MGM MIRAGE - 10-Q Quarterly Report

UNITED STATES

SECURITIES & EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-16760

MGM MIRAGE

(Exact name of registrant as specified in its charter)


Delaware		88-0215232

(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109

(Address of principal executive offices — Zip Code)

(702) 693-7120

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act): x Yes o No

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


Class		Outstanding at August 5, 2004
Common Stock, $.01 par value		138,724,313 shares

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

MGM MIRAGE AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)
(Unaudited)


	June 30,			December 31,
	2004			2003
ASSETS
Current assets
Cash and cash equivalents	$	185,793		$	178,047
Accounts receivable, net		166,166			139,475
Inventories		64,110			65,189
Income tax receivable		—			9,901
Deferred income taxes		48,458			49,286
Prepaid expenses and other		77,189			89,641
Assets held for sale		81,907			226,082

Total current assets		623,623			757,621

Property and equipment, net		8,790,673			8,681,339
Other assets
Investments in unconsolidated affiliates		791,812			756,012
Goodwill and other intangible assets, net		232,353			267,668
Deposits and other assets, net		265,747			247,070

Total other assets		1,289,912			1,270,750

	$	10,704,208		$	10,709,710

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	127,650		$	85,439
Income taxes payable		38,118			—
Current portion of long-term debt		6,802			9,008
Accrued interest on long-term debt		95,629			87,711
Other accrued liabilities		512,764			559,445
Liabilities related to assets held for sale		7,207			23,456

Total current liabilities		788,170			765,059

Deferred income taxes		1,731,916			1,765,426
Long-term debt		5,526,728			5,521,890
Other long-term obligations		148,054			123,547
Commitments and contingencies (Note 9)
Stockholders’ equity
Common stock, $.01 par value: authorized 300,000,000 shares; issued 171,762,565 and 168,268,213 shares; outstanding 138,684,079 and 143,096,213 shares		1,718			1,683
Capital in excess of par value		2,280,366			2,171,625
Deferred compensation		(14,871	)		(19,174	)
Treasury stock, at cost (33,078,486 and 25,172,000 shares)		(1,105,189	)		(760,594	)
Retained earnings		1,344,468			1,133,903
Accumulated other comprehensive income		2,848			6,345

Total stockholders’ equity		2,509,340			2,533,788

	$	10,704,208		$	10,709,710

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

MGM MIRAGE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)
(Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Revenues
Casino	$	551,691		$	508,944		$	1,110,414		$	1,005,165
Rooms		232,304			212,689			467,265			425,987
Food and beverage		212,040			189,424			429,804			377,501
Entertainment		65,971			59,485			133,213			124,628
Retail		48,072			46,304			93,170			87,394
Other		66,015			55,008			117,101			107,357

		1,176,093			1,071,854			2,350,967			2,128,032
Less: Promotional allowances		(103,568	)		(97,737	)		(212,006	)		(202,041	)

		1,072,525			974,117			2,138,961			1,925,991

Expenses
Casino		269,518			251,812			547,121			513,828
Rooms		62,468			58,910			124,300			116,816
Food and beverage		121,138			106,694			240,687			211,946
Entertainment		47,548			43,377			94,127			90,110
Retail		30,566			29,262			59,078			55,848
Other		38,328			33,284			71,212			63,769
Provision for doubtful accounts		(2,915	)		6,784			3,962			14,420
General and administrative		151,420			146,377			297,701			284,677
Corporate expense		18,458			15,022			34,196			28,768
Preopening and start-up expenses		1,619			14,896			2,000			21,443
Restructuring costs		3,900			548			4,314			1,153
Property transactions, net		1,938			3,094			3,677			9,910
Depreciation and amortization		97,484			101,044			195,037			201,594

		841,470			811,104			1,677,412			1,614,282

Income from unconsolidated affiliates		29,542			8,547			53,714			19,336

Operating income		260,597			171,560			515,263			331,045

Non-operating income (expense)
Interest income		1,116			734			2,019			2,442
Interest expense, net		(92,622	)		(80,181	)		(182,432	)		(162,979	)
Non-operating items from unconsolidated affiliates		(6,690	)		(73	)		(12,895	)		(224	)
Other, net		(2,573	)		(5,561	)		(9,727	)		(4,793	)

		(100,769	)		(85,081	)		(203,035	)		(165,554	)

Income from continuing operations before income taxes		159,828			86,479			312,228			165,491
Provision for income taxes		(58,165	)		(32,023	)		(113,425	)		(62,259	)

Income from continuing operations		101,663			54,456			198,803			103,232

Discontinued operations
Income (loss) from discontinued operations, including gain (loss) on disposal of $8,186 (six months 2004) and ($7,357) (three and six months 2003)		4,809			(6,321	)		18,678			(1,589	)
Benefit (provision) for income taxes		(1,755	)		5,615			(6,916	)		3,110

		3,054			(706	)		11,762			1,521

Net income	$	104,717		$	53,750		$	210,565		$	104,753

Basic earnings per share of common stock
Income from continuing operations	$	0.73		$	0.36		$	1.41		$	0.68
Discontinued operations		0.02			—			0.08			0.01

Net income per share	$	0.75		$	0.36		$	1.49		$	0.69

Diluted earnings per share of common stock
Income from continuing operations	$	0.70		$	0.36		$	1.36		$	0.67
Discontinued operations		0.02			(0.01	)		0.08			0.01

Net income per share	$	0.72		$	0.35		$	1.44		$	0.68

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

MGM MIRAGE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)


	Six Months Ended
	June 30,
	2004			2003
Cash flows from operating activities
Net income	$	210,565		$	104,753
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		195,531			211,807
Amortization of debt discount and issuance costs		15,605			17,747
Provision for doubtful accounts		4,069			14,911
Property transactions, net		3,677			10,550
Loss on early extinguishment of debt		5,527			—
(Gain) loss on disposal of discontinued operations		(8,186	)		7,357
Income from unconsolidated affiliates		(40,819	)		(19,112	)
Distributions from unconsolidated affiliates		22,500			21,500
Deferred income taxes		(32,822	)		10,056
Tax benefit from stock option exercises		22,501			447
Change in assets and liabilities:
Accounts receivable		(28,414	)		(11,175	)
Inventories		(986	)		1,009
Income taxes receivable and payable		48,875			965
Prepaid expenses and other		6,122			11,199
Accounts payable and accrued liabilities		(23,774	)		(7,559	)
Other		(4,314	)		(3,015	)

Net cash provided by operating activities		395,657			371,440

Cash flows from investing activities
Purchases of property and equipment		(347,349	)		(221,945	)
Dispositions of property and equipment		14,415			1,162
Proceeds from sale of the Golden Nugget Subsidiaries, net		210,119			—
Investments in unconsolidated affiliates		(13,791	)		(6,350	)
Change in construction payable		39,562			8,512
Other		(9,863	)		(12,809	)

Net cash used in investing activities		(106,907	)		(231,430	)

Cash flows from financing activities
Net repayments under bank credit facilities		(475,332	)		(106,305	)
Issuance of long-term debt		522,207			—
Repurchase of senior notes		(52,149	)		—
Debt issuance costs		(5,360	)		(1,719	)
Issuance of common stock		86,275			1,245
Repurchase of common stock		(343,856	)		(90,605	)
Other		(2,486	)		(10,826	)

Net cash used in financing activities		(270,701	)		(208,210	)

Cash and cash equivalents
Net increase (decrease) for the period		18,049			(68,200	)
Cash related to discontinued operations		(10,303	)		(12,310	)
Balance, beginning of period		178,047			211,234

Balance, end of period	$	185,793		$	130,724

Supplemental cash flow disclosures
Interest paid, net of amounts capitalized	$	161,788		$	151,871
Federal, state and foreign income taxes paid, net of refunds		79,215			39,632

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

MGM MIRAGE AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

MGM MIRAGE (the “Company”), formerly MGM Grand, Inc., is a Delaware corporation, incorporated on January 29, 1986. As of June 30, 2004, approximately 59% of the outstanding shares of the Company’s common stock was 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, operates and invests in casino resorts, which typically include casinos, hotels, restaurants and other resort amenities.

The Company owns and operates the following casino resorts in Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, The Mirage, Treasure Island (“TI”), New York-New York and the Boardwalk Hotel and Casino. The Company also owns a 50% interest in the joint venture that owns and operates Monte Carlo Resort & Casino in Las Vegas and a 50% interest in the limited liability company developing The Residences at MGM Grand, a 576-unit condominium tower adjacent to MGM Grand Las Vegas. The Company owns three resorts in Primm, Nevada, at the California/Nevada state line – Whiskey Pete’s, Buffalo Bill’s and the Primm Valley Resort – as well as two championship golf courses located near the resorts. The Company also owns Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip resorts.

