UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2008
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission File No. 001-10362
MGM MIRAGE
(Exact name of registrant as specified in its charter)
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Delaware
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88-0215232
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109
(Address of principal
executive offices - Zip Code)
(702) 693-7120
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act):
Yes
o
No
þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date:
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Class
Common Stock, $.01 par value
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Outstanding at May 7, 2008
278,764,374 shares
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MGM MIRAGE AND SUBSIDIARIES
FORM 10-Q
I N D E X
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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March 31,
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December 31,
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2008
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2007
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ASSETS
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Current assets
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Cash and cash equivalents
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$
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327,745
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$
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412,390
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Accounts receivable, net
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390,452
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412,345
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Inventories
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124,190
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126,116
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Deferred income taxes
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56,464
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63,453
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Prepaid expenses and other
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135,269
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105,412
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Assets held for sale
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54,435
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55,670
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Total current assets
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1,088,555
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1,175,386
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Property and equipment, net
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16,845,320
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16,823,704
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Other assets
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Investments in unconsolidated affiliates
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2,487,363
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2,482,727
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Goodwill
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1,262,922
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1,262,922
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Other intangible assets, net
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358,987
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359,770
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Deposits and other assets, net
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852,732
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623,177
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Total other assets
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4,962,004
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4,728,596
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$
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22,895,879
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$
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22,727,686
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities
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Accounts payable
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$
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169,419
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$
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219,556
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Construction payable
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67,546
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76,524
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Income taxes payable
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20,034
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284,075
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Accrued interest on long-term debt
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152,096
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211,228
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Other accrued liabilities
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855,067
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929,424
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Liabilities related to assets held for sale
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3,761
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3,880
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Total current liabilities
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1,267,923
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1,724,687
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Deferred income taxes
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3,406,120
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3,416,660
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Long-term debt
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12,777,215
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11,175,229
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Other long-term obligations
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348,903
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350,407
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Commitments and contingencies (Note 5)
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Stockholders equity
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Common stock, $.01 par value: authorized 600,000,000 shares;
Issued 368,865,942 and 368,395,926 shares; outstanding
278,721,429 and 293,768,899 shares
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3,689
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3,684
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Capital in excess of par value
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3,978,213
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3,951,162
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Treasury stock, at cost (90,144,513 and 74,627,027 shares)
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(3,222,272
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)
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(2,115,107
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)
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Retained earnings
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4,338,754
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4,220,408
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Accumulated other comprehensive income (loss)
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(2,666
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)
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556
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Total stockholders equity
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5,095,718
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6,060,703
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$
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22,895,879
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$
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22,727,686
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The accompanying notes are an integral part of these consolidated financial statements.
1
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended
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March 31,
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2008
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2007
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Revenues
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Casino
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$
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790,464
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$
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811,939
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Rooms
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518,741
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549,004
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Food and beverage
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402,392
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417,449
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Entertainment
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134,838
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134,248
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Retail
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64,037
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68,250
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Other
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147,973
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122,070
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2,058,445
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2,102,960
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Less: Promotional allowances
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(174,812
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)
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(173,525
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)
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1,883,633
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1,929,435
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Expenses
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Casino
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416,563
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411,792
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Rooms
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136,797
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135,185
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Food and beverage
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236,272
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235,704
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Entertainment
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95,664
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97,243
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Retail
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43,164
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43,744
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Other
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92,564
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68,808
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General and administrative
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320,374
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311,674
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Corporate expense
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32,450
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33,955
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Preopening and start-up expenses
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5,164
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14,276
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Restructuring costs
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329
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Property transactions, net
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2,776
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5,019
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Depreciation and amortization
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194,339
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168,277
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1,576,456
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1,525,677
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Income from unconsolidated affiliates
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34,111
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41,375
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Operating income
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341,288
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445,133
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Non-operating income (expense)
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Interest income
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3,466
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2,657
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Interest expense, net
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(149,789
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)
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(184,011
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)
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Non-operating items from unconsolidated affiliates
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(9,891
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)
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(5,106
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)
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Other, net
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230
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|
|
|
(2,728
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)
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|
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|
|
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(155,984
|
)
|
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|
(189,188
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)
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Income from continuing operations before income taxes
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185,304
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255,945
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Provision for income taxes
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(66,958
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)
|
|
|
(92,935
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)
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|
|
|
|
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|
|
|
|
|
|
|
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Income from continuing operations
|
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|
118,346
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|
|
|
163,010
|
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|
|
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|
|
|
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|
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Discontinued operations
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Income from discontinued operations
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|
|
|
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7,846
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Provision for income taxes
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|
|
|
|
|
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(2,683
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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5,163
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|
|
|
|
|
|
|
|
|
|
|
|
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Net income
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$
|
118,346
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$
|
168,173
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|
|
|
|
|
|
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|
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|
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|
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Basic earnings per share of common stock
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Income from continuing operations
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$
|
0.41
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|
|
$
|
0.57
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|
Discontinued operations
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|
|
|
|
|
0.02
|
|
|
|
|
|
|
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Net income per share
|
|
$
|
0.41
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|
|
$
|
0.59
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Diluted earnings per share of common stock
|
|
|
|
|
|
|
|
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Income from continuing operations
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|
$
|
0.40
|
|
|
$
|
0.55
|
|
Discontinued operations
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|
|
|
|
|
|
0.02
|
|
|
|
|
|
|
|
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Net income per share
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|
$
|
0.40
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|
|
$
|
0.57
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|
|
|
|
|
|
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|
The accompanying notes are an integral part of these consolidated financial statements.
