of Mississippi initiated an examination of returns filed by subsidiaries of MGM MIRAGE and Mandalay Resort Group for the 2004 through 2006 tax years. This audit was settled during the first quarter of 2008, with no material impact to us. No other state or local income tax returns are under examination.
  Stock-based Compensation
     We account for stock-based compensation in accordance with SFAS 123(R). We measure fair value of share-based awards using the Black-Scholes model. There are several management assumptions required to determine the inputs into the Black-Scholes model. Our volatility and expected term assumptions can significantly impact the fair value of stock-based awards. The extent of the impact will depend, in part, on the extent of stock-based awards in any given year. In 2007, we granted 2.6 million stock appreciation rights with a total fair value of $68 million. In 2006, we granted 1.9 million stock options and stock appreciation rights with a total fair value of $28 million.
     For 2007 awards, a 10% change in the volatility assumption (32% for 2007; for sensitivity analysis, volatility was assumed to be 29% and 35%) would have resulted in a $4.6 million, or 7%, change in fair value. A 10% change in the expected term assumption (4.1 years for 2007; for sensitivity analysis, expected term was assumed to be 3.7 years and 4.5 years) would have resulted in a $3.8 million, or 6%, change in fair value. These changes in fair value would have been recognized over the five-year vesting period of such awards. It should be noted that a change in the expected term would cause other changes, since the risk-free rate and volatility assumptions are specific to the term; we did not attempt to adjust those assumptions in performing the sensitivity analysis above.
  Business Combinations
     We account for business combinations in accordance with Statement of Financial Accounting Standards No. 141, “Accounting for Business Combinations” (“SFAS 141”) and Statement of Financial Accounting Standards No. 142, “Accounting for Goodwill and Other Intangible Assets,” and related interpretations. SFAS 141 requires that we record the net assets of acquired businesses at fair value, and we must make estimates and assumptions to determine the fair value of these acquired assets and assumed liabilities.
     The determination of the fair value of acquired assets and assumed liabilities in the Mandalay acquisition required us to make certain fair value estimates, primarily related to land, property and equipment and intangible assets. These estimates require significant judgment and include a variety of assumptions in determining the fair value of acquired assets and assumed liabilities, including market data, estimated future cash flows, growth rates, current replacement cost for similar capacity for certain fixed assets, market rate assumptions for contractual obligations and settlement plans for contingencies and liabilities.

29


Table of Contents

Recently Issued Accounting Standards
  Accounting for Business Combinations and Non-Controlling Interests
     In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (R), “Business Combinations,” (“SFAS 141R”) and SFAS No. 160 “Non-controlling interests in Consolidated Financial Statements — an amendment of ARB No. 51,” (“SFAS 160”). These standards amend the requirements for accounting for business combinations, including the recognition and measurement of additional assets and liabilities at their fair value, expensing of acquisition-related costs which are currently capitalizable under existing rules, treatment of adjustments to deferred taxes and liabilities subsequent to the measure period, and the measurement of non-controlling interest, previously commonly referred to as minority interests, at fair value. SFAS 141R also includes additional disclosure requirements with respect to the methodologies and techniques used to determine the fair value of assets and liabilities recognized in a business combination. SFAS 141R and SFAS 160 apply prospectively to fiscal years beginning on or after December 15, 2008, except for the treatment of deferred tax adjustments which apply to deferred taxes recognized in previous business combinations. These standards will become effective for us on January 1, 2009. We are currently evaluating the effect, if any, the adoption of SFAS 141R and SFAS 160 will have on our consolidated financial statements.
  Impact of Buy-Sell Clauses on Sales of Real Estate
     In December 2007, the Emerging Issues Task Force (“EITF”) of the FASB ratified its consensus on EITF No. 07-6 “Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement No. 66, Accounting for Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause.” The EITF reached consensus that a buy-sell clause, in and of itself, does not constitute a prohibited form of continuing involvement that would preclude partial sale-recognition under Statement 66. This EITF is effective for fiscal years beginning after December 15, 2007, or for us January 1, 2008. The adoption of EITF No. 07-6 did not have a material impact on our consolidated financial statements.
  Fair Value and Fair Value Option
      In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits the measure of certain financial instruments and certain other items at fair value and establishes presentation and disclosure requirements to help financial statement users to understand these measurements and their impact on earnings. This statement is effective for us beginning in January 1, 2008. The adoption of SFAS 159 did not have a material impact on our consolidated financial statements.
     In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS 157”), SFAS 157 establishes a framework for measuring fair value under generally accepted accounting principles and expands fair value disclosures. This statement will be effective for us beginning January 1, 2008 for financial assets and liabilities and beginning January 1, 2009 for certain non-financial assets and liabilities. The adoption of SFAS 157 did not have a material impact on our consolidated financial statements.
Market Risk
     Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed rate borrowings and short-term borrowings under our bank credit facilities.
     As of December 31, 2007, long-term fixed rate borrowings represented approximately 71% of our total borrowings. Based on December 31, 2007 debt levels, an assumed 100 basis-point change in LIBOR would cause our annual interest cost to change by approximately $3 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     We incorporate by reference the information appearing under “Market Risk” in Item 7 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
     Our Consolidated Financial Statements and Notes to Consolidated Financial Statements, including the Independent Registered Public Accounting Firm’s Report thereon, referred to in Item 15(a)(1) of this Form 10-K, are included at pages 42 to 68 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
     None.

30


Table of Contents

ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
     Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of December 31, 2007. This conclusion is based on an evaluation conducted under the supervision and with the participation of Company management. Disclosure controls and procedures are those controls and procedures which ensure that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported in a timely manner and in accordance with Securities and Exchange Commission rules and regulations.
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 this Form 10-K, is included at page 40 of this Form 10-K.
Attestation Report of the Independent Registered Public Accounting Firm
     The Independent Registered Public Accounting Firm’s Attestation Report on our internal control over financial reporting referred to in Item 15(a)(1) of this Form 10-K, is included at page 41 of this Form 10-K.
Changes in Internal Control Over Financial Reporting
     During the quarter ended December 31, 2007, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
     None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
     We incorporate by reference the information appearing under “Executive Officers of the Registrant” in Item 1 of this Form 10-K and under “Election of Directors” and “Corporate Governance” in our definitive Proxy Statement for our 2008 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about April 14, 2008 (the “Proxy Statement”).
ITEM 11. EXECUTIVE COMPENSATION
     We incorporate by reference the information appearing under “Executive and Director Compensation and Other Information” and “Corporate Governance — Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
     We incorporate by reference the information appearing under “Equity Compensation Plan Information” in Item 5 of this Form 10-K, and under “Principal Stockholders” and “Election of Directors” in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
     We incorporate by reference the information appearing under “Transactions with Related Persons” and “Corporate Governance” in the Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
     We incorporate by reference the information appearing under “Selection of Independent Registered Public Accounting Firm” in the Proxy Statement.

31


Table of Contents

PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
     (a)(1). Financial Statements.
Included in Part II of this Report:
   Management’s Annual Report on Internal Control Over Financial Reporting
   Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
   Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
   Consolidated Balance Sheets — December 31, 2007 and 2006
   Years Ended December 31, 2007, 2006 and 2005
      Consolidated Statements of Income
      Consolidated Statements of Cash Flows
      Consolidated Statements of Stockholders’ Equity
   Notes to Consolidated Financial Statements
     (a)(2). Financial Statement Schedule.
   Years Ended December 31, 2007, 2006 and 2005
      Schedule II — Valuation and Qualifying Accounts
     We have omitted schedules other than the one listed above because they are not required or are not applicable, or the required information is shown in the financial statements or notes to the financial statements.
     (a)(3). Exhibits.
     
Exhibit    
Number   Description
 
   
3(1)
  Certificate of Incorporation of the Company, as amended through 1997 (incorporated by reference to Exhibit 3(1) to Registration Statement No. 33-3305 and to Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997).
 
   
3(2)
  Certificate of Amendment to Certificate of Incorporation of the Company, dated January 7, 2000, relating to an increase in the authorized shares of common stock (incorporated by reference to Exhibit 3(2) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (the “1999 10-K”)).
 
   
3(3)
  Certificate of Amendment to Certificate of Incorporation of the Company, dated January 7, 2000, relating to a 2-for-1 stock split (incorporated by reference to Exhibit 3(3) to the 1999 10-K).
 
   
3(4)
  Certificate of Amendment to Certificate of Incorporation of the Company, dated August 1, 2000, relating to a change in name of the Company (incorporated by reference to Exhibit 3(i).4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000 (the “September 2000 10-Q”)).
 
   
3(5)
  Certificate of Amendment to Certificate of Incorporation of the Company, dated June 3, 2003, relating to compliance with provisions of the New Jersey Casino Control Act relating to holders of Company securities (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2003 (the “June 2003 10-Q”)).
 
   
3(6)
  Certificate of Amendment to Certificate of Incorporation of the Company, dated May 3, 2005, relating to an increase in the authorized shares of common stock (incorporated by reference to Exhibit 3.10 to Amendment No. 1 to the Company’s Form 8-A filed with the Commission on May 11, 2005).
 
   
3(7)
  Amended and Restated Bylaws of the Company, effective December 4, 2007 (incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated December 4, 2007).
 
   
4(1)
  Indenture dated July 21, 1993, by and between Mandalay and First Interstate Bank of Nevada, N.A., as Trustee with respect to $150 million aggregate principal amount of 7.625% Senior Subordinated Debentures due 2013 (incorporated by reference to Exhibit 4(a) to Mandalay’s Current Report on Form 8-K dated July 21, 1993).

32


Table of Contents

     
Exhibit    
Number   Description
 
   
4(2)
  Indenture, dated February 1, 1996, by and between Mandalay and First Interstate Bank of Nevada, N.A., as Trustee (the “Mandalay February 1996 Indenture”) (incorporated by reference to Exhibit 4(b) to Mandalay’s Current Report on Form 8-K dated January 29, 1996 (the “Mandalay January 1996 8-K”)).
 
   
4(3)
  Supplemental Indenture, dated as of November 15, 1996, by and between Mandalay and Wells Fargo Bank (Colorado), N.A., (successor to First Interstate Bank of Nevada, N.A.), as Trustee, to the Mandalay February 1996 Indenture, with respect to $150 million aggregate principal amount of 6.70% Senior Notes due 2096 (incorporated by reference to Exhibit 4(c) to Mandalay’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 1996 (the “Mandalay October 1996 10-Q”)).
 
   
4(4)
  6.70% Senior Notes due February 15, 2096 in the principal amount of $150,000,000 (incorporated by reference to Exhibit 4(d) to the Mandalay October 1996 10-Q).
 
   
4(5)
  Indenture, dated November 15, 1996, by and between Mandalay and Wells Fargo Bank (Colorado), N.A., as Trustee (the “Mandalay November 1996 Indenture”) (incorporated by reference to Exhibit 4(e) to the Mandalay October 1996 10-Q).
 
   
4(6)
  Supplemental Indenture, dated as of November 15, 1996, to the Mandalay November 1996 Indenture, with respect to $150 million aggregate principal amount of 7.0% Senior Notes due 2036 (incorporated by reference to the Mandalay October 1996 10-Q).
 
   
4(7)
  7.0% Senior Notes due February 15, 2036, in the principal amount of $150,000,000 (incorporated by reference to Exhibit 4(g) to the Mandalay October 1996 10-Q).
 
   
4(8)
  Indenture, dated as of August 1, 1997, between MRI and First Security Bank, National Association, as trustee (the “MRI 1997 Indenture”) (incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q of MRI for the fiscal quarter ended June 30, 1997 (the “MRI June 1997 10-Q”)).
 
   
4(9)
  Supplemental Indenture, dated as of August 1, 1997, to the MRI 1997 Indenture, with respect to $100 million aggregate principal amount of 7.25% Debentures due 2017 (incorporated by reference to Exhibit 4.2 to the MRI June 1997 10-Q).
 
   
4(10)
  Second Supplemental Indenture, dated as of October 10, 2000, to the MRI 1997 Indenture (incorporated by reference to Exhibit 4(14) to the 2000 10-K).
 
   
4(11)
  Indenture, dated as of February 4, 1998, between MRI and PNC Bank, National Association, as trustee (the “MRI 1998 Indenture”) (incorporated by reference to Exhibit 4(e) to the Annual Report on Form 10-K of MRI for the fiscal year ended December 31, 1997 (the “MRI 1997 10-K”)).
 
   
4(12)
  Supplemental Indenture, dated as of February 4, 1998, to the MRI 1998 Indenture, with respect to $200 million aggregate principal amount of 6.75% Notes due 2008 (incorporated by reference to Exhibit 4(f) to the MRI 1997 10-K).
 
   
4(13)
  Second Supplemental Indenture, dated as of October 10, 2000, to the MRI 1998 Indenture (incorporated by reference to Exhibit 4(15) to the 2000 10-K).
 
   
4(14)
  Indenture dated as of August 16, 2000 by and between Mandalay and The Bank of New York, with respect to $200 million aggregate principal amount of 9.5% Senior Notes due 2008 (incorporated by reference to Exhibit 4.1 to Mandalay’s Form S-4 Registration Statement No. 333-44838).
 
   
4(15)
  Indenture, dated as of September 15, 2000, among the Company, as issuer, the Subsidiary Guarantors parties thereto, as guarantors, and U.S. Trust Company, National Association, as trustee, with respect to $850 million aggregate principal amount of 8.5% Senior Notes due 2010 (incorporated by reference to Exhibit 4 to the Company’s Amended Current Report on Form 8-K/A dated September 12, 2000).
 
   
4(16)
  First Supplemental Indenture, dated as of September 15, 2000, among the Company, Bellagio Merger Sub, LLC and U.S. Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4(11) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the “2000 10-K”)).

33


Table of Contents

     
Exhibit    
Number   Description
 
   
4(17)
  Second Supplemental Indenture, dated as of December 31, 2000, among the Company, MGM Grand Hotel & Casino Merger Sub, LLC and U.S. Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4(17) to the 2000 10-K).
 
   
4(18)
  Indenture, dated as of January 23, 2001, among the Company, as issuer, the Subsidiary Guarantors parties thereto, as guarantors, and United States Trust Company of New York, as trustee, with respect to $400 million aggregate principal amount of 8.375% Senior Subordinated Notes due 2011 (incorporated by reference to Exhibit 4 to the Company’s Current Report on Form 8-K dated January 18, 2001).
 
   
4(19)
  Indenture dated as of December 20, 2001 by and among Mandalay and The Bank of New York, with respect to $300 million aggregate principal amount of 9.375% Senior Subordinated Notes due 2010 (incorporated by reference to Exhibit 4.1 to Mandalay’s Form S-4 Registration Statement No. 333-82936).
 
   
4(20)
  Indenture dated as of March 21, 2003 by and among Mandalay and The Bank of New York with respect to $400 million aggregate principal amount of Floating Rate Convertible Senior Debentures due 2033 (incorporated by reference to Exhibit 4.44 to Mandalay’s Annual Report on Form 10-K for the fiscal year ended January 31, 2003).
 
   
4(21)
  First Supplemental Indenture dated as of July 26, 2004, relating to Mandalay’s Floating Rate Senior Convertible Debentures due 2033 (incorporated by reference to Exhibit 4 to Mandalay’s Current Report on Form 8-K dated July 26, 2004).
 