The Company, through its wholly-owned subsidiary, MGM Grand Detroit, Inc., and its local partners formed MGM Grand Detroit, LLC, to develop a hotel, casino and entertainment complex in Detroit, Michigan. MGM Grand Detroit, LLC operates a casino in an interim facility located in downtown Detroit. See Note 9 for discussion of the revised development agreement with the City of Detroit. The Company also owns and operates Beau Rivage, a beachfront resort located in Biloxi, Mississippi, and a 50% interest in a limited liability company that owns Borgata, a casino resort at Renaissance Pointe, located in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation owns the other 50% of Borgata and also operates the resort. Borgata opened in July 2003. The Company owns approximately 95 developable acres adjacent to Borgata, a portion of which consists of common roads, landscaping and master plan improvements which the Company designed and developed as required under the agreement with Boyd. See Note 2 for information regarding operations classified as discontinued operations.

The Company is actively seeking future development opportunities in the United Kingdom, as more fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. In January 2004, the Company contributed approximately $9 million to its joint venture with Newcastle United PLC, which is refundable if certain conditions are not met by January 2008. In addition, the Company has entered into other agreements related to possible future developments in the United Kingdom which are subject to implementation of proposed gaming law reforms and a tax structure acceptable to the Company.

In June 2004, the Company entered into a joint venture agreement to develop, build and operate a hotel-casino resort in Macau S.A.R. The agreement is subject to, among other things, the approval of the government of Macau S.A.R., and other regulatory approvals, as well as the entry into a subconcession agreement with the holder of one of the existing concessions.

In January 2004, the Company reached agreement with the Board of Directors of Wembley plc (“Wembley”) on the terms of a proposed cash acquisition by the Company of Wembley. Wembley received a higher competing offer and, in May 2004, the Company announced that it would make no further bids for Wembley.

In June 2004, the Company entered into a definitive merger agreement with Mandalay Resort Group (“Mandalay”) under which the Company will acquire Mandalay for $71.00 in cash for each share of common stock of Mandalay. Mandalay owns and operates eleven properties in Nevada, including Mandalay Bay, Luxor, Excalibur, Circus Circus, and Slots-A-Fun in Las Vegas, Circus Circus-Reno in Reno, Colorado Belle and Edgewater in Laughlin, Gold Strike and Nevada Landing in Jean, and Railroad Pass in Henderson. Mandalay also owns and operates Gold Strike, a hotel/casino in Tunica County, Mississippi. In addition, Mandalay owns a 50% interest in Silver Legacy in Reno, a 50% interest in Monte Carlo in Las Vegas, a 50% interest in Grand Victoria, a riverboat in Elgin, Illinois, and a 53.5% interest in MotorCity in Detroit, Michigan. The total consideration is approximately $8.1 billion, including equity value of approximately $4.8 billion, convertible debentures with a redemption value of approximately $574 million, the assumption or repayment of other outstanding Mandalay debt with a fair value of approximately $2.6 billion as of June 30, 2004, and $100 million of estimated transaction costs. The transaction is subject to the approval of Mandalay stockholders as well as regulatory and other customary conditions. The transaction will be accounted for as a purchase and is anticipated to close during the first quarter of 2005.

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 Company’s 2003 annual consolidated financial statements and notes thereto included in the Company’s Current Report on Form 8-K dated July 20, 2004.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position as of June 30, 2004, and the results of its operations for the three and six month periods ended June 30, 2004 and 2003. The results of operations for such periods are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentation, which have no effect on previously reported net income.

NOTE 2 — DISCONTINUED OPERATIONS

In June 2003, the Company entered into an agreement to sell the Golden Nugget Las Vegas in downtown Las Vegas and the Golden Nugget Laughlin in Laughlin, Nevada (the “Golden Nugget Subsidiaries”), including substantially all of the assets and liabilities of those resorts, for approximately $215 million, subject to certain working capital adjustments. This transaction closed in January 2004, with net proceeds to the Company of $210 million. Also in June 2003, the Company ceased operations of PLAYMGMMIRAGE.com, its online gaming website (“MGM MIRAGE Online”). In February 2004, the Company entered into an agreement to sell the subsidiaries that own and operate MGM Grand Australia. This transaction closed in July 2004 with proceeds to the Company of A$195 million (approximately $140 million), plus certain working capital adjustments. The Company expects to report an after-tax gain from the sale of discontinued operations of approximately $50 million in the third quarter of 2004.

The results of the Golden Nugget Subsidiaries, MGM MIRAGE Online and MGM Grand Australia are classified as discontinued operations in the accompanying consolidated statements of income for all periods presented. Net revenues of discontinued operations were $14 million and $67 million, respectively, for the three months ended June 30, 2004 and 2003, and $41 million and $137 million, respectively, for the six months ended June 30, 2004 and 2003. Included in income from discontinued operations is an allocation of interest expense based on the ratio of the net assets of the discontinued operations to the total consolidated net assets and debt of the Company. Interest allocated to discontinued operations was $1 million and $3 million, respectively, for the three months ended June 30, 2004 and 2003, and $2 million and $6 million, respectively, for the six months ended June 30, 2004 and 2003. Included in discontinued operations for the six months ended June 30, 2004 is a gain on the sale of the Golden Nugget Subsidiaries of $8 million. Included in discontinued operations for the three and six months ended June 30, 2003 is a loss on disposal of MGM MIRAGE Online of $7 million.

The following table summarizes the assets and liabilities of discontinued operations as of June 30, 2004 (MGM Grand Australia), and December 31, 2003 (the Golden Nugget Subsidiaries and Online) included as assets and liabilities held for sale in the accompanying consolidated balance sheets:


	June 30,		December 31,
	2004		2003
	(In thousands)
Cash	$	10,303	$	15,230
Accounts receivable, net		496		6,024
Inventories		736		4,321
Prepaid expenses and other		1,530		5,174

Total current assets		13,065		30,749
Property and equipment, net		36,813		185,516
Other assets, net		32,029		9,817

Total assets		81,907		226,082

Accounts payable		1,192		2,180
Other current liabilities		3,649		20,885

Total current liabilities		4,841		23,065
Other long-term liabilities		2,366		391

Total liabilities		7,207		23,456

Net assets	$	74,700	$	202,626

NOTE 3 — INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company recorded its share of the results of operations of unconsolidated affiliates as follows:


	Three Months						Six Months
For the periods ended June 30,	2004			2003			2004			2003
	(In thousands)
Income from unconsolidated affiliates	$	29,542		$	8,547		$	53,714		$	19,336
Preopening and start-up expenses		—			(11,828	)		—			(15,901	)
Non-operating items from unconsolidated affiliates		(6,690	)		(73	)		(12,895	)		(224	)

	$	22,852		$	(3,354	)	$	40,819		$	3,211

NOTE 4 — LONG-TERM DEBT

Long-term debt consisted of the following:


	June 30,			December 31,
	2004			2003
	(In thousands)
Senior Credit Facility:
$1.5 billion revolving credit facility	$	108,000		$	525,000
$1.0 billion term loan		1,000,000			1,000,000
$50 million revolving line of credit		—			50,000
Australian bank facility, due 2004		6,789			11,868
Other note due to bank		34,000			38,000
$300 million 6.95% senior notes, due 2005, net		300,607			301,128
$176.4 million ($200 million in 2003) 6.625% senior notes, due 2005, net		174,432			196,029
$244.5 million ($250 million in 2003) 7.25% senior notes, due 2006, net		233,253			236,294
$710 million 9.75% senior subordinated notes, due 2007, net		706,341			705,713
$200 million 6.75% senior notes, due 2007, net		185,055			183,405
$180.4 million ($200 million in 2003) 6.75% senior notes, due 2008, net		164,935			181,517
$200 million 6.875% senior notes, due 2008, net		198,949			198,802
$600 million 6% senior notes, due 2009		600,000			600,000
$825 million 8.5% senior notes, due 2010, net		821,968			821,722
$400 million 8.375% senior subordinated notes, due 2011		400,000			400,000
$525 million 5.875% senior notes, due 2014, net		517,435			—
$100 million 7.25% senior debentures, due 2017, net		81,557			81,211
Other notes		209			209

		5,533,530			5,530,898
Less: Current portion		(6,802	)		(9,008	)

	$	5,526,728		$	5,521,890

Total interest incurred for the three month periods ended June 30, 2004 and 2003 was $98 million and $86 million, respectively, of which $5 million and $6 million, respectively, was capitalized. Total interest incurred for the six month periods ended June 30, 2004 and 2003 was $190 million and $175 million, respectively, of which $8 million and $12 million, respectively, was capitalized.

