This management's discussion and analysis of financial condition and results of operations ("MD&A") contains forward-looking statements that involve risks and uncertainties. Please see "Cautionary Statement Concerning Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes for the fiscal year ended December 31, 2011, which were included in our Form 10-K, filed with the SEC on February 29, 2012. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. MGM Resorts International together with its subsidiaries may be referred to as "we," "us" or "our." MGM China Holdings Limited together with its subsidiaries is referred to as "MGM China."

Executive Overview

Our primary business is the ownership and operation of casino resorts, which includes offering gaming, hotel, convention, dining, entertainment, retail and other resort amenities. We believe that we own and invest in several of the premier casino resorts in the world and have continually reinvested in our resorts to maintain our competitive advantage. Most of our revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. We rely heavily on the ability of our resorts to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide cash for future development. Our results of operations are affected by decisions we make related to our capital allocation, our access to capital and our cost of capital. Our access to lower cost capital has improved, and over the next few years we remain committed to further deleveraging our balance sheet and improving our credit profile.

Our results of operations do not tend to be seasonal in nature, though a variety of factors may affect the results of any interim period, including the timing of major Las Vegas conventions, the amount and timing of marketing and special events for our high-end customers and the level of play during major holidays, including New Year and Chinese New Year. Our results do not depend on key individual customers, although our success in marketing to customer groups, such as convention customers, or the financial health of customer segments, such as business travelers or high-end gaming customers from a particular country or region, can affect our results. Certain of our resorts earn significant revenues from the high-end gaming business, which may lead to variability in our results.

We have two reportable segments that are based on the regions in which we operate: wholly owned domestic resorts and MGM China. We currently operate 15 wholly owned resorts in the United States. MGM China's operations consist of the MGM Macau resort and casino. We have additional business activities including investments in unconsolidated affiliates, our MGM Hospitality operations and certain other corporate and management operations. CityCenter is our most significant unconsolidated affiliate, which we also manage for a fee. Our operations which have not been segregated into separate reportable segments are reported as "corporate and other" operations in our reconciliations of segment results to consolidated results.

Wholly Owned Domestic Resorts

Over half of the net revenue from our wholly owned domestic resorts is derived from non-gaming operations including hotel, food and beverage, entertainment and other non-gaming amenities. We utilize our significant convention and meeting facilities to maximize hotel occupancy and customer volumes during off-peak times such as mid-week or during traditionally slower leisure travel periods, which also leads to better labor utilization. Our operating results are highly dependent on the volume of customers at our resorts, which in turn affects the price we can charge for our hotel rooms and other amenities. We market to different customer segments to manage our hotel occupancy, such as targeting large conventions to increase mid-week occupancy.

We generate a significant portion of our revenue from our wholly owned domestic resorts in Las Vegas, Nevada, which exposes us to certain risks, such as increased competition from new or expanded Las Vegas resorts, and from the expansion of gaming in the United States.

While adverse conditions in the economic environment affected our operating results in recent years, we believe positive trends, such as increased visitation and consumer spending, will continue. However, we believe that certain aspects of the current economy, such as continued weaknesses in employment and the housing market, will limit economic growth in the United States and temper our recovery. Because of these economic conditions, we have increasingly focused on managing costs and staffing levels across all our resorts and will continue to strive to achieve additional operating efficiencies. However, as a result of our leveraged business model, our operating results are significantly affected by our ability to generate operating revenues.

Key performance indicators related to gaming and hotel revenue at our wholly owned domestic resorts are:

† Gaming revenue indicators - table games drop and slots handle (volume indicators); "win" or "hold" percentage, which is not fully controllable by us. Our normal table games hold percentage is in the range of 19% to 23% of table games drop and our normal slots hold percentage is in the range of 7.5% to 8.5% of slots handle;

† Hotel revenue indicators - hotel occupancy (a volume indicator); average daily rate ("ADR," a price indicator); and revenue per available room ("REVPAR," a summary measure of hotel results, combining ADR and occupancy rate). Our calculation of ADR, which is the average price of occupied rooms per day, includes the impact of complimentary rooms. Complimentary room rates are determined based on an analysis of retail or "cash" rates for each customer segment and each type of room product to estimate complimentary rates which are consistent with retail rates. Complimentary rates are reviewed at least annually and on an interim basis if there are significant changes in market conditions. Because the mix of rooms provided on a complimentary basis, particularly to casino customers, includes a disproportionate suite component, the composite ADR including complimentary rooms is slightly higher than the ADR for cash rooms, reflecting the higher retail value of suites.

