mgm-ex993_270.htm

We have audited the accompanying consolidated financial statements of CityCenter Holdings, LLC and its subsidiaries (the “Company”), which comprise the consolidated balance sheets as of December 31, 2015 and 2014, and the related consolidated statements of operations, members’ equity, and cash flows for each of the three years in the period ended December 31, 2015, and the related notes to the consolidated financial statements.

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CityCenter Holdings, LLC and its subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in accordance with accounting principles generally accepted in the United States of America.

	December 31,
	2015		2014

ASSETS
Current assets
Cash and cash equivalents	$	269,557	$	266,411
Restricted cash		-		143,170
Accounts receivable, net		107,179		106,477
Inventories		18,786		20,537
Prepaid expenses and other current assets		28,621		25,309
Total current assets		424,143		561,904

Residential real estate		1,771		17,007

Property and equipment, net		7,569,599		7,795,723

Other assets
Intangible assets, net		21,769		22,969
Deposits and other assets, net		41,501		34,908
Total other assets		63,270		57,877
	$	8,058,783	$	8,432,511
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Accounts payable	$	23,027	$	24,151
Construction payable		7,513		203,401
Current portion of long-term debt		5,167		-
Due to MGM Resorts International		55,018		45,500
Other accrued liabilities		181,048		235,116
Total current liabilities		271,773		508,168

Long-term debt, net		1,480,529		1,519,442
Other long-term obligations		18,726		20,369

Commitments and contingencies (Note 11)

Members' equity		6,287,755		6,384,532
	$	8,058,783	$	8,432,511

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

	Year Ended December 31,
	2015			2014			2013
Revenues
Casino	$	450,166		$	422,979		$	447,106
Rooms		429,488			409,495			370,199
Food and beverage		289,925			297,567			286,322
Entertainment		54,273			55,225			66,418
Retail		81,857			79,236			77,195
Residential		33,358			62,985			99,370
Other		52,065			51,590			46,830
		1,391,132			1,379,077			1,393,440
Less: Promotional allowances		(130,673	)		(129,683	)		(137,001	)
		1,260,459			1,249,394			1,256,439
Expenses
Casino		230,227			226,582			223,302
Rooms		133,507			130,150			115,492
Food and beverage		174,624			179,588			174,547
Entertainment		36,904			37,318			44,708
Retail		19,837			19,148			25,231
Residential		23,994			49,195			75,791
Other		31,197			30,505			27,668
General and administrative		258,298			278,543			262,187
Preopening and start-up expenses		-			-			752
Property transactions, net		(154,733	)		61,914			(11,265	)
Depreciation and amortization		272,330			350,926			345,920
		1,026,185			1,363,869			1,284,333
Operating income (loss)		234,274			(114,475	)		(27,894	)
Non-operating income (expense)
Interest income		541			332			1,463
Interest expense, net		(72,791	)		(82,260	)		(239,052	)
Loss on retirement of debt		-			(4,584	)		(140,390	)
Other, net		(191	)		(7,579	)		(37,275	)
		(72,441	)		(94,091	)		(415,254	)
Net income (loss)	$	161,833		$	(208,566	)	$	(443,148	)

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

	Year Ended December 31,
	2015			2014			2013
Cash flows from operating activities
Net income (loss)	$	161,833		$	(208,566	)	$	(443,148	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		272,330			350,926			345,920
Amortization of debt discounts and issuance costs		4,486			4,718			58,461
Pay-in-kind interest		-			-			31,874
Loss on retirement of long-term debt		-			4,584			140,390
Property transactions, net		(154,733	)		61,914			(11,265	)
Provision for doubtful accounts		22,420			18,311			7,272
Changes in current assets and liabilities:
Accounts receivable		(22,622	)		3,756			(33,330	)
Inventories		1,751			(263	)		1,783
Prepaid expenses and other		(11,612	)		(279	)		(2,178	)
Accounts payable and accrued liabilities		(74,248	)		(8,248	)		(10,904	)
Change in residential real estate		6,609			44,548			62,575
Change in residential mortgage notes receivable		-			-			42,096
Other		(7,754	)		(6,924	)		21
Net cash provided by operating activities		198,460			264,477			189,567
Cash flows from investing activities
Capital expenditures, net of construction payable		(133,966	)		(60,266	)		(66,825	)
Litigation settlements and insurance proceeds		87,617			93,635			-
Increase in restricted cash		-			(85,164	)		(128,195	)
Decrease in restricted cash		143,170			13,900			201,990
Other		(49	)		(746	)		(977	)
Net cash provided by (used in) investing activities		96,772			(38,641	)		5,993
Cash flows from financing activities
Net repayments under bank credit facilities – maturities of three months or less		(38,000	)		(154,250	)		-
Retirement of senior notes, including premiums paid		-			-			(1,967,183	)
Issuance of senior secured credit facility		-			-			1,683,000
Dividends paid		(400,000	)		-			-
Cash contributions from Members		141,390			31,400			24,600
Due to MGM Resorts International		4,524			(3,002	)		(2,295	)
Debt issuance costs		-			(772	)		(19,417	)
Net cash used in financing activities		(292,086	)		(126,624	)		(281,295	)

