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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2004

Commission File No. 1-13481

METRO-GOLDWYN-MAYER INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (310) 449-3000

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    ¨ No

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

The number of shares of the Registrant’s common stock outstanding as of July 30, 2004 was 237,575,462.

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METRO-GOLDWYN-MAYER INC.

FORM 10-Q

June 30, 2004

INDEX

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PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

METRO-GOLDWYN-MAYER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements.

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METRO-GOLDWYN-MAYER INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements.

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METRO-GOLDWYN-MAYER INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements.

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METRO-GOLDWYN-MAYER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

Note 1—Basis of Presentation

Basis of Presentation.    The accompanying condensed consolidated financial statements include the accounts of Metro-Goldwyn-Mayer Inc. (“MGM”), Metro-Goldwyn-Mayer Studios Inc. and its majority owned subsidiaries (collectively, “MGM Studios”) and Orion Pictures Corporation and its majority owned subsidiaries (collectively, “Orion”) (collectively, the “Company”). MGM is a Delaware corporation formed on July 10, 1996 specifically to acquire MGM Studios, and is majority owned by an investor group comprised of Tracinda Corporation and a corporation that is principally owned by Tracinda Corporation (collectively, the “Tracinda Group”) and Mr. Kirk Kerkorian. The acquisition of MGM Studios by MGM was completed on October 10, 1996, at which time MGM commenced principal operations. The acquisition of Orion was completed on July 10, 1997. The Company completed the acquisition of certain film libraries and film related rights that were previously owned by PolyGram N.V. and its subsidiaries (collectively, “PolyGram”) on January 7, 1999.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and the instructions to Form 10-Q related to interim period financial statements. Accordingly, these financial statements do not include certain information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. However, these financial statements contain all adjustments consisting only of normal recurring accruals which, in the opinion of management, are necessary in order to make the financial statements not misleading. The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2003. As permitted by American Institute of Certified Public Accountants Statement of Position (“SOP”) 00-2, “Accounting by Producers or Distributors of Films,” the Company has presented unclassified balance sheets.

Earnings Per Share.    The Company computes earnings per share in accordance with SFAS No. 128, “Earnings Per Share” (“EPS”). The weighted average number of shares used in computing basic and diluted earnings or loss per share was 235,961,448 and 236,803,698 in the quarter and six months ended June 30, 2004, respectively, and 244,807,107 and 246,628,261 in the quarter and six months ended June 30, 2003, respectively. Dilutive securities of 7,424,593 and 4,704,143 in the quarter and six months ended June 30, 2004, respectively, and 28,147 and 14,791 in the quarter and six months ended June 30, 2003, respectively, are not included in the calculation of diluted EPS because they are antidilutive. Additionally, potentially dilutive securities of 9,304,184 and 9,849,216 in the quarter and six months ended June 30, 2004, respectively, and 30,182,873 and 30,530,673 in the quarter and six months ended June 30, 2003, respectively, have not been included in the calculation of diluted EPS because their exercise prices are greater than the average market price of the Company’s common stock during the periods.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Comprehensive Income (Loss).     The Company computes comprehensive income (loss) pursuant to SFAS No. 130, “Reporting Comprehensive Income.” This statement established standards for the reporting and display of comprehensive income (loss) and its components in financial statements and thereby reports a measure of all changes in equity of an enterprise that result from transactions and other economic events other than transactions with owners. Total comprehensive income (loss) for the Company includes net income (loss) and other comprehensive income (loss) items, including unrealized gain (loss) on derivative instruments, unrealized gain (loss) on securities, changes in unfunded pension plan obligations and cumulative foreign currency translation adjustments. Components of other comprehensive income (loss), net of related income tax effect, are shown below (in thousands):

Components of accumulated other comprehensive income (loss) are shown below (in thousands):