MGM China

On June 3, 2011, we and Ms. Ho, Pansy Catilina Chiu King ("Ms. Pansy Ho") completed a reorganization of the capital structure and the initial public offering of 760 million shares of MGM China on The Stock Exchange of Hong Kong Limited (the "IPO"), representing 20% of the post issuance base capital stock of MGM China, at an offer price of HKD 15.34 per share. Pursuant to this reorganization, we acquired, through a wholly owned subsidiary, an additional 1% of the overall capital stock of MGM China for HKD 15.34 per share, or approximately $75 million, and thereby became the owner of 51% of MGM China, which owns MGM Grand Paradise, S.A. ("MGM Grand Paradise"), the Macau company that owns the MGM Macau resort and casino ("MGM Macau") and the related gaming subconcession and land concession.

Through the acquisition of the additional 1% interest of MGM China, we obtained a controlling interest and were required to consolidate MGM China as of June 3, 2011. Prior to the IPO, we held a 50% interest in MGM Grand Paradise, which was accounted for under the equity method. The acquisition of the controlling financial interest was accounted for as a business combination and we recognized 100% of the assets, liabilities and noncontrolling interests of MGM China at fair value at the date of acquisition. The fair value of the equity of MGM China was determined by the IPO transaction price and equaled approximately $7.5 billion. The carrying value of our equity method investment was significantly less than our share of the fair value of MGM China, resulting in a $3.5 billion gain on the acquisition.

We believe our investment in MGM China plays an important role in extending our reach internationally and will foster future growth and profitability. Asia is the fastest-growing gaming market in the world and Macau is the world's largest gaming destination in terms of revenue, and has continued to grow over the past few years despite the global economic downturn.

Our MGM China operations primarily consist of MGM Macau. Revenues at MGM Macau are generated primarily from gaming operations made up of two distinct market segments: main floor and high-end ("VIP"). MGM Macau main floor operations consist of both table games and slot machines offered to the public, which usually consists of walk-in and day trip visitors. VIP players play mostly in dedicated VIP rooms or designated gaming areas. VIP customers can be further divided into customers sourced by in-house VIP programs and those sourced through gaming promoters. A significant portion of our VIP volume is generated through the use of gaming promoters, also known as junket operators. These operators introduce high-end gaming players to MGM Macau, assist these customers with travel arrangements and extend gaming credit to these players.

VIP gaming at MGM Macau is conducted by the use of special purpose nonnegotiable gaming chips called "rolling chips." Gaming promoters purchase these rolling chips from MGM Macau and in turn they sell these chips to their players. The rolling chips allow MGM Macau to track the amount of wagering conducted by each gaming promoter's clients in order to determine VIP gaming play. In exchange for the gaming promoters' services, MGM Macau pays them either through rolling chip turnover-based commissions or through revenue-sharing arrangements. The estimated portion of the gaming promoter payments that represent amounts passed through to VIP customers is recorded net against casino revenue, and the estimated portion retained by the gaming promoter for its compensation is recorded to casino expense.

In addition to the key performance indicators used by our wholly owned domestic resorts, MGM Macau utilizes "turnover," which is the sum of rolling chip wagers won by MGM Macau (rolling chips purchased plus rolling chips exchanged less rolling chips returned). Turnover provides a basis for measuring VIP casino win percentage. Normal win for VIP gaming operations at MGM Macau is in the range of 2.7% to 3.0% of turnover. MGM Macau's main floor historical table games hold percentage is in the range of 20% to 30% of table games drop. Normal slots hold percentage at MGM Macau is in the range of 5.5% to 7.5% of slots handle.

Corporate and Other

Corporate and other includes our investments in unconsolidated affiliates, MGM Hospitality and certain management and other operations.