Cash and cash equivalents
Net increase (decrease) for the period		3,146			99,212			(85,735	)
Balance, beginning of period		266,411			167,199			252,934
Balance, end of period	$	269,557		$	266,411		$	167,199

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

Balance as of January 1, 2013	$	6,167,764

Cash contributions by Members		24,600
Amounts due to MGM Resorts International reclassified to equity (Note 12)		72,618
Conversion of Members' notes to equity (Notes 8 and 12)		737,511
Non-cash capital contributions		2,353

Net loss		(443,148	)

Balance as of December 31, 2013		6,561,698

Cash contributions by Members		31,400

Net loss		(208,566	)

Balance as of December 31, 2014		6,384,532

Cash contributions by Members		141,390
Dividends paid		(400,000	)

Net income		161,833

Balance as of December 31, 2015	$	6,287,755

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

Organization. CityCenter Holdings, LLC (the “Company”) is a Delaware limited liability company formed on November 2, 2007. The Company was formed to acquire, own, develop and operate the CityCenter development (“CityCenter”) in Las Vegas, Nevada. The Company is a joint venture which is 50%-owned by a wholly owned subsidiary of MGM Resorts International (together with its wholly owned subsidiaries, “MGM Resorts”), a Delaware corporation, and 50%-owned by Infinity World Development Corp (“Infinity World”), which is wholly owned by Dubai World, a Dubai United Arab Emirates government decree entity (each, a “Member”). The governing document for the Company is the Third Amended and Restated Limited Liability Company Agreement dated December 22, 2015 (the “LLC Agreement”).

Under the LLC Agreement, the Board of Directors of the Company is composed of six representatives (subject to intermittent vacancies) – three selected by each Member – and has exclusive power and authority for the overall management of the Company. Compensation for Board of Directors’ duties is borne by the Members. The Company has no employees and has entered into several agreements with MGM Resorts to provide for the development and day-to-day management of CityCenter and the Company. See Note 14 for further discussion of such agreements.

Nature of Business. CityCenter is a mixed-use development on the Las Vegas Strip located between the Bellagio and Monte Carlo resorts, both owned by MGM Resorts. CityCenter consists of the following components:

Substantially all of the operations of CityCenter commenced in December 2009, and closing of sales of residential condominium units began in early 2010. See Note 11 for discussion of the demolition of the Harmon Hotel & Spa (“Harmon”).

Basis of presentation. The consolidated financial statements include the accounts of the Company and its subsidiaries. The Company does not have a variable interest in any variable interest entities. All intercompany balances and transactions have been eliminated in consolidation. The results of operations are not necessarily indicative of the results to be expected in the future.

Management’s use of estimates. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Those principles require the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair value measurements. Fair value measurements affect the Company’s accounting for and impairment assessments of its long-lived assets, residential real-estate, residential mortgage notes and intangible assets. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy consisting of: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs.

When assessing fair value of its residential real estate, the Company estimates fair value less costs to sell utilizing Level 3 inputs, including a discounted cash flow analysis based on management’s current expectations of future cash flows. See Note 4 for further discussion.

The Company valued its residential mortgage notes using a discounted cash flow analysis based on Level 3 inputs, including contractual cash flows and discount rates based on market indicators. The Company sold its residential mortgage note portfolio in 2013. See “Residential mortgage notes” below for further discussion.

Cash and cash equivalents. Cash and cash equivalents include investments and interest bearing instruments with maturities of three months or less at the date of acquisition. Such investments are carried at cost, which approximates fair value.

Restricted cash. As of December 31, 2014, restricted cash included $58 million in condo proceeds contractually restricted to use for payment on construction related liens, which were subsequently used to fund amounts due to Perini Building Company (“Perini”) pursuant to the settlement agreements, and $85 million of restricted cash related to insurance proceeds received in connection with certain settlement agreements, discussed in Note 11. Under the terms of the agreements applicable to CityCenter, such proceeds were being held in a segregated account and were payable by the Company to MGM Resorts. During 2015 such restrictions were removed in accordance with these agreements. See Notes 11 and 13 for further discussion.

Accounts receivable and credit risk. The Company issues markers to approved casino customers following investigations of creditworthiness. As of December 31, 2015, approximately 73% of the Company’s casino receivables were due from customers residing in foreign countries. Business or economic conditions or other significant events in these countries could affect the collectability of such receivables.