2
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended
|
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|
March 31,
|
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2008
|
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|
2007
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
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Net income
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|
$
|
118,346
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|
|
$
|
168,173
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|
Adjustments to reconcile net income to net cash provided
by operating activities:
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|
|
|
|
|
|
|
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Depreciation and amortization
|
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|
194,339
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|
|
|
168,277
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|
Amortization of debt discounts, premiums and issuance costs
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|
631
|
|
|
|
(1,732
|
)
|
Provision for doubtful accounts
|
|
|
14,140
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|
|
|
9,039
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|
Stock-based compensation
|
|
|
11,203
|
|
|
|
13,827
|
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Property transactions, net
|
|
|
2,776
|
|
|
|
5,019
|
|
Income from unconsolidated affiliates
|
|
|
(19,414
|
)
|
|
|
(33,037
|
)
|
Distributions from unconsolidated affiliates
|
|
|
39,134
|
|
|
|
46,978
|
|
Deferred income taxes
|
|
|
(2,934
|
)
|
|
|
(22,716
|
)
|
Change in current assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
15,772
|
|
|
|
(19,658
|
)
|
Inventories
|
|
|
1,973
|
|
|
|
(6,815
|
)
|
Income taxes receivable and payable
|
|
|
(263,090
|
)
|
|
|
62,505
|
|
Prepaid expenses and other
|
|
|
(29,690
|
)
|
|
|
(9,746
|
)
|
Accounts payable and accrued liabilities
|
|
|
(187,635
|
)
|
|
|
(109,976
|
)
|
Increase in real estate under development
|
|
|
|
|
|
|
(56,087
|
)
|
Residential sales deposits, net
|
|
|
|
|
|
|
50,863
|
|
Business interruption insurance recoveries
|
|
|
10,439
|
|
|
|
7,295
|
|
Change in insurance receivable
|
|
|
|
|
|
|
(1,170
|
)
|
Other
|
|
|
(30,312
|
)
|
|
|
(14,779
|
)
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(124,322
|
)
|
|
|
256,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures, net
|
|
|
(249,343
|
)
|
|
|
(580,689
|
)
|
Dispositions of property and equipment
|
|
|
43
|
|
|
|
15,096
|
|
Investments in unconsolidated affiliates
|
|
|
(1,718
|
)
|
|
|
|
|
Advances to CityCenter for development costs
|
|
|
(200,000
|
)
|
|
|
|
|
Property damage insurance recoveries
|
|
|
11,361
|
|
|
|
48,475
|
|
Other
|
|
|
(34,007
|
)
|
|
|
(26,440
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(473,664
|
)
|
|
|
(543,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under bank credit facilities maturities
of 90 days or less
|
|
|
506,550
|
|
|
|
(497,700
|
)
|
Borrowings under bank credit facilities maturities longer than 90 days
|
|
|
3,030,000
|
|
|
|
1,000,000
|
|
Repayments under bank credit facilities maturities longer than 90 days
|
|
|
(1,750,000
|
)
|
|
|
(250,000
|
)
|
Retirement of senior notes
|
|
|
(180,442
|
)
|
|
|
|
|
Issuance of common stock upon exercise of stock options
|
|
|
6,395
|
|
|
|
36,433
|
|
Purchases of common stock
|
|
|
(1,107,166
|
)
|
|
|
(174,586
|
)
|
Excess tax benefits from stock-based compensation
|
|
|
7,072
|
|
|
|
32,651
|
|
Other
|
|
|
(96
|
)
|
|
|
(308
|
)
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
512,313
|
|
|
|
146,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Net decrease for the period
|
|
|
(85,673
|
)
|
|
|
(140,808
|
)
|
Change in cash related to assets held for sale
|
|
|
1,028
|
|
|
|
1,831
|
|
Balance, beginning of period
|
|
|
412,390
|
|
|
|
452,944
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
327,745
|
|
|
$
|
313,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures
|
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized
|
|
$
|
208,290
|
|
|
$
|
228,781
|
|
Federal, state and foreign income taxes paid, net of refunds
|
|
|
324,319
|
|
|
|
20,401
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
Increase (decrease) in construction payable
|
|
|
(8,978
|
)
|
|
|
61,578
|
|
The accompanying notes are an integral part of these consolidated financial statements.
3
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
Organization.
MGM MIRAGE (the Company) is a Delaware corporation, incorporated on
January 29, 1986. As of March 31, 2008, approximately 53% of the outstanding shares of the
Companys 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.
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 over 1,500 units. 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 Bills, Primm Valley, and
Whiskey Petes casino resorts (the Primm Valley Resorts), not including the Primm Valley
Golf Club, with net proceeds to the Company of approximately $398 million. In June 2007, the
Company completed the sale of the Colorado Belle and Edgewater in Laughlin (the Laughlin
Properties), with net proceeds to the Company of approximately $199 million. In February
2007, the Company entered into an agreement to contribute Gold Strike, Nevada Landing (closed
in March 2007) and surrounding land (the Jean Properties) to a joint venture. The joint
ventures purpose is to develop a mixed-use community on the site. See Note 2 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, expected to open in late 2009. 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 in The
Crystals retail complex; 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 $8.5 billion, after net residential proceeds of
$2.7 billion. The gross project budget consists of $9.2 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 Company is managing the development of CityCenter
and, upon completion of construction, will manage the operations of CityCenter for a fee. The
Company owned 100% of CityCenter until November 2007.
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, which
includes the Fallen Oak golf course, and Gold Strike Tunica.
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. 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.
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 4,500 slot machines and 250 table games,
approximately 500,000 square-feet of retail, an extensive convention center, and other typical
resort amenities.
4
Financial statement impact of Hurricane Katrina and Monte Carlo fire.
The Company
maintains insurance for both property damage and business interruption relating to
catastrophic events, such as Hurricane Katrina affecting Beau Rivage in August 2005 and the
rooftop fire at Monte Carlo in January 2008. Business interruption coverage covers lost
profits and other costs incurred during the closure period and up to six months following
re-opening.
Non-refundable insurance recoveries received in excess of the net book value of damaged
assets, clean-up and demolition costs, and post-event costs are recognized as income in the
period received or committed based on the Companys estimate of the total claim for property
damage and business interruption compared to the recoveries received at that time. All
post-event costs and expected recoveries are recorded net within General and administrative
expenses, except for depreciation of non-damaged assets, which is classified as Depreciation
and amortization.
Insurance recoveries are classified in the statement of cash flows based on the coverage
to which they relate. Recoveries related to business interruption are classified as operating
cash flows and recoveries related to property damage are classified as investing cash flows.
However, the Companys insurance policy includes undifferentiated coverage for both property
damage and business interruption. Therefore, the Company classifies insurance recoveries as
being related to property damage until the full amount of damaged assets and demolition costs
are recovered and classifies additional recoveries up to the amount of the post-event costs
incurred as being related to business interruption. Insurance recoveries beyond that amount
are classified as operating or investing cash flows based on the Companys estimated
allocation of the total claim.
Hurricane Katrina.
The Company reached final settlement agreements with its insurance
carriers related to Hurricane Katrina in late 2007 and received insurance recoveries of $635
million, which exceeded the $265 million net book value of damaged assets and post-storm costs
incurred. The Company recognized the $370 million of insurance recoveries in income in 2007
and 2006, of which $303 million was recorded within Property transactions, net and $67
million related to the business interruption portion of the Companys claim was recorded
within General and administrative expenses. None of these amounts were recognized in the
three months ended March 31, 2007. During the three months ended March 31, 2007, insurance
recoveries of $7 million were classified as operating cash flows and insurance recoveries of
$48 million were classified as investing activities.
Monte Carlo fire.