CityCenter. We own 50% of CityCenter. The other 50% of CityCenter is owned by Infinity World Development Corp ("Infinity World"), a wholly owned subsidiary of Dubai World, a Dubai, United Arab Emirates government decree entity. CityCenter consists of Aria, a casino resort; Mandarin Oriental Las Vegas, a non-gaming boutique hotel; Crystals, a retail and entertainment district; and Vdara, a luxury condominium-hotel. In addition, CityCenter features residential units in the Residences at Mandarin Oriental. We receive a management fee of 2% of revenues for the management of Aria and Vdara, and 5% of EBITDA (as defined in the agreements governing our management of Aria and Vdara). In addition, we receive an annual fee of $3 million for the management of Crystals.

Other unconsolidated affiliates. We also own 50% interests in Grand Victoria and Silver Legacy. Grand Victoria is a riverboat casino in Elgin, Illinois; an affiliate of Hyatt Gaming owns the other 50% of Grand Victoria and also operates the resort. Silver Legacy is located in Reno, adjacent to Circus Circus Reno, and the other 50% is owned by Eldorado LLC.

MGM Hospitality. MGM Hospitality seeks to leverage our management expertise and well-recognized brands through strategic partnerships and international expansion opportunities. We have entered into management agreements for hotels in the Middle East, North Africa, India and, through its joint venture with Diaoyutai State Guesthouse, The People's Republic of China. MGM Hospitality opened its first resort, MGM Grand Sanya on Hainan Island, The People's Republic of China in early 2012.

Borgata. We have a 50% economic interest in Borgata Hotel Casino & Spa ("Borgata") located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation ("Boyd") owns the other 50% of Borgata and also operates the resort. Our interest is held in trust and currently offered for sale pursuant to our amended settlement agreement with New Jersey Department of Gaming Enforcement ("DGE") and approved by the New Jersey Casino Control Commission ("CCC"). The terms of the amended settlement agreement mandate the sale by March 2014. We have the right to direct the sale through March 2013, subject to approval of the CCC, and the trustee is responsible for selling the trust property during the following 12-month period.

We consolidate the trust as we are the sole economic beneficiary and we account for our interest in Borgata under the cost method. Distributions received by the trust that do not exceed our share of earnings are recognized currently in earnings. However, distributions received by the trust that exceed our share of earnings for such periods are applied to reduce the carrying amount of our investment. As of June 30, 2012, the trust had $162 million of cash and investments, of which $135 million is held in U.S. treasury securities with maturities greater than three months but less than one year, and is recorded within "Prepaid expenses and other." For the three and six months ended June 30, 2012, $3 million and $26 million, respectively were withdrawn from the trust account for the payment of property taxes and interest on our senior credit facility, as authorized in accordance with the terms of the trust agreement.

Results of Operations

The following discussion is based on our consolidated financial statements for the three and six months ended June 30, 2012 and 2011.

Summary Financial Results



The following table summarizes our financial results:



                                         Three Months Ended             Six Months Ended
                                              June 30,                      June 30,
                                        2012           2011           2012           2011
                                                          (In thousands)
Net revenues                         $ 2,323,765    $ 1,805,985    $ 4,611,355    $ 3,318,836
Operating income                         175,375      3,683,760        367,981      3,853,465
Net income (loss)                        (70,434 )    3,450,691       (273,741 )    3,360,820
Net income (loss) attributable to
MGM Resorts International               (145,452 )    3,441,985       (362,705 )    3,352,114

Our results of operations include the results of MGM China on a consolidated basis following the June 3, 2011 date of acquisition. Prior to that date, results of operations of MGM China were reflected under the equity method of accounting - see "Operating Results - Income (Loss) from Unconsolidated Affiliates."

Consolidated operating income was $175 million for the three months ended June 30, 2012 compared to $3.7 billion for the three months ended June 30, 2011. Operating income was affected by an $85 million impairment charge related to Grand Victoria in the current year. Operating income in the prior year quarter was affected by $26 million related to our share of the CityCenter residential inventory impairment and $3.5 billion related to the gain on MGM China. The current year quarter results benefited from improved operating results at MGM China, our wholly owned domestic resorts and CityCenter. Consolidated operating income was $368 million for the year-to-date period ended June 30, 2012 and was also impacted by the items noted above.