   
4(22)
  Indenture, dated as of July 31, 2003, by and between Mandalay and The Bank of New York with respect to $250 million aggregate principal amount of 6.5% Senior Notes due 2009 (incorporated by reference to Exhibit 4.1 to Mandalay’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2003).
 
   
4(23)
  Indenture, dated as of September 17, 2003, among the Company, as issuer, the Subsidiary Guarantors parties thereto, as guarantors, and U.S. Bank National Association, as trustee, with respect to $1,050 million 6% Senior Notes due 2009 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated September 11, 2003).
 
   
4(24)
  Indenture, dated as of November 25, 2003, by and between Mandalay and The Bank of New York with respect to $250 million aggregate principal amount of 6.375% Senior Notes due 2011 (incorporated by reference to Exhibit 4.1 to Mandalay’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2003).
 
   
4(25)
  Indenture dated as of February 27, 2004, among the Company, as issuer, the Subsidiary Guarantors, as guarantors, and U.S. Bank National Association, as trustee, with respect to $525 million 5.875% Senior Notes due 2014 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, dated February 27, 2004).
 
   
4(26)
  Indenture dated as of August 25, 2004, among the Company, as issuer, certain subsidiaries of the Company, as guarantors, and U.S. Bank National Association, as trustee, with respect to $550 million 6.75% Senior Notes due 2012 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 25, 2004).
 
   
4(27)
  Indenture, dated June 20, 2005, among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank National Association, with respect to $500 million aggregate principal amount of 6.625% Senior Notes due 2015 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated June 20, 2005).
 
   
4(28)
  Supplemental Indenture, dated September 9, 2005, among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank National Association, with respect to $375 million aggregate principal amount of 6.625% Senior Notes due 2015 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated September 9, 2005).
 
   
4(29)
  Indenture, dated April 5, 2006, among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank National Association, with respect to $500 million aggregate principal amount of 6.75% Senior Notes due 2013 and $250 million original principal amount of 6.875% Senior Notes due 2016 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 5, 2006 (the “April 2006 8-K”)).

34


Table of Contents

     
Exhibit    
Number   Description
 
   
4(30)
  Registration Rights Agreement, dated April 5, 2006, among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and certain initial purchases parties thereto (incorporated by reference to Exhibit 4.2 to the April 2006 8-K).
 
   
4(31)
  Indenture dated as of December 21, 2006, among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated December 21, 2006 (the “December 2006 8-K”)).
 
   
4(32)
  Supplemental Indenture dated as of December 21, 2006, by and among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank National Association, with respect to $750 million aggregate principal amount of 7.625% Senior Notes due 2017 (incorporated by reference to Exhibit 4.2 to the December 2006 8-K).
 
   
4(33)
  Second Supplemental Indenture dated as of May 17, 2007 among MGM MIRAGE, certain subsidiaries of MGM MIRAGE, and U.S. Bank National Association, with respect to $750 million aggregate principal amount of 7.5% Senior Notes due 2016 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated May 17, 2007).
 
   
10.1(1)
  Guarantee, dated as of May 31, 2000, by certain subsidiaries of the Company, in favor of The Chase Manhattan Bank, as successor in interest to PNC Bank, National Association, as trustee for the benefit of the holders of Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.4 to the May 2000 8-K).
 
   
10.1(2)
  Schedule setting forth material details of the Guarantee, dated as of May 31, 2000, by certain subsidiaries of the Company, in favor of U.S. Trust Company, National Association (formerly known as U.S. Trust Company of California, N.A.), as trustee for the benefit of the holders of Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.5 to the May 2000 8-K).
 
   
10.1(3)
  Schedule setting forth material details of the Guarantee (Mirage Resorts, Incorporated 6.75% Notes Due February 1, 2008), dated as of May 31, 2000, by the Company and certain of its subsidiaries, in favor of The Chase Manhattan Bank, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.7 to the May 2000 8-K).
 
   
10.1(4)
  Schedule setting forth material details of the Guarantee (Mirage Resorts, Incorporated 6.75% Notes Due August 1, 2007 and 7.25% Debentures Due August 1, 2017), dated as of May 31, 2000, by the Company and certain of its subsidiaries, in favor of First Security Bank, National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.8 to the May 2000 8-K).
 
   
10.1(5)
  Instrument of Joinder, dated as of May 31, 2000, by MRI and certain of its wholly owned subsidiaries, in favor of the beneficiaries of the Guarantees referred to therein (incorporated by reference to Exhibit 10.9 to the May 2000 8-K).
 
   
10.1(6)
  Guarantee (MGM MIRAGE 8.5% Senior Notes due 2010), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York N.A., as successor to U.S. Trust Company, National Association, for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.7 to the September 2005 10-Q).
 
   
10.1(7)
  Guarantee (Mandalay Resort Group 7.625% Senior Subordinated Notes due 2013), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.9 to the September 2005 10-Q).
 
   
10.1(8)
  Guarantee (MGM MIRAGE 8.375% Senior Subordinated Notes due 2011), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York N.A., successor to the United States Trust Company of New York, as trustee for the benefit of holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.11 to the September 2005 10-Q).
 
   
10.1(9)
  Guarantee (MGM MIRAGE 6.0% Senior Notes due 2009), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of U.S. Bank National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.12 to the September 2005 10-Q).

35


Table of Contents

     
Exhibit    
Number   Description
 
   
10.1(10)
  Guarantee (MGM MIRAGE 6.0% Senior Notes due 2009 (Exchange Notes)), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of U.S. Bank National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.13 to the September 2005 10-Q).
 
   
10.1(11)
  Guarantee (MGM MIRAGE 5.875% Senior Notes due 2014), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of U.S. Bank National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.14 to the September 2005 10-Q).
 
   
10.1(12)
  Guarantee (MGM MIRAGE 5.875% Senior Notes due 2014 (Exchange Notes)), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of U.S. Bank National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.15 to the September 2005 10-Q).
 
   
10.1(13)
  Guarantee (MGM MIRAGE 6.75% Senior Notes due 2012), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of U.S. Bank National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.16 to the September 2005 10-Q).
 
   
10.1(14)
  Guarantee (Mirage Resorts, Incorporated 6.75% Senior Notes due 2007 and 7.25% Debentures due 2017), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of Wells Fargo Bank Northwest, National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.17 to the September 2005 10-Q).
 
   
10.1(15)
  Guarantee (Mirage Resorts, Incorporated 6.75% Senior Notes due 2008), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of JPMorgan Chase Bank, N.A., successor in interest to PNC Bank, National Association, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.18 to the September 2005 10-Q).
 
   
10.1(16)
  Guarantee (Mandalay Resort Group 9.375% Senior Subordinated Notes due 2010), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.20 to the September 2005 10-Q).
 
   
10.1(17)
  Guarantee (Mandalay Resort Group 6.70% Senior Notes due 2096), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as successor in interest to First Interstate Bank of Nevada, N.A., as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.21 to the September 2005 10-Q).
 
   
10.1(18)
  Guarantee (Mandalay Resort Group 7.0% Senior Notes due 2036), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.22 to the September 2005 10-Q).
 
   
10.1(19)
  Guarantee (Mandalay Resort Group 9.5% Senior Notes due 2008), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.23 to the September 2005 10-Q).
 
   
10.1(20)
  Guarantee (Mandalay Resort Group Floating Rate Convertible Senior Debentures due 2033), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.24 to the September 2005 10-Q).
 
   
10.1(21)
  Guarantee (Mandalay Resort Group 6.5% Senior Notes due 2009), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.25 to the September 2005 10-Q).
 
   
10.1(22)
  Guarantee (Mandalay Resort Group 6.375% Senior Notes due 2011), dated as of April 25, 2005, by certain subsidiaries of MGM MIRAGE, in favor of The Bank of New York, as trustee for the benefit of the holders of the Notes pursuant to the Indenture referred to therein (incorporated by reference to Exhibit 10.26 to the September 2005 10-Q).

36


Table of Contents

     
Exhibit    
Number   Description
 
   
10.1(23)
  Fifth Amended and Restated Loan Agreement dated as of October 3, 2006, by and among MGM MIRAGE, as borrower; MGM Grand Detroit, LLC, as co-borrower; the Lenders and Co-Documentation Agents named therein; Bank of America, N.A., as Administrative Agent; the Royal Bank of Scotland PLC, as Syndication Agent; Bank of America Securities LLC and The Royal Bank of Scotland PLC, as Joint Lead Arrangers; and Bank of America Securities LLC, The Royal Bank of Scotland PLC, J.P. Morgan Securities Inc., Citibank North America, Inc. and Deutsche Bank Securities Inc. as Joint Book Managers (incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K dated October 3, 2006).
 
   
10.1(24)
  Guaranty Agreement, dated July 19, 2006, by MGM MIRAGE in favor of Bank of America, N.A., as Administrative Agent for the benefit of the Lenders from time to time party to a Construction Loan Agreement with the Borrower, Turnberry/MGM Grand Tower C, LLC.
 
   
10.2(1)
  Lease, dated August 3, 1977, by and between B&D Properties, Inc., as lessor, and Mandalay, as lessee; Amendment of Lease, dated May 6, 1983 (incorporated by reference to Exhibit 10(h) to Mandalay’s Registration Statement (No. 2-85794) on Form S-1).
 
   
10.2(2)
  Lease by and between Robert Lewis Uccelli, guardian, as lessor, and Nevada Greens, a limited partnership, William N. Pennington, as trustee, and William G. Bennett, as trustee, and related Assignment of Lease (incorporated by reference to Exhibit 10(p) to Mandalay’s Registration Statement (No. 33-4475) on Form S-1).
 
   
10.2(3)
  Public Trust Tidelands Lease, dated February 4, 1999, between the State of Mississippi and Beau Rivage Resorts, Inc. (without exhibits) (incorporated by reference to Exhibit 10.73 to the Annual Report on Form 10-K of MRI for the fiscal year ended December 31, 1999).
 
   
*10.3(1)
  Nonqualified Stock Option Plan (incorporated by reference to Exhibit 10(1) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1996).
 
   
*10.3(2)
  1997 Nonqualified Stock Option Plan, Amended and Restated February 2, 2004 (incorporated by reference to Exhibit 10.1 of the June 2004 10-Q).
 
   
*10.3(3)
  Amendment to the MGM MIRAGE 1997 Nonqualified Stock Option Plan (incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K dated July 9, 2007).
 
   
*10.3(4)
  MGM MIRAGE 2005 Omnibus Incentive Plan (incorporated by reference to Exhibit 10 to the Company’s Registration Statement on Form S-8 filed May 12, 2005).
 
   
*10.3(5)
  Amended and Restated Annual Performance-Based Incentive Plan for Executive Officers, giving effect to amendment approved by the Company’s shareholders on May 9, 2006 (incorporated by reference to Appendix A to the Company’s 2006 Proxy Statement).
 
   
*10.3(6)
  Non-Qualified Deferred Compensation Plan, dated as of January 1, 2001 (incorporated by reference to Exhibit 10.3(12) to the 2000 10-K).
 
   
*10.3(7)
  Supplemental Executive Retirement Plan, dated as of January 1, 2001 (incorporated by reference to Exhibit 10.3(13) to the 2000 10-K).
 
   
*10.3(8)
  Deferred Compensation Plan II, dated as of December 30, 2004 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated January 10, 2005 (the “January 2005 8-K”).
 
   
*10.3(9)
  Supplemental Executive Retirement Plan II, dated as of December 30, 2004 (incorporated by reference to Exhibit 10.1 to the January 2005 8-K).
 
   
*10.3(10)
  Amendment to Deferred Compensation Plan II, dated as of December 21, 2005 (incorporated by reference to Exhibit 10.3(9) to the 2005 10-K).
 
   
*10.3(11)
  Amendment No. 1 to the Deferred Compensation Plan II, dated as of July 10, 2007.
 
   
*10.3(12)
  Amendment No. 1 to the Supplemental Executive Retirement Plan II, dated as of July 10, 2007.
 
   
*10.3(13)
  Amendment No. 2 to the Deferred Compensation Plan II, dated as of October 15, 2007.

37


Table of Contents

     
Exhibit    
Number   Description
 
   
*10.3(14)
  Amendment No. 2 to the Supplemental Executive Retirement Plan II, dated as of October 15, 2007.
 
   
*10.3(15)
  Employment Agreement, dated September 16, 2005, between the Company and J. Terrence Lanni (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 16, 2005 (the “September 16, 2005 8-K”)).
 
   
*10.3(16)
  Employment Agreement, dated September 16, 2005, between the Company and Robert H. Baldwin (incorporated by reference to Exhibit 10.2 to the September 16, 2005 8-K).
 
   
*10.3(17)
  Employment Agreement, dated September 16, 2005, between the Company and John Redmond (incorporated by reference to Exhibit 10.3 to the September 16, 2005 8-K).
 
   
*10.3(18)
  Employment Agreement, dated September 16, 2005, between the Company and James J. Murren (incorporated by reference to Exhibit 10.4 to the September 16, 2005 8-K).
 
   
*10.3(19)
  Employment Agreement, dated September 16, 2005, between the Company and Gary N. Jacobs (incorporated by reference to Exhibit 10.5 to the September 16, 2005 8-K).
 
   
*10.3(20)
  Employment Agreement, dated March 1, 2007, between the Company and Aldo Manzini.
 
   
*10.3(21)
  Letter Agreement dated June 19, 2007, between the Company and Aldo Manzini.
 
   
*10.3(22)
  Employment Agreement, dated December 3, 2007, between the Company and Dan D’Arrigo (incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K dated December 3, 2007).
 
   
10.4(1)
  Second Amended and Restated Joint Venture Agreement of Marina District Development Company, dated as of August 31, 2000, between MAC, CORP. and Boyd Atlantic City, Inc. (without exhibits) (incorporated by reference to Exhibit 10.2 to the September 2000 10-Q).
 
   
10.4(2)
  Contribution and Adoption Agreement, dated as of December 13, 2000, among Marina District Development Holding Co., LLC, MAC, CORP. and Boyd Atlantic City, Inc. (incorporated by reference to Exhibit 10.4(15) to the 2000 10-K).
 
   
10.4(3)
  Amended and Restated Agreement of Joint Venture of Circus and Eldorado Joint Venture by and between Eldorado Limited Liability Company and Galleon, Inc. (incorporated by reference to Exhibit 3.3 to the Form S-4 Registration Statement of Circus and Eldorado Joint Venture and Silver Legacy Capital Corp.—Commission File No. 333-87202).
 
   
10.4(4)
  Amended and Restated Joint Venture Agreement, dated as of June 25, 2002, between Nevada Landing Partnership and RBG, L.P. (incorporated by reference to Exhibit 10.1 to Mandalay’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2004.)
 
   
10.4(5)
  Amendment No.1 to Amended and Restated Joint Venture Agreement, dated as of April 25, 2005, by and among Nevada Landing Partnership, an Illinois general partnership, and RBG, L.P., an Illinois limited partnership (incorporated by reference to Exhibit 10.4(5) to the 2005 10-K).
 