As of March 31, 2008, the Company had received $22 million of proceeds
from its insurance carriers related to the Monte Carlo fire. The Company recorded a
write-down of $4 million related to the net book value of damaged assets and demolition costs
of $7 million, both fully offset by $11 million of recoveries. A recovery of $19 million was
recorded for costs incurred during the closure period, but no recoveries have been recorded
for lost profits. Therefore, as of March 31, 2008, the Company had a receivable of $8 million
from its insurance carriers. During the three months ended March 31, 2008, insurance recoveries
of $10 million were classified as operating cash flows and insurance recoveries of $11 million
were classified as investing cash flows.
Fair
value measurement.
The Company adopted SFAS No. 157, Fair
Value Measurements (SFAS 157), on January 1,
2008. SFAS 157 establishes a framework for measuring the fair value
of financial assets and liabilities and requires certain disclosures
about fair value. The Companys only significant assets and
liabilities affected by the adoption of SFAS 157 are marketable
securities held in connection with the Companys deferred
compensation and supplemental executive retirement plans, and the
plans corresponding liabilities. As of March 31, 2008, the
assets and liabilities related to these plans each totaled
$143 million, measured entirely using Level 1 inputs
under FAS 157, which are observable inputs such as quoted prices in
an active market.
Basis of presentation.
As permitted by the rules and regulations of the Securities and
Exchange Commission, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting principles have
been condensed or omitted. These consolidated financial statements should be read in
conjunction with the Companys 2007 annual consolidated financial statements and notes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2007.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments which include only normal recurring adjustments
necessary to present fairly the Companys financial position as of March 31, 2008 and the
results of its operations and cash flows for the three month periods ended March 31, 2008 and
2007. The results of operations for such periods are not necessarily indicative of the
results to be expected for the full year. Certain reclassifications, which have no effect on
previously reported net income, have been made to the 2007 financial statements to conform to
the 2008 presentation. Substantially all of the prior year reclassifications relate to the
classification of meals provided free to employees as a General and administrative expense,
while in past periods the cost of these meals was charged to each operating department. The
total amount reclassified to General and administrative expenses for the three months ended
March 31, 2007 was $27 million.
5
NOTE 2 ASSETS HELD FOR SALE AND 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. 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 three months ended March 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:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Cash
|
|
$
|
2,706
|
|
|
$
|
3,734
|
|
Accounts receivable, net
|
|
|
605
|
|
|
|
587
|
|
Inventories
|
|
|
777
|
|
|
|
825
|
|
Prepaid expenses and other
|
|
|
785
|
|
|
|
952
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
4,873
|
|
|
|
6,098
|
|
Property and equipment, net
|
|
|
47,209
|
|
|
|
47,194
|
|
Other assets, net
|
|
|
2,353
|
|
|
|
2,378
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
54,435
|
|
|
|
55,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
866
|
|
|
|
938
|
|
Other current liabilities
|
|
|
2,895
|
|
|
|
2,942
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,761
|
|
|
|
3,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets held for sale
|
|
$
|
50,674
|
|
|
$
|
51,790
|
|
|
|
|
|
|
|
|
The results of the Laughlin Properties and Primm Valley Resorts are classified as
discontinued operations in the accompanying consolidated statements of income for the three
months ended March 31, 2007. Due to our continuing investment 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:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
2007
|
|
|
(In thousands)
|
Net revenues of discontinued operations
|
|
$
|
|
|
|
$
|
96,650
|
|
Interest allocated to discontinued operations (based on the ratio of net assets
of discontinued operations to total consolidated net assets and debt)
|
|
|
|
|
|
|
4,424
|
|
NOTE 3 INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Investments in unconsolidated affiliates consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
CityCenter Holdings, LLC CityCenter (50%)
|
|
$
|
1,439,309
|
|
|
$
|
1,421,480
|
|
Marina District Development Company Borgata (50%)
|
|
|
452,199
|
|
|
|
453,277
|
|
Elgin Riverboat ResortRiverboat Casino Grand Victoria (50%)
|
|
|
297,114
|
|
|
|
297,328
|
|
MGM Grand Paradise Limited Macau (50%)
|
|
|
261,347
|
|
|
|
258,298
|
|
Circus and Eldorado Joint Venture Silver Legacy (50%)
|
|
|
28,604
|
|
|
|
35,152
|
|
Turnberry/MGM Grand Towers The Signature at
MGM Grand (50%)
|
|
|
5,651
|
|
|
|
5,651
|
|
Other
|
|
|
3,139
|
|
|
|
11,541
|
|
|
|
|
|
|
|
|
|
|
$
|
2,487,363
|
|
|
$
|
2,482,727
|
|
|
|
|
|
|
|
|
6
As
described in Note 1, the net project budget for CityCenter is
$8.5 billion, and the joint
venture expects to spend approximately $2.0 billion in construction costs during the remainder
of 2008. During the three months ended March 31, 2008,
the Company and Dubai World each made loans of
$200 million to CityCenter to fund near-term construction
costs. Subsequent to March 31, 2008, the Company and Dubai World each funded additional
near-term construction costs and expect to fund additional costs on an as-needed basis. The
joint venture is currently negotiating with its lenders to obtain project financing, and
anticipates that such 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 the Company and Dubai World, which require approval of the joint ventures
Board of Directors.
During the three months ended March 31, 2008, the Company incurred $13 million of costs
reimbursable by CityCenter, primarily employee compensation, residential sales costs, and
certain allocated costs. Such costs are recorded as Other operating expenses, and the
reimbursement of such costs is recorded as Other revenue, in the accompanying consolidated
statements of income.