Corporate expense increased 6% to $43 million for the second quarter of 2012 and increased 11% to $85 million for the year-to-date period as a result of expenses related to the outsourcing of information systems and additional legal, professional services and development costs associated with future development initiatives. Depreciation and amortization in the second quarter of 2012 increased from 2011 primarily as a result of the consolidation of MGM China, which had $95 million of depreciation and amortization expense, including amortization of intangible assets recognized in the acquisition. Depreciation for the year-to-date period increased to $472 million and included $191 million of depreciation and amortization for MGM China.

Operating Results - Detailed Segment Information

The following table presents net revenue and Adjusted EBITDA by reportable segment. Management uses Adjusted Property EBITDA as the primary profit measure for our reportable segments. See "Non-GAAP Measures" for additional Adjusted EBITDA information:

                                        Three Months Ended             Six Months Ended
                                             June 30,                      June 30,
                                       2012           2011           2012           2011
                                                         (In thousands)
Net revenues:
Wholly owned domestic resorts       $ 1,505,228    $ 1,505,308    $ 2,984,826    $ 2,911,738
MGM China                               709,296        192,984      1,411,386        192,984
Reportable segment net revenues       2,214,524      1,698,292      4,396,212      3,104,722
Corporate and other                     109,241        107,693        215,143        214,114
                                    $ 2,323,765    $ 1,805,985    $ 4,611,355    $ 3,318,836

Adjusted EBITDA:
Wholly owned domestic resorts       $   345,158    $   331,386    $   666,130    $   631,348
MGM China                               186,560         46,422        351,081         46,422
Reportable segment Adjusted
Property EBITDA                         531,718        377,808      1,017,211        677,770
Corporate and other                     (30,233 )      (12,002 )      (85,394 )       10,229
                                    $   501,485    $   365,806    $   931,817    $   687,999

See below for detailed discussion of segment results related to our wholly owned domestic operations and MGM China. Corporate and other revenue includes revenues from MGM Hospitality and management operations and reimbursed revenue primarily related to our CityCenter management agreement. Adjusted EBITDA losses related to corporate and other for the quarter and six month periods increased primarily as a result of MGM Macau ceasing to be recorded as an equity method investment in 2011 and an increase in corporate expense as discussed above.

Wholly owned domestic resorts. The following table presents detailed net revenue at our wholly owned domestic resorts:

                                  Three Months Ended                         Six Months Ended
                                       June 30,                                  June 30,
                                      Percentage                                Percentage
                           2012         Change         2011          2012         Change         2011
                                                         (In thousands)
Casino revenue, net:
Table games             $   177,783           (2 )% $   182,319   $   384,245            5 %  $   367,127
Slots                       406,887            0 %      407,674       824,242            4 %      796,221
Other                        15,251          (14 )%      17,650        34,962            1 %       34,515
Casino revenue, net         599,921           (1 )%     607,643     1,243,449            4 %    1,197,863
Non-casino revenue:
Rooms                       404,570            3 %      392,500       784,043            3 %      760,837
Food and beverage           373,169            2 %      364,239       726,295            4 %      698,510
Entertainment, retail
and other                   286,629           (3 )%     296,908       550,824           (2 )%     559,244
Non-casino revenue        1,064,368            1 %    1,053,647     2,061,162            2 %    2,018,591
                          1,664,289            0 %    1,661,290     3,304,611            3 %    3,216,454
Less: Promotional
allowances                 (159,061 )          2 %     (155,982 )    (319,785 )          5 %     (304,716 )
                        $ 1,505,228            0 %  $ 1,505,308   $ 2,984,826            3 %  $ 2,911,738

Net revenue related to wholly owned domestic resorts for the second quarter of 2012 was flat compared to the prior year second quarter. Table games revenue decreased 2% for the second quarter of 2012. Table games hold percentage was 17.7% in the current year quarter and 18.2% in the prior year quarter. Slot revenue was flat for the second quarter.