   
10.4(6)
  Amended and Restated Subscription and Shareholders Agreement, dated June 19, 2004, among Pansy Ho, Grand Paradise Macau Limited, MGMM Macau, Ltd., MGM MIRAGE Macau, Ltd., MGM MIRAGE and MGM Grand Paradise Limited (formerly N.V. Limited) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 19, 2005).
 
   
10.4(7)
  Amendment Agreement to the Subscription and Shareholders Agreement, dated January 20, 2007, among Pansy Ho, Grand Paradise Macau Limited, MGMM Macau, Ltd., MGM MIRAGE Macau, Ltd., MGM MIRAGE and MGM Grand Paradise Limited (formerly N.V. Limited).
 
   
10.4(8)
  Loan Agreement with the M Resort LLC dated April 24, 2007 (incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K dated April 24, 2007).
 
   
10.4(9)
  Limited Liability Company Agreement of CityCenter Holdings, LLC, dated August 21, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 21, 2007 (the “August 2007 8-K”)).

38


Table of Contents

     
Exhibit    
Number   Description
 
   
10.4(10)
  Amendment No 1, dated November 15, 2007, to the Limited Liability Company Agreement of CityCenter Holdings, LLC, dated August 21, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 15, 2007).
 
   
10.4(11)
  Amendment No 2, dated December 31, 2007, to the Limited Liability Company Agreement of CityCenter Holdings, LLC, dated August 21, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 31, 2007).
 
   
10.4(12)
  Limited Liability Company Operating Agreement of IKM JV, LLC, dated September 10, 2007 (incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K dated September 10, 2007).
 
   
10.5(1)
  Revised Development Agreement among the City of Detroit, The Economic Development Corporation of the City of Detroit and MGM Grand Detroit, LLC (incorporated by reference to Exhibit 10.10 to the June 2002 10-Q).
 
   
10.5(2)
  Revised Development Agreement effective August 2, 2002, by and among the City of Detroit, The Economic Development Corporation of the City of Detroit and Detroit Entertainment, L.L.C. (incorporated by reference to Exhibit 10.61 of Mandalay’s Annual Report on Form 10-K for the year ended January 31, 2005).
 
   
10.6(1)
  Purchase Agreement dated October 13, 2006, by and among Mandalay Resort Group, as seller, Edgewater Hotel Corporation, Colorado Belle Corporation, and Aces High Management, LLC, as purchaser (incorporated by reference to the Company’s Current Report on Form 8-K dated October 13, 2006).
 
   
10.6(2)
  Purchase Agreement dated October 31, 2006, by and among New York-New York Hotel & Casino, LLC, as seller, PRMA Land Development Company, The Primadonna Company LLC, and Herbst Gaming Inc., as purchaser (incorporated by reference to the Company’s Current Report on Form 8-K dated October 31, 2006).
 
   
10.6(3)
  Operating Agreement of Jeanco, LLC, dated February 9, 2007, (incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K dated February 9, 2007).
 
   
10.6(4)
  Company Stock Purchase and Support Agreement, dated August 21, 2007, by and between MGM MIRAGE and Infinity World Investments, LLC (incorporated by reference to Exhibit 10.2 to the August 2007 8-K).
 
   
10.6(5)
  Amendment No. 1, dated October 17, 2007, to the Company Stock Purchase and Support Agreement by and between MGM MIRAGE and Infinity World Investments, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 17, 2007).
 
   
21
  List of subsidiaries of the Company.
 
   
23
  Consent of Deloitte & Touche LLP.
 
   
31.1
  Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a — 14(a) and Rule 15d — 14(a).
 
   
31.2
  Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a — 14(a) and Rule 15d — 14(a).
 
   
**32.1
  Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
 
   
**32.2
  Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
 
   
99.1
  Description of our Operating Resorts.
 
   
99.2
  Description of Regulation and Licensing.
 
*   Management contract or compensatory plan or arrangement.
 
**   Exhibits 32.1 and 32.2 shall not be deemed filed with the Securities and Exchange Commission, nor shall they be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or the Securities Act of 1933, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

39


Table of Contents

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, 2007, 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 period ended December 31, 2007 and issued their report thereon, which is included in this annual report. Deloitte & Touche LLP has also issued an attestation report on the effectiveness of the Company’s internal control over financial reporting and such report is also included in this annual report.

40


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of MGM MIRAGE
     We have audited the internal control over financial reporting of MGM MIRAGE and subsidiaries (the “Company”) as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued 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. 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, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2007, of the Company and our report dated February 29, 2008, expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph regarding the adoption of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, and the adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 .
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 29, 2008

41


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of MGM MIRAGE
     We have audited the accompanying consolidated balance sheets of MGM MIRAGE and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedule of Valuation and Qualifying Accounts included in Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the 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, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
     As discussed in Note 15 to the consolidated financial statements, on January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. Also, as discussed in Note 12 to the consolidated financial statements, on January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.
     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2008 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 29, 2008

42


Table of Contents

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
                 
    At December 31,  
    2007     2006  
ASSETS
               
Current assets
               
Cash and cash equivalents
  $ 412,390     $ 452,944  
Accounts receivable, net
    412,345       362,921  
Inventories
    126,116       118,459  
Income tax receivable
          18,619  
Deferred income taxes
    63,453       68,046  
Prepaid expenses and other
    105,412       124,414  
Assets held for sale
    55,670       369,348  
 
           
Total current assets
    1,175,386       1,514,751  
 
           
 
               
Real estate under development
          188,433  
 
               
Property and equipment, net
    16,823,704       17,241,860  
 
               
Other assets
               
Investments in unconsolidated affiliates
    2,482,727       1,092,257  
Goodwill
    1,262,922       1,300,747  
Other intangible assets, net
    359,770       367,200  
Deposits and other assets, net
    623,177       440,990  
 
           
Total other assets
    4,728,596       3,201,194  
 
           
 
  $ 22,727,686     $ 22,146,238  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
Current liabilities
               
Accounts payable
  $ 219,556     $ 182,154  
Construction payable
    76,524       234,486  
Income taxes payable
    284,075        
Accrued interest on long-term debt
    211,228       232,957  
Other accrued liabilities
    929,424       958,244  
Liabilities related to assets held for sale
    3,880       40,259  
 
           
Total current liabilities
    1,724,687       1,648,100  
 
           
 
               
Deferred income taxes
    3,416,660       3,441,157  
Long-term debt
    11,175,229       12,994,869  
Other long-term obligations
    350,407       212,563  
 
               
Commitments and contingencies (Note 13)
               
 
               
Stockholders’ equity
               
Common stock, $.01 par value: authorized 600,000,000 shares; issued 368,395,926 and 362,886,027 shares; outstanding 293,768,899 and 283,909,000 shares
    3,684       3,629  
Capital in excess of par value
    3,951,162       2,806,636  
Treasury stock, at cost (74,627,027 and 78,977,027 shares)
    (2,115,107 )     (1,597,120 )
Retained earnings
    4,220,408       2,635,989  
Accumulated other comprehensive income
    556       415  
 
           
Total stockholders’ equity
    6,060,703       3,849,549  
 
           
 
  $ 22,727,686     $ 22,146,238  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

43


Table of Contents

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
                         
    Year Ended December 31,  
    2007     2006     2005  
Revenues
                       
Casino
  $ 3,239,054     $ 3,130,438     $ 2,764,546  
Rooms
    2,130,542       1,991,477       1,634,588  
Food and beverage
    1,651,655       1,483,914       1,271,650  
Entertainment
    560,909       459,540       426,175  
Retail
    296,148       278,695       253,214  
Other
    519,360       452,669       339,424  
 
                 
 
    8,397,668       7,796,733       6,689,597  
Less: Promotional allowances
    (706,031 )     (620,777 )     (560,754 )
 
                 
 
    7,691,637       7,175,956       6,128,843  
 
                 
 
                       
Expenses
                       
Casino
    1,677,884       1,612,992       1,422,472  
Rooms
    570,191       539,442       454,082  
Food and beverage
    984,279       902,278       782,372  
Entertainment
    399,106       333,619       305,799  
Retail
    190,137       179,929       164,189  
Other
    317,550       245,126       187,956  
General and administrative
    1,140,363       1,070,942       889,806  
Corporate expense
    193,893       161,507       130,633  
Preopening and start-up expenses
    92,105       36,362       15,752  
Restructuring costs (credit)
          1,035       (59 )
Property transactions, net
    (186,313 )     (40,980 )     37,021  
Gain on CityCenter transaction
    (1,029,660 )            
Depreciation and amortization
    700,334       629,627       560,626  
 
                 
 
    5,049,869       5,671,879       4,950,649  
 
                 
 
                       
Income from unconsolidated affiliates
    222,162       254,171       151,871  
 
                 
 
                       
Operating income
    2,863,930       1,758,248       1,330,065  
 
                 
 
                       
Non-operating income (expense)
                       
Interest income
    17,210       11,192       12,037  
Interest expense, net
    (708,343 )     (760,361 )     (640,758 )
Non-operating items from unconsolidated affiliates
    (18,805 )     (16,063 )     (15,825 )
Other, net
    4,436       (15,090 )     (18,434 )
 
                 
 
    (705,502 )     (780,322 )     (662,980 )
 
                 
 
                       
Income from continuing operations before income taxes
    2,158,428       977,926       667,085  
Provision for income taxes
    (757,883 )     (341,930 )     (231,719 )
 
                 
 
                       
Income from continuing operations
    1,400,545       635,996       435,366  
 
                 
 
                       
Discontinued operations
                       
Income from discontinued operations
    10,461       18,473       11,815  
Gain on disposal of discontinued operations
    265,813              
Provision for income taxes
    (92,400 )     (6,205 )     (3,925 )
 
                 
 
    183,874       12,268       7,890  
 
                 
 
                       
Net income
  $ 1,584,419     $ 648,264     $ 443,256  
 
                 
 
                       
Basic income per share of common stock
                       
Income from continuing operations
  $ 4.88     $ 2.25     $ 1.53  
Discontinued operations
    0.64       0.04       0.03  
 
                 
Net income per share
  $ 5.52     $ 2.29     $ 1.56  
 
                 
 
                       
Diluted income per share of common stock
                       
Income from continuing operations
  $ 4.70     $ 2.18     $ 1.47  
Discontinued operations
    0.61       0.04       0.03  
 
                 
Net income per share
  $ 5.31     $ 2.22     $ 1.50  
 
                 
The accompanying notes are an integral part of these consolidated financial statements.

44


Table of Contents

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                         
    Year Ended December 31,  
    2007     2006     2005  
Cash flows from operating activities
                       
Net income
  $ 1,584,419     $ 648,264     $ 443,256  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation and amortization
    700,334       653,919       588,102  
Amortization of debt discounts, premiums and issuance costs
    4,298       (3,096 )     5,791  
Provision for doubtful accounts
    32,910       47,950       25,846  
Stock-based compensation
    45,678       73,626       7,323  
Property transactions, net
    (186,313 )     (41,135 )     36,880  
Loss on early retirements of debt
                18,139  
Gain on CityCenter transaction
    (1,029,660 )            
Gain on disposal of discontinued operations
    (265,813 )            
Income from unconsolidated affiliates
    (162,217 )     (229,295 )     (134,132 )
Distributions from unconsolidated affiliates
    211,062       212,477       89,857  
Deferred income taxes
    32,813       59,764       51,759  
Tax benefit from stock option exercises
                94,083  
Changes in current assets and liabilities:
                       
Accounts receivable
    (82,666 )     (65,467 )     (68,159 )
Inventories
    (8,511 )     (10,431 )     (7,017 )
Income taxes receivable and payable
    315,877       (129,929 )     8,058  
Prepaid expenses and other
    10,937       (21,921 )     10,830  
Accounts payable and accrued liabilities
    32,720       111,559       75,404  
Real estate under development
    (458,165 )     (89,724 )      
Residential sales deposits, net
    247,046       13,970        
Hurricane Katrina insurance recoveries
    72,711       98,786        
Change in Hurricane Katrina insurance receivable
    (5,962 )     (46,581 )     (46,275 )
Other
    (97,082 )     (50,784 )     (16,949 )
 
                 
Net cash provided by operating activities
    994,416       1,231,952       1,182,796  
 
                 
 
                       
Cash flows from investing activities
                       
Purchases of property and equipment
    (2,917,409 )     (1,758,795 )     (719,146 )
Proceeds from contribution of CityCenter
    2,468,652              
Acquisition of Mandalay Resort Group, net of cash acquired
                (4,420,990 )
Proceeds from disposals of discontinued operations, net
    578,873              
Purchase of convertible note
    (160,000 )            
Hurricane Katrina insurance recoveries
    207,289       209,963       46,250  
Dispositions of property and equipment
    47,571       11,375       7,828  
Investments in unconsolidated affiliates
          (86,000 )     (183,000 )
Other
    (15,675 )     (18,970 )     (33,759 )
 
                 
Net cash provided by (used in) investing activities
    209,301       (1,642,427 )     (5,302,817 )
 
                 
 
                       
Cash flows from financing activities
                       
Net borrowings (repayments) under bank credit facilities — maturities of 90 days or less
    (402,300 )     756,850       325,000  
Borrowings under bank credit facilities — maturities longer than 90 days
    6,750,000       7,000,000       4,400,000  
Repayments under bank credit facilities — maturities longer than 90 days
    (7,500,000 )     (8,150,000 )      
Issuance of long-term debt
    750,000       1,500,000       880,156  
Repayment of long-term debt
    (1,402,233 )     (444,500 )     (1,408,992 )
Debt issuance costs
    (5,983 )     (28,383 )     (50,331 )
Issuance of common stock
    1,192,758              
Issuance of common stock upon exercise of stock options
    97,792       89,113       145,761  
Purchases of common stock
    (826,765 )     (246,892 )     (217,316 )
Excess tax benefits from stock-based compensation
    102,479       47,330        
Other
    3,715       (13,494 )     (11,452 )
 
                 
Net cash provided by (used in) financing activities
    (1,240,537 )     510,024       4,062,826  
 
                 
 
                       
Cash and cash equivalents
                       
Net increase (decrease) for the year
    (36,820 )     99,549       (57,195 )
Cash related to assets held for sale
    (3,734 )     (24,538 )      
Balance, beginning of year
    452,944       377,933       435,128  
 
                 
Balance, end of year
  $ 412,390     $ 452,944     $ 377,933  
 
                 
 
                       
Supplemental cash flow disclosures
                       
Interest paid, net of amounts capitalized
  $ 731,618     $ 778,590     $ 588,587  
State, federal and foreign income taxes paid, net of refunds
    391,042       369,450       75,776  
 
                       
Non-cash investing and financing activities
                       
Carrying value of net assets contributed to joint venture
  $ 2,773,612     $     $  
Increase in construction payable
    127,993       125,258       40,803  
The accompanying notes are an integral part of these consolidated financial statements.