Trade receivables, including casino and hotel receivables, are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded when received. An allowance for doubtful accounts is maintained to reduce the Company’s receivables to their estimated realizable amount, which approximates fair value. The allowance is estimated based on a specific review of customer accounts as well as historical collection experience and current economic and business conditions. Management believes that as of December 31, 2015, no significant concentrations of credit risk existed.

Inventories. Inventories consist primarily of food and beverage, retail merchandise and operating supplies, and are stated at the lower of cost or market. Cost is determined primarily by the average cost method for food and beverage and operating supplies. Cost for retail merchandise is determined using the cost method.

Residential real estate. Residential real estate represents capitalized costs of residential inventory, which consists of completed condominium units available for sale less impairments previously recognized. Costs include land, direct and indirect construction and development costs, and capitalized property taxes and interest. See Note 4 for further discussion of residential real estate.

As part of an increase in the Company’s construction accrual during 2013, the Company recognized an increased cost of its residential inventory of $20 million, $14 million of which was recorded to “Property transactions, net” in the year ended December 31, 2013, representing additional costs associated with previously sold residential units.

Residential operating expenses include cost of real estate sold, holding costs, selling costs, indirect selling costs and valuation allowances for residential mortgage notes receivable. Costs associated with residential sales were deferred during construction, except for indirect selling costs and general and administrative expense, which were expensed as incurred.

Property and equipment. Property and equipment are stated at cost including capitalized interest. Gains or losses on dispositions of property and equipment are included in the determination of income or loss. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated over the following estimated useful lives on a straight-line basis:

Project costs are stated at cost and recorded as property and equipment (which includes adjustments made upon the initial contribution by MGM Resorts) unless determined to be impaired, in which case the carrying value is reduced to estimated fair value. Final costs of the initial project were determined in connection with settlement of Perini litigation in December 2014 as discussed in Note 11. The Company recorded non-operating expense related to the Perini settlement of $8 million and $37 million for statutory

interest on estimated amounts payable in 2014 and 2013, respectively. At December 31, 2014, the Company accrued $139 million payable to Perini related to the settlement agreement.

In December 2015, the Company decided to close the Zarkana show at the Aria Resort & Casino as part of a plan to expand its conference and convention space. The Company expects the majority of the assets related to the Zarkana theatre will be disposed in April 2016 with construction of the conference and convention space to begin in May 2016. As a result, the Company has shortened the useful life of the assets related to the Zarkana theatre and recognized $20 million in accelerated depreciation expense associated with such assets in 2015. Accelerated depreciation expense of $20 million will be recognized each month until the theatre’s disposition in April 2016.

Impairment of long-lived assets. The Company evaluates its property and equipment for impairment as held and used. The Company reviews assets to be held and used for impairment whenever indicators of impairment exist. It then compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying amount of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying amount, then impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model.

Intangible assets. Indefinite-lived intangible assets are reviewed for impairment at least annually and between annual test dates in certain circumstances. The Company performs its annual impairment test for indefinite-lived intangible assets in the fourth quarter of each fiscal year. See Note 6 for further discussion.

Debt issuance costs. The Company capitalizes debt issuance costs, which include legal and other direct costs related to the issuance of debt. The capitalized costs are amortized straight-line to interest expense over the contractual term of the debt. The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” (“ASU 2015-03”), in 2015 on a retrospective basis as further discussed in the “Recently issued accounting standards” section. Accordingly, a reclassification has been made to the prior year financial statements to reclassify $13 million from Deposits and other assets, net, to Long-term debt, net as of December 31, 2014.

Revenue recognition and promotional allowances. Casino revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs (“casino front money”) and for chips in the customers’ possession (“casino outstanding chip liability”). Hotel, food and beverage, entertainment, retail and other operating revenues are recognized as services are performed and goods are provided. Advance deposits on rooms and advance ticket sales are recorded as accrued liabilities until services are provided to the customer.

Gaming revenues are recognized net of certain sales incentives, including discounts and points earned in point-loyalty programs. The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenue and then deducted as promotional allowances. The estimated cost of providing such promotional allowances is primarily included in casino expenses as follows:

Real estate sales – revenue recognition. Revenue for residential sales is deferred until closing occurs, which is when title, possession and other attributes of ownership have been transferred to the buyer and the Company is not obligated to perform activities after the sale. Additionally, the buyer’s initial and continuing investment must be adequate to demonstrate a commitment to pay and the buyer’s receivable cannot be subject to future subordination.

