MGM

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2009 for MGM MIRAGE (now MGM Resorts International). The company operates a portfolio of casino resorts, primarily concentrated on the Las Vegas Strip, with additional properties in Nevada, Mississippi, Michigan, Atlantic City, and Macau. The reporting period was heavily influenced by the global financial crisis, resulting in reduced consumer spending, lower visitor volumes, and significant liquidity challenges.

Key Financial Metrics

Note: The 2009 cash balance includes a $1.6 billion drawdown on the senior credit facility on December 30, 2009, which was repaid on January 4, 2010.

Material Changes vs. Prior Period

• Revenue Decline: Net revenues decreased 17% to $5.98 billion, driven by a 28% drop in room revenue and a 12% decline in casino revenue due to lower occupancy and average daily rates (ADR) on the Las Vegas Strip.
• Impairment Charges: The company recorded significant non-cash impairment charges totaling approximately $1.7 billion in 2009, including:
  • $956 million related to the CityCenter investment.
  • $548 million related to Renaissance Pointe land holdings in Atlantic City.
  • $203 million share of CityCenter residential real estate impairment.
  • $176 million related to the M Resort convertible note.
• Asset Disposition: The company sold the Treasure Island (TI) resort in March 2009, recognizing a pre-tax gain of $187 million.
• Capital Structure: The company issued approximately 164.5 million shares of common stock in May 2009 for net proceeds of $1.1 billion to improve liquidity and reduce debt.

Guidance, Outlook, and Risks

Liquidity and Debt: The company faces significant financial obligations in 2010, including $1.1 billion in debt maturities and $1.0 billion in estimated interest payments. On February 25, 2010, MGM MIRAGE entered into an amendment to its senior credit facility to extend maturities and restructure terms, requiring a 20% reduction in credit exposure for extending lenders.

CityCenter Completion Guarantee: The company provided an unlimited completion and cost overrun guarantee for CityCenter, secured by Circus Circus Las Vegas assets. As of December 31, 2009, a liability of $150 million was recorded, with a potential exposure of up to $300 million.

Regulatory Contingency (Borgata): The New Jersey Division of Gaming Enforcement (DGE) recommended that the company disengage from its Macau joint venture partner. The company is in settlement discussions to place its 50% interest in Borgata into a divestiture trust. Failure to settle could result in the loss of the Borgata license.

Outlook: Management expects continued pressure from economic conditions, including high unemployment and a weak housing market, to affect visitor volumes and spending in 2010. The company is focusing on cost management and expects to receive approximately $385 million in tax refunds during 2010.

Investor Verification Checklist

• Debt Refinancing: Verify the company's ability to refinance $1.1 billion of debt maturing in 2010 and comply with the new credit facility covenants.
• Borgata Settlement: Monitor the status of the settlement with the New Jersey DGE regarding the Borgata joint venture and the potential divestiture of the 50% interest.
• CityCenter Funding: Track the funding requirements under the CityCenter completion guarantee and the timing of residential unit sales proceeds.
• Operational Recovery: Assess the recovery of Las Vegas Strip occupancy rates and ADRs against 2009 lows to gauge the return to profitability.
• Impairment Risks: Evaluate the potential for further impairments on CityCenter residential inventory upon completion in early 2010.