45


Table of Contents

MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
For the Years Ended December 31, 2007, 2006 and 2005
                                                                 
                                                    Accumulated Other        
    Common Stock     Capital in                             Comprehensive     Total  
    Shares     Par     Excess of     Deferred     Treasury     Retained     Income     Stockholders’  
    Outstanding     Value     Par Value     Compensation     Stock     Earnings     (Loss)     Equity  
Balances, January 1, 2005
    280,740     $ 3,472     $ 2,346,329     $ (10,878 )   $ (1,110,551 )   $ 1,544,499     $ (1,167 )   $ 2,771,704  
 
                                                               
Net income
                                  443,256             443,256  
Currency translation adjustment
                                        (1,631 )     (1,631 )
Other comprehensive income from unconsolidated affiliate, net
                                        1,997       1,997  
 
                                                             
Total comprehensive income
                                                            443,622  
 
                                                               
Stock-based compensation
                      7,323                         7,323  
Tax benefit from stock-based compensation
                92,690                               92,690  
Cancellation of restricted stock
    (24 )                 422       (422 )                  
Issuance of common stock upon exercise of stock options
    10,115       101       145,690                   (30 )           145,761  
Purchases of treasury stock
    (5,500 )                       (217,316 )                 (217,316 )
Restricted shares turned in for tax withholding
    (261 )                       (10,105 )                 (10,105 )
Other
                1,878       (485 )                       1,393  
 
                                               
 
                                                               
Balances, December 31, 2005
    285,070       3,573       2,586,587       (3,618 )     (1,338,394 )     1,987,725       (801 )     3,235,072  
 
                                                               
Net income
                                  648,264             648,264  
Currency translation adjustment
                                        1,213       1,213  
Other comprehensive income from unconsolidated affiliate, net
                                        3       3  
 
                                                             
Total comprehensive income
                                                            649,480  
 
                                                               
Stock-based compensation
                71,186       3,238                         74,424  
Tax benefit from stock-based compensation
                60,033                               60,033  
Cancellation of restricted stock
    (4 )                 70       (70 )                  
Issuance of common stock upon exercise of stock options
    5,623       56       89,057                               89,113  
Purchases of treasury stock
    (6,500 )                       (246,892 )                 (246,892 )
Restricted shares turned in for tax withholding
    (280 )                       (11,764 )                 (11,764 )
Other
                (227 )     310                         83  
 
                                               
 
                                                               
Balances, December 31, 2006
    283,909       3,629       2,806,636             (1,597,120 )     2,635,989       415       3,849,549  
 
                                                               
Net income
                                  1,584,419             1,584,419  
Currency translation adjustment
                                        583       583  
Other comprehensive loss from unconsolidated affiliate, net
                                        (442 )     (442 )
 
                                                             
Total comprehensive income
                                                            1,584,560  
 
                                                               
Stock-based compensation
                47,267                               47,267  
Tax benefit from stock-based compensation
                115,439                               115,439  
Issuance of common stock
    14,200             883,980             308,778                   1,192,758  
Issuance of common stock upon exercise of stock options and stock appreciation rights
    5,510       55       96,691                               96,746  
Purchases of treasury stock
    (9,850 )                       (826,765 )                 (826,765 )
Other
                1,149                               1,149  
 
                                               
 
                                                               
Balances, December 31, 2007
    293,769     $ 3,684     $ 3,951,162     $     $ (2,115,107 )   $ 4,220,408     $ 556     $ 6,060,703  
 
                                               
The accompanying notes are an integral part of these consolidated financial statements.

46


Table of Contents

MGM MIRAGE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION
     MGM MIRAGE (the “Company”) is a Delaware corporation, incorporated on January 29, 1986. As of December 31, 2007, approximately 52% of the outstanding shares of the Company’s common stock were owned by Tracinda Corporation, a Nevada corporation wholly owned by Kirk Kerkorian. MGM MIRAGE acts largely as a holding company and, through wholly-owned subsidiaries, owns and/or operates casino resorts. On April 25, 2005, the Company completed its merger with Mandalay Resort Group (“Mandalay”) – see Note 3.
     The Company owns and operates the following casino resorts in Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, Treasure Island (“TI”), New York-New York, Excalibur, Monte Carlo, Circus Circus Las Vegas and Slots-A-Fun. Operations at MGM Grand Las Vegas include management of The Signature at MGM Grand Las Vegas, a condominium-hotel consisting of three towers. Other Nevada operations include Circus Circus Reno, Gold Strike in Jean, and Railroad Pass in Henderson. The Company has a 50% investment in Silver Legacy in Reno, which is adjacent to Circus Circus Reno. The Company also owns Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip resorts, and Primm Valley Golf Club at the California/Nevada state line.
     In April 2007, the Company completed the sale of Buffalo 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. In February 2007, the Company entered into an agreement to contribute Gold Strike, Nevada Landing and surrounding land (the “Jean Properties”) to a joint venture. The joint venture’s purpose is to develop a mixed-use community on the site. See Note 4 for further discussion of these transactions.
     The Company is a 50% owner of CityCenter, a mixed-use development on the Las Vegas Strip, between Bellagio and Monte Carlo. CityCenter will feature a 4,000-room casino resort designed by world-famous architect Cesar Pelli; two 400-room non-gaming boutique hotels, one of which will be managed by luxury hotelier Mandarin Oriental; approximately 425,000 square feet of retail shops, dining and entertainment venues; and approximately 2.3 million square feet of residential space in approximately 2,700 luxury condominium and condominium-hotel units in multiple towers. The estimated net project budget for CityCenter is $8.0 billion, after net residential proceeds of $2.7 billion. The gross project budget consists of $8.7 billion of construction costs, including capitalized interest, $1.7 billion of land, $0.2 billion of preopening expenses, and $0.1 billion of intangible assets. The construction costs, land and intangible assets reflect the impact of $1.3 billion of positive valuation adjustments upon the contribution of the CityCenter assets to the joint venture. The Company owned 100% of CityCenter until November 15, 2007; see Note 5 for discussion of the CityCenter joint venture transaction.
     The Company and its local partners own and operate MGM Grand Detroit, which recently opened a new permanent hotel and casino complex in downtown Detroit, Michigan. The interim facility closed on September 30, 2007 and the new casino resort opened on October 2, 2007. The Company also owns and operates two resorts in Mississippi – Beau Rivage in Biloxi and Gold Strike Tunica. Beau Rivage reopened in August 2006, after having been closed due to damage sustained as a result of Hurricane Katrina in August 2005.
     The Company has 50% interests in three resorts outside of Nevada – Grand Victoria, Borgata and MGM Grand Macau (through its 50% ownership of MGM Grand Paradise Limited). Grand Victoria is a riverboat in Elgin, Illinois – an affiliate of Hyatt Gaming owns the other 50% of Grand Victoria and also operates the resort. Borgata is a casino resort located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation owns the other 50% of Borgata and also operates the resort.
     The Company owns additional land adjacent to Borgata, a portion of which consists of common roads, landscaping and master plan improvements, a portion of which is being utilized for an expansion of Borgata, and a portion of which is planned for a wholly-owned development, MGM Grand Atlantic City, preliminarily estimated to cost approximately $4.5 – $5.0 billion excluding land and associated costs. The proposed resort would include three towers with more than 3,000 rooms and suites, approximately 5,000 slot machines, 200 table games, 500,000 square-feet of retail, an extensive convention center, and other typical resort amenities.
     MGM Grand Macau is a casino resort that opened on December 18, 2007. Pansy Ho Chiu-King owns the other 50% of MGM Grand Paradise Limited. Construction of MGM Grand Macau is expected to cost approximately $880 million, excluding preopening, land rights and license costs. Preopening and start-up expenses were approximately $110 million. The land rights cost approximately $60 million. The subconcession agreement, which allows MGM Grand Paradise Limited to operate casinos in Macau, cost $200 million.

47


Table of Contents

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
     Principles of consolidation. The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in unconsolidated affiliates which are 50% or less owned and do not meet the consolidation criteria of Financial Accounting Standards Board Interpretation No. 46(R) (as amended), “Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51” (“FIN 46(R)”), are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. The 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. The Company maintained insurance for both property damage and business interruption covering wind and flood damage sustained at Beau Rivage. Business interruption coverage covered lost profits and other costs incurred during the construction period and up to six months following the re-opening of the facility. Non-refundable insurance recoveries received in excess of the net book value of damaged assets, clean-up and demolition costs, and post-storm costs have been recognized as income in the period received or committed based on the Company’s estimate of the total claim for property damage and business interruption compared to the recoveries received at that time.
     As of December 31, 2007, the Company had reached final settlement agreements with its insurance carriers and received insurance recoveries of $635 million, which exceeded the $265 million net book value of damaged assets and post-storm costs incurred. All post-storm costs and expected recoveries have been recorded net within “General and administrative” expenses in the accompanying consolidated statements of income, except for depreciation of non-damaged assets, which is classified as “Depreciation and amortization.” During the year ended December 31, 2007, the Company recognized $284 million of insurance recoveries in income, of which $217 million was recorded within “Property transactions, net” and $67 million related to the business interruption portion of the Company’s claim was recorded within “General and administrative expenses.” The remaining $86 million previously recognized in income was recorded within “Property transactions, net” in 2006.
     Insurance recoveries are classified in the statement of cash flows based on the coverage to which they relate. Recoveries related to business interruption are classified as operating cash flows and recoveries related to property damage are classified as investing cash flows. However, the Company’s insurance policy includes undifferentiated coverage for both property damage and business interruption. Therefore, the Company classified insurance recoveries as being related to property damage until the full $160 million of damaged assets and demolition costs were recovered and classified additional recoveries up to the amount of the post-storm costs incurred as being related to business interruption. Insurance recoveries beyond that amount have been classified as operating or investing cash flows based on the Company’s estimated allocation of the total claim. During the years ended December 31, 2007, 2006 and 2005, insurance recoveries of $73 million, $99 million and $0, respectively, have been classified as operating cash flows and recoveries of $207 million, $210 million and $46 million, respectively, have been classified as investing cash flows.
     Cash and cash equivalents. Cash and cash equivalents include investments and interest bearing instruments with maturities of three months or less at the date of acquisition. Such investments are carried at cost which approximates market value. Book overdraft balances resulting from the Company’s cash management program are recorded as accounts payable or construction payable, as applicable.
     Accounts receivable and credit risk. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino accounts receivable. The Company issues markers to approved casino customers following background checks and investigations of creditworthiness. At December 31, 2007, a substantial portion of the 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, 2007, no significant concentrations of credit risk existed for which an allowance had not already been recorded.

48


Table of Contents

     Inventories. Inventories consist of food and beverage, retail merchandise and operating supplies, and are stated at the lower of cost or market. Cost is determined primarily by the average cost method for food and beverage and supplies and the retail inventory or specific identification methods for retail merchandise.
     Real estate under development. Real estate under development at December 31, 2006 represented capitalized costs of wholly-owned real estate projects to be sold, which consisted entirely of condominium and condominium-hotel developments at CityCenter. Subsequent to the contribution of CityCenter to a joint venture – See Note 5 – the Company no longer has real estate under development.
     Property and equipment. Property and equipment are stated at cost. Gains or losses on dispositions of property and equipment are included in the determination of income. Maintenance costs are expensed as incurred. Property and equipment are generally depreciated over the following estimated useful lives on a straight-line basis:
         
Buildings and improvements
    30 to 45 years  
Land improvements
    10 to 20 years  
Furniture and fixtures
    3 to 10 years  
Equipment
    3 to 20 years  
     We evaluate our property and equipment and other long-lived assets for impairment in accordance with the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” For assets to be disposed of, we recognize the asset to be sold at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is estimated based on comparable asset sales, offers received, or a discounted cash flow model.
     For assets to be held and used, we review fixed assets for impairment whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. For a discussion of recognized impairment losses, see Note 17.
     Capitalized interest. The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. When no debt is incurred specifically for a project, interest is capitalized on amounts expended on the project using the weighted-average cost of the 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 entire carrying value of the convertible note is included in “Deposits and other assets, net” in the accompanying consolidated balance sheets, as the security is not marketable.
     Goodwill and other intangible assets. Goodwill represents the excess of purchase price over fair market value of net assets acquired in business combinations. Goodwill and indefinite-lived intangible assets must be reviewed for impairment at least annually and between annual test dates in certain circumstances. The Company performs its annual impairment test for goodwill and indefinite-lived intangible assets in the fourth quarter of each fiscal year. No impairments were indicated as a result of the annual impairment reviews for goodwill and indefinite-lived intangible assets in 2007, 2006 or 2005.
     Revenue recognition and promotional allowances. Casino revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs (“casino front money”) and for chips in the customers’ possession (“outstanding chip liability”). Hotel, food and beverage, entertainment and other operating revenues are recognized as services are performed. Advance deposits on rooms and advance ticket sales are recorded as accrued liabilities until services are provided to the customer.

49


Table of Contents

     Gaming revenues are recognized net of certain sales incentives, including discounts and points earned in point-loyalty programs. The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenue and then deducted as promotional allowances. The estimated cost of providing such promotional allowances is primarily included in casino expenses as follows:
                         
    Year Ended December 31,  
    2007     2006     2005  
    (In thousands)  
Rooms
  $ 96,183     $ 91,799     $ 74,022  
Food and beverage
    303,900       296,866       229,892  
Other
    33,457       34,439       31,733  
 
                 
 
  $ 433,540     $ 423,104     $ 335,647  
 
                 
     Reimbursed expenses. The Company recognizes costs reimbursed pursuant to management services as revenue in the period it incurs the costs. Reimbursed costs in 2007 related solely to the Company’s management of CityCenter and totaled $5 million, classified as other revenue and other operating expenses in the accompanying consolidated statements of income.
     Point-loyalty programs. The 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, 2007 and 2006, the total company-wide liability for point-loyalty programs was $56 million and $47 million, respectively, including amounts classified as liabilities related to assets held for sale.
     Advertising. The Company expenses advertising costs the first time the advertising takes place. Advertising expense of continuing operations, which is generally included in general and administrative expenses, was $141 million, $119 million and $98 million for 2007, 2006 and 2005, respectively.
     Corporate expense. Corporate expense represents unallocated payroll and aircraft costs, professional fees and various other expenses not directly related to the 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 and start-up expenses. The Company accounts for costs incurred during the preopening and start-up phases of operations in accordance with the American Institute of Certified Public Accountants’ (“AICPA”) Statement of Position 98-5, “Reporting on the Costs of Start-up Activities.” Preopening and start-up costs, including organizational costs, are expensed as incurred. Costs classified as preopening and start-up expenses include payroll, outside services, advertising, and other expenses related to new or start-up operations and new customer initiatives.
     Property transactions, net. The Company classifies transactions related to long-lived assets – such as write-downs and impairments, demolition costs, and normal gains and losses on the sale of fixed assets – as “Property transactions, net” in the accompanying consolidated statements of income. See Note 17 for a detailed discussion of these amounts.
     Income per share of common stock. The weighted-average number of common and common equivalent shares used in the calculation of basic and diluted earnings per share consisted of the following:
                         
    Year Ended December 31,  
    2007     2006     2005  
            (In thousands)          
Weighted-average common shares outstanding used in the calculation of basic earnings per share
    286,809       283,140       284,943  
Potential dilution from stock options, stock appreciation rights and restricted stock
    11,475       8,607       11,391  
 
                 
Weighted-average common and common equivalent shares used in the calculation of diluted earnings per share
    298,284       291,747       296,334  
 
                 
     Currency translation. The Company accounts for currency translation in accordance with Statement of Financial Accounting Standards No. 52, “Foreign Currency Translation.” Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments resulting from this process are charged or credited to other comprehensive income.