Stock-Based Compensation.    On January 1, 2004, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” Under the modified prospective method of adoption selected by the Company under the provisions of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure,” stock-based employee compensation expense recognized in 2004 is the same as that which would have been recognized had the fair value recognition provisions of SFAS No. 123 been applied to all awards from its original effective date. During the quarter and six months ended June 30, 2004, the Company recorded compensation expense of $7,013,000 and $14,510,000 regarding its employee stock incentive plan, which has been included in selling, general and administrative expenses in the consolidated statement of operations.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Prior to January 1, 2004, the Company applied Accounting Principles Board Opinion No. 25, “Accounting For Stock Issued to Employees,” and related interpretations in accounting for its stock incentive plan. Had compensation cost for the plan been determined consistent with the fair value recognition provisions of SFAS No. 123 in each period, the Company’s net loss and loss per share would have been the following pro forma amounts (in thousands, except per share data, unaudited):

The fair value of option grants issued prior to January 1, 2004 were estimated using the Black-Scholes model and the fair value of option grants issued in 2004 were estimated using a binomial model. The weighted average fair value of stock options granted in the quarter and six months ended June 30, 2004 was $7.33 and $6.52, respectively, and was $4.96 and $4.71 in the quarter and six months ended June 30, 2003, respectively. The fair values were determined using the following assumptions: the dividend yield was 0 percent in all periods, and expected volatility was 44.6 percent and 44.8 percent for the quarter and six months ended June 30, 2004, respectively, and expected volatility was 52.6 percent and 52.8 percent for the quarter and six months ended June 30, 2003, respectively. The weighted average expected life was 5.0 years in all periods, and the weighted average assumed risk-free interest rate was 3.7 percent and 3.6 percent for the quarter and six months ended June 30, 2004, respectively, and 2.5 percent and 2.6 percent for the quarter and six months ended June 30, 2003, respectively.

New Accounting Pronouncements.    In January 2003, the FASB issued Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities,” which establishes criteria to identify variable interest entities (“VIE”) and the primary beneficiary of such entities. An entity that qualifies as a VIE must be consolidated by its primary beneficiary. All other holders of interests in a VIE must disclose the nature, purpose, size and activity of the VIE as well as their maximum exposure to losses as a result of involvement with the VIE. FIN 46 was revised in December 2003 and is effective for financial statements of public entities that have special-purpose entities, as defined, for periods ending after December 15, 2003. For public entities without special-purpose entities, it was effective for financial statements for periods ending after March 15, 2004. The Company does not have any special-purpose entities, as defined. The adoption of FIN 46 did not have a material effect on the Company’s financial statements.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In December 2003, the FASB issued SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” This statement revises employers’ disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by SFAS No. 87, “Employers’ Accounting for Pensions,” SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” This statement retains the disclosure requirements contained in SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” which it replaces. It requires additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The required information should be provided separately for pension plans and for other postretirement benefit plans. This statement is effective for financial statements with fiscal years ending after December 15, 2003. The Company implemented SFAS No. 132 (revised 2003) on December 31, 2003.

Note 2—Severance and Other Related Costs

In June 1999, the Company incurred $85,171,000 of severance and other related costs, as well as the estimated costs of withdrawing from the Company’s arrangements with United International Pictures B.V. (“UIP”) on November 1, 2000. The severance charge in 1999 included the termination of 46 employees, including the Company’s former Chairman and Vice Chairman, across all divisions of the Company.

In June 2000, the Company reduced previously charged reserves by $5,000,000 due to a negotiated settlement with UIP regarding the Company’s withdrawal from the joint venture. Additionally, in June 2000, the Company incurred severance and other related charges of $1,285,000 related to the closure of a foreign sales office.

As of June 30, 2004, the Company has paid $54,844,000 of the severance and other related costs. In January and February 2002, in accordance with certain agreements with the Company’s former Chairman and Vice Chairman, $16,964,000 of the severance and related costs were converted into 863,499 shares of common stock of the Company. The remaining unpaid severance at June 30, 2004 consists of 1,745,680 unexercised stock options held by the Company’s former Chairman. On January 1, 2004, upon adoption of the fair value recognition provisions of SFAS No. 123, such amount was transferred to additional paid-in capital.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3—Film and Television Costs

Film and television costs, net of amortization, are summarized as follows (in thousands):

Interest costs capitalized to theatrical productions were $1,411,000 and $2,764,000 during the quarter and six months ended June 30, 2004, respectively, and were $2,204,000 and $5,174,000 during the quarter and six months ended June 30, 2003, respectively.