At June 30, 2004, the Senior Credit Facility consisted of (1) a $1.5 billion senior revolving credit facility which matures on November 24, 2008; and (2) a $1.0 billion term loan.

During the first quarter of 2004, the Company issued $525 million of 5.875% senior notes due 2014. Of this amount, $225 million of the senior notes were issued pursuant to the Company’s shelf registration statement, which completed the available securities issuances under that registration statement, and $300 million of the senior notes were issued through a Rule 144A offering. The Company has filed a registration statement to register the Rule 144A notes under the Securities Act as required by the indenture. The proceeds of these offerings were used to reduce the amount outstanding under the Company’s $1.5 billion revolving credit facility.

In August 2003, the Company’s Board of Directors authorized the repurchase of up to $100 million of the Company’s public debt securities, and the Company repurchased $25 million of its senior notes. During March 2004, the Company repurchased $49 million of its senior notes for $52 million, leaving $26 million available for repurchase under the current authorization. The March 2004 repurchases resulted in a loss on early retirement of debt of $6 million, including the write-off of unamortized original issue discount, classified as “Other, net” in the accompanying consolidated statement of income.

The Company attempts to limit its exposure to interest rate risk by managing the mix of its long-term fixed rate borrowings and short-term borrowings under its bank credit facilities. In August 2003, the Company entered into interest rate swap agreements, designated as fair value hedges, which effectively converted $400 million of the Company’s fixed rate debt to floating rate debt. In March 2004, the Company terminated interest rate swap agreements with total notional amounts of $200 million and entered into additional interest rate swap agreements, designated as fair value hedges, with total notional amounts of $100 million, leaving interest rate swap agreements with total notional amounts of $300 million remaining as of June 30, 2004. At June 30, 2004, the fair value of the interest rate swap agreements was a liability of $8 million.

Under the terms of the interest rate swap agreements, the Company makes payments based on specified spreads over six-month LIBOR, and receives payments equal to the interest payments due on the fixed rate debt. The interest rate swap agreements qualify for the “shortcut method” allowed under Statement of Financial Accounting Standards No. 133, which allows an assumption of no ineffectiveness in the hedging relationship. As such, there is no income statement impact from changes in the fair value of the hedging instruments. Instead, the fair value of the instruments is recorded as an asset or liability on the Company’s balance sheet, with an offsetting adjustment to the carrying value of the related debt. The Company received $3 million upon termination of swap agreements in March 2004, which has been added to the carrying value of the related debt obligations and is being amortized and recorded as a reduction of interest expense over the remaining life of that debt.

The Company’s long-term debt obligations contain certain customary covenants. The Company’s Senior Credit Facility contains covenants that require the Company to maintain certain financial ratios. At June 30, 2004, the Company was required to maintain a maximum leverage ratio (average debt to EBITDA, as defined) of 5.5:1, which decreases periodically to 4.75:1 by December 2007. The Company must also maintain a minimum coverage ratio (EBITDA to interest charges, as defined) of 2.75:1. As of June 30, 2004, the Company’s leverage and interest coverage ratios were 4.3:1 and 3.8:1, respectively.

NOTE 5 — SHARE REPURCHASES

During the six months ended June 30, 2004, the Company repurchased 7.9 million shares of its common stock for $344 million, leaving 0.1 million shares authorized for future purchase as of June 30, 2004 under the November 2003 authorization by the Board of Directors. In July 2004, the Company’s Board of Directors approved a new stock repurchase program, authorizing the purchase of up to an additional 10 million shares of the Company’s common stock.

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				Six Months
For the periods ended June 30,	2004		2003		2004		2003
	(In thousands)
Weighted-average common shares outstanding (used in the calculation of basic earnings per share)		139,904		150,721		141,018		151,412
Potential dilution from stock options and restricted stock		4,844		2,331		4,788		1,829

Weighted-average common and common equivalent shares (used in the calculation of diluted earnings per share)		144,748		153,052		145,806		153,241

NOTE 7 — COMPREHENSIVE INCOME

Comprehensive income consisted of the following:


	Three Months					Six Months
For the periods ended June 30,	2004			2003		2004			2003
	(In thousands)
Net income	$	104,717		$	53,750	$	210,565		$	104,753
Currency translation adjustment		(5,813	)		2,644		(5,113	)		5,160
Derivative income (loss) from unconsolidated affiliate, net of tax		1,532			45		1,616			(26	)

Comprehensive income	$	100,436		$	56,439	$	207,068		$	109,887

NOTE 8 — STOCK OPTION PLANS AND STOCK-BASED COMPENSATION

A summary of the status of the Company’s stock option plans is presented below:


				Weighted
				Average
	Shares			Exercise
Six months ended June 30, 2004	(000’s)			Price
Outstanding at beginning of period		20,867		$	27.37
Granted		101			43.29
Exercised		(3,496	)		24.71
Terminated		(390	)		27.41

Outstanding at end of period		17,082			28.00

Exercisable at end of period		8,385			28.53

As of June 30, 2004, the aggregate number of shares subject to options available for grant under the Company’s stock option plans was 2.3 million.

The Company accounts for stock-based compensation, including employee stock option plans, in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and the Financial Accounting Standards Board’s Interpretation No. 44, “Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25.” Had the Company accounted for these plans under the fair value method allowed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), as amended by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS 148”), the Company’s net income and earnings per share would have been reduced to recognize the fair value of employee stock options.

The following are required disclosures under SFAS 123 and SFAS 148:


	Three Months						Six Months
For the periods ended June 30,	2004			2003			2004			2003
	(In thousands, except per share amounts)
Net income
As reported	$	104,717		$	53,750		$	210,565		$	104,753
Stock-based compensation under SFAS 123		(6,224	)		(11,951	)		(11,919	)		(19,728	)

Pro forma	$	98,493		$	41,799		$	198,646		$	85,025

Basic earnings per share
As reported	$	0.75		$	0.36		$	1.49			0.69
Stock-based compensation under SFAS 123		(0.05	)		(0.08	)		(0.08	)		(0.13	)

Pro forma	$	0.70		$	0.28		$	1.41		$	0.56

Diluted earnings per share
As reported	$	0.72		$	0.35		$	1.44		$	0.68
Stock-based compensation under SFAS 123		(0.04	)		(0.08	)		(0.08	)		(0.13	)

Pro forma	$	0.68		$	0.27		$	1.36		$	0.55

The stock-based compensation included in the table above represents the after-tax amount of pro forma compensation related to stock option plans. Reported net income includes $1 million, net of tax, of amortization of restricted stock compensation for each of the three month periods ended June 30, 2004 and 2003 and $2 million and $3 million, net of tax, for the six months ended June 30, 2004 and 2003, respectively.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Detroit Development Agreement. MGM Grand Detroit, LLC has operated a casino facility in downtown Detroit since July 1999 and is planning a permanent casino facility under a revised development agreement with the City of Detroit entered into in August 2002. As part of the revised development agreement, MGM Grand Detroit, LLC paid the City of Detroit $44 million, agreed to provide letter of credit support for repayment of $50 million of bonds issued by the Economic Development Corporation of the City of Detroit, agreed to transfer assets of $3 million to the City and agreed to indemnify the City for up to $20 million related to the Lac Vieux and certain other litigation. The Lac Vieux litigation challenged the City of Detroit’s process of selecting MGM Grand Detroit, LLC and the other developers to develop casinos in Detroit. In addition to the above payments, the Company will pay the City 1% of gaming revenues (2% if annual revenues exceed $400 million) beginning January 1, 2006. In exchange for these payments, the Company obtained the right to construct its permanent facility at a location other than the originally planned riverfront location, was released from certain requirements related to the permanent casino, including lowering the requirement for the size of the hotel from 800 rooms to 400 rooms, and obtained modifications to certain other obligations.

The Company recorded an intangible asset (development rights, deemed to have an indefinite life) of approximately $115 million in connection with its payment obligations under the revised development agreement, based on the present value of the Company’s obligations. Management determined that the indemnification obligation met the accrual criteria under Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies”, and the obligation was accrued as part of the payments under the revised development agreement.

At June 30, 2004, the Company’s remaining obligation of $18 million under the indemnification is included in accrued liabilities and the Company’s obligation for the $50 million of bonds is included in other long-term liabilities.