50


Table of Contents

     Comprehensive income. Comprehensive income includes net income 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,  
    2007     2006  
    (In thousands)  
Other comprehensive income (loss) from unconsolidated affiliates
  $ (305 )   $ 137  
Foreign currency translation adjustments
    861       278  
 
           
 
  $ 556     $ 415  
 
           
     Reclassifications. The consolidated financial statements for prior years reflect certain reclassifications, which have no effect on previously reported net income, to conform to the current year presentation.
     Recently Issued Accounting Standards. The following accounting standards were issued in 2007 but will impact the Company in future periods.
     Accounting for Business Combinations and Non-Controlling Interests. In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (R), “Business Combinations,” (“SFAS 141R”) and SFAS No. 160 “Non-controlling interests in Consolidated Financial Statements – an amendment of ARB No. 51,” (“SFAS 160”). These standards amend the requirements for accounting for business combinations, including the recognition and measurement of additional assets and liabilities at their fair value, expensing of acquisition-related costs which are currently capitalizable under existing rules, treatment of adjustments to deferred taxes and liabilities subsequent to the measure period, and the measurement of non-controlling interest, previously commonly referred to as minority interests, at fair value. SFAS 141R also includes additional disclosure requirements with respect to the methodologies and techniques used to determine the fair value of assets and liabilities recognized in a business combination. SFAS 141R and SFAS 160 apply prospectively to fiscal years beginning on or after December 15, 2008, except for the treatment of deferred tax adjustments which apply to deferred taxes recognized in previous business combinations. These standards will become effective for the Company on January 1, 2009. The Company is currently evaluating the effect, if any, the adoption of SFAS 141R and SFAS 160 will have on its consolidated financial statements.
     Impact of Buy-Sell Clauses on Sales of Real Estate. In December 2007, the Emerging Issues Task Force (“EITF”) of the FASB ratified its consensus on EITF No. 07-6 “Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement No. 66, Accounting for Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause.” The EITF reached consensus that a buy-sell clause, in and of itself, does not constitute a prohibited form of continuing involvement that would preclude partial sale-recognition under Statement 66. This EITF is effective for fiscal years beginning after December 15, 2007, or for the Company on January 1, 2008. The adoption of EITF No. 07-6 did not have a material impact on the Company’s consolidated financial statements.
     Fair Value and Fair Value Option. In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits the measure of certain financial instruments and certain other items at fair value and establishes presentation and disclosure requirements to help financial statement users to understand these measurements and their impact on earnings. This statement is effective for the Company beginning in January 1, 2008. The adoption of SFAS 159 did not have a material impact on the Company’s consolidated financial statements.
     In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a framework for measuring fair value under generally accepted accounting principles and expands fair value disclosures. This statement will be effective for the Company beginning January 1, 2008 for financial assets and liabilities and beginning January 1, 2009 for certain non-financial assets and liabilities. The adoption of SFAS 157 did not have a material impact on the Company’s consolidated financial statements.
NOTE 3 — ACQUISITION
     On April 25, 2005, the Company closed its merger with Mandalay under which the Company acquired 100% of the outstanding common stock of Mandalay for $71 in cash for each share of Mandalay’s common stock. The total acquisition cost was $7.3 billion, including the fair value of debt assumed, transaction costs, and the net proceeds from disposal of Mandalay assets.

51


Table of Contents

     The operating results for Mandalay are included in the accompanying consolidated statements of income from the date of the acquisition. The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the Mandalay acquisition had occurred on January 1, 2005.
         
Year Ended December 31,   2005
    (In thousands, except
    per share amounts)
Net revenues
  $ 6,977,609  
Operating income
    1,488,013  
Income from continuing operations
    454,365  
Net income
    465,539  
Basic earnings per share:
       
Income from continuing operations
  $ 1.59  
Net income
    1.63  
Diluted earnings per share:
       
Income from continuing operations
  $ 1.53  
Net income
    1.57  
NOTE 4 — DISCONTINUED OPERATIONS
     The sale of the Primm Valley Resorts in April 2007 resulted in a pre-tax gain of $202 million and the sale of the Laughlin Properties in June 2007 resulted in a pre-tax gain of $64 million.
     The assets and liabilities of the Jean Properties have not been contributed to the planned joint venture and therefore are classified as held for sale at December 31, 2007. The assets and liabilities of Primm Valley Resorts and the Laughlin Properties were classified as held for sale at December 31, 2006 in the accompanying consolidated balance sheets. Nevada Landing closed in March 2007 and the carrying value of its building assets were written-off. These amounts are included in “Property transactions, net” in the accompanying consolidated statements of income for the twelve month period ended December 31, 2007.
     The following table summarizes the assets held for sale and liabilities related to assets held for sale in the accompanying consolidated balance sheets:
                 
    At December 31,  
    2007     2006  
    (In thousands)  
Cash
  $ 3,734     $ 24,538  
Accounts receivable, net
    587       3,203  
Inventories
    825       3,196  
Prepaid expenses and other
    952       8,141  
 
           
Total current assets
    6,098       39,078  
Property and equipment, net
    47,194       316,332  
Goodwill
          5,000  
Other assets, net
    2,378       8,938  
 
           
Total assets
    55,670       369,348  
 
           
 
               
Accounts payable
    938       6,622  
Other current liabilities
    2,942       29,142  
 
           
Total current liabilities
    3,880       35,764  
Other long-term obligations
          4,495  
 
           
Total liabilities
    3,880       40,259  
 
           
 
               
Net assets
  $ 51,790     $ 329,089  
 
           
     The results of the Laughlin Properties and Primm Valley Resorts are classified as discontinued operations in the accompanying consolidated statements of income for all periods presented. Due to our continuing involvement in the Jean Properties, the results of these operations have not been classified as discontinued operations in the accompanying consolidated statements of income. The cash flows of discontinued operations are included with the cash flows of continuing operations in the accompanying consolidated statements of cash flows.
     Other information related to discontinued operations is as follows:
                         
For the periods ended December 31,   2007   2006   2005
            (In thousands)        
Net revenues of discontinued operations
  $ 128,619     $ 412,032     $ 353,125  
Interest allocated to discontinued operations (based on the ratio of net assets of discontinued operations to total consolidated net assets and debt)
    5,844       18,160       15,267  

52


Table of Contents

NOTE 5 — CITYCENTER TRANSACTION
     In August 2007, the Company and Dubai World, a Dubai, United Arab Emirates government decree entity, agreed to form a 50/50 joint venture for the CityCenter development. The joint venture, CityCenter Holdings, LLC, is owned equally by the Company and Infinity World Development Corp., a wholly-owned subsidiary of Dubai World. On November 15, 2007 the Company contributed the CityCenter assets which the parties valued at $5.4 billion, subject to certain adjustments. Dubai World contributed $2.96 billion in cash. At the close of the transaction, the Company received a cash distribution of $2.47 billion, of which $22 million will be repaid to CityCenter as a result of a post-closing adjustment. The joint venture retained approximately $492 million to fund near-term construction costs. The Company will continue to serve as developer of CityCenter and will receive additional consideration of up to $100 million if the project is completed on time and actual development costs, net of residential proceeds, are within specified parameters. Upon completion of construction, the Company will manage CityCenter for a fee.
     The initial contribution of the CityCenter assets has been accounted for as a partial sale of real estate. As a partial sale, profit can be recognized when a seller retains an equity interest in the assets, but only to the extent of the outside equity interests, and only if the following criteria are met: 1) the buyer is independent of the seller; 2) collection of the sales price is reasonably assured; and 3) the seller will not be required to support the operations of the property to an extent greater than its proportionate retained interest.
     The transaction meets criteria 1 and 3, despite the 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 Dubai World’s interest if Dubai World is denied required gaming approvals. The Company assessed the probability of such contingency as remote and, therefore, determined that a prohibited form of continuing involvement does not exist.
     As described above, the Company did not receive the entire amount of the sales price, as a portion remained in the venture to fund near-term construction costs. The Company expects that the permanent financing for CityCenter will require such funds to remain in the venture and not be distributed; therefore, the Company believes that portion of the gain does not meet criteria 2 above and has been deferred. The Company recorded a gain of $1.03 billion based on the following (in millions):
         
Cash received:
       
Initial distribution
  $ 2,468  
Post-closing adjustment
    (22 )
 
     
Net cash received
    2,446  
Less: 50% of carrying value of assets contributed
    (1,387 )
Less: Liabilities resulting from the transaction
    (29 )
 
     
 
  $ 1,030  
 
     
     The Company is accounting for its ongoing investment in CityCenter using the equity method, consistent with its other investments in unconsolidated affiliates. The Company assessed whether CityCenter should be consolidated under the provisions of FIN 46(R) and determined that CityCenter is not a variable interest entity, based on the following: 1) CityCenter does not meet the scope exceptions in FIN 46(R); 2) the equity at risk in CityCenter is sufficient, based on qualitative assessments; 3) the equity holders of CityCenter (the Company and Dubai World) have the ability to control CityCenter and the right/obligation to receive/absorb expected returns/losses of CityCenter; and 4) while the 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,  
    2007     2006  
    (In thousands)  
Casino
  $ 266,059     $ 248,044  
Hotel
    181,545       175,770  
Other
    50,579       29,131  
 
           
 
    498,183       452,945  
Less: Allowance for doubtful accounts
    (85,838 )     (90,024 )
 
           
 
  $ 412,345     $ 362,921  
 
           

53


Table of Contents

NOTE 7 — PROPERTY AND EQUIPMENT, NET
     Property and equipment consisted of the following:
                 
    At December 31,  
    2007     2006  
    (In thousands)  
Land
  $ 7,692,737     $ 7,905,430  
Buildings, building improvements and land improvements
    8,713,703       7,869,972  
Furniture, fixtures and equipment
    3,229,416       2,954,921  
Construction in progress
    552,667       1,306,770  
 
           
 
    20,188,523       20,037,093  
Less: Accumulated depreciation and amortization
    (3,364,819 )     (2,795,233 )
 
           
 
  $ 16,823,704     $ 17,241,860  
 
           
NOTE 8 — INVESTMENTS IN UNCONSOLIDATED AFFILIATES
     The Company has investments in unconsolidated affiliates accounted for under the equity method. Under the equity method, carrying value is adjusted for the Company’s share of the investees’ earnings and losses, as well as capital contributions to and distributions from these companies. Investments in unconsolidated affiliates consisted of the following:
                 
    At December 31,  
    2007     2006  
    (In thousands)  
CityCenter Holdings, LLC — CityCenter (50%)
  $ 1,421,480     $  
Marina District Development Company — Borgata (50%)
    453,277       454,354  
Elgin Riverboat Resort-Riverboat Casino — Grand Victoria (50%)
    297,328       300,151  
MGM Grand Paradise Limited — Macau (50%)
    258,298       285,038  
Circus and Eldorado Joint Venture — Silver Legacy (50%)
    35,152       31,258  
Turnberry/MGM Grand Towers — The Signature at MGM Grand (50%)
    5,651       11,661  
Other
    11,541       9,795  
 
           
 
  $ 2,482,727     $ 1,092,257  
 
           
     As of December 31, 2007, The Signature at MGM Grand had completed the sales of all units and had essentially ceased operations. During the fourth quarter of 2007, the Company purchased the remaining 88 units in Towers B and C from the joint venture for $39 million. These units have been recorded as property, plant and equipment in the accompaying consolidated balance sheets.
     The Company recognized the following related to its share of profit from condominium sales, based on when sales were closed.
                         
For the periods ended December 31,   2007     2006     2005  
    (In thousands)  
Income from joint venture
  $ 83,728     $ 102,785     $  
Gain on land previously deferred
    8,003       14,524        
Other income (loss)
    776       (108 )     (2,777 )
 
                 
 
  $ 92,507     $ 117,201     $ (2,777 )
 
                 
     Differences between the Company’s venture-level equity and investment balances are as follows:
                 
    At December 31,  
    2007     2006  
    (In thousands)  
Venture-level equity
  $ 2,976,271     $ 698,587  
Fair value adjustments to investments acquired in business combinations
    321,814       321,814  
Adjustment to CityCenter equity upon contribution of net assets by MGM MIRAGE
    (662,492 )      
Capitalized interest
    99,055       68,806  
Other adjustments
    (251,921 )     3,050  
 
           
 
  $ 2,482,727     $ 1,092,257  
 
           
     The fair value adjustments related to business combinations include a $90 million increase for Borgata, related to land; a $267 million increase for Grand Victoria, related to indefinite-lived gaming license rights; and a $35 million reduction for Silver Legacy, related to long-term assets and long-term debt. The adjustments for Borgata and Grand Victoria are not being amortized; the adjustments for Silver Legacy are being amortized based on the useful lives of the related assets and liabilities.
     The adjustment to CityCenter equity reflects the fact that the net assets (and corresponding equity) contributed by MGM MIRAGE were recorded at a partial step-up in value, while the investment is on a historical cost basis. Other adjustments includes the deferred gain on the CityCenter transaction. A portion of the CityCenter-related amounts will be amortized, based on amounts assigned to depreciable assets, or recorded upon the sales of condominium units. The remainder will not be amortized, based on amounts assigned to land and indefinite-lived intangible assets.