Note 4—Investments In and Advances to Affiliates

On July 18, 2003, the Company sold its 20 percent equity interest in the American Movie Classics, The Independent Film Channel and WE: Women’s Entertainment cable channels (the “Cable Channels”) to Cablevision Systems Corporation for $500,000,000, less sales-related expenses of $2,750,000. The Company received $250,000,000 in cash and a $250,000,000 promissory note that was collected in cash on December 18, 2003. As the Company’s cost basis in the Cable Channels exceeded the net selling price, the Company recorded a write-down of its investment in the cable channels of $93,059,000 during the quarter ended June 30, 2003.

The Company has accounted for its investment in the Cable Channels in accordance with APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” Pursuant to the requirements of APB No. 18, the Company has recorded its share of the earnings and losses in the Cable Channels based on the most recently available financial statements received from the cable channels. Due to a lag in the receipt of the financial statements from the Cable Channels, the Company reported its interest in the Cable Channels on a one-quarter lag. Beginning April 1, 2003, due to the agreement to sell the remaining cable channels for less than the book value of the investment, which closed on July 18, 2003, the Company ceased recording its 20 percent equity interest in the operating results of the cable channels in its results of operations.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In the six months ended June 30, 2003, the Company’s share of the Cable Channels’ net operating results was a profit of $4,781,000. Summarized financial information for the Cable Channels (including Bravo through December 5, 2002) for the six months ended March 31, 2003, were as follows (in thousands):

On April 30, 2004, MGM Domestic Television Distribution, Inc., a wholly-owned subsidiary of the Company, and NBC Enterprises Inc. (“NBC”) agreed to terminate their joint venture, MGM-NBC Media Sales, LLC (the “Joint Venture”), effective on September 30, 2004. The Joint Venture was formed in February 2002 to act as an agent to sell barter advertising spots received by the Company and NBC as full or partial consideration from the licensing of feature film and television programming product in the domestic television syndication market. Upon termination of the Joint Venture, the Company intends to assume the sale of advertising spots for its programming in the domestic television syndication market.

Note 5—Property and Equipment

Property and equipment are summarized as follows (in thousands):

Note 6—Bank and Other Debt

Bank and other debt is summarized as follows (in thousands):

Credit Facilities.    On April 26, 2004, the Company, through its subsidiary MGM Studios, entered into a fourth amended and restated credit facility with a syndicate of banks (the “2004 Credit Facility”) aggregating $2.4 billion, consisting of a five-year $400,000,000 revolving credit facility (the “Revolving Facility”), a six-year $400,000,000 term loan (“Term A Facility”) and a seven-year $1.6 billion term loan (“Term B Facility”) (collectively, the “Term Loans”), which replaced the pre-existing $1.75 billion amended credit facility. The Revolving Facility and Term A Facility bear interest at 2.25 percent over the Adjusted LIBOR rate, as defined (3.59 percent at June 30, 2004), and the Term B Loan bears interest at 2.50 percent over the Adjusted LIBOR rate, as defined (3.84 percent at June 30, 2004). The Revolving Facility matures on April 30, 2009. The Company incurred approximately $19,400,000 in fees and other costs associated with the refinancing of the credit facility.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Proceeds from the loans under the 2004 Credit Facility were used to finance the payment of a $1.89 billion special one-time cash dividend to stockholders on May 17, 2004 (see Note 8), to refinance loans existing under the previous credit facility and for general corporate purposes.

In connection with the refinancing of the prior credit facility, the Company wrote-off deferred loan fees of $6,859,000 in the quarter and six months ending June 30, 2004.