The Company is currently in the process of obtaining land and developing plans for the permanent casino facility and currently expects the project to cost approximately $575 million (including land, capitalized interest and preopening expenses, but excluding the $115 million of payments to the City discussed above). The design, budget and schedule of the permanent facility are at an early stage, and the ultimate timing, cost and scope of the project is subject to risks attendant to large-scale projects.

The ability to construct the permanent casino facility is currently subject to resolution of the Lac Vieux litigation. See Part II, Item 1, “Legal Proceedings”, for further information on the status of this litigation.

New York Racing Association. The Company has an understanding with the New York Racing Association (“NYRA”) to manage video lottery terminals (“VLT”) at NYRA’s Aqueduct horseracing facility in metropolitan New York. The Company would assist in the development of the facility, including providing project financing, and would manage the facility for a fee. The project is anticipated to cost $135 million. Work was halted on the VLT facility in August 2003 pending the outcome of an investigation of certain aspects of NYRA’s operations by Federal prosecutors. In December 2003, NYRA reached an agreement with the Justice Department whereby NYRA was indicted with prosecution deferred. NYRA agreed to pay a fine and the indictment will be dismissed with prejudice upon NYRA implementing certain reforms and otherwise complying with the terms of the agreement. The Company’s participation is subject to a definitive agreement, regulatory approvals and certain legislative changes by the State of New York.

Macau. In connection with the Company’s pending joint venture in Macau (see Note 1), the Company has committed to invest up to $280 million in the entity in the form of capital contributions and shareholder loans.

NOTE 10 — PROPERTY TRANSACTIONS, NET

Net property transactions consist of the following:


	Three Months					Six Months
For the periods ended June 30,	2004			2003		2004			2003
	(In thousands)
Write downs and impairments	$	—		$	992	$	—		$	5,888
Net (gains) losses on sale or disposal of fixed assets		(1,133	)		1,088		(242	)		1,416
Demolition costs		3,071			1,014		3,919			2,606

	$	1,938		$	3,094	$	3,677		$	9,910

During 2004, demolition costs relate primarily to the Bellagio expansion and standard room remodel projects and site preparation for The Residences at MGM Grand. During 2003, approximately $3 million of the write downs and substantially all of the demolition costs relate to preparation for the new Cirque du Soleil show at MGM Grand Las Vegas. Substantially all of the remaining 2003 write-downs and impairments relate to other assets disposed of in connection with remodeling or expansion projects at MGM Grand Las Vegas.

NOTE 11 — CONSOLIDATING CONDENSED FINANCIAL INFORMATION

The Company’s subsidiaries (excluding MGM Grand Detroit, LLC and certain minor subsidiaries) have fully and unconditionally guaranteed, on a joint and several basis, payment of the 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 June 30, 2004 and December 31, 2003 and for the three and six month periods ended June 30, 2004 and 2003 is as follows:

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION


	As of June 30, 2004
				Guarantor		Non-Guarantor
	Parent			Subsidiaries		Subsidiaries		Elimination			Consolidated
	(In thousands)
Current assets	$	60,743		$	373,925	$	188,955	$	—		$	623,623
Property and equipment, net		8,851			8,685,889		107,905		(11,972	)		8,790,673
Investments in subsidiaries		8,462,571			224,777		—		(8,687,348	)		—
Investments in unconsolidated affiliates		127,902			1,006,075		—		(342,165	)		791,812
Other non-current assets		47,459			328,096		122,545		—			498,100

	$	8,707,526		$	10,618,762	$	419,405	$	(9,041,485	)	$	10,704,208

Current liabilities	$	173,713		$	563,005	$	51,452	$	—		$	788,170
Intercompany accounts		(399,584	)		380,870		18,714		—			—
Deferred income taxes		1,731,916			—		—		—			1,731,916
Long-term debt		4,687,300			839,428		—		—			5,526,728
Other non-current liabilities		4,841			93,010		50,203		—			148,054
Stockholders’ equity		2,509,340			8,742,449		299,036		(9,041,485	)		2,509,340

	$	8,707,526		$	10,618,762	$	419,405	$	(9,041,485	)	$	10,704,208


	As of December 31, 2003
				Guarantor		Non-Guarantor
	Parent			Subsidiaries		Subsidiaries		Elimination			Consolidated
	(In thousands)
Current assets	$	63,085		$	608,549	$	85,987	$	—		$	757,621
Property and equipment, net		9,373			8,525,531		158,407		(11,972	)		8,681,339
Investments in subsidiaries		8,023,527			186,114		—		(8,209,641	)		—
Investments in unconsolidated affiliates		127,902			970,275		—		(342,165	)		756,012
Other non-current assets		47,251			312,699		154,788		—			514,738

	$	8,271,138		$	10,603,168	$	399,182	$	(8,563,778	)	$	10,709,710

Current liabilities	$	116,734		$	585,316	$	63,009	$	—		$	765,059
Intercompany accounts		(781,455	)		756,181		25,274		—			—
Deferred income taxes		1,761,706			—		3,720		—			1,765,426
Long-term debt		4,640,365			878,651		2,874		—			5,521,890
Other non-current liabilities		—			71,702		51,845		—			123,547
Stockholders’ equity		2,533,788			8,311,318		252,460		(8,563,778	)		2,533,788

	$	8,271,138		$	10,603,168	$	399,182	$	(8,563,778	)	$	10,709,710

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION


	For the Three Months Ended June 30, 2004
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Elimination			Consolidated
	(In thousands)
Net revenues	$	—		$	960,458		$	112,067		$	—		$	1,072,525
Equity in subsidiaries’ earnings		240,809			35,780			—			(276,589	)		—
Expenses:
Casino and hotel operations		—			516,224			53,342			—			569,566
Provision for doubtful accounts		—			(2,853	)		(62	)		—			(2,915	)
General and administrative		—			137,037			14,383			—			151,420
Corporate expense		2,261			16,197			—			—			18,458
Preopening and start-up expenses		—			1,619			—			—			1,619
Restructuring costs		—			3,900			—			—			3,900
Property transactions, net		(1,466	)		3,447			(43	)		—			1,938
Depreciation and amortization		260			89,850			7,374			—			97,484

		1,055			765,421			74,994			—			841,470

Income from unconsolidated affiliates		—			29,542			—			—			29,542

Operating income		239,754			260,359			37,073			(276,589	)		260,597
Interest expense, net		(77,824	)		(13,376	)		(306	)		—			(91,506	)
Other, net		500			(9,768	)		5			—			(9,263	)

Income from continuing operations before income taxes		162,430			237,215			36,772			(276,589	)		159,828
Provision for income taxes		(57,173	)		—			(992	)		—			(58,165	)

Income from continuing operations		105,257			237,215			35,780			(276,589	)		101,663
Discontinued operations, net		(540	)		—			3,594			—			3,054

Net income	$	104,717		$	237,215		$	39,374		$	(276,589	)	$	104,717


	For the Three Months Ended June 30, 2003
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Elimination			Consolidated
	(In thousands)
Net revenues	$	—		$	871,639		$	102,478		$	—		$	974,117
Equity in subsidiaries’ earnings		167,523			32,705			—			(200,228	)		—
Expenses:
Casino and hotel operations					473,367			49,972			—			523,339
Provision for doubtful accounts		—			6,693			91			—			6,784
General and administrative		—			133,583			12,794			—			146,377
Corporate expense		1,218			13,804			—			—			15,022
Preopening and start-up expenses		19			14,577			300			—			14,896
Restructuring costs		126			422			—			—			548
Property transactions, net		19			2,775			300			—			3,094
Depreciation and amortization		279			92,222			8,543			—			101,044

		1,661			737,443			72,000			—			811,104

Income from unconsolidated affiliates		—			8,547			—			—			8,547

Operating income		165,862			175,448			30,478			(200,228	)		171,560
Interest expense, net		(66,458	)		(12,400	)		(589	)		—			(79,447	)
Other, net		(12,741	)		3,316			3,791			—			(5,634	)

Income from continuing operations before income taxes		86,663			166,364			33,680			(200,228	)		86,479
Provision for income taxes		(31,048	)		—			(975	)		—			(32,023	)

Income from continuing operations		55,615			166,364			32,705			(200,228	)		54,456
Discontinued operations, net		(1,865	)		(644	)		1,803			—			(706	)