54


Table of Contents

     The Company recorded its share of the results of operations of the unconsolidated affiliates as follows:
                         
    Year Ended December 31,  
    2007     2006     2005  
    (In thousands)  
Income from unconsolidated affiliates
  $ 222,162     $ 254,171     $ 151,871  
Preopening and start-up expenses
    (41,140 )     (8,813 )     (1,914 )
Non-operating items from unconsolidated affiliates
    (18,805 )     (16,063 )     (15,825 )
 
                 
 
  $ 162,217     $ 229,295     $ 134,132  
 
                 
     Summarized balance sheet information of the unconsolidated affiliates is as follows:
                 
    At December 31,
    2007   2006
    (In thousands)
Current assets
  $ 678,217     $ 281,766  
Property and other assets, net
    7,803,128       2,227,570  
Current liabilities
    839,667       248,931  
Long-term debt and other liabilities
    1,896,670       1,009,565  
Equity
    5,745,008       1,250,840  
     Summarized results of operations of the unconsolidated affiliates are as follows:
                         
    Year Ended December 31,  
    2007     2006     2005  
    (In thousands)  
Net revenues
  $ 1,885,595     $ 2,020,523     $ 1,243,465  
Operating expenses, except preopening expenses
    (1,450,854 )     (1,536,253 )     (938,972 )
Preopening and start-up expenses
    (79,596 )     (12,285 )     (1,352 )
 
                 
Operating income
    355,145       471,985       303,141  
Interest expense
    (48,500 )     (37,898 )     (35,034 )
Other non-operating income
    6,082       2,462       1,435  
 
                 
Net income
  $ 312,727     $ 436,549     $ 269,542  
 
                 
     Summarized balance sheet information of the CityCenter joint venture is as follows:
         
    December 31,
    2007
Current assets
  $ 217,415  
Property and other assets, net
    4,973,887  
Current liabilities
    337,598  
Other liabilities
    286,952  
Equity
    4,566,752  
     Summarized income statement information of the CityCenter joint venture is as follows:
         
    December 31,  
    2007  
Net revenues
  $  
Operating expenses, except preopening expenses
    (3,842 )
Preopening and start-up expenses
    (5,258 )
 
     
Operating loss
    (9,100 )
Interest income
    1,913  
 
     
Net loss
  $ (7,187 )
 
     
NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS
     Goodwill and other intangible assets consisted of the following:
                 
    At December 31,  
    2007     2006  
    (In thousands)  
Goodwill:
               
Mandalay acquisition (2005)
  $ 1,214,297     $ 1,216,990  
Mirage Resorts acquisition (2000)
    47,186       76,342  
Other
    1,439       7,415  
 
           
 
  $ 1,262,922     $ 1,300,747  
 
           
Indefinite-lived intangible assets:
               
Detroit development rights
  $ 98,098     $ 100,056  
Trademarks, license rights and other
    245,146       247,346  
 
           
 
    343,244       347,402  
Other intangible assets, net
    16,526       19,798  
 
           
 
  $ 359,770     $ 367,200  
 
           

55


Table of Contents

     Goodwill related to the Mandalay acquisition was primarily assigned to Mandalay Bay, Luxor, Excalibur and Gold Strike Tunica. Goodwill related to the Mirage Resorts acquisition was assigned to Bellagio, The Mirage and TI. Changes in the recorded balances of goodwill are as follows:
                 
    Year Ended December 31,  
    2007     2006  
    (In thousands)  
Balance, beginning of period
  $ 1,300,747     $ 1,314,561  
Resolution of Mirage Resorts acquisition tax reserves
    (29,156 )      
Finalization of the Mandalay purchase price allocation
    (2,693 )     (8,814 )
Other
    (5,976 )     (5,000 )
 
           
Balance, end of the period
  $ 1,262,922     $ 1,300,747  
 
           
     The Company’s indefinite-lived intangible assets consist primarily of development rights in Detroit and trademarks. The Company’s 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.
NOTE 10 — OTHER ACCRUED LIABILITIES
     Other accrued liabilities consisted of the following:
                 
    At December 31,  
    2007     2006  
    (In thousands)  
Payroll and related
  $ 302,707     $ 304,924  
Advance deposits and ticket sales
    137,771       163,121  
Casino outstanding chip liability
    105,126       89,574  
Casino front money deposits
    71,069       71,918  
Other gaming related accruals
    89,131       76,739  
Taxes, other than income taxes
    72,528       66,827  
Other
    151,092       185,141  
 
           
 
  $ 929,424     $ 958,244  
 
           
NOTE 11 — LONG-TERM DEBT
     Long-term debt consisted of the following:
                 
    At December 31,  
    2007     2006  
    (In thousands)  
Senior credit facility
  $ 3,229,550     $ 4,381,850  
$710 million 9.75% senior subordinated notes, due 2007, net
          709,477  
$200 million 6.75% senior notes, due 2007, net
          197,279  
$492.2 million 10.25% senior subordinated notes, due 2007, net
          505,704  
$180.4 million 6.75% senior notes, due 2008, net
    180,085       175,951  
$196.2 million 9.5% senior notes, due 2008, net
    200,203       206,733  
$226.3 million 6.5% senior notes, due 2009, net
    227,356       227,955  
$1.05 billion 6% senior notes, due 2009, net
    1,052,577       1,053,942  
$297.6 million 9.375% senior subordinated notes, due 2010, net
    312,807       319,277  
$825 million 8.5% senior notes, due 2010, net
    823,689       823,197  
$400 million 8.375% senior subordinated notes, due 2011
    400,000       400,000  
$132.4 million 6.375% senior notes, due 2011, net
    133,320       133,529  
$550 million 6.75% senior notes, due 2012
    550,000       550,000  
$150 million 7.625% senior subordinated debentures, due 2013, net
    154,679       155,351  
$500 million 6.75% senior notes due 2013
    500,000       500,000  
$525 million 5.875% senior notes, due 2014, net
    523,089       522,839  
$875 million 6.625% senior notes, due 2015, net
    879,173       879,592  
$250 million 6.875% senior notes due 2016
    250,000       250,000  
$750 million 7.5% senior notes due 2016
    750,000        
$100 million 7.25% senior debentures, due 2017, net
    84,499       83,556  
$750 million 7.625% senior notes due 2017
    750,000       750,000  
Floating rate convertible senior debentures due 2033
    8,472       8,472  
$150 million 7% debentures due 2036, net
    155,835       155,900  
$4.3 million 6.7% debentures, due 2096
    4,265       4,265  
Other notes
    5,630        
 
           
 
    11,175,229       12,994,869  
Less: Current portion
           
 
           
 
  $ 11,175,229     $ 12,994,869  
 
           
     Amounts due within one year of the balance sheet date are classified as long-term in the accompanying consolidated balance sheets because the Company has both the intent and ability to repay these amounts with available borrowings under the senior credit facility.

56


Table of Contents

     Interest expense, net consisted of the following:
                         
For the periods ended December 31,   2007     2006     2005  
      (In thousands)          
Total interest incurred
  $ 930,138     $ 900,661     $ 685,552  
Interest capitalized
    (215,951 )     (122,140 )     (29,527 )
Interest allocated to discontinued operations
    (5,844 )     (18,160 )     (15,267 )
 
                 
 
  $ 708,343     $ 760,361     $ 640,758  
 
                 
     The senior credit facility has a total capacity of $7 billion and matures in 2011. The Company has the ability to solicit additional lender commitments to increase the capacity to $8 billion. The components of the senior credit facility include a term loan facility of $2.5 billion and a revolving credit facility of $4.5 billion. At December 31, 2007, the Company had approximately $3.7 billion of available borrowing capacity under the senior credit facility.
     In May 2007, the Company issued $750 million of 7.5% senior notes due 2016. In June 2007, the Company repaid the $710 million of 9.75% senior subordinated notes at maturity. In August 2007, the Company repaid the $200 million of 6.75% senior notes and the $492.2 million of 10.25% senior subordinated notes at maturity using borrowings under the senior credit facility.
     In February 2006, the Company repaid the $200 million 6.45% senior notes at their maturity. In October 2006, the Company repaid the $244.5 million 7.25% senior notes at their maturity. The Company repaid both issuances of senior notes with borrowings under the senior credit facility. In April 2006, the Company issued $500 million of 6.75% senior notes due 2013 and $250 million of 6.875% senior notes due 2016. In December 2006, the Company issued $750 million of 7.625% senior notes due 2017. The proceeds of the April 2006 and December 2006 issuances were used to repay outstanding borrowings under the senior credit facility.
     In February 2005, the Company redeemed all of its outstanding 6.875% senior notes due February 2008 at the present value of future interest payments plus accrued interest at the date of redemption. The Company recorded a loss on retirement of debt of $20 million in the first quarter of 2005, classified as “Other, net” in the accompanying consolidated statements of income.
     In December 2004, the Company’s Board of Directors authorized the purchase of up to $100 million of the Company’s public debt securities. This authorization remains available as of December 31, 2007.
     The Company and each of its material subsidiaries, excluding MGM Grand Detroit, LLC and the 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, 2007, the outstanding amount of borrowings related to MGM Grand Detroit, LLC was $361 million. See Note 19 for consolidating condensed financial information of the subsidiary guarantors and non-guarantors. None of the Company’s assets serve as collateral for its senior credit facility, senior notes, or other long-term debt.
     The Company’s long-term debt obligations contain customary covenants requiring the Company to maintain certain financial ratios. At December 31, 2007, the Company was required to maintain a maximum leverage ratio (debt to EBITDA, as defined) of 6.5:1 and a minimum coverage ratio (EBITDA to interest charges, as defined) of 2.0:1. As of December 31, 2007, the Company’s leverage and interest coverage ratios were 3.0:1 and 4.0:1, respectively.
     Maturities of the Company’s long-term debt as of December 31, 2007 are as follows:
         
Years ending December 31,   (In thousands)  
2008
  $ 377,998  
2009
    1,277,665  
2010
    1,123,891  
2011
    3,763,245  
2012
    551,335  
Thereafter
    4,060,169  
 
     
 
    11,154,303  
Debt premiums and discounts, net
    20,926  
 
     
 
  $ 11,175,229  
 
     
     The estimated fair value of the Company’s long-term debt at December 31, 2007 was approximately $10.9 billion, versus its book value of $11.2 billion. At December 31, 2006, the estimated fair value of the Company’s long-term debt was approximately $13 billion, consistent with its book value. The estimated fair value of the Company’s debt securities was based on quoted market prices on or about December 31, 2007 and 2006.

57


Table of Contents

NOTE 12 — INCOME TAXES
     The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.
     The income tax provision attributable to continuing operations and discontinued operations is as follows:
                         
    Year Ended December 31,  
    2007     2006     2005  
    (In thousands)  
Continuing operations
  $ 757,883     $ 341,930     $ 231,719  
Discontinued operations
    92,400       6,205       3,925  
 
                 
 
  $ 850,283     $ 348,135     $ 235,644  
 
                 
     The income tax provision attributable to income from continuing operations before income taxes is as follows:
                         
    Year Ended December 31,  
    2007     2006     2005  
            (In thousands)          
Current—federal
  $ 729,249     $ 328,068     $ 218,901  
Deferred—federal
    16,921       8,152       4,164  
Other noncurrent—federal
    6,326              
 
                 
Provision for federal income taxes
    752,496       336,220       223,065  
 
                 
 
                       
Current—state
    2,493       3,920       5,252  
Deferred—state
    728       1,432       6,811  
Other noncurrent—state
    2,166              
 
                 
Provision for state income taxes
    5,387       5,352       12,063  
 
                 
 
                       
Current—foreign
          (72 )     (2,979 )
Deferred—foreign
          430       (430 )
 
                 
Provision for foreign income taxes
          358       (3,409 )
 
                 
 
  $ 757,883     $ 341,930     $ 231,719  
 
                 
     A reconciliation of the federal income tax statutory rate and the Company’s effective tax rate is as follows:
                         
    Year Ended December 31,
    2007   2006   2005
Federal income tax statutory rate
    35.0 %     35.0 %     35.0 %
State income tax (net of federal benefit)
    0.1       0.4       1.2  
Reversal of reserves for prior tax years
    (0.2 )     (0.8 )      
Losses of unconsolidated foreign affiliates
    2.0              
Domestic Production Activity deduction
    (1.8 )            
Foreign earnings repatriation – benefit of American Job Creation Act of 2004
                (1.5 )
Tax credits
    (0.3 )     (0.6 )     (1.3 )
Permanent and other items
    0.3       1.0       1.3  
 
                       
 
    35.1 %     35.0 %     34.7 %
 
                       
     The major tax-effected components of the Company’s net deferred tax liability are as follows:
                 
    At December 31,  
    2007     2006  
    (In thousands)  
Deferred tax assets—federal and state
               
Bad debt reserve
  $ 39,880     $ 35,454  
Deferred compensation
    48,439       39,039  
Net operating loss carryforward
    1,054       5,705  
Preopening and start-up costs
    4,278       5,006  
Accruals, reserves and other
    68,614       34,316  
Long-term debt
          6,338  
Stock-based compensation
    45,442       23,662  
Tax credits
    2,491       2,491  
 
           
 
    210,198       152,011  
Less: Valuation allowance
    (4,047 )     (8,308 )
 
           
 
  $ 206,151     $ 143,703  
 
           

58


Table of Contents

                 
    At December 31,  
    2007     2006  
    (In thousands)  
Deferred tax liabilities—federal and state
               
Property and equipment
  $ (3,444,406 )   $ (3,385,984 )
Long-term debt
    (1,479 )      
Investments in unconsolidated affiliates
    (10,735 )     (31,839 )
Intangibles
    (102,738 )     (98,991 )
 
           
 
    (3,559,358 )     (3,516,814 )
 
           
Deferred taxes—foreign
    2,214       2,144  
Less: Valuation allowance
    (2,214 )     (2,144 )
 
           
 
           
 
           
Net deferred tax liability
  $ (3,353,207 )   $ (3,373,111 )
 
           
     For federal income tax purposes, the Company has a foreign tax credit carryforward of $2 million that will expire in 2015 if not utilized.
     For state income tax purposes, the Company has a New Jersey net operating loss carryforward of $18 million, which equates to a deferred tax asset of $1 million, after federal tax effect, and before valuation allowance. The New Jersey net operating loss carryforwards began to expire in 2005.
     At December 31, 2007, there is a $2 million valuation allowance provided on certain New Jersey state net operating loss carryforwards and other New Jersey state deferred tax assets, a valuation allowance of $2 million on the foreign tax credit, and a $2 million valuation allowance related to certain foreign deferred tax assets because management believes these assets do not meet the “more likely than not” criteria for recognition under SFAS 109. Management believes all other deferred tax assets are more likely than not to be realized because of the future reversal of existing taxable temporary differences and expected future taxable income. Accordingly, there are no other valuation allowances provided at December 31, 2007.
     Effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 requires that tax positions be assessed using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred income tax accounts, and at December 31, 2007, the Company has classified $3 million as current (“Other accrued liabilities”) and $84 million as long-term (“Other long-term liabilities”) in the accompanying consolidated balance sheets, based on the time until expected payment. A cumulative effect adjustment to retained earnings was not required as a result of the implementation of FIN 48.
     A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows (in thousands):
         
Gross unrecognized tax benefits at January 1, 2007
  $ 105,139  
Gross increases – Prior period tax positions
    14,423  
Gross decreases – Prior period tax positions
    (47,690 )
Gross increases – Current period tax positions
    13,220  
Settlements with taxing authorities
    (7,162 )
Lapse in statutes of limitations
    (602 )
 
     
Gross unrecognized tax benefits at December 31, 2007
  $ 77,328  
 
     
     The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate is $24 million.
     The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. This policy did not change as a result of the adoption of FIN 48. The Company had $11 million and $5 million in interest related to unrecognized tax benefits accrued as of December 31, 2007 and December 31, 2006, respectively. No amounts were accrued for penalties as of either date. Income tax expense for the year ended December 31, 2007 includes interest related to unrecognized tax benefits of $7 million. For the years prior to adoption of FIN 48, income tax expense included amounts accrued for interest expense of $2 million and $1 million for the years ended December 31, 2006 and December 31, 2005, respectively.