The Company’s borrowings under the 2004 Credit Facility are secured by substantially all the assets of the Company, with the exception of the copyrights in the James Bond series of motion pictures. The 2004 Credit Facility contains various covenants, including limitations on indebtedness, dividends and capital expenditures, and maintenance of certain financial ratios. The 2004 Credit Facility limits the amount of the investment in MGM which may be made by Metro-Goldwyn-Mayer Studios Inc. and Orion Pictures Corporation, both of which are wholly-owned subsidiaries, in the form of loans or advances, or purchases of capital stock of MGM, up to a maximum aggregate amount of $300,000,000. Such covenant does not preclude MGM from using its own resources to purchase its capital stock. As of June 30, 2004, $231.7 million was loaned to MGM by MGM Studios primarily to fund the Dutch Auction tender offer (see Note 8) and the purchase of treasury stock by MGM. Restricted net assets of Metro-Goldwyn-Mayer Studios Inc. and Orion Pictures Corporation at June 30, 2004 are approximately $2.1 billion. As of June 30, 2004, the Company was in compliance with all applicable covenants.

Capitalized Lease Obligations and Other Borrowings.    Capitalized lease obligations and other borrowings relate principally to contractual liabilities and capitalized lease obligations.

Note 7—Financial Instruments

The Company is subject to market risks resulting from fluctuations in foreign currency exchange rates because approximately 25 percent of the Company’s revenues are denominated, and the Company incurs certain operating and production costs, in foreign currencies. In certain instances, the Company enters into foreign currency exchange forward contracts in order to reduce exposure to changes in foreign currency exchange rates that affect the value of the Company’s firm commitments and certain anticipated foreign currency cash flows. The Company currently intends to continue to enter into such contracts to hedge against future material foreign currency exchange rate risks. As of June 30, 2004, the Company has outstanding foreign currency forward contracts aggregating Canadian $28,570,000, EUR 3,525,000, CZK 40,459,000 and AUD 2,000. As of June 30, 2004, the Company would be obligated to pay approximately $36,000 if all such foreign currency forward contracts were terminated. As of December 31, 2003, the Company had outstanding foreign currency forward contracts aggregating Canadian $26,100,000 and British pounds 8,100,000. As of December 31, 2003, the Company was entitled to receive approximately $2,770,000 if all such foreign currency forward contracts were terminated. The market value of the foreign currency forward contracts as of June 30, 2004 and December 31, 2003 have been included in other assets and, with respect to qualified hedged instruments, in accumulated other comprehensive income (loss).

Note 8—Stockholders’ Equity

Stockholder Dividend.    On April 26, 2004, the Company declared a special one-time cash dividend of $8.00 per share to stockholders of record on May 7, 2004, which was paid on May 17, 2004. The cash dividend, aggregating approximately $1.89 billion, was financed by borrowings under the 2004 Credit Facility (see Note 6).

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pursuant to the provisions of the Amended and Restated 1996 Stock Incentive Plan (the “Plan”), the Compensation Committee of the Board of Directors of the Company has adjusted the outstanding stock options issued under the Plan such that following the payment of the one-time cash dividend to stockholders, each option holder shall receive upon exercise, in addition to the shares of common stock otherwise obtainable, a cash amount of $8 per share.

Dutch Auction Tender Offer.    On December 4, 2003 the Company commenced a Dutch Auction tender offer (the “Dutch Auction Tender Offer”) to purchase up to 10,000,000 shares of its common stock at a purchase price not greater than $18.00 nor less than $16.25 per share. Under the procedures for the Dutch Auction Tender Offer, stockholders of the Company had the opportunity to tender some or all of their shares of common stock at prices specified by the stockholder. The Company then determined the lowest price per share within the range of $16.25 to $18.00 per share that would enable it to buy 10,000,000 shares, or such lesser number of shares that are properly tendered and not withdrawn. All shares accepted in the Dutch Auction Tender Offer were purchased by the Company at the same determined price per share regardless of whether the stockholder tendered at a lower price. The Tracinda Group and Mr. Kerkorian, the Company’s principal stockholders, did not participate in the Dutch Auction Tender Offer, nor did any members of the Company’s Board of Directors or executive management.