The Company recorded its share of the results of operations of unconsolidated affiliates
as follows:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Income from unconsolidated affiliates
|
|
$
|
34,111
|
|
|
$
|
41,375
|
|
Preopening and start-up expenses
|
|
|
(4,806
|
)
|
|
|
(3,232
|
)
|
Non-operating items from unconsolidated affiliates
|
|
|
(9,891
|
)
|
|
|
(5,106
|
)
|
|
|
|
|
|
|
|
|
|
$
|
19,414
|
|
|
$
|
33,037
|
|
|
|
|
|
|
|
|
NOTE 4 LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Senior credit facility
|
|
$
|
5,016,100
|
|
|
$
|
3,229,550
|
|
$180.4 million 6.75% senior notes, due 2008, net
|
|
|
|
|
|
|
180,085
|
|
$196.2 million 9.5% senior notes, due 2008, net
|
|
|
198,506
|
|
|
|
200,203
|
|
$226.3 million 6.5% senior notes, due 2009, net
|
|
|
227,201
|
|
|
|
227,356
|
|
$1.05 billion 6% senior notes, due 2009, net
|
|
|
1,052,226
|
|
|
|
1,052,577
|
|
$297.6 million 9.375% senior subordinated notes, due 2010, net
|
|
|
311,126
|
|
|
|
312,807
|
|
$825 million 8.5% senior notes, due 2010, net
|
|
|
823,812
|
|
|
|
823,689
|
|
$400 million 8.375% senior subordinated notes, due 2011
|
|
|
400,000
|
|
|
|
400,000
|
|
$132.4 million 6.375% senior notes, due 2011, net
|
|
|
133,266
|
|
|
|
133,320
|
|
$550 million 6.75% senior notes, due 2012
|
|
|
550,000
|
|
|
|
550,000
|
|
$150 million 7.625% senior subordinated debentures, due 2013, net
|
|
|
154,503
|
|
|
|
154,679
|
|
$500 million 6.75% senior notes, due 2013
|
|
|
500,000
|
|
|
|
500,000
|
|
$525 million 5.875% senior notes, due 2014, net
|
|
|
523,153
|
|
|
|
523,089
|
|
$875 million 6.625% senior notes, due 2015, net
|
|
|
879,064
|
|
|
|
879,173
|
|
$250 million 6.875% senior notes, due 2016,
|
|
|
250,000
|
|
|
|
250,000
|
|
$750 million 7.5% senior notes, due 2016
|
|
|
750,000
|
|
|
|
750,000
|
|
$100 million 7.25% senior debentures, due 2017, net
|
|
|
84,751
|
|
|
|
84,499
|
|
$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
|
|
|
155,818
|
|
|
|
155,835
|
|
$4.3 million 6.7% debentures, due 2096
|
|
|
4,265
|
|
|
|
4,265
|
|
Other notes
|
|
|
4,952
|
|
|
|
5,630
|
|
|
|
|
|
|
|
|
|
|
$
|
12,777,215
|
|
|
$
|
11,175,229
|
|
|
|
|
|
|
|
|
7
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.
Interest expense, net consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Total interest incurred
|
|
$
|
189,067
|
|
|
$
|
233,253
|
|
Interest capitalized
|
|
|
(39,278
|
)
|
|
|
(44,818
|
)
|
Interest allocated to discontinued operations
|
|
|
|
|
|
|
(4,424
|
)
|
|
|
|
|
|
|
|
|
|
$
|
149,789
|
|
|
$
|
184,011
|
|
|
|
|
|
|
|
|
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 March 31, 2008, the Company had
approximately $1.9 billion of available borrowing capacity under the senior credit facility.
In February 2008, the Company repaid the $180.4 million of 6.75% senior notes at maturity
using borrowings under the senior credit facility.
The Companys
long-term debt obligations contain customary covenants requiring the
Company to maintain certain financial ratios. At March 31, 2008, 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. At March 31, 2008, the Companys
leverage and interest coverage ratios were 3.5:1 and 4.1:1, respectively.
NOTE 5
COMMITMENTS AND CONTINGENCIES
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 MPTNs investment in future 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, of which $200
million will be distributed to the Company, for the other 50% of the equity.
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 Companys 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 March 31, 2008, 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 Companys financial position
or results of operations.
8
Sales and use tax on complimentary meals.
In March 2008, the Nevada Supreme Court ruled,
in a case involving another casino company, that food and non-alcoholic beverages purchased
for use in providing complimentary meals to customers and to employees was exempt from sales
and use tax. The Company had previously paid use tax on these items and has generally filed
for refunds for the periods from January 2001 to February 2008 related to this matter. The
amount subject to these refunds, including amounts related to the Mandalay Resort Group
properties prior to the Companys 2005 acquisition of Mandalay Resort Group, is approximately
$33 million.
The Nevada Department of Taxation has filed a petition for rehearing, and there is no set
timetable for the Nevada Supreme Court to respond. As of March 31, 2008, the Company had not
recorded income related to this matter since it is still subject to court action. However,
the Company is claiming the exemption on sales and use tax returns for periods after February
2008 in light of the Nevada Supreme Court decision.
NOTE 6 INCOME PER SHARE OF COMMON STOCK
The weighted-average number of common and common equivalent shares used in the
calculation of basic and diluted earnings per share consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Weighted-average common shares outstanding
(used in the calculation of basic earnings per share)
|
|
|
288,943
|
|
|
|
284,021
|
|
Potential dilution from stock options and restricted stock
|
|
|
9,457
|
|
|
|
11,556
|
|
|
|
|
|
|
|
|
Weighted-average common and common equivalent shares
(used in the calculation of diluted earnings per share)
|
|
|
298,400
|
|
|
|
295,577
|
|
|
|
|
|
|
|
|
Approximately 3.6 million and 0.7 million stock options and stock appreciation rights
were excluded from the calculation of diluted earnings per share in the three months ended
March 31, 2008 and 2007, respectively, since including these stock options and stock
appreciation rights would have been anti-dilutive.
NOTE 7 COMPREHENSIVE INCOME
Comprehensive income consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Net income
|
|
$
|
118,346
|
|
|
$
|
168,173
|
|
Currency translation adjustments
|
|
|
(3,222
|
)
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
$
|
115,124
|
|
|
$
|
168,191
|
|
|
|
|
|
|
|
|
NOTE 8 STOCKHOLDERS EQUITY
Tender Offer
. In February 2008, the Company and a wholly-owned subsidiary of Dubai World
completed a joint tender offer to purchase 15 million shares of Company common stock at a
price of $80 per share. The Company purchased 8.5 million shares at a total purchase price of
$680 million.
Stock repurchases
. In addition to the tender offer, the Company repurchased 7.0 million
and 2.5 million shares of common stock in the three months ended March 31, 2008 and 2007,
respectively, at a total cost of $427 million and $175 million, respectively. At March 31,
2008, the Company had 2.6 million shares available for repurchase under a December 2007
authorization.
9
NOTE 9 STOCK-BASED COMPENSATION
The Company adopted an omnibus incentive plan in 2005 which allows it to grant 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
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 be at least equal to the fair market value of the stock on the date of grant and the maximum
term of such an award is ten years.
|
To date, the Committee has only awarded stock options and SARs under the omnibus plan.
The Companys practice has been to issue new shares upon the exercise of stock options and
SARs. Under the Companys 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 vest in either four or five equal annual installments.
As of March 31, 2008, the aggregate number of share-based awards available for grant
under the omnibus plan was 2.1 million. A summary of activity under the Companys share-based
payment plans for the three months ended March 31, 2008 is presented below:
Stock options and stock appreciation rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
|
Exercise
|
|
|
|
(000s)
|
|
|
Price
|
|
Outstanding at January 1, 2008
|
|
|
26,674
|
|
|
$
|
31.90
|
|
Granted
|
|
|
1,102
|
|
|
|
65.48
|
|
Exercised
|
|
|
(464
|
)
|
|
|
13.62
|
|
Forfeited or expired
|
|
|
(46
|
)
|
|
|
52.89
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008
|
|
|
27,266
|
|
|
|
33.51
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2008
|
|
|
13,933
|
|
|
|
20.93
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008, there was a total of $114 million of unamortized compensation
related to stock options and stock appreciation rights expected to vest, which is expected to
be recognized over a weighted-average period of 2.4 years. The following table includes
additional information related to stock options and SARs:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
2007
|
|
|
(In thousands)
|
Intrinsic value of stock options and SARs exercised
|
|
$
|
22,871
|
|
|
$
|
111,421
|
|
Income tax benefit from stock options and SARs exercised
|
|
|
7,967
|
|
|
|
37,788
|
|
Proceeds from stock option exercises
|
|
|
6,395
|
|
|
|
36,433
|
|
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 Companys 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.