59


Table of Contents

     The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the taxes paid in foreign jurisdictions are not material. As of December 31, 2007, the Company was no longer subject to examination of its U.S. federal income tax returns filed for years ended prior to 2003. While the IRS examination of the 2001 and 2002 tax years closed during the first quarter of 2007, the statute of limitations for assessing tax for such years has been extended in order for the Company to complete the appeals process for issues that were not agreed upon at the closure of the examination. It is reasonably possible that this appeal may be settled in the next twelve months. The IRS is currently examining the Company’s federal income tax returns for the 2003 and 2004 tax years. Tax returns for subsequent years are also subject to examination.
     As of December 31, 2007, the Company was no longer subject to examination of its various state and local tax returns filed for years ended prior to 2003. During 2007, the City of Detroit initiated an examination of a Mandalay Resort Group subsidiary return for the pre-acquisition year ended April 25, 2005. Also during 2007, the state of Mississippi initiated an examination of returns filed by subsidiaries of MGM MIRAGE and Mandalay Resort Group for the 2004 through 2006 tax years. This audit was settled during the first quarter of 2008. No other state or local income tax returns are under examination.
     Due to the potential resolution of the appeals process for the IRS examination of the 2001 and 2002 tax years, the expiration of various statutes of limitation, and the settlement of the Mississippi state income tax examination in the first quarter of 2008, it is reasonably possible that the Company’s amount of unrecognized tax benefits may decrease within the next twelve months by a range of $0 to $8 million.
NOTE 13 — COMMITMENTS AND CONTINGENCIES
     Leases. The Company leases real estate and various equipment under operating and, to a lesser extent, capital lease arrangements. Certain real estate leases provide for escalation of rent based upon a specified price index and/or based upon periodic appraisals.
     At December 31, 2007, the Company was obligated under non-cancelable operating leases and capital leases to make future minimum lease payments as follows:
                 
    Operating     Capital  
    Leases     Leases  
    (In thousands)  
Years ending December 31,
               
2008
    14,190       1,814  
2009
    9,498       1,637  
2010
    7,843       1,607  
2011
    7,021       1,401  
2012
    5,983       981  
Thereafter
    40,756        
 
           
Total minimum lease payments
  $ 85,291       7,440  
 
             
Less: Amounts representing interest
            (666 )
 
             
Total obligations under capital leases
            6,774  
Less: Amounts due within one year
            (1,492 )
 
             
Amounts due after one year
          $ 5,282  
 
             
     The current and long-term obligations under capital leases are included in “Other accrued liabilities” and “Other long-term obligations,” respectively, in the accompanying consolidated balance sheets. Rental expense for operating leases, including rental expense of discontinued operations, was $36 million for each of the years ended December 31, 2007 and 2006, and $33 million for the year ended December 31, 2005.
     CityCenter. As described in Note 1, the net project budget for CityCenter is $8.0 billion. The joint venture expects to spend approximately $2.5 billion in construction costs in 2008. As of December 31, 2007, the joint venture had $207 million of cash. In February 2008, MGM MIRAGE and Dubai World each loaned $100 million to the joint venture to fund near-term construction costs. The joint venture is currently negotiating with its lenders to obtain project financing to fund remaining construction spending. The joint venture anticipates that project financing will include requirements to utilize the project assets as security for the financing. The other potential source of project financing is additional contributions from MGM MIRAGE and Dubai World, which require approval of the joint venture’s Board of Directors.

60


Table of Contents

     Mashantucket Pequot Tribal Nation. The Company entered into a series of agreements to implement a strategic alliance with the Mashantucket Pequot Tribal Nation (“MPTN”), which owns and operates Foxwoods Casino Resort in Ledyard, Connecticut. The Company and MPTN have formed a jointly owned company – Unity Gaming, LLC – to acquire or develop future gaming and non-gaming enterprises. The Company will provide a loan of up to $200 million to finance a portion of 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. The Company will contribute 40 acres of land, which is being valued at $20 million per acre, for fifty percent of the equity in the joint venture. Kerzner International and Istithmar will contribute cash totaling $600 million, and each will obtain twenty-five percent of the equity in the joint venture.
     Other guarantees. The Company is party to various guarantee contracts in the normal course of business, which are generally supported by letters of credit issued by financial institutions. The 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, 2007, the Company had provided $85 million of total letters of credit, including $50 million to support bonds issued by the Economic Development Corporation of the City of Detroit, which are recorded as a liability of the Company.
     Litigation. The Company is a party to various legal proceedings, most of which relate to routine matters incidental to its business. Management does not believe that the outcome of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.
NOTE 14 — STOCKHOLDERS’ EQUITY
     Stock split. In May 2005, the Company completed a 2-for-1 stock split effected in the form of a 100% stock dividend. All share and per share data in the accompanying financial statements and notes thereto have been restated for all periods presented to reflect the 100% stock dividend.
     Stock sale. On October 18, 2007, the Company completed the sale of 14.2 million shares of common stock to Infinity World Investments, a wholly-owned subsidiary of Dubai World, at a price of $84 per share for total proceeds of approximately $1.2 billion. These shares were previously held by the Company as treasury stock. Proceeds from the sale were used to reduce amounts outstanding under the senior credit facility.
     Stock repurchases. Share repurchases are only conducted under repurchase programs approved by the Board of Directors and publicly announced. Share repurchase activity was as follows:
                         
    Year Ended December 31,  
    2007     2006     2005  
            (In thousands)          
July 2004 authorization (8 million, 6.5 million and 5.5 million shares purchased)
  $ 659,592     $ 246,892     $ 217,316  
December 2007 authorization (1.9 million shares purchased)
    167,173              
 
                 
 
  $ 826,765     $ 246,892     $ 217,316  
 
                 
 
                       
Average price of shares repurchased
  $ 83.92     $ 37.98     $ 39.51  
     At December 31, 2007, the Company had 18.2 million shares available for repurchase under the December 2007 authorization.
NOTE 15 — STOCK-BASED COMPENSATION
     Information about the Company’s share-based awards. The Company adopted an omnibus incentive plan in 2005 which allows for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, and other stock-based awards to eligible directors, officers and employees. The plans are administered by the Compensation and Stock Option Committee (the “Committee”) of the Board of Directors. Salaried officers, directors and other key employees of the Company and its subsidiaries are eligible to receive awards. The Committee has discretion under the omnibus plan regarding which type of awards to grant, the vesting and service requirements, exercise price and other conditions, in all cases subject to certain limits, including:
    The omnibus plan allowed for the issuance of up to 20 million shares or share-based awards;
 
    For stock options and stock appreciation rights, the exercise price of the award must equal the fair market value of the stock on the date of grant and the maximum term of such an award is ten years.

61


Table of Contents

     To date, the Committee has only awarded stock options and SARs under the omnibus plan. The Company’s practice has been to issue new shares upon the exercise of stock options. Under the Company’s previous plans, the Committee had issued stock options and restricted stock. Stock options and SARs granted under all plans generally have either 7-year or 10-year terms, and in most cases are exercisable in either four or five equal annual installments. Restrictions on restricted shares granted under a previous plan lapsed 50% on the third anniversary date after the grant and 50% on the fourth anniversary date after the grant.
     As of December 31, 2007, the aggregate number of share-based awards available for grant under the omnibus plan was 3.1 million. A summary of activity under the Company’s share-based payment plans for the year ended December 31, 2007 is presented below:
Stock options and stock appreciation rights
                                 
                    Weighted        
            Weighted     Average     Aggregate  
            Average     Remaining     Intrinsic  
    Shares     Exercise     Contractual     Value  
    (000’s)     Price     Term     ($000’s)  
Outstanding at January 1, 2007
    30,532     $ 25.37                  
Granted
    2,640       79.12                  
Exercised
    (5,565 )     18.21                  
Forfeited or expired
    (933 )     34.11                  
 
                             
Outstanding at December 31, 2007
    26,674       31.90       4.8     $ 1,402,095  
 
                         
Vested and expected to vest at December 31, 2007
    25,969       31.70       4.8     $ 1,370,195  
 
                         
Exercisable at December 31, 2007
    11,357       21.83       4.4     $ 708,621  
 
                         
     As of December 31, 2007, there was a total of $103 million of unamortized compensation related to stock options and SARs, which cost is expected to be recognized over a weighted-average period of 2.3 years. The following table includes additional information related to stock options and SARs:
                         
    Year Ended December 31,
    2007   2006   2005
            (In thousands)        
Intrinsic value of stock options and SARs exercised
  $ 339,154     $ 166,257     $ 255,663  
Income tax benefit from stock options and SARs exercised
    114,641       56,351       89,337  
Proceeds from stock option exercises
    97,792       89,113       145,761  
     Recognition of compensation cost. The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”) on January 1, 2006 using the modified prospective method. The Company recognizes the fair value of awards granted under the Company’s omnibus plan in the income statement based on the fair value of these awards measured at the date of grant using the Black-Scholes model. For awards granted prior to adoption, the unamortized expense is being recognized on an accelerated basis, since this was the method used for disclosure purposes prior to the adoption of SFAS 123(R). For awards granted after adoption, such expense is being recognized on a straight-line basis over the vesting period of the awards. Forfeitures are estimated at the time of grant, with such estimate updated periodically and with actual forfeitures recognized currently to the extent they differ from the estimate. The following table shows information about compensation cost recognized:
                         
    Year Ended December 31,  
    2007     2006     2005  
            (In thousands)          
Compensation cost:
                       
Stock options and stock appreciation rights
  $ 47,267     $ 71,386     $ 139  
Restricted stock
          3,038       7,184  
 
                 
Total compensation cost
    47,267       74,424       7,323  
Less: Compensation cost capitalized
    (1,589 )     (798 )      
 
                 
Compensation cost recognized as expense
    45,678       73,626       7,323  
Less: Related tax benefit
    (15,734 )     (24,901 )     (1,204 )
 
                 
Compensation expense, net of tax benefit
  $ 29,944     $ 48,725     $ 6,119  
 
                 
     Compensation cost for stock options and SARs was based on the fair value of each award, measured by applying the Black-Scholes model on the date of grant, using the following weighted-average assumptions (assumptions in 2005 were used to compute the pro forma compensation for disclosure purposes only):
                         
    Year Ended December 31,
    2007   2006   2005
Expected volatility
    32 %     33 %     37 %
Expected term
  4.1years   4.1years   4.3years
Expected dividend yield
    0 %     0 %     0 %
Risk-free interest rate
    4.4 %     4.9 %     3.8 %
Forfeiture rate
    4.6 %     4.6 %     0 %
Weighted-average fair value of options granted
  $ 25.93     $ 14.50     $ 12.73  

62


Table of Contents

     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 US Treasury instruments with maturities matching the relevant expected term of the award.
     Pro forma disclosures. Had the Company accounted for these plans during 2005 under the fair value method allowed by SFAS 123, the Company’s net income and earnings per share would have been reduced to recognize the fair value of employee stock options, as follows:
         
Year Ended December 31,   2005  
    (In thousands)  
Net income
       
As reported
  $ 443,256  
Incremental stock-based compensation under SFAS 123, net of tax benefit
    (47,934 )
 
     
Pro forma
  $ 395,322  
 
     
Basic earnings per share
       
As reported
  $ 1.56  
 
     
Pro forma
  $ 1.39  
 
     
Diluted earnings per share
       
As reported
  $ 1.50  
 
     
Pro forma
  $ 1.33  
 
     
NOTE 16 — EMPLOYEE BENEFIT PLANS
     Employees of the Company who are members of various unions are covered by union-sponsored, collectively bargained, multi-employer health and welfare and defined benefit pension plans. The Company recorded an expense of $194 million in 2007, $189 million in 2006 and $161 million in 2005 under such plans. The plans’ sponsors have not provided sufficient information to permit the Company to determine its share of unfunded vested benefits, if any.
     The Company is self-insured for most health care benefits for its non-union employees. The liability for claims filed and estimates of claims incurred but not reported — $25 million and $24 million at December 31, 2007 and 2006, respectively — is included in “Other accrued liabilities” in the accompanying consolidated balance sheets.
     The Company has retirement savings plans under Section 401(k) of the Internal Revenue Code for eligible employees. The plans allow employees to defer, within prescribed limits, up to 30% of their income on a pre-tax basis through contributions to the plans. The Company matches, within prescribed limits, a portion of eligible employees’ contributions. In the case of certain union employees, the Company contributions to the plan are based on hours worked. The Company recorded charges for 401(k) contributions of $27 million in 2007, $27 million in 2006 and $19 million in 2005.
     The Company maintains a nonqualified deferred retirement plan for certain key employees. The plan allows participants to defer, on a pre-tax basis, a portion of their salary and bonus and accumulate tax deferred earnings, plus investment earnings on the deferred balances, as a retirement fund. Participants receive a Company match of up to 4% of salary, net of any Company match received under the Company’s 401(k) plan. All employee deferrals vest immediately. The Company matching contributions vest ratably over a three-year period. The Company recorded charges for matching contributions of $1 million in 2007, and $2 million in 2006 and 2005.
     The Company implemented a supplemental executive retirement plan (“SERP”) for certain key employees effective January 1, 2001. The SERP is a nonqualified plan under which the Company makes quarterly contributions which are intended to provide a retirement benefit that is a fixed percentage of a participant’s estimated final five-year average annual salary, up to a maximum of 65%. Company contributions and investment earnings on the contributions are tax-deferred and accumulate as a retirement fund. Employees do not make contributions under this plan. A portion of the Company contributions and investment earnings thereon vests after three years of SERP participation and the remaining portion vests after both five years of SERP participation and 10 years of continuous service. The Company recorded expense under this plan of $7 million in 2007, $7 million in 2006 and $6 million in 2005.

63


Table of Contents

NOTE 17 — PROPERTY TRANSACTIONS, NET
     Property transactions, net consisted of the following:
                         
    Year Ended December 31,  
    2007     2006     2005  
            (In thousands)          
Write-downs and impairments
  $ 33,624     $ 40,865     $ 28,622  
Demolition costs
    5,665       348       5,362  
Insurance recoveries
    (217,290 )     (86,016 )      
Other net losses on asset sales or disposals
    (8,312 )     3,823       3,037  
 
                 
 
  $ (186,313 )   $ (40,980 )   $ 37,021  
 
                 
     Write-downs and impairments in 2007 included write-offs related to discontinued construction projects and a write-off of the carrying value of the building assets of Nevada Landing which closed in March 2007. The 2007 periods also include demolition costs related to ongoing projects at the Company’s resorts.
     Write-downs and impairments in 2006 included $22 million related to the write-off of the tram connecting Bellagio and Monte Carlo, including the stations at both resorts, in preparation for construction of CityCenter. Other impairments related to assets being replaced in connection with several smaller capital projects, primarily at MGM Grand Las Vegas, Mandalay Bay and The Mirage, as well as the $4 million write-off of Luxor’s investment in the Hairspray show.
     Write-downs and impairments in 2005 related primarily to assets removed from service in connection with new capital projects at several resorts, including Bellagio, TI, The Mirage and Mandalay Bay. The amount of the impairments was based on the net book value of the disposed assets. Demolition costs related primarily to room remodel activity at MGM Grand Las Vegas and the new showroom at The Mirage.
     Insurance recoveries in 2007 and 2006 related to insurance recoveries received related to property damage from Hurricane Katrina in excess of the book value of the damaged assets and post-storm costs incurred.
NOTE 18 — RELATED PARTY TRANSACTIONS
     The Company and CityCenter have entered into agreements whereby the Company will be responsible for oversight and management of the design, planning, development and construction of CityCenter and will manage the operations of CityCenter once complete. The Company will be reimbursed for certain costs in performing the development services and will receive additional consideration of up to $100 million if the project is completed on time and actual development costs, net of residential proceeds, are within specified parameters. Upon completion of construction, the Company will manage CityCenter for a fee.
     During the period from inception of the joint venture to December 31, 2007, the Company incurred $5 million of costs reimbursable by the joint venture, primarily employee compensation and certain allocated costs. As of December 31, 2007, CityCenter owes the Company $9 million for unreimbursed development services costs, which includes liabilities assumed at the close of the transaction. Also as of December 31, 2007, the Company owes CityCenter $22 million related to a post-closing adjustment to the agreed-upon value of CityCenter.
     Borgata leases 10 acres from the Company on a long-term basis for use in its current operations and for its expansion, and nine acres from the Company on a short-term basis for surface parking. Total payments received from Borgata under these lease agreements were $6 million in each of the years ended December 31, 2007 and 2006, and $4 million in the year ended December 31, 2005.
     The Company pays legal fees to a firm affiliated with the Company’s general counsel. Payments to the firm totaled $11 million, $8 million, and $13 million for the years ended December 31, 2007, 2006, and 2005, respectively. At December 31, 2007, the Company owed the firm $3 million.
     The Company has occasionally chartered aircraft from its majority shareholder, Tracinda, and pays Tracinda at market rates. No payments were made to Tracinda in 2007. Payments to Tracinda for the use of its aircraft totaled $2 million for the year ended December 31, 2006. Amounts in 2005 were not material.
     Members of the 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.
     Prior to the Mandalay merger the Company made payments to Monte Carlo for lost business as a result of closing the tram between Bellagio and Monte Carlo in preparation for the Bellagio expansion. These payments totaled $1 million in 2005.