Leases where the Company is a lessor. The majority of the Company’s revenue from leasing activities relates to Crystals. Minimum rental revenue, if applicable to the lease, is recognized on a straight-line basis over the terms of the related leases. Revenue from contingent rent is recognized as earned. The Company provides construction allowances to certain tenants. Construction allowances are recorded as fixed assets if the Company has determined it is the owner of such improvements for accounting purposes; improvements related specifically to the current tenant are depreciated over the shorter of the asset life or lease term. Where the Company has determined it is not the owner of such improvements, the construction allowances are amortized over the life of the related lease as a reduction of revenue.

Loyalty programs. Aria participates in the MGM Resorts’ “M life” loyalty program. Customers may earn points and/or Express Comps for their gaming play which can be redeemed at restaurants, box offices or the M life front desk at participating properties. Points may also be redeemed for free slot play on participating machines. The Company records a liability based on the points earned multiplied by the redemption value, less an estimate for points not expected to be redeemed, and records a corresponding reduction in casino revenue. Customers also earn Express Comps based on their gaming play which can be redeemed for complimentary goods and services, including hotel rooms, food and beverage, and entertainment. The Company records a liability for the estimated costs of providing goods and services for Express Comps based on the Express Comps earned multiplied by a cost margin, less an estimate for Express Comps not expected to be redeemed and records a corresponding expense in the casino department.

Preopening and start-up expenses. Costs incurred for one-time activities during the start-up phase of operations are accounted for as preopening and start-up costs. Preopening and start-up costs, including organizational costs, are expensed as incurred. No preopening expenses were incurred for the periods ended December 31, 2015 and 2014. During 2013, costs classified as preopening and start-up expense represent costs associated with the opening of a new wedding chapel.

Advertising. The Company expenses advertising costs the first time the advertising takes place. Advertising expense is included in preopening and start-up expenses when related to the preopening and start-up period and in general and administrative expense when related to ongoing operations or residential selling expenses. Advertising expense was $20 million for the each of the years ended December 31, 2015, 2014 and 2013.

Property transactions, net. The Company classifies transactions related to long-lived assets – such as write-downs and impairments, demolition costs, and gains and losses on the sale of fixed assets – within “Property transactions, net” in the accompanying consolidated statements of operations. See Note 9 for details.

Residential mortgage notes. Certain buyers of CityCenter’s residential units participated in the Company’s seller financing program, whereby the Company provided first mortgage financing. All mortgage notes were classified as held for sale and reported at the lower of cost or fair value, determined based on management’s assessment of the market terms of the portfolio and its collectability. The evaluation of collectability was based on several factors including past payment history, duration of the loan, creditworthiness, loan-to-value ratios, underlying collateral, and present economic conditions. The entire residential mortgage note receivable portfolio was sold in April 2013.

Income taxes. The Company is treated as a partnership for federal income tax purposes. Therefore, federal income taxes are the responsibility of the Members. As a result, no provision for income taxes is reflected in the accompanying consolidated financial statements.

Comprehensive income (loss). Net income (loss) equals comprehensive income (loss) for all periods presented.

Dividends. In April 2015, the Company adopted an annual distribution policy and declared and paid a special dividend of $400 million. Under the annual distribution policy, the Company will distribute up to 35% of excess cash flow, subject to the approval of the Company’s board of directors.

Recently issued accounting standards. On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842),” (“ASU 2016-02”), which replaces the existing guidance in Accounting Standards Codification 840, Leases. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (“ROU”) asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. The Company is currently assessing the impact that adoption of this guidance will have on its consolidated financial statements and footnote disclosures.

In August 2015, the FASB issued Accounting Standards Update No. 2015-14, “Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date,” which defers the effective date of Accounting Standards Update No. 2014-09, “Revenue From Contracts With Customers,” (“ASU 2014-09”) to the fiscal year, and interim periods within the year, beginning on or after December 15, 2017. FASB ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. Additionally, the new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The Company is currently assessing the impact that adoption of this guidance will have on its consolidated financial statements and footnote disclosures.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”), effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. ASU 2015-11 requires inventory that is measured using first-in, first-out (FIFO) or average cost method to be measured “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures). ASU No. 2015-11 will not apply to inventories that are measured by using either the LIFO method or the retail inventory method. The Company is currently assessing the impact that adoption of ASU 2015-11 will have on its consolidated financial statements and footnote disclosures.

During 2015, the Company early adopted ASU 2015-03, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The amortization of such costs will continue to be reported as interest expense. In addition, in accordance with Accounting Standards Update No. 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements: Amendments to SEC Paragraph Pursuant to Staff Announcement at June 18, 2015 EITF Meeting,” (“ASU 2015-15”), which was adopted concurrent with ASU 2015-03, the Company will continue to present the debt issuance costs associated with the Company's revolving credit facilities as other assets included within the Company's consolidated balance sheets and continue amortizing those deferred costs over the term of the related facilities. ASU 2015-03 requires the new guidance to be applied on a retrospective basis. Accordingly, as of December 31, 2015 and 2014, the Company reclassified $11 million and $13 million, respectively, of debt issuance costs in the accompanying consolidated balance sheets.