10
The following table shows information about compensation cost recognized:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Compensation cost
|
|
$
|
11,242
|
|
|
$
|
14,133
|
|
Less: Compensation cost capitalized
|
|
|
(39
|
)
|
|
|
(306
|
)
|
|
|
|
|
|
|
|
Compensation cost recognized as expense
|
|
|
11,203
|
|
|
|
13,827
|
|
Less: Related tax benefit
|
|
|
(3,847
|
)
|
|
|
(4,797
|
)
|
|
|
|
|
|
|
|
Compensation expense, net of tax benefit
|
|
$
|
7,356
|
|
|
$
|
9,030
|
|
|
|
|
|
|
|
|
Compensation cost for stock options and stock appreciation rights 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:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
2007
|
|
Expected volatility
|
|
|
37
|
%
|
|
|
30
|
%
|
Expected term
|
|
4.5 years
|
|
4.1 years
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-free interest rate
|
|
|
2.5
|
%
|
|
|
4.5
|
%
|
Forfeiture rate
|
|
|
3.4
|
%
|
|
|
4.6
|
%
|
Weighted-average fair value of options granted
|
|
$
|
22.79
|
|
|
$
|
20.15
|
|
NOTE 10 PROPERTY TRANSACTIONS, NET
Net property transactions consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Write-downs and impairments
|
|
$
|
2,643
|
|
|
$
|
5,097
|
|
Demolition costs
|
|
|
84
|
|
|
|
|
|
Net (gains) losses on sale or disposal of fixed assets
|
|
|
49
|
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
$
|
2,776
|
|
|
$
|
5,019
|
|
|
|
|
|
|
|
|
Write-downs and impairments in 2008 primarily related to a damaged marquee sign at
Bellagio and assets written off in conjunction with retail store changes at Mandalay Bay.
Write-downs and impairments in 2007 primarily related to the write-off of the carrying
value of the building assets of Nevada Landing which closed in March 2007.
11
NOTE 11 CONSOLIDATING CONDENSED FINANCIAL INFORMATION
The Companys 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, the senior notes and the senior subordinated notes. Separate
condensed financial statement information for the subsidiary guarantors and non-guarantors as
of March 31, 2008 and December 31, 2007 and for the three month periods ended March 31, 2008
and 2007 is as follows:
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
113,292
|
|
|
$
|
911,310
|
|
|
$
|
63,953
|
|
|
$
|
|
|
|
$
|
1,088,555
|
|
Property and equipment, net
|
|
|
|
|
|
|
16,076,177
|
|
|
|
781,115
|
|
|
|
(11,972
|
)
|
|
|
16,845,320
|
|
Investments in subsidiaries
|
|
|
19,506,253
|
|
|
|
490,825
|
|
|
|
|
|
|
|
(19,997,078
|
)
|
|
|
|
|
Investments in unconsolidated affiliates
|
|
|
|
|
|
|
2,226,014
|
|
|
|
261,349
|
|
|
|
|
|
|
|
2,487,363
|
|
Other non-current assets
|
|
|
242,692
|
|
|
|
2,120,675
|
|
|
|
111,274
|
|
|
|
|
|
|
|
2,474,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,862,237
|
|
|
$
|
21,825,001
|
|
|
$
|
1,217,691
|
|
|
$
|
(20,009,050
|
)
|
|
$
|
22,895,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
153,235
|
|
|
$
|
1,081,043
|
|
|
$
|
33,645
|
|
|
$
|
|
|
|
$
|
1,267,923
|
|
Intercompany accounts
|
|
|
(29,384
|
)
|
|
|
(261,518
|
)
|
|
|
290,902
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
3,406,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,406,120
|
|
Long-term debt
|
|
|
11,148,255
|
|
|
|
1,282,860
|
|
|
|
346,100
|
|
|
|
|
|
|
|
12,777,215
|
|
Other non-current liabilities
|
|
|
88,293
|
|
|
|
206,931
|
|
|
|
53,679
|
|
|
|
|
|
|
|
348,903
|
|
Stockholders equity
|
|
|
5,095,718
|
|
|
|
19,515,685
|
|
|
|
493,365
|
|
|
|
(20,009,050
|
)
|
|
|
5,095,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,862,237
|
|
|
$
|
21,825,001
|
|
|
$
|
1,217,691
|
|
|
$
|
(20,009,050
|
)
|
|
$
|
22,895,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2008
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Net revenues
|
|
$
|
|
|
|
$
|
1,733,987
|
|
|
$
|
149,646
|
|
|
$
|
|
|
|
$
|
1,883,633
|
|
Equity in subsidiaries earnings
|
|
|
306,733
|
|
|
|
18,920
|
|
|
|
|
|
|
|
(325,653
|
)
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations
|
|
|
3,762
|
|
|
|
932,979
|
|
|
|
84,283
|
|
|
|
|
|
|
|
1,021,024
|
|
General and administrative
|
|
|
2,725
|
|
|
|
289,396
|
|
|
|
28,253
|
|
|
|
|
|
|
|
320,374
|
|
Corporate expense
|
|
|
4,431
|
|
|
|
27,629
|
|
|
|
390
|
|
|
|
|
|
|
|
32,450
|
|
Preopening and start-up expenses
|
|
|
|
|
|
|
4,970
|
|
|
|
194
|
|
|
|
|
|
|
|
5,164
|
|
Restructuring costs
|
|
|
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
329
|
|
Property transactions, net
|
|
|
(280
|
)
|
|
|
3,048
|
|
|
|
8
|
|
|
|
|
|
|
|
2,776
|
|
Depreciation and amortization
|
|
|
449
|
|
|
|
179,539
|
|
|
|
14,351
|
|
|
|
|
|
|
|
194,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,087
|
|
|
|
1,437,890
|
|
|
|
127,479
|
|
|
|
|
|
|
|
1,576,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates
|
|
|
|
|
|
|
24,218
|
|
|
|
9,893
|
|
|
|
|
|
|
|
34,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
295,646
|
|
|
|
339,235
|
|
|
|
32,060
|
|
|
|
(325,653
|
)
|
|
|
341,288
|
|
Interest income (expense), net
|
|
|
(119,861
|
)
|
|
|
(22,268
|
)
|
|
|
(4,194
|
)
|
|
|
|
|
|
|
(146,323
|
)
|
Other, net
|
|
|
3,815
|
|
|
|
(5,853
|
)
|
|
|
(7,623
|
)
|
|
|
|
|
|
|
(9,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