Net income	$	53,750		$	165,720		$	34,508		$	(200,228	)	$	53,750

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION


	For the Six Months Ended June 30, 2004
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Elimination			Consolidated
	(In thousands)
Net revenues	$	—		$	1,922,977		$	215,984		$	—		$	2,138,961
Equity in subsidiaries’ earnings		480,779			66,164			—			(546,943	)		—
Expenses:
Casino and hotel operations		—			1,031,460			105,065			—			1,136,525
Provision for doubtful accounts		—			3,941			21			—			3,962
General and administrative		—			269,770			27,931			—			297,701
Corporate expense		4,758			29,438			—			—			34,196
Preopening and start-up expenses		129			1,871			—			—			2,000
Restructuring costs		—			4,314			—			—			4,314
Property transactions, net		(1,466	)		4,797			346			—			3,677
Depreciation and amortization		522			179,667			14,848			—			195,037

		3,943			1,525,258			148,211			—			1,677,412

Income from unconsolidated affiliates		—			53,714			—			—			53,714

Operating income		476,836			517,597			67,773			(546,943	)		515,263
Interest expense, net		(151,397	)		(27,985	)		(1,031	)		—			(180,413	)
Other, net		(581	)		(22,048	)		7			—			(22,622	)

Income from continuing operations before income taxes		324,858			467,564			66,749			(546,943	)		312,228
Provision for income taxes		(112,840	)		—			(585	)		—			(113,425	)

Income from continuing operations		212,018			467,564			66,164			(546,943	)		198,803
Discontinued operations, net		(1,453	)		7,362			5,853			—			11,762

Net income	$	210,565		$	474,926		$	72,017		$	(546,943	)	$	210,565


	For the Six Months Ended June 30, 2003
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Elimination			Consolidated
	(In thousands)
Net revenues	$	—		$	1,728,744		$	197,247		$	—		$	1,925,991
Equity in subsidiaries’ earnings		305,834			55,701			—			(361,535	)		—
Expenses:
Casino and hotel operations		—			955,394			96,923			—			1,052,317
Provision for doubtful accounts		—			14,705			(285	)		—			14,420
General and administrative		—			260,624			24,053			—			284,677
Corporate expense		2,464			26,304			—			—			28,768
Preopening and start-up expenses		19			21,124			300			—			21,443
Restructuring costs		406			747			—			—			1,153
Property transactions, net		208			9,246			456			—			9,910
Depreciation and amortization		559			183,911			17,124			—			201,594

		3,656			1,472,055			138,571			—			1,614,282

Income from unconsolidated affiliates		—			19,336			—			—			19,336

Operating income		302,178			331,726			58,676			(361,535	)		331,045
Interest expense, net		(130,385	)		(29,055	)		(1,097	)		—			(160,537	)
Other, net		(2,889	)		(2,128	)		—			—			(5,017	)

Income from continuing operations before income taxes		168,904			300,543			57,579			(361,535	)		165,491
Provision for income taxes		(60,381	)		—			(1,878	)		—			(62,259	)

Income from continuing operations		108,523			300,543			55,701			(361,535	)		103,232
Discontinued operations, net		(3,770	)		2,343			2,948			—			1,521

Net income	$	104,753		$	302,886		$	58,649		$	(361,535	)	$	104,753

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION


	For the Six Months Ended June 30, 2004
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Elimination			Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	(187,993	)	$	498,070		$	85,580		$	—		$	395,657
Net cash provided by (used in) investing activities		(2,655	)		(97,957	)		(4,208	)		(2,087	)		(106,907	)
Net cash provided by (used in) financing activities		194,439			(431,750	)		(35,477	)		2,087			(270,701	)


	For the Six Months Ended June 30, 2003
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Elimination			Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	(153,794	)	$	448,136		$	77,317		$	(219	)	$	371,440
Net cash provided by (used in) investing activities		(4,750	)		(212,217	)		(12,523	)		(1,940	)		(231,430	)
Net cash provided by (used in) financing activities		161,275			(304,039	)		(67,605	)		2,159			(208,210	)

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

Results of Operations

Overview

Our operations consist of 11 wholly-owned casino resorts and 50% investments in two other casino resorts, including:


Las Vegas, Nevada:		Bellagio, MGM Grand Las Vegas, The Mirage, TI, New York-New York, Boardwalk, and Monte Carlo (50% owned).
Other domestic:		The Primm Valley Resorts (Buffalo Bill’s, Primm Valley Resort and Whiskey Pete’s) in Primm, Nevada; Beau Rivage in Biloxi, Mississippi; MGM Grand Detroit; and Borgata (50% owned) in Atlantic City, New Jersey.

In February 2004, we entered into an agreement to sell the subsidiaries that own and operate MGM Grand Australia. This transaction closed in July 2004 with proceeds to the Company of A$195 million (approximately $140 million), plus certain working capital adjustments. We expect to report an after-tax gain from the sale of discounted operations of approximately $50 million in the third quarter of 2004.

In June 2004, we announced that we had entered into a definitive merger agreement with Mandalay Resort Group (“Mandalay”) under which we will acquire Mandalay for $71.00 in cash for each share of common stock of Mandalay. Mandalay owns and operates eleven properties in Nevada, including Mandalay Bay, Luxor, Excalibur, Circus Circus, and Slots-A-Fun in Las Vegas, Circus Circus-Reno in Reno, Colorado Belle and Edgewater in Laughlin, Gold Strike and Nevada Landing in Jean, and Railroad Pass in Henderson. Mandalay also owns and operates Gold Strike, a hotel/casino in Tunica County, Mississippi. In addition, Mandalay owns a 50% interest in Silver Legacy in Reno, a 50% interest in Monte Carlo in Las Vegas, a 50% interest in Grand Victoria, a riverboat in Elgin, Illinois, and a 53.5% interest in MotorCity in Detroit, Michigan. The total consideration is approximately $8.1 billion, including equity value of approximately $4.8 billion, convertible debentures with a redemption value of approximately $574 million, the assumption or repayment of other outstanding Mandalay debt with a fair value of approximately $2.6 billion as of June 30, 2004, and $100 million of estimated transaction costs. The transaction is anticipated to close during the first quarter of 2005.

We operate in one segment, the operation of casino resorts, which includes offering gaming, hotel, dining, entertainment, retail, convention services and other resort amenities. Slightly over half of our net revenues are derived from gaming activities, a lower 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. 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.

We generate a majority of our net revenues and operating income from our resorts in Las Vegas, Nevada. In 2003, over 75% of our net revenues and operating income was generated by wholly-owned Las Vegas resorts. However, earning a majority of our operating profit from our Las Vegas resorts exposes us to certain risks outside of our control, such as competition from other Las Vegas resorts, including several expanded resorts and a major new competitor expected to open in 2005, and the impact from potential 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.

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:

• Gaming revenue indicators – table games drop and slot 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 slot win percentage is in the range of 6% to 7% of slot handle;

• Hotel revenue indicators – hotel occupancy (volume indicator); average daily rate (“ADR”, price indicator); revenue per available room (“REVPAR”), a summary measure of hotel results combining ADR and occupancy rate.

A full description of our operations, key performance indicators and outlook can be found in our Annual Report on Form 10-K for the year ended December 31, 2003.

Financial Results

The following discussion is based on our consolidated financial statements for the three and six months ended June 30, 2004 and 2003. On a consolidated basis, the most important factors and trends contributing to our operating performance for the quarter were:

• Strong visitation levels in Las Vegas. According to the Las Vegas Convention and Visitors Authority, total visitors to Las Vegas increased 7.3% over prior year on a year-to-date basis through May 2004.

• The introduction of new dining and entertainment amenities at several of our resorts, allowing us to capture an increased share of our guests’ spending.

• The impact of Players Club and other marketing programs, along with the positive effects of cashless gaming technology.

• Continued positive economic recovery in the United States, leading to increased spending by our guests and increased pricing power for our hotel rooms and non-gaming amenities.

• The addition of Borgata, of which we own 50%. Borgata opened on July 3, 2003.

As a result of the above factors and trends, our net revenues increased 10% in the quarter and 11% for the six months over the same prior year periods. Our operating income in 2004 increased 52% and 56% for the quarter and year-to-date, respectively, due to the strong revenue trends and the operating leverage obtained from the increased room and pricing, along with the income from Borgata, which was not open in the prior year periods. Several of our resorts set records for net revenues and operating income performance in a single quarter, driven by new amenities and significant increases in room rates earned during the quarter.

Income from continuing operations increased 87% and 93% over the 2003 quarter and six month periods, respectively. On a diluted per share basis, income from continuing operations increased 94% for the quarter and 103% for the six months, as we had a lower weighted average number of shares outstanding resulting from share repurchases throughout 2003 and the first half of 2004.