Subsequent events. Management has evaluated subsequent events through February 26, 2016, the date these consolidated financial statements were issued.

Residential real estate was $2 million and $17 million as of December 31, 2015 and 2014, respectively. As of December 31, 2014, an additional $7 million was recorded in property and equipment, net related to a portion of the residential inventory in the rental program. During the years ended December 31, 2015, 2014 and 2013, the Company transferred $7 million, $43 million, and $16 million, respectively, of net residential real estate assets from property and equipment, net related to a portion of the units that were previously included in the rental program.

The Company is required to carry its residential inventory at the lower of cost or fair value less costs to sell. When assessing impairment of its residential real estate, the Company estimates fair value less costs to sell utilizing Level 3 inputs, including a discounted cash flow analysis based on management’s current expectations of future cash flows. These estimates are subject to management’s judgment and are highly sensitive to changes in the market and economic conditions. No impairment charges were recorded against the Company’s residential inventory for the years ended December 31, 2015, 2014 and 2013.

The majority of the Company’s intangible assets are assets that were contributed by MGM Resorts upon formation of the Company. Intellectual property represents trademarks, domain names, and other intellectual property including the CityCenter, Aria, Vdara and Crystals tradenames and Aria.com domain. There is no contractual or market-based limit to the use of these intangible assets and therefore they have been classified as indefinite-lived.

The Company performs an annual review of its indefinite-lived intangible assets for impairment in the fourth quarter each year. The asset’s fair value is compared to its carrying value, and an impairment charge is recorded for any short-fall. Fair value is estimated using the relief-from-royalty method which discounts cash flows that would be required to obtain the use of the related intangible asset. Key inputs in the relief-from-royalty analysis include forecasted revenues related to the intangible asset, market royalty rates, discount rates and terminal year growth rates.

The aircraft time sharing agreement intangible asset relates to an agreement between MGM Resorts and the Company whereby MGM Resorts provides the Company the use of MGM Resorts’ aircraft in its operations. The Company is charged a rate that is based on Federal Aviation Administration regulations, which provides for reimbursement for specific costs incurred by MGM Resorts without any profit or mark-up. Accordingly, the fair value of this agreement was recognized as an intangible asset, and is being amortized on a straight-line basis over 20 years, and will be fully amortized in 2029.

	December 31,
	2015		2014

	(In thousands)
Advance deposits and ticket sales	$	31,033	$	25,856
Casino outstanding chip liability		56,807		45,863
Casino front money deposits		36,764		40,038
Other gaming related accruals		10,257		7,089
Taxes, other than income taxes		15,616		14,817
Harmon demolition accrual		14,693		22,778
Deferred insurance proceeds		-		55,000
Other		15,878		23,675
	$	181,048	$	235,116

See Note 11 for discussion of the Harmon demolition accrual and deferred insurance proceeds.

Senior secured credit facility. At December 31, 2015, the Company’s senior secured credit facility consisted of a $75 million revolving facility maturing in October 2018, and a $1.5 billion term loan B facility maturing in October 2020. The term loan B facility requires the Company to make amortization payments of 0.25% of the original principal balance at each quarter end. In June 2014 the Company completed a repricing of the term loan B facility and used available cash to permanently repay $150 million of the term loan B facility, a portion of which represents the amortization obligation through the remaining term of the facility.

The loans under the term loan B bear interest, in the case of Eurodollar loans, at LIBOR plus 3.25% with a LIBOR floor of 1.00%, and in the case of base rate loans, at the base rate plus 2.25%. As of December 31, 2015, the interest rate on the term loan B was 4.25%. Loans under the revolving facility bear interest, in the case of Eurodollar loans, at LIBOR plus 3.75% or 4.00%, depending on the Company’s credit ratings, and in the case of base rate loans, 2.75% or 3.00%, depending on the Company’s ratings. Additionally, the Company pays an applicable fee of 0.375% or 0.50%, depending on the Company’s credit ratings, for the unused portion of the revolving facility. The Company had $63 million of available borrowing capacity under its senior secured credit facility at December 31, 2015.

In connection with the closing of the senior secured credit facility in October 2013, the Company redeemed its existing 7.625% senior secured first lien notes and 10.75% senior secured second lien PIK toggle notes at a premium in accordance with the terms of the indentures governing those notes. As a result of the transaction, the Company recorded a loss on retirement of long-term debt of $140 million, primarily consisting of premiums associated with the redemption of the existing first and second lien notes as well as the write-off of previously unamortized debt issuance costs. In connection with the October 2013 debt restructuring, sponsor notes with a carrying value of approximately $738 million were converted to Members’ equity. As a result of these transactions, the senior secured credit facility is CityCenter’s only remaining long-term debt.