The Dutch Auction Tender Offer expired on January 15, 2004. Pursuant to the Dutch Auction Tender Offer, the Company purchased 10,000,000 shares of its common stock at a purchase price of $17.00 per share, or an aggregate amount of $170,000,000, plus offering expenses of approximately $1,000,000. The Dutch Auction Tender Offer was financed primarily from available cash on hand, net cash flow provided by operating activities and borrowings under the Revolving Facility. Following completion of the Dutch Auction Tender Offer, Mr. Kerkorian and the Tracinda Group together owned approximately 74.0 percent of the Company’s outstanding common stock.

Treasury Stock.    On July 26, 2002, the Company announced a share repurchase program authorizing the Company to purchase up to 10,000,000 shares of its common stock. The Company has funded the repurchase program from available cash on hand. On November 12, 2003, the Board of Directors of the Company increased its authorization for the Company’s share repurchase program by an additional 2,500,000 shares, to a total of 12,500,000 shares. As of June 30, 2004, under the share repurchase program, the Company had repurchased 8,104,300 shares of common stock, at an average price of $11.46 per share, for an aggregate cost of $92,890,000. During the quarter and six months ended June 30, 2004, the Company issued 1,226,673 and 2,403,022 shares of common stock, respectively, from treasury valued at $20,619,000 and $38,163,000, respectively, for directors, officers and employees. During the quarter and six months ended June 30, 2003, the Company issued 102,650 and 210,886 shares of common stock, respectively, from treasury valued at $1,161,000 and $2,332,000, respectively, for directors, officers and employees.

Note 9—Retirement Plans

The Company has a non-contributory retirement plan (the “Plan”) covering substantially all regular full-time, non-union employees. Benefits are based on years of service and compensation, as defined. The Company’s disclosures are in accordance with SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” which revised employers’ disclosures about pension and postretirement benefit plans.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pension cost includes the following components (in thousands):

The unrecognized net asset is being amortized over the estimated remaining service life of 19.4 years. Domestic pension benefits and expense were determined under the entry age actuarial cost method.

The Company has not made any contribution to the pension plan in the six months ended June 30, 2004. Based on the most recent actuarial report, the Company does not anticipate making any contributions to the pension plan in 2004.

A significant number of the Company’s production employees are covered by union sponsored, collectively bargained multi-employer pension plans. The Company contributed approximately $3,656,000 and $8,486,000, respectively, for such plans for the quarter and six months ended June 30, 2004, respectively, and $2,762,000 and $7,267,000 for the quarter and six months ended June 30, 2003, respectively. Information from the plans’ administrators is not sufficient to permit the Company to determine its share of unfunded vested benefits, if any.

The Company also provides each of its employees, including its officers, who have completed one year of service with the Company the opportunity to participate in the MGM Savings Plan (the “Savings Plan”). The Company contributed approximately $1,430,000 and $2,735,000, respectively, in shares of the Company’s common stock to the Savings Plan in the quarter and six months ended June 30, 2004, and $1,058,000 and $2,162,000 was contributed to the Savings Plan in the quarter and six months ended June 30, 2003, respectively.

Note 10—Segment Information

The Company’s business units have been aggregated into four reportable operating segments: feature films, television programming, cable channels and other. The Company sold its equity interest in the Bravo cable channel on December 5, 2002 and sold its equity interest in the remaining Cable Channels on July 18, 2003 (see Note 4). The factors for determining the reportable segments were based on the distinct nature of their operations. They are managed as separate business units because each requires and is responsible for executing a unique business strategy. Income or losses of industry segments and geographic areas, other than those accounted for under the equity method, exclude interest income, interest expense, goodwill amortization, income taxes and other unallocated corporate expenses. Identifiable assets are those assets used in the operations of the segments. Other corporate assets consist of cash and certain corporate receivables.

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METRO-GOLDWYN-MAYER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized financial information concerning the Company’s reportable segments is shown in the following tables (in thousands):