64


Table of Contents

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 financial statement information for the subsidiary guarantors and non-guarantors as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005 is as follows:
                                         
    As of December 31, 2007  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
                    (In thousands)                  
Balance Sheet
                                       
Current assets
  $ 81,379     $ 1,033,407     $ 60,600     $     $ 1,175,386  
Property and equipment, net
          16,044,642       791,034       (11,972 )     16,823,704  
Investments in subsidiaries
    19,169,892       484,047             (19,653,939 )      
Investments in unconsolidated affiliates
          2,224,429       258,298             2,482,727  
Other non-current assets
    244,857       1,890,308       110,704             2,245,869  
 
                             
 
  $ 19,496,128     $ 21,676,833     $ 1,220,636     $ (19,665,911 )   $ 22,727,686  
 
                             
 
                                       
Current liabilities
  $ 459,968     $ 1,217,506     $ 47,213     $     $ 1,724,687  
Intercompany accounts
    125,094       (396,080 )     270,986              
Deferred income taxes
    3,416,660                         3,416,660  
Long-term debt
    9,347,527       1,467,152       360,550             11,175,229  
Other long-term obligations
    86,176       209,554       54,677             350,407  
Stockholders’ equity
    6,060,703       19,178,701       487,210       (19,665,911 )     6,060,703  
 
                             
 
  $ 19,496,128     $ 21,676,833     $ 1,220,636     $ (19,665,911 )   $ 22,727,686  
 
                             
                                         
    For the Year Ended December 31, 2007  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
                    (In thousands)                  
Statement of Income
                                       
Net revenues
  $     $ 7,204,278     $ 487,359     $     $ 7,691,637  
Equity in subsidiaries earnings
    2,982,008       34,814             (3,016,822 )      
Expenses:
                                       
Casino and hotel operations
    14,514       3,850,182       274,451             4,139,147  
General and administrative
    11,455       1,055,644       73,264             1,140,363  
Corporate expense
    35,534       158,359                   193,893  
Preopening and start-up expenses
    731       28,264       63,110             92,105  
Property transactions, net
          (186,313 )                 (186,313 )
Gain on CityCenter transaction
          (1,029,660 )                 (1,029,660 )
Depreciation and amortization
    1,497       667,015       31,822             700,334  
 
                             
 
    63,731       4,543,491       442,647             5,049,869  
 
                             
Income from unconsolidated affiliates
          222,162                   222,162  
 
                             
Operating income
    2,918,277       2,917,763       44,712       (3,016,822 )     2,863,930  
Interest income (expense), net
    (599,178 )     (86,473 )     (5,482 )           (691,133 )
Other, net
    575       (14,890     (54 )           (14,369 )
 
                             
Income from continuing operations before income taxes
    2,319,674       2,816,400       39,176       (3,016,822 )     2,158,428  
Provision for income taxes
    (731,456 )     (22,065 )     (4,362 )           (757,883 )
 
                             
Income from continuing operations
    1,588,218       2,794,335       34,814       (3,016,822 )     1,400,545  
Discontinued operations
    (3,799 )     187,673                   183,874  
 
                             
Net income
  $ 1,584,419     $ 2,982,008     $ 34,814     $ (3,016,822 )   $ 1,584,419  
 
                             
 
                                       
Statement of Cash Flows
                                       
Net cash provided by (used in) operating activities
  $ (1,098,889 )   $ 2,008,888     $ 84,417     $     $ 994,416  
Net cash provided by (used in) investing activities
          621,727       (407,745 )     (4,681 )     209,301  
Net cash provided by (used in) financing activities
    1,108,286       (2,675,119 )     321,615       4,681       (1,240,537 )

65


Table of Contents

                                         
    As of December 31, 2006  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
                    (In thousands)                  
Balance Sheet
                                       
Current assets
  $ 95,361     $ 1,369,711     $ 49,679     $     $ 1,514,751  
Real estate under development
          188,433                   188,433  
Property and equipment, net
          16,797,263       456,569       (11,972 )     17,241,860  
Investments in subsidiaries
    16,563,917       300,560             (16,864,477 )      
Investments in unconsolidated affiliates
          792,106       300,151             1,092,257  
Other non-current assets
    94,188       1,911,362       103,387             2,108,937  
 
                             
 
  $ 16,753,466     $ 21,359,435     $ 909,786     $ (16,876,449 )   $ 22,146,238  
 
                             
 
                                       
Current liabilities
  $ 227,743     $ 1,364,472     $ 55,885     $     $ 1,648,100  
Intercompany accounts
    (1,478,207 )     1,339,654       138,553              
Deferred income taxes
    3,441,157                         3,441,157  
Long-term debt
    10,712,047       2,173,972       108,850             12,994,869  
Other long-term obligations
    1,177       161,458       49,928             212,563  
Stockholders’ equity
    3,849,549       16,319,879       556,570       (16,876,449 )     3,849,549  
 
                             
 
  $ 16,753,466     $ 21,359,435     $ 909,786     $ (16,876,449 )   $ 22,146,238  
 
                             
                                         
    For the Year Ended December 31, 2006  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
                    (In thousands)                  
Statement of Income
                                       
Net revenues
  $     $ 6,714,659     $ 461,297     $     $ 7,175,956  
Equity in subsidiaries earnings
    1,777,144       167,262             (1,944,406 )      
Expenses:
                                       
Casino and hotel operations
    19,251       3,543,026       251,109             3,813,386  
General and administrative
    20,713       993,732       56,497             1,070,942  
Corporate expense
    40,151       121,356                   161,507  
Preopening and start-up expenses
    523       32,526       3,313             36,362  
Restructuring costs
          1,035                   1,035  
Property transactions, net
    10,872       (51,853 )     1             (40,980 )
Depreciation and amortization
    2,398       611,045       16,184             629,627  
 
                             
 
    93,908       5,250,867       327,104             5,671,879  
 
                             
Income from unconsolidated affiliates
          218,063       36,108             254,171  
 
                             
Operating income
    1,683,236       1,849,117       170,301       (1,944,406 )     1,758,248  
Interest income (expense), net
    (708,902 )     (40,407 )     140             (749,169 )
Other, net
    (1,978 )     (29,962 )     787             (31,153 )
 
                             
Income from continuing operations before income taxes
    972,356       1,778,748       171,228       (1,944,406 )     977,926  
Provision for income taxes
    (312,288 )     (25,676 )     (3,966 )           (341,930 )
 
                             
Income from continuing operations
    660,068       1,753,072       167,262       (1,944,406 )     635,996  
Discontinued operations
    (11,804 )     24,072                   12,268  
 
                             
Net income
  $ 648,264     $ 1,777,144     $ 167,262     $ (1,944,406 )   $ 648,264  
 
                             
 
Statement of Cash Flows
                                       
Net cash provided by (used in) operating activities
  $ (896,346 )   $ 1,974,375     $ 153,923     $     $ 1,231,952  
Net cash provided by (used in) investing activities
    5,300       (1,359,878 )     (283,241 )     (4,608 )     (1,642,427 )
Net cash provided by (used in) financing activities
    874,485       (503,801 )     134,732       4,608       510,024  

66


Table of Contents

                                         
    For the Year Ended December 31, 2005  
            Guarantor     Non-Guarantor              
    Parent     Subsidiaries     Subsidiaries     Elimination     Consolidated  
            (In thousands)                  
Statement of Income
                                       
Net revenues
  $     $ 5,687,750     $ 441,093     $     $ 6,128,843  
Equity in subsidiaries earnings
    1,228,651       152,107             (1,380,758 )      
Expenses:
                                       
Casino and hotel operations
          3,082,987       233,883             3,316,870  
General and administrative
          834,166       55,640             889,806  
Corporate expense
    13,797       116,836                   130,633  
Preopening and start-up expenses
          15,249       503             15,752  
Restructuring costs (credit)
          (59 )                 (59 )
Property transactions, net
          36,587       434             37,021  
Depreciation and amortization
    2,390       531,586       26,650             560,626  
 
                             
 
    16,187       4,617,352       317,110             4,950,649  
 
                             
Income from unconsolidated affiliates
          120,330       31,541             151,871  
 
                             
Operating income
    1,212,464       1,342,835       155,524       (1,380,758 )     1,330,065  
Interest income (expense), net
    (517,617 )     (112,506 )     1,402             (628,721 )
Other, net
    (14,293 )     (20,005 )     39             (34,259 )
 
                             
Income before income taxes
    680,554       1,210,324       156,965       (1,380,758 )     667,085  
Provision for income taxes
    (227,374 )           (4,345 )           (231,719 )
 
                             
Income from continuing operations
    453,180       1,210,324       152,620       (1,380,758 )     435,366  
Discontinued operations
    (9,924 )     17,814                   7,890  
 
                             
Net income
  $ 443,256     $ 1,228,138     $ 152,620     $ (1,380,758 )   $ 443,256  
 
                             
 
                                       
Statement of Cash Flows
                                       
Net cash provided by (used in) operating activities
  $ (449,590 )   $ 1,471,372     $ 161,014     $     $ 1,182,796  
Net cash provided by (used in) investing activities
    (4,587,820 )     (618,007 )     (93,687 )     (3,303 )     (5,302,817 )
Net cash provided by (used in) financing activities
    5,043,152       (732,145 )     (251,484 )     3,303       4,062,826  

67


Table of Contents

NOTE 20 — SELECTED QUARTERLY FINANCIAL RESULTS (UNAUDITED)
                                         
    Quarter
    First   Second   Third   Fourth   Total
            (In thousands, except per share amounts)        
2007
                                       
Net revenues
  $ 1,929,435     $ 1,936,416     $ 1,897,070     $ 1,928,716     $ 7,691,637  
Operating income
    445,133       468,973       464,613       1,485,211       2,863,930  
Income from continuing operations
    163,010       182,898       183,863       870,774       1,400,545  
Net income
    168,173       360,172       183,863       872,211       1,584,419  
Basic income per share:
                                       
Income from continuing operations
  $ 0.57     $ 0.64     $ 0.65     $ 2.96     $ 4.88  
Net income
    0.59       1.27       0.65       2.96       5.52  
Diluted income per share
                                       
Income from continuing operations
  $ 0.55     $ 0.62     $ 0.62     $ 2.85     $ 4.70  
Net income
    0.57       1.22       0.62       2.85       5.31  
 
                                       
2006
                                       
Net revenues
  $ 1,774,368     $ 1,760,508     $ 1,795,042     $ 1,846,038     $ 7,175,956  
Operating income
    413,353       417,422       419,397       508,076       1,758,248  
Income from continuing operations
    139,762       143,341       153,765       199,128       635,996  
Net income
    144,037       146,394       156,262       201,571       648,264  
Basic income per share:
                                       
Income from continuing operations
  $ 0.49     $ 0.50     $ 0.55     $ 0.70     $ 2.25  
Net income
    0.51       0.51       0.55       0.71       2.29  
Diluted income per share
                                       
Income from continuing operations
  $ 0.48     $ 0.49     $ 0.53     $ 0.68     $ 2.18  
Net income
    0.49       0.50       0.54       0.69       2.22  
     Because income per share amounts are calculated using the weighted average number of common and dilutive common equivalent shares outstanding during each quarter, the sum of the per share amounts for the four quarters may not equal the total income per share amounts for the year.
     As discussed in Note 5, the Company recorded a $1.03 billion pre-tax gain on the contribution of the CityCenter assets to a joint venture. The gain was recorded in the fourth quarter of 2007, and resulted in a $2.23 impact on fourth quarter 2007 diluted earnings per share and a $2.28 impact on full year 2007 diluted earnings per share.
     As discussed in Note 1, Beau Rivage closed in August 2005 due to damage sustained from Hurricane Katrina and re-opened one year later. During 2007, we recorded pre-tax income from insurance recoveries of $284 million with an annual impact on diluted earnings per share of $0.62. We recorded $135 million in the third quarter of 2007 and $149 million in the fourth quarter of 2007, with corresponding impacts on diluted earnings per share of $0.30 and $0.32, respectively. In the fourth quarter of 2006, we recorded pre-tax income from insurance recoveries of $86 million, with an impact on diluted earnings per share of $0.19 for both the fourth quarter and full year of 2006.
NOTE 21 — SUBSEQUENT EVENTS
     Tender offer. In February 2008, the Company and a wholly-owned subsidiary of Dubai World completed a joint tender offer to purchase 15 million shares of Company common stock at a price of $80 per share. The Company purchased 8.5 million shares at a total purchase price of $680 million.
     Monte Carlo fire. On January 25, 2008, a roof-top fire broke out at the Monte Carlo causing the closing of the resort. The Monte Carlo reopened on February 15, 2008 with approximately 1,200 rooms and has opened, or will soon open, an additional 1,200 rooms. The remaining approximately 600 rooms in Monte Carlo’s normal 3,000 room inventory will remain out of service while undergoing more extensive redesign. The Company maintains property damage and business interruption insurance coverage, with a property damage deductible of $1 million and business interruption deductible equivalent to a 24-hour period of lost profit. The Company is currently evaluating the financial statement impact of the fire.

68


Table of Contents

SIGNATURES
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MGM MIRAGE
             
 
  By:   /s/ J. Terrence Lanni    
 
           
 
      J. Terrence Lanni, Chairman and Chief Executive Officer    
 
      (Principal Executive Officer)    
 
           
 
  By:   /s/ Daniel J. D’Arrigo    
 
           
 
      Daniel J. D’Arrigo, Executive Vice President and Chief Financial Officer    
 
      (Principal Financial Officer)    
 
           
 
  By:   /s/ Robert C. Selwood    
 
           
 
      Robert C. Selwood, Executive Vice President and Chief Accounting Officer    
 
      (Principal Accounting Officer)    
Dated: February 29, 2008
     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
         
Signature   Title   Date
 
       
/s/ J. Terrence Lanni
 
  Chairman and Chief Executive Officer    February 29, 2008
J. Terrence Lanni
  and Chairman of the Board    
 
  (Principal Executive Officer)