The senior secured credit facility is a general senior obligation of the Company and ranks equally with the Company’s other existing and future senior obligations, is fully and unconditionally guaranteed on a senior secured basis by the restricted subsidiaries of the Company, and is secured by a first-priority perfected lien on substantially all of the Company’s assets and the assets of its subsidiaries.

The senior secured credit facility contains covenants that, among other things, restrict the Company’s ability to (i) incur additional indebtedness or liens, (ii) pay dividends or make distributions on its equity interests or repurchase its equity interests, (iii) make certain investments, (iv) enter into certain burdensome agreements limiting the ability of its subsidiaries to pay dividends or make other distributions to it, (v) sell certain assets or merge with or into other companies, and (vi) enter into certain transactions with its equity holders and affiliates. In addition, the senior secured credit facility includes certain financial covenants that require the Company to maintain a quarterly minimum interest coverage ratio of 2.0:1.0 and a maximum quarterly leverage ratio for the trailing four quarters of: 6.75:1.00 for December 31, 2015; 6.00:1.00 for March 31, 2016 through December 31, 2016; and 5.50:1.00 for March 31, 2017 and thereafter. The Company was in compliance with all applicable covenants as of December 31, 2015.

Pursuant to the senior secured credit facility, the Company is required to make permanent repayments of principal based on an annual calculation of excess cash flow, as defined in the agreements. The percentage of excess cash flow required to be repaid is based on the Company’s leverage ratio as of the end of the fiscal year, with 50% required to be repaid if the leverage ratio is greater than 5.0:1.0 as of the measurement date, 25% if the leverage ratio is less than or equal to 5.0:1.0 and greater than 4.0:1.0, and no payment of excess cash flow is required if the leverage ratio is less than or equal to 4.0:1.0. As of December 31, 2015, the Company’s excess cash flow required to be paid in accordance with the senior secured credit agreement for 2015 was $43 million. During 2015 the Company paid $38 million related to its 2015 excess cash flow obligation and recorded $5 million in current portion of long-term debt related to its remaining obligation. As of December 31, 2014, the Company’s excess cash flow required to be paid in accordance with the senior secured credit agreement for 2014 was included in the $150 million principal repayments. As a result, the Company did not record a current portion of long-term debt related to a 2014 obligation of excess cash flow repayment.

Fair value of long-term debt. The estimated fair value of the Company’s long-term debt as of December 31, 2015 and 2014 was approximately $1.50 billion and $1.61 billion, respectively, and was determined using estimates based on trading prices of similar liabilities, a Level 2 input.

Maturities of long-term debt. As of December 31, 2015, maturities of the Company’s long-term debt were as follows:

In 2015, the Company recorded a $160 million gain associated with the settlement of the Perini litigation. See Note 11 for details.

In 2014, the Company recorded charges of $48 million related to certain settlement agreements in conjunction with the resolution of the Perini litigation as discussed in Note 11.

In 2013, the Company recognized a $33 million gain associated with the settlement of insurance claims for errors and omissions with respect to the original construction of CityCenter. Other property transactions, net for the year ended December 31, 2013 includes $14 million related to increases in cost estimates allocated to residential units sold in prior periods.

Other property transactions, net for the years ended December 31, 2015, 2014 and 2013 also includes miscellaneous asset disposals in the normal course of business.

The Company determines its segments based on the nature of the products and services provided. There are six operating segments: Aria, Vdara, Mandarin Oriental hotel, Crystals, Mandarin Oriental residential and Veer residential. Mandarin Oriental has both a hotel and a residential operating segment. The Company has aggregated residential operations into one reportable segment (“Residential”) given the similar economic characteristics and business of selling and leasing high-rise condominiums. All other operating segments are reported separately. The Company’s operating segments do not include the ongoing activity associated with closing out its construction costs and certain corporate administrative costs.

The Company analyzes the results of its operating segments’ operations based on Adjusted EBITDA, which it defines as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, and property transactions, net. The Company believes Adjusted EBITDA is 1) a widely used measure of operating performance in the hospitality and gaming industry, and 2) a principal basis for valuation of hospitality and gaming companies.

While items excluded from Adjusted EBITDA may be recurring in nature and should not be disregarded in evaluating the Company’s or its segments’ earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, the Company believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, write-downs and impairments includes normal recurring disposals and gains and losses on sales of assets related to specific assets within CityCenter, but also includes impairment charges which may not be comparable period over period.