Operating Results – Detailed Revenue Information

The following table presents detail of our net revenues:


	Three Months Ended June 30,									Six Months Ended June 30,
				Percentage									Percentage
	2004			Change			2003			2004			Change			2003
	(Dollars in thousands)
Casino revenue, net:
Table games	$	234,264			7	%	$	219,723		$	482,024			11	%	$	433,352
Slots		302,909			10	%		276,384			596,056			10	%		544,057
Other		14,518			13	%		12,837			32,334			16	%		27,756

Casino revenue, net		551,691			8	%		508,944			1,110,414			10	%		1,005,165

Non-casino revenue:
Rooms		232,304			9	%		212,689			467,265			10	%		425,987
Food and beverage		212,040			12	%		189,424			429,804			14	%		377,501
Entertainment, retail and other		180,058			12	%		160,797			343,484			8	%		319,379

Non-casino revenue		624,402			11	%		562,910			1,240,553			10	%		1,122,867

		1,176,093			10	%		1,071,854			2,350,967			10	%		2,128,032
Less: Promotional allowances		(103,568	)		6	%		(97,737	)		(212,006	)		5	%		(202,041	)

	$	1,072,525			10	%	$	974,117		$	2,138,961			11	%	$	1,925,991

Increases in table games revenues in both the quarter and six months were driven by volume increases, as we experienced strong volumes during the key Chinese New Year and Super Bowl periods and hosted a baccarat tournament at MGM Grand Las Vegas in April. Table games hold percentages were within a normal range for all periods and varied very little between the current year periods and prior year periods. Slot revenues continued to show strong year-over-year gains, a trend that started in 2003. This is the result of strong visitation and the impact of our Players Club rewards program, which was implemented in our major resorts over 2002 and 2003, and the implementation of cashless gaming technology in 2003.

Non-casino revenue increased in 2004 primarily due to increased spending by guests, strong conference and group business, and higher room rates in all segments. For both the quarter and six months ended June 30, 2004, REVPAR was $123 compared to $111 in the 2003 second quarter and $112 in the 2003 six month period, increases of 11% for the quarter and 10% for the six months. At our Las Vegas resorts, REVPAR was $142 in the 2004 quarter and $144 in the 2004 six months, increases of 12% in both periods over prior year. These REVPAR increases were driven almost entirely by higher rates, as occupancy was up only slightly compared to prior year. Other revenue includes business interruption proceeds of $6 million for the Bellagio power outage. Based on information from the Company’s insurance provider, this amount is a reasonable estimate of the minimum amount the Company should receive upon final settlement of the claim. Therefore, the Company expects that further recoveries may be recorded in future periods.

Operating Results – Details of Certain Charges

Preopening and start-up expenses consisted of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
	(In thousands)
Borgata	$	—	$	11,828	$	—	$	15,901
New York-New York (Zumanity, Nine Fine Irishmen)		—		2,015		—		2,068
Players Club		—		295		—		1,991
Other		1,619		758		2,000		1,483

	$	1,619	$	14,896	$	2,000	$	21,443

Property transactions, net consisted of the following:


	Three Months Ended June 30,					Six Months Ended June 30,
	2004			2003		2004			2003
	(In thousands)
Write-downs and impairments	$	—		$	992	$	—		$	5,888
Net (gains) losses on sale or disposal of fixed assets		(1,133	)		1,088		(242	)		1,416
Demolition costs		3,071			1,014		3,919			2,606

	$	1,938		$	3,094	$	3,677		$	9,910

During 2004, demolition costs relate primarily to the Bellagio expansion and standard room remodel projects and site preparation for The Residences at MGM Grand. Net (gains) losses on fixed asset disposals include net recoveries, in excess of carrying amount, of $1.1 million related to equipment damaged in the power outage at Bellagio. During 2003, approximately $3 million of the write downs and substantially all of the demolition costs relate to preparation for the new Cirque du Soleil show at MGM Grand Las Vegas. Substantially all of the remaining 2003 write-downs and impairments relate to other assets disposed of in connection with remodeling or expansion projects at MGM Grand Las Vegas.

Non-operating Results

Net interest expense increased to $93 million and $182 million in the 2004 quarter and six months, respectively, from $80 million and $163 million in the 2003 quarter and six months, due to higher debt levels and lower capitalized interest. In 2003, we were capitalizing interest related to our investment in Borgata.

The effective income tax rate was 36% in both the quarter and year-to-date periods in 2004, which was lower than the 37% rate in the 2003 quarter and 38% rate in the 2003 year-to-date period due to higher income levels and stable amounts of non-deductible items.

Discontinued Operations

Income from discontinued operations increased to $3 million in the second quarter of 2004 from a loss of $1 million in the year-ago period, due to the 2003 loss on disposal of MGM MIRAGE Online of $7 million, offset by not having the results of the Golden Nugget Subsidiaries. For the six months, income from discontinued operations increased from $2 million to $12 million, due to the MGM MIRAGE Online loss in 2003 and the $5 million after-tax gain on sale of the Golden Nugget Subsidiaries in 2004, offset by not having a full period of results of the Golden Nugget Subsidiaries in 2004.

Factors Affecting Future Results

In August 2004, the Michigan state legislature approved an increase to the gaming tax rate in Michigan from 18% to 24%, effective September 1, 2004, provided that once our subsidiary begins operation of the permanent casino complex the rate will be reduced to 19%, and if our subsidiary does not complete a permanent casino complex by July 2009, the rate will increase on a graduated basis to 27%. The legislation still requires approval from the Governor of Michigan. Taxable gaming revenues for MGM Grand Detroit were approximately $403 million for the year ended December 31, 2003 and approximately $225 million for the six months ended June 30, 2004.

Liquidity and Capital Resources

Cash Flows – Operating Activities

Trends in our operating cash flows tend to follow trends in our operating income, excluding non-cash charges, since our business is primarily cash-based. Cash flow from operations in the six months ended June 30, 2004 increased from 2003, resulting from the increase in operating income, excluding non-cash charges. The increase in operating cash flow was not as significant, on a relative basis, as the increase in operating income due to Borgata’s income not resulting in cash flow (Borgata has not yet made any distributions) and the timing of hotel sales on credit, primarily to large groups. At June 30, 2004, we held cash and cash equivalents of $186 million.

Cash Flows – Investing Activities

Capital expenditures of $347 million through June 30, 2004 were significantly higher than the $222 million spent in 2003, due largely to major projects at our existing resorts. These projects included:

• The Bellagio expansion, started in 2003 and expected to be completed in December 2004. The Bellagio expansion consists of a new 928-room tower, along with expanded retail, convention, spa and food and beverage facilities. The project is designed to complement the existing, newly remodeled standard rooms, and cause minimal business interruption during construction;

• The theatre at MGM Grand Las Vegas for a new show by Cirque du Soleil, started in 2003 and expected to be completed in 2004;

• The Bellagio standard room remodel and upgrade, started in 2003 and completed in February 2004; and

• The New York-New York standard room remodel, started in January 2004 and expected to be completed by the third quarter of 2004.

Remaining 2004 capital expenditures were for general property improvements. Capital expenditures in the prior year period primarily consisted of construction of the new theatre at New York-New York and implementation of new slot technology, along with general property improvements.

Investments in unconsolidated affiliates for the 2004 quarter primarily represent our contribution to our joint venture with Newcastle United PLC, which is refundable if certain conditions are not met by January 2008, and required contributions to The Residences at MGM Grand, our joint venture with Turnberry Associates.

Cash Flows – Financing Activities

In February and March 2004, we issued $525 million of 5.875% Senior Notes, due 2014. Through June 30, 2004, we repaid a net $475 million on our bank credit facilities and repurchased $49 million of our existing senior notes for $52 million, resulting in a loss on early retirement of debt of $6 million (including the write-off of unamortized original issue discount), which is classified as “Other, net” in the accompanying consolidated statement of income.

We repurchased 7.9 million shares of our common stock during the first six months of 2004 at a total cost of $344 million. Our share repurchases are conducted under repurchase programs approved by our Board of Directors and publicly announced. At June 30, 2004, we had 0.1 million shares available for repurchase under the November 2003 authorization. In July 2004, our Board of Directors approved a new 10 million share repurchase program. We received $86 million of proceeds from the exercise of employee stock options in the first six months of 2004. As of June 30, 2004, we had approximately $1.4 billion of available liquidity under our bank credit facilities.