179,600
|
|
|
|
311,114
|
|
|
|
20,243
|
|
|
|
(325,653
|
)
|
|
|
185,304
|
|
Provision for income taxes
|
|
|
(61,254
|
)
|
|
|
(4,381
|
)
|
|
|
(1,323
|
)
|
|
|
|
|
|
|
(66,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
118,346
|
|
|
$
|
306,733
|
|
|
$
|
18,920
|
|
|
$
|
(325,653
|
)
|
|
$
|
118,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Net revenues
|
|
$
|
|
|
|
$
|
1,813,301
|
|
|
$
|
116,134
|
|
|
$
|
|
|
|
$
|
1,929,435
|
|
Equity in subsidiaries earnings
|
|
|
417,841
|
|
|
|
36,977
|
|
|
|
|
|
|
|
(454,818
|
)
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations
|
|
|
3,750
|
|
|
|
925,027
|
|
|
|
63,699
|
|
|
|
|
|
|
|
992,476
|
|
General and administrative
|
|
|
4,046
|
|
|
|
292,399
|
|
|
|
15,229
|
|
|
|
|
|
|
|
311,674
|
|
Corporate expense
|
|
|
5,734
|
|
|
|
28,221
|
|
|
|
|
|
|
|
|
|
|
|
33,955
|
|
Preopening and start-up expenses
|
|
|
192
|
|
|
|
11,705
|
|
|
|
2,379
|
|
|
|
|
|
|
|
14,276
|
|
Property transactions, net
|
|
|
472
|
|
|
|
4,546
|
|
|
|
1
|
|
|
|
|
|
|
|
5,019
|
|
Depreciation and amortization
|
|
|
449
|
|
|
|
161,866
|
|
|
|
5,962
|
|
|
|
|
|
|
|
168,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,643
|
|
|
|
1,423,764
|
|
|
|
87,270
|
|
|
|
|
|
|
|
1,525,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates
|
|
|
|
|
|
|
32,289
|
|
|
|
9,086
|
|
|
|
|
|
|
|
41,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
403,198
|
|
|
|
458,803
|
|
|
|
37,950
|
|
|
|
(454,818
|
)
|
|
|
445,133
|
|
Interest income (expense), net
|
|
|
(157,363
|
)
|
|
|
(23,874
|
)
|
|
|
(117
|
)
|
|
|
|
|
|
|
(181,354
|
)
|
Other, net
|
|
|
13,974
|
|
|
|
(22,006
|
)
|
|
|
198
|
|
|
|
|
|
|
|
(7,834
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before income taxes
|
|
|
259,809
|
|
|
|
412,923
|
|
|
|
38,031
|
|
|
|
(454,818
|
)
|
|
|
255,945
|
|
Provision for income taxes
|
|
|
(88,760
|
)
|
|
|
(3,121
|
)
|
|
|
(1,054
|
)
|
|
|
|
|
|
|
(92,935
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
171,049
|
|
|
|
409,802
|
|
|
|
36,977
|
|
|
|
(454,818
|
)
|
|
|
163,010
|
|
Discontinued operations
|
|
|
(2,876
|
)
|
|
|
8,039
|
|
|
|
|
|
|
|
|
|
|
|
5,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
168,173
|
|
|
$
|
417,841
|
|
|
$
|
36,977
|
|
|
$
|
(454,818
|
)
|
|
$
|
168,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
|
|
|
|
For the Three Months Ended March 31, 2008
|
|
|
|
|
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Elimination
|
|
Consolidated
|
|
|
(In thousands)
|
Net cash provided by (used in) operating activities
|
|
$
|
(499,102
|
)
|
|
$
|
370,585
|
|
|
$
|
4,195
|
|
|
$
|
|
|
|
$
|
(124,322
|
)
|
Net cash used in investing activities
|
|
|
|
|
|
|
(466,858
|
)
|
|
|
(5,410
|
)
|
|
|
(1,396
|
)
|
|
|
(473,664
|
)
|
Net cash provided by (used in) financing activities
|
|
|
537,823
|
|
|
|
(28,423
|
)
|
|
|
1,517
|
|
|
|
1,396
|
|
|
|
512,313
|
|
|
|
|
For the Three Months Ended March 31, 2007
|
|
|
|
|
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Elimination
|
|
Consolidated
|
|
|
(In thousands)
|
Net cash provided by (used in) operating activities
|
|
$
|
(249,798
|
)
|
|
$
|
466,185
|
|
|
$
|
39,873
|
|
|
$
|
|
|
|
$
|
256,260
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(468,663
|
)
|
|
|
(73,636
|
)
|
|
|
(1,259
|
)
|
|
|
(543,558
|
)
|
Net cash provided by (used in) financing activities
|
|
|
270,418
|
|
|
|
(147,990
|
)
|
|
|
22,803
|
|
|
|
1,259
|
|
|
|
146,490
|
|
13
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Overview
At March 31, 2008, our primary 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, 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).
|
MGM Grand Las Vegas includes The Signature at MGM Grand, a condominium hotel consisting
of over 1,500 units in three towers which we manage as a hotel. 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 addition, we
own 50% of CityCenter Holdings, LLC which is 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. The
other 50% of CityCenter is owned by Infinity World Development Corp., a wholly-owned
subsidiary of Dubai World. We will continue to serve as developer of CityCenter and, upon
completion of construction, we will manage CityCenter for a fee. We owned 100% of CityCenter
until November 2007.
In April 2007, we sold the Primm Valley Resorts (Whiskey Petes, Buffalo Bills and Primm
Valley Resort in Primm, Nevada), not including the two golf courses. In June 2007, we sold the
Laughlin Properties (Colorado Belle and Edgewater). 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.
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 that 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
high-end gaming customers, which can cause variability in our results. Key performance
indicators related to revenue are:
|
|
Casino 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;
|
|
|
|
Rooms 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.
|
14
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 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 competition
from other recently opened 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.