	Year Ended December 31,
	2015		2014		2013

Net revenues	(In thousands)
Aria	$	985,483	$	955,563	$	951,727
Vdara		111,006		103,856		90,444
Mandarin Oriental		61,541		60,515		53,714
Crystals		69,071		66,475		61,184
Residential		33,358		62,985		99,370
Net revenues	$	1,260,459	$	1,249,394	$	1,256,439

	Year Ended December 31,
	2015			2014			2013

Adjusted EBITDA	(In thousands)
Aria	$	267,606		$	242,790		$	252,670
Vdara		29,666			25,688			20,650
Mandarin Oriental		5,685			5,028			3,471
Crystals		44,997			43,453			38,712
Residential		7,877			9,378			15,171
Reportable segment Adjusted EBITDA		355,831			326,337			330,674

Other operating income (expense)
Development and corporate administration		(3,960	)		(27,972	)		(23,161	)
Preopening and start-up expenses		-			-			(752	)
Property transactions, net		154,733			(61,914	)		11,265
Depreciation and amortization		(272,330	)		(350,926	)		(345,920	)
Operating income (loss)		234,274			(114,475	)		(27,894	)

Non-operating income (expense)
Interest income		541			332			1,463
Interest expense, net		(72,791	)		(82,260	)		(239,052	)
Loss on retirement of debt		-			(4,584	)		(140,390	)
Other, net		(191	)		(7,579	)		(37,275	)
		(72,441	)		(94,091	)		(415,254	)
Net income (loss)	$	161,833		$	(208,566	)	$	(443,148	)

	Year Ended December 31,
	2015		2014		2013

Capital expenditures	(In thousands)
Aria	$	47,807	$	31,174	$	28,687
Vdara		1,121		1,583		4,391
Mandarin Oriental		1,050		814		325
Crystals		1,399		169		5,236
Residential		-		-		-
Reportable segment capital expenditures		51,377		33,740		38,639
Development and corporate administration, net of change in construction payable and due to MGM Resorts International		82,589		26,526		28,186
Capital expenditures, net of change in construction payable	$	133,966	$	60,266	$	66,825

Capital expenditures related to the original construction costs are included in “development and corporate administration, net of change in construction payable and due to MGM Resorts International.” See Note 2 for discussion of project costs and allocation methodologies. Ongoing capital expenditures not related to the project budget are included within the relevant segments.

Construction litigation. In March 2010, Perini, general contractor for CityCenter, filed a lawsuit in the Eighth Judicial District Court for Clark County, State of Nevada, against MGM MIRAGE Design Group (a wholly owned subsidiary of MGM Resorts which was the original party to the Perini construction agreement) and certain direct or indirect subsidiaries of the Company. Perini asserted, among other things, that CityCenter was substantially completed, but the defendants failed to pay Perini approximately $490 million allegedly due and owing under the construction agreement for labor, equipment and materials expended on CityCenter.

In April 2010, Perini served an amended complaint in this case which joined as defendants many owners of CityCenter residential condominium units (the “Condo Owner Defendants”), added a count for foreclosure of Perini's recorded master mechanic’s lien against the CityCenter property in the amount of approximately $491 million, and asserted the priority of this mechanic’s lien over the interests of the Company, the Condo Owner Defendants and the Company’s lenders in the CityCenter property. In November 2012, Perini filed a second amended complaint which, among other things, added claims against the CityCenter defendants of breach of contract (alleging that CityCenter’s Owner Controlled Insurance Program (“OCIP”) failed to provide adequate project insurance for Perini with broad coverages and high limits), and tortious breach of the implied covenant of good faith and fair dealing (alleging improper administration by the Company of the OCIP and Builders Risk insurance programs). Prior to the Final Settlement, as defined below, the Company settled the claims of 219 first-tier Perini subcontractors (including the claims of any lower-tier subcontractors that might have claims through those first-tier subcontractors). As a result of these settlement agreements and the prior settlement agreements between Perini and the Company, most but not all of the components of Perini’s non-Harmon-related lien claim against the Company were resolved. On February 24, 2014, Perini filed a revised lien for $174 million as the amount claimed by Perini and the remaining Harmon-related subcontractors.

During 2013, the Company reached a settlement agreement with certain professional service providers against whom it had asserted claims in this litigation for errors or omissions with respect to the CityCenter project, and relevant insurers. This settlement was approved by the court and the Company received proceeds of $38 million in 2014 related to both the Harmon and other components of the CityCenter project.

In 2014, the Company reached a settlement with builder’s risk insurers of a claim relating to damage alleged at the Harmon and received proceeds of $55 million.