Net revenue related to wholly owned domestic resorts increased 3% for the year-to-date period, driven by an increase in casino revenue. Table games revenue increased 5% for the year-to-date period with a hold percentage of 18.3% compared to 18.0% for the prior year period. Slots revenue was up 4% on a year-to-date basis.

Rooms revenue in the second quarter of 2012 increased 3%, with a 5% increase in Las Vegas Strip REVPAR. Rooms revenue for the 2012 year-to-date period increased 3% with a 5% increase in Las Vegas Strip REVPAR. The following table shows key hotel statistics for our Las Vegas Strip resorts:

                                        Three Months Ended        Six Months Ended
                                             June 30,                 June 30,
                                        2012         2011        2012         2011

Occupancy                                    94 %         94 %        92 %         90 %

Adjusted Property EBITDA for wholly owned domestic resorts increased 4% compared to the second quarter of 2011. The prior year quarter was negatively affected by the temporary closure of Gold Strike Tunica. Adjusted Property EBITDA for wholly owned domestic resorts increased 6% for the year-to-date period, driven by a 17% increase at the Bellagio.

MGM China. The following table presents summary financial results for MGM China beginning on June 3, 2011. Prior to June 3, 2011, the results of MGM Macau were accounted for under the equity method of accounting:

                     Three Months Ended        Six Months Ended
                          June 30,                 June 30,
                      2012        2011         2012         2011
                                    (In thousands)
Net revenues       $  709,296   $ 192,984   $ 1,411,386   $ 192,984
Operating income       90,215      19,448       158,342      19,448
Net income            139,658      15,515       160,282      15,515

For the three months ended June 30, 2012, net revenue for MGM China was $709 million, a 6% increase over MGM Macau's prior year quarter, driven by increases in volume for main floor table games and slots of 7% and 39%, respectively. VIP table games turnover decreased 6% from the prior year quarter, while hold percentage was 3.3% in the current year quarter compared to 3.1% in the prior year quarter. MGM China's operating income was $90 million for the three months ended June 30, 2012 and Adjusted Property EBITDA was $187 million, which included $12 million of branding fee expense. Excluding branding fees, Adjusted Property EBITDA increased 14% over MGM Macau's prior year second quarter results.

Net revenue for MGM China for the six month period ended June 30, 2012 was $1.4 billion, a 12% increase over the prior year period driven by increases in volume for main floor table games and slots of 10% and 33%, respectively. VIP table games turnover decreased less than 1% from the prior year, while hold percentage was 3.2% in the current year compared to 3.0% in the prior year period. MGM China's operating income was $158 million for the six month period ended June 30, 2012 and Adjusted Property EBITDA was $351 million, which included $25 million of branding fee expense. Excluding branding fees, Adjusted Property EBITDA increased 17% over MGM Macau's prior year results for the six month period ended June 30, 2012.

Operating Results - Details of Certain Charges



Property transactions, net consisted of the following:



                                            Three Months Ended            Six Months Ended
                                                 June 30,                     June 30,
                                            2012           2011          2012          2011
                                                            (In thousands)
Grand Victoria investment impairment
charge                                  $     85,009    $        -    $    85,009    $       -
Other property transactions, net               5,458           900          6,375          991
                                        $     90,467    $      900    $    91,384    $     991

At June 30, 2012, we reviewed the carrying value of our Grand Victoria investment for impairment due to a decrease in operating results at the property and the loss of market share as a result of the opening of a new river boat casino in the Illinois market, as well as a decrease in forecasted cash flows for 2013 through 2015. We used a discounted cash flow analysis to determine the estimated fair value from a market participant's point of view. Key assumptions included in the analysis were estimates of future cash flows including outflows for capital expenditures, a long-term growth rate of 2% and a discount rate of 10.5%. As a result of the discounted cash flow analysis, we determined that it was necessary to record an other-than-temporary impairment charge of $85 million based on an estimated fair value of $205 million for our 50% interest. We intend to and believe we will be able to retain our investment in Grand Victoria; however, due to the extent of the shortfall and our assessment of the uncertainty of fully recovering our investment, we have determined that the impairment was other-than-temporary.

. . .