Other Factors Affecting Liquidity

The proposed acquisition of Mandalay, the proposed joint venture in Macau and the proposed investments in the United Kingdom will require significant additional sources of funds beyond expected operating cash flow and current availability under our senior credit facility. We may raise additional funds through increased bank financing, the issuance of notes or the issuance of equity.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements. To prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, we must make estimates and assumptions that affect the amounts reported in the consolidated financial statements. We regularly evaluate these estimates and assumptions, particularly in areas we consider to be critical accounting estimates, where changes in the estimates and assumptions could have a material impact on our results of operations, financial position and, generally to a lesser extent, cash flows. Senior management and the Audit Committee of the Board of Directors have reviewed the disclosures included herein about our critical accounting estimates, and have reviewed the processes to determine those estimates.

A complete description of our critical accounting policies and estimates can be found in our Annual Report on Form 10-K for the year ended December 31, 2003. We present below a discussion of our policies related to income taxes, which has been updated from the discussion included in our Annual Report.

Income taxes

We are subject to income taxes in the United States, and in several states and foreign jurisdictions in which we operate. We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards, tax credits and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

Our income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities. While positions taken in tax returns are sometimes subject to uncertainty in the tax laws, we do not take such positions unless we have “substantial authority” to do so under the Internal Revenue Code and applicable regulations. We may take positions on our tax returns based on substantial authority that are not ultimately accepted by the IRS.

We assess such potential unfavorable outcomes based on the criteria of Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” (“SFAS 5”). We establish a tax reserve if an unfavorable outcome is probable and the amount of the unfavorable outcome can be reasonably estimated. We assess the potential outcomes of tax uncertainties on a quarterly basis. In determining whether the probable criterion of SFAS 5 is met, we presume that the taxing authority will focus on the exposure and we assess the probable outcome of a particular issue based upon the relevant legal and technical merits. We also apply our judgment regarding the potential actions by the tax authorities and resolution through the settlement process.

We maintain required tax reserves until such time as the underlying issue is resolved. When actual results differ from reserve estimates, we adjust the income tax provision and our tax reserves in the period resolved. For tax years that are examined by taxing authorities, we adjust tax reserves in the year the tax examinations are settled. For tax years that are not examined by taxing authorities, we adjust tax reserves in the year that the statute of limitations expires. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental, and we believe we have adequately provided for any reasonable and foreseeable outcomes related to uncertain tax matters.

We classify reserves for tax uncertainties within “other accrued liabilities” in the accompanying consolidated balance sheets, separate from any related income tax payable or deferred income taxes. Reserve amounts may relate to the deductibility of an item, as well as potential interest associated with those items.

Recently Issued Accounting Standards

There are no accounting standards issued before June 30, 2004 but effective after June 30, 2004 which are expected to have a material impact on our financial reporting.

Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed rate borrowings and short-term borrowings under our bank credit facilities.

In the third quarter of 2003, we entered into interest rate swap agreements, designated as fair value hedges, which effectively convert $400 million of our fixed rate debt to floating rate debt. In March 2004, the Company terminated interest rate swap agreements with total notional amounts of $200 million and entered into additional interest rate swap agreements, designated as fair value hedges, with total notional amounts of $100 million, leaving interest rate swap agreements with total notional amounts of $300 million remaining as of June 30, 2004. Under the terms of these agreements, we make payments based on specified spreads over six-month LIBOR, and receive payments equal to the interest payments due on the fixed rate debt. The interest rate swap agreements qualify for the “shortcut method” allowed under Statement of Financial Accounting Standards No. 133, which allows an assumption of no ineffectiveness in the hedging relationship. As such, there is no income statement impact from changes in the fair value of the hedging instruments.

The following table provides information about our interest rate swaps as of June 30, 2004:


Maturity Date	August 1, 2007			February 1, 2008			February 27, 2014
Notional Value	$100 million			$100 million			$100 million
Estimated Fair Value	($1.7 million)			($1.7 million)			($4.8 million)
Average Pay Rate*		5.10	%		4.88	%		3.41	%
Average Receive Rate		6.75	%		6.75	%		5.875	%

* Interest rates are determined in arrears. These rates have been estimated based on implied forward rates in the yield curve.

As of June 30, 2004, after giving effect to the interest rate swaps discussed above, long-term fixed rate borrowings represented approximately 74% of our total borrowings. Assuming a 100 basis-point change in LIBOR, our annual interest cost would change by approximately $14 million.

Safe Harbor Provision

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

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 June 30, 2004. 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 June 30, 2004, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Detroit Slot Machine Litigation

In July 2001, an individual, Mary Kraft, filed a complaint in the Wayne County Circuit Court in Detroit, Michigan, against International Game Technology, Anchor Gaming, Inc. and the three operators of casinos in Detroit, Michigan, including a subsidiary of the Company. The plaintiff claimed the bonus wheel feature of the Wheel of Fortune® and I Dream of Jeannie™ slot machines, which are manufactured, designed and programmed by International Game Technology and/or Anchor Gaming, Inc., are deceptive and misleading. The complaint alleged violations of the Michigan Consumer Protection Act, common law fraud. The plaintiff sought to certify a class of any individual in Michigan who had played either of these games since June of 1999. The machines and their programs were approved for use by the Michigan Gaming Control Board, the administrative agency responsible for policing the Detroit casinos.

We, along with the other casino operators, filed a motion for summary disposition arguing that the plaintiff’s complaint fails to state a claim as a matter of law. In April 2002, the Wayne County Circuit Court granted the motion for summary disposition. The plaintiff appealed and, after a full briefing of the case, oral argument was held in November 2003.

In April 2004, the Michigan Court of Appeals, an intermediate appellate court, affirmed the trial court’s dismissal of the plaintiff’s claims. The Michigan Court of Appeals held that the plaintiff’s claims are exempt from the Michigan Consumer Protection Act because the operation of the slot machines was specifically authorized by the Michigan Gaming Control Board, and that the plaintiff’s common law claims are pre-empted by the Michigan Act. The Plaintiff did not seek review of the appellate court decision by the Michigan Supreme Court and, therefore, the decision of the Michigan Court of Appeals is final.

Lac Vieux Litigation

For a complete description of the facts and circumstances surrounding the case of Lac Vieux Desert Band of Lake Superior Chippewa Indians v. Michigan Gaming Control Board, et. al., see our Annual report on Form 10-K for the year ended December 31, 2003. As of December 31, 2003, the casino developers, including our subsidiary, were prohibited from developing permanent casino complexes under an injunction issued by the 6^th Circuit Court of Appeals.

In December 2003, the Tribe and the owners of the two other casinos filed a joint motion with the 6^th Circuit Court requesting approval of the terms of a partial settlement, asserted to have resolved the case among the filing parties. The settlement calls for exemption of those developers from a reselection process and other related relief, in exchange for cash payments to the Tribe, but purports to continue the Tribe’s appeal as it relates to our subsidiary. In a subsequent filing, the settling parties requested that issues pertaining to this partial settlement be remanded to the District Court for consideration. Our subsidiary filed a responsive motion with the 6^th Circuit Court requesting dismissal of the appeal as moot, or, upon denial of such relief, expedited decision of our cross appeal and a full briefing on the issues surrounding the proposed partial settlement.

In February 2004, the 6^th Circuit Court remanded the proposed settlement to the District Court for review and approval. In remanding the case, the 6^th Circuit Court directed that the non-settling parties should not be prejudiced by the actions of the settling parties.

In April 2004, the District Court issued a ruling approving the proposed settlement among Lac Vieux, Greektown Casino and Detroit Entertainment/Atwater. As to the position of the Company’s subsidiary in the case, the District Court’s settlement opinion observed that Lac Vieux’s proposed relief of rebidding of the subsidiary’s casino development would be inequitable to our subsidiary, since our subsidiary was not eligible for, did not seek and did not receive any preferential treatment in the casino selection process. The District Court also stated that Lac Vieux’s agreement in the settlement not to pursue rebidding of the developments of the two parties who did receive preferences strengthens our subsidiary’s legal position that a rebidding of only one casino development would make the rebidding process even more inequitable as to our subsidiary.