Financial Results
The following discussion is based on our consolidated financial statements for the three
months ended March 31, 2008 and 2007. On a consolidated basis, the most important factors and
trends contributing to our operating performance for the periods were:
|
|
The weakness in the United States economy, particularly the impacts on leisure
travelers of: 1) the weak housing market; 2) credit concerns and related effect on
housing sales and prices; 3) increase in travel costs due to higher gas prices; 4)
overall weakness in the employment market; and 5) stock market
volatility. Additionally, the convention and conference group market
segment was impacted by cancellations and reduced attendance, leading
to a 13% decrease in group room nights. These factors
contributed to a decline in Las Vegas Strip REVPAR for the quarter, the first such
decline since 2003. Other resort-based revenues were similarly
impacted. Regional markets, such as Detroit and Mississippi, are being impacted by the current
economic situation to a greater extent than the Las Vegas Market. See Operating Results
Detailed Revenue Information.
|
|
|
|
The closure of Monte Carlo from January 25, 2008 through February 14, 2008 due to a
rooftop fire; additionally, a significant portion of Monte Carlos rooms and suites
remained out of service through March 31, 2008. While we maintain insurance coverage for
both property damage and business interruption, we do not record recovery of lost profits
until all contingencies with the insurance claim have been resolved. Monte Carlo earned
operating income of $8 million for the first quarter of 2008 compared to $28 million for
the first quarter of 2007.
|
|
|
|
Our share of profits from MGM Grand Macau, which opened in December 2007.
|
Our net revenue decreased 2% in the first quarter from the prior year period, due to the
factors described above. Decreases in room prices and occupancy more than offset increased
revenues from new restaurants and other amenities at several of our resorts, as well as
increased revenues from the new casino and hotel at MGM Grand Detroit.
Operating income decreased 23% for the quarter to $341 million as a result of the
following factors: 1) an overall decrease in revenue, a significant
element of which was the result of lower ADR; 2) while we were able to address staffing levels for volume decreases,
those reductions were offset by increased wage rates and benefits;
and 3) the increased costs of operating the larger MGM Grand Detroit. Our
operating margin decreased from 23% to 18%. As discussed further below in Operating Results
Details of Certain Charges, during the first quarter of 2008 we had lower preopening and
start-up expenses in the quarter. We have been reviewing our operating costs for several
quarters, and most recently in April 2008 reduced our salaried management positions by over
400. We are working on several other initiatives to increase the efficiency of our
operations and at MGM Grand Detroit, we continue to adjust costs following the opening, a
normal process in the initial stages of a new operation.
15
Operating Results Detailed Revenue Information
The following table presents details of our net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
2008
|
|
|
Change
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Casino revenue, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games
|
|
$
|
308,348
|
|
|
|
(5
|
%)
|
|
$
|
324,928
|
|
Slots
|
|
|
453,665
|
|
|
|
(1
|
%)
|
|
|
457,433
|
|
Other
|
|
|
28,451
|
|
|
|
(4
|
%)
|
|
|
29,578
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino revenue, net
|
|
|
790,464
|
|
|
|
(3
|
%)
|
|
|
811,939
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
|
518,741
|
|
|
|
(6
|
%)
|
|
|
549,004
|
|
Food and beverage
|
|
|
402,392
|
|
|
|
(4
|
%)
|
|
|
417,449
|
|
Entertainment, retail and other
|
|
|
346,848
|
|
|
|
7
|
%
|
|
|
324,568
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue
|
|
|
1,267,981
|
|
|
|
(2
|
%)
|
|
|
1,291,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,058,445
|
|
|
|
(2
|
%)
|
|
|
2,102,960
|
|
Less: Promotional allowances
|
|
|
(174,812
|
)
|
|
|
1
|
%
|
|
|
(173,525
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,883,633
|
|
|
|
(2
|
%)
|
|
$
|
1,929,435
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games revenue decreased primarily due to a 4% decrease in table games volume,
including baccarat, at our Las Vegas Strip resorts. Table games hold percentages were above
the mid-point of the Companys normal range in both periods, and slightly higher in 2008.
Slots revenue benefitted from a 9% increase at MGM Grand Detroit, though these results are
below our long-term expectations for the resort, given the significant increase in capacity
with the permanent casino. Slots revenue decreased 2% on the Las Vegas Strip, though flat
excluding Monte Carlo, with increases at Bellagio, The Mirage, and Mandalay Bay offset by
decreases at other resorts. Slots revenue decreased 5% at our Mississippi resorts; our
mid-market resorts and resorts in regional markets were more severely impacted by the current
economy.
Room revenues decreased 6% overall, with a 4% decrease in Las Vegas Strip REVPAR. We had
44,000 fewer rooms available company-wide, 60,000 on the Las Vegas Strip, with the closure of
Monte Carlo and current year room remodel activity offset partially by the new MGM Grand
Detroit hotel and rooms back in service after 2007 room remodels. The following table shows
key hotel statistics for our Las Vegas Strip resorts:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
2007
|
|
Occupancy %
|
|
|
93
|
%
|
|
|
96
|
%
|
Average Daily Rate (ADR)
|
|
$
|
165
|
|
|
$
|
169
|
|
Revenue per Available Room (REVPAR)
|
|
|
155
|
|
|
|
162
|
|
While food and beverage revenue decreased as well down 4% entertainment revenue was
flat, as our Cirque du Soleil production shows performed well and offset an events calendar
with fewer concerts and sporting events in the 2008 quarter. Other revenue increased $26
million, or 21%, in the first quarter of 2008. This was due primarily to increased revenue at
The Signature of MGM Grand Tower 3 was not open in the 2007 quarter and revenue related to
reimbursement by CityCenter of costs we incur in managing the projects development. For both
of these items, the corresponding expenses are reflected in Other operating expenses, which
also increased significantly in the quarter.
Operating Results Details of Certain Charges
Preopening and start-up expenses were $5 million in the 2008 quarter versus $14 million
in 2007. The current year amount consists largely of our portion of CityCenters preopening
expenses.
Property transactions, net consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Write-downs and impairments
|
|
$
|
2,643
|
|
|
$
|
5,097
|
|
Demolition costs
|
|
|
84
|
|
|
|
|
|
Net (gains) losses on sale or disposal of fixed assets
|
|
|
49
|
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
$
|
2,776
|
|
|
$
|
5,019
|
|
|
|
|
|
|
|
|
16
Write-downs and impairments in 2008 primarily related to a damaged marquee sign at
Bellagio and assets written off in conjunction with retail store changes at Mandalay Bay.
Write-downs and impairments in 2007 primarily related to the write-off of the carrying
value of the Nevada Landing building assets due to its closure in March 2007.
Operating Results Income from Unconsolidated Affiliates
Income from unconsolidated affiliates decreased by $7 million in the quarter, as our
share of income from MGM Grand Macau (which opened in December 2007) $10 million was
offset by several items: 1) Lower income at Borgata and Silver Legacy; 2) prior year profits
from the unit sales at The Signature at MGM Grand of $8 million; and 3) our share of
CityCenters preopening expenses in the current year while the project was wholly-owned in
2007.