In May 2004, our subsidiary filed a notice of appeal to the 6^th Circuit Court of the District Court’s approval of the proposed consent judgment in order to preserve certain issues regarding the appropriateness of remedies for further briefing and argument should the Tribe prevail in its appeal and our subsidiary not prevail in its cross-appeal. Our subsidiary followed with a motion for scheduling of review of all matters remaining before the 6^th Circuit Court. Aside from review of the District Court’s approval of the settlement, several other matters in the litigation remain pending before the 6^th Circuit, including our subsidiary’s motion to dismiss Lac Vieux’s appeal on the grounds that the settlement makes the appeal moot; Lac Vieux’s continuing appeal and request for a rebid as to our subsidiary’s Detroit casino development; our subsidiary’s cross-appeal of the District Court’s denial of the subsidiary’s request for declaratory ruling that it should not be subject to rebid because it never received a preference in the developer selection process; and the injunction prohibiting construction of permanent casino complexes pending further action by the 6^th Circuit Court.

In June 2004, the 6^th Circuit Court issued an order directing the parties to file letter briefs stating their respective positions on questions posed by that court concerning what parties and issues would remain to be decided if the 6^th Circuit Court approved the settlement and dissolved the injunction. All parties filed letter briefs in response to the 6^th Circuit Court’s directive. In July 2004, the 6^th Circuit Clerk notified all parties that nothing further need be filed and that the panel of judges assigned to the appeals will proceed as expeditiously as possible to dispose of the questions presented. The timetable for the 6^th Circuit’s further review of this case is uncertain. Our subsidiary intends to continue to vigorously defend its positions in this case.

Other

For information on other material legal proceedings to which the Company and its subsidiaries are a party, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Item 2. Changes in 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 June 30, 2004:


					Shares Purchased		Maximum
	Total		Average		As Part of a		Shares Still
	Shares		Price Per		Publicly-Announced		Available for
	Purchased		Share		Program		Repurchase
April 1 – April 30, 2004		814,300	$	46.79		814,300		4,326,800	(1)
May 1 – May 31, 2004		4,212,286		43.85		4,212,286		114,514	(1)
June 1 – June 30, 2004		—		—		—		114,514	(1)

		5,026,586		44.33		5,026,586

(1)

The November 2003 repurchase program was announced in November 2003 for up to 10 million shares with no expiration.

In July 2004, our Board of Directors approved a new 10 million share repurchase program.

Item 4. Submission of Matters to a Vote of Security Holders

(a) The Company’s 2004 Annual Meeting of Stockholders was held on May 11, 2004.

(c) At the Annual Meeting, the following individuals were elected to serve one-year terms as members of the Board of Directors:


Name	Shares Voted For		Shares Withheld
James D. Aljian		117,415,792		17,692,666
Robert H. Baldwin		118,906,403		16,202,055
Terry Christensen		119,064,169		16,044,289
Willie D. Davis		122,988,972		12,119,486
Alexander M. Haig, Jr.		119,048,869		16,059,589
Alexis Herman		131,685,868		3,422,590
Roland Hernandez		131,874,660		3,233,798
Gary N. Jacobs		118,906,426		16,202,032
Kirk Kerkorian		121,068,520		14,039,938
J. Terrence Lanni		118,990,903		16,117,555
George J. Mason		129,416,349		5,692,109
James J. Murren		118,744,170		16,364,288
Ronald M. Popeil		130,126,281		4,982,177
John T. Redmond		119,496,473		15,611,985
Daniel M. Wade		119,079,571		16,028,887
Melvin B. Wolzinger		130,105,356		5,003,102
Alex Yemenidjian		119,459,742		15,648,716

Additionally, a proposal ratifying the selection of Deloitte & Touche to serve as the Company’s independent auditors for the year ending December 31, 2004 was ratified, by a vote of 133,740,645 shares in favor, 1,318,574 shares opposed and 49,239 shares abstaining.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1 Amended and Restated Bylaws of MGM MIRAGE, as of May 11, 2004.

10.1 MGM MIRAGE 1997 Nonqualified Stock Option Plan, Amended and Restated – February 2, 2004.

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.

(b) Reports on Form 8-K.

The Company filed the following Current Reports on Form 8-K during the quarter ended June 30, 2004:

Current Report on Form 8-K, filed by the Company on April 21, 2004, for the purpose of furnishing the earnings press release for the quarter ended March 31, 2004.

Current Report on Form 8-K, filed by the Company on June 4, 2004, for the purpose of furnishing a press release and letter, dated June 4, 2004, to Mandalay Resort Group, announcing the Company’s offer to acquire Mandalay Resort Group.

Current Report on Form 8-K, filed by the Company on June 8, 2004, for the purpose of furnishing a press release related to the extension of the Company’s offer to buy Mandalay Resort Group.

Current Report on Form 8-K, filed by the Company on June 14, 2004, for the purpose of furnishing a press release related to the agreement with Mandalay Resort Group on an acquisition of Mandalay Resort Group by the Company.

Current Report on Form 8-K, filed by the Company on June 15, 2004, for the purpose of filing the merger agreement related to the Company’s acquisition of Mandalay Resort Group.

Current Report on Form 8-K, filed by the Company on June 16, 2004, for the purpose of furnishing a press release related to the agreement with Mandalay Resort Group on an acquisition of Mandalay Resort Group by the Company.

Current Report on Form 8-K, filed by the Company on June 21, 2004, for the purpose of furnishing a press release related to the Company’s agreement for a Macau-based casino.


	MGM MIRAGE

Date: August 9, 2004	By:	/s/ J. TERRENCE LANNI

		J. Terrence Lanni
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Date: August 9, 2004		/s/ JAMES J. MURREN

		James J. Murren
		President, Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

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		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets at June 30, 2004 and December 31, 2003		1
	Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2004 and June 30, 2003		2
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and June 30, 2003		3
	Condensed Notes to Consolidated Financial Statements		4-13
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		14-20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		20
Item 4.	Controls and Procedures		20
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		20-22
Item 2.	Changes in Securities and Use of Proceeds		22
Item 4.	Submission of Matters to a Vote of Security Holders		22
Item 6.	Exhibits and Reports on Form 8-K		23
SIGNATURES			24
Exhibit 3.1
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

•		Gaming revenue indicators – table games drop and slot 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 slot win percentage is in the range of 6% to 7% of slot handle;

•		Hotel revenue indicators – hotel occupancy (volume indicator); average daily rate (“ADR”, price indicator); revenue per available room (“REVPAR”), a summary measure of hotel results combining ADR and occupancy rate.

•		Strong visitation levels in Las Vegas. According to the Las Vegas Convention and Visitors Authority, total visitors to Las Vegas increased 7.3% over prior year on a year-to-date basis through May 2004.

•		The introduction of new dining and entertainment amenities at several of our resorts, allowing us to capture an increased share of our guests’ spending.

•		The impact of Players Club and other marketing programs, along with the positive effects of cashless gaming technology.

•		Continued positive economic recovery in the United States, leading to increased spending by our guests and increased pricing power for our hotel rooms and non-gaming amenities.

•		The addition of Borgata, of which we own 50%. Borgata opened on July 3, 2003.

	(a)		The Company’s 2004 Annual Meeting of Stockholders was held on May 11, 2004.

	(c)		At the Annual Meeting, the following individuals were elected to serve one-year terms as members of the Board of Directors:

	3.1		Amended and Restated Bylaws of MGM MIRAGE, as of May 11, 2004.

	10.1		MGM MIRAGE 1997 Nonqualified Stock Option Plan, Amended and Restated – February 2, 2004.

	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.

	(b)		Reports on Form 8-K.

			The Company filed the following Current Reports on Form 8-K during the quarter ended June 30, 2004:

			Current Report on Form 8-K, filed by the Company on April 21, 2004, for the purpose of furnishing the earnings press release for the quarter ended March 31, 2004.

			Current Report on Form 8-K, filed by the Company on June 4, 2004, for the purpose of furnishing a press release and letter, dated June 4, 2004, to Mandalay Resort Group, announcing the Company’s offer to acquire Mandalay Resort Group.

			Current Report on Form 8-K, filed by the Company on June 8, 2004, for the purpose of furnishing a press release related to the extension of the Company’s offer to buy Mandalay Resort Group.

			Current Report on Form 8-K, filed by the Company on June 14, 2004, for the purpose of furnishing a press release related to the agreement with Mandalay Resort Group on an acquisition of Mandalay Resort Group by the Company.

			Current Report on Form 8-K, filed by the Company on June 15, 2004, for the purpose of filing the merger agreement related to the Company’s acquisition of Mandalay Resort Group.

			Current Report on Form 8-K, filed by the Company on June 16, 2004, for the purpose of furnishing a press release related to the agreement with Mandalay Resort Group on an acquisition of Mandalay Resort Group by the Company.

			Current Report on Form 8-K, filed by the Company on June 21, 2004, for the purpose of furnishing a press release related to the Company’s agreement for a Macau-based casino.