Non-operating Results
Net interest expense decreased to $150 million in the 2008 first quarter from $184
million in the 2007 period. Gross interest was lower due to a combination of lower market
interest rates and the decrease in average debt balances outstanding as a result of the net
proceeds of approximately $3.7 billion from the CityCenter transaction and Dubai World stock
sale in November 2007, offset by recent share repurchase activity. Capitalized interest
decreased, as we are no longer capitalizing interest on our investment in MGM Grand Macau or
the Detroit permanent casino, and capitalization of interest on our CityCenter investment was
lower than our former capitalization of interest on CityCenter construction costs when the
project was wholly-owned. These items were offset partially by new capitalized interest on MGM
Grand Atlantic City construction and related land costs.
Liquidity and Capital Resources
Cash Flows Operating Activities
Cash used in operations was $124 million for the three months ended March 31, 2008,
compared to cash provided by operations of $256 million in the prior year period. The
decrease was primarily due to the decrease in operating income and significant income tax
payment made in the first quarter of 2008 related to the contribution of CityCenter to a joint
venture. At March 31, 2008, we held cash and cash equivalents of $328 million.
Cash Flows Investing Activities
Capital expenditures of $249 million in 2008 consisted of room remodel costs, primarily
at The Mirage, TI, and Excalibur; trailing payments on the construction of MGM Grand Detroit;
payments for corporate aircraft; payments for the showroom at Luxor that will feature a new
show by Cirque du Soleil and Criss Angel; and other routine capital expenditures. Capital
expenditures in 2007 included significant spending on the CityCenter and MGM Grand Detroit
development projects as well as room remodel costs, payments for corporate aircraft, and other
routine capital expenditures. We also funded $200 million of CityCenters construction costs
during the first quarter of 2008 see Other Factors Affecting Liquidity.
Cash Flows Financing Activities
In the three months ended March 31, 2008, we borrowed net debt of $1.6 billion. In
February 2008, we completed, along with a wholly-owned subsidiary of Dubai World, 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.
In addition, we repurchased 7 million shares of our common stock on the open market at a cost
of $427 million during the three months ended March 31, 2008, leaving 2.6 million shares
available under our current share repurchase authorization. We also repaid $180 million of
6.75% senior notes at maturity in February 2008. At March 31, 2008 our senior credit facility
had an outstanding balance of $5.0 billion, with available liquidity of $1.9 billion.
17
Other Factors Affecting Liquidity
Long-term Debt Payable in 2008
. We have a total of $196 million in senior notes that we
expect to repay at maturity in 2008. In addition, holders of our $150 million of 7%
debentures due 2036 will have the option to require us to repurchase such debt late in 2008.
CityCenter
. The estimated net project budget for CityCenter is $8.5 billion, after net
residential proceeds of $2.7 billion. The gross project budget consists of $9.2 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 joint venture expects to spend approximately $2.0 billion in construction costs
during the remainder of 2008. During the three months ended
March 31, 2008, we and Dubai World each made loans of $200 million to CityCenter to fund near-term
construction costs. Subsequent to March 31, 2008, we and Dubai World each funded additional
near-term construction costs and expect to fund additional costs on an as-needed basis. The
joint venture is currently negotiating with its lenders to obtain project financing, and
anticipates that such 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 us and Dubai World, which require approval of the joint ventures Board of
Directors.
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 4,500 slot machines and 250 table games,
approximately 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, a
new casino resort owned and operated by MPTN and adjacent to the existing Foxwoods casino resort will carry the MGM Grand
brand name. The resort is scheduled to open in May 2008, and we are receiving a branding fee
in connection with this agreement. We have also formed a jointly owned company with MPTN
Unity Gaming, LLC to acquire or develop future gaming and non-gaming enterprises. We will
provide a loan of up to $200 million to finance a portion of MPTNs investment in future 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 Jean Properties 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 transfer of the Jean
Properties and surrounding land to the venture, which is subject to the venture obtaining
necessary regulatory and other approvals, and $20 million no later than August 2008. Nevada
Landing closed in March 2007.
Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices,
such as interest rates and foreign currency exchange rates. Our primary exposure to market
risk is interest rate risk associated with our variable rate 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 March 31, 2008, long-term fixed rate borrowings represented approximately 61% of
our total borrowings. Assuming a 100 basis-point change in LIBOR at March 31, 2008, our
annual interest cost would change by approximately $50 million.
18
Forward-looking Statements
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
This Form 10-Q contains 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-K, Annual Reports to
Stockholders, Forms 8-K, press releases and other materials we release to the public. Any or
all of our forward-looking statements in this Form 10-Q 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-Q
for example, government regulation and the competitive environment will be important in
determining our future results. Consequently, no forward-looking statement can be guaranteed.
Our actual future results may differ materially.
We undertake no obligation to publicly update any forward-looking statements, whether as
a result of new information, future events or otherwise. You are advised, however, to consult
any further disclosures we make on related subjects in our Forms 10-K, 10-Q and 8-K reports to
the Securities and Exchange Commission. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We incorporate by reference the information appearing under Market Risk in Part I, Item
2 of this Form 10-Q.
Item 4. 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 March 31, 2008. 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.
During the quarter ended March 31, 2008, there were no changes in our internal control
over financial reporting that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
19
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
For a complete description of the facts and circumstances surrounding material litigation
we are a party to, see our Annual Report on Form 10-K for the year ended December 31, 2007.
There have been no significant developments in any of the cases disclosed in our Form 10-K in
the three months ended March 31, 2008.
Item 1A. Risk Factors
A complete description of certain factors that may affect our future results and risk
factors is set forth in our Annual Report on Form 10-K for the year ended December 31, 2007.
There have been no material changes to those factors in the three months ended March 31, 2008.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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 March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
Maximum
|
|
|
Total
|
|
Average
|
|
As Part of a
|
|
Shares Still
|
|
|
Shares
|
|
Price Per
|
|
Publicly-Announced
|
|
Available for
|
|
|
Purchased
|
|
Share
|
|
Program
|
|
Repurchase
|
January 1 January 31, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
18,150,000
|
(1)
|
February 1 February 28, 2008
|
|
|
8,500,000
|
|
|
|
80.00
|
|
|
|
8,500,000
|
|
|
|
9,650,000
|
(1)
|
March 1 March 31, 2008
|
|
|
7,017,486
|
|
|
|
60.85
|
|
|
|
7,017,486
|
|
|
|
2,632,514
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,517,486
|
|
|
|
|
|
|
|
15,517,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The December 2007 repurchase program was announced in December 2007
for up to 20 million shares with no expiration.
|
Item 6. Exhibits
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.
|
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
|
|
MGM MIRAGE
|
|
Date: May 9, 2008
|
By:
|
/s/ J. TERRENCE LANNI
|
|
|
|
J. Terrence Lanni
|
|
|
|
Chairman and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
Date: May 9, 2008
|
|
/s/ DANIEL J. DARRIGO
|
|
|
|
Daniel J. DArrigo
|
|
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
21
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