In December 2014, the Perini matter was concluded through a global settlement among the Company, MGM Resorts, Perini, the remaining subcontractors, including those implicated in the Harmon work (and their affiliates), and relevant insurers, which followed the previously disclosed settlement agreements and an extra-judicial program for settlement of certain project subcontractor claims. This global settlement concluded all outstanding claims in the case (the “Final Settlement”). The effectiveness of the global settlement was made contingent upon the Company’s execution of certain indemnity and release agreements (which were executed in January 2015) and the Company’s procurement of replacement general liability insurance covering construction of the CityCenter development (which was obtained in January 2015).

The Final Settlement, together with previous settlement agreements relating to the non-Harmon related lien claims, resolved all of Perini’s and the remaining subcontractors’ lien claims against the Company and MGM Resorts, certain direct and indirect subsidiaries, MGM Resorts International Design (formerly known as MGM MIRAGE Design Group), and the Condo Owner Defendants. However, the Company expressly reserved any claims for latent or hidden defects as to any portion of CityCenter’s original construction (other than the Harmon) not known to the Company at the time of the agreement. The Company and MGM Resorts entered into the Final Settlement solely as a compromise and settlement and not in any way as an admission of liability or fault.

With respect to its non-Harmon lien claims, Perini waived a specific portion of its lien claim against the Company, which combined with the prior non-Harmon agreement and accrued interest resulted in a total payment to Perini of $153 million, approximately $14 million of which was paid in December 2014. The total payment to Perini was funded by MGM Resorts under their completion guarantee and included the application of approximately $58 million of condominium proceeds that were previously held in escrow by the Company to fund construction lien claims upon final resolution of the Perini litigation.

The Company’s recovery for its Harmon construction defect claims, when added to the Harmon-related proceeds from prior insurance settlements of $85 million, resulted in gross cash settlement proceeds to the Company of approximately $191 million (of which approximately $18 million was paid by MGM Resorts to CityCenter under the completion guarantee in February 2015).

In conjunction with the Final Settlement, MGM Resorts and an insurer participating in the OCIP resolved their arbitration dispute concerning such insurers claim for payments it made under the OCIP general liability coverage for contractor costs incurred in the Harmon litigation, premium adjustments and certain other costs and expenses. MGM Resorts settled this dispute for $38 million, and funded the majority of such amounts under the completion guarantee in January 2015.

Harmon. As discussed above, a global settlement was reached in the Perini litigation in December 2014, which finally resolved all outstanding liens, claims and counterclaims between the Company and MGM Resorts on one hand, and Perini, the remaining subcontractors and remaining insurers on the other hand. Among the matters resolved were the Company’s claims against Perini and other contractors and subcontractors with respect to construction at the Harmon. Pursuant to leave of court in 2014, the Company commenced demolition of the building. The Company has completed a partial demolition of the building and is currently evaluating options for further demolition and plans for the future use of the remaining structure. The Company believes the remaining demolition of the Harmon structure if demolished to the ground level would cost approximately $15 million.

Other litigation. The Company is a party to various legal proceedings that relate to construction and development matters and operational matters incidental to its business. Management does not believe that the outcome of such proceedings will have a material adverse effect on the Company’s consolidated financial statements. The Company maintained an OCIP during the construction and development process. Under the OCIP, certain insurance coverages may cover a portion of the Company’s general liability, workers compensation, and other potential liabilities.

Other commitments. The Company entered into an agreement with a service provider for the initial and ongoing leasing of Crystals. Under the terms of the agreement, the Company was required to pay an annual service fee of approximately $2 million in 2011, increasing 3% each year through the initial term of the agreement, which expires in 2019. In addition to the service fee, the Company will be required to pay approximately $11 million at the termination of the agreement in 2019, which is being recorded ratably over the contract term. As of December 31, 2015, the Company recorded $8 million related to such amount within “Other long-term obligations” in the consolidated balance sheet. Additional fees may be incurred if the service provider exercises its option to renew the agreement in 2019.

Other guarantees. The Company is party to various guarantee contracts in the normal course of business, which are generally supported by letters of credit issued by financial institutions. The Company’s available borrowing capacity under the senior secured credit facility is reduced by any outstanding letters of credit. At December 31, 2015, the Company had $12 million in letters of credit outstanding.

Leases where the Company is a lessee. The Company is party to various leases for real estate and equipment under operating lease arrangements. The Company’s future minimum obligations under non-cancelable leases are immaterial in each of the next five years, and in total.

Leases where the Company is a lessor. The Company enters into operating leases related to retail, dining and entertainment venues primarily at Crystals. As of December 31, 2015, the Company has 62 such leases in place. Tenants are primarily responsible for tenant improvements, though the Company provides construction allowances to certain lessees. Leases include base rent, common area maintenance charges and, in some cases, percentage rent based on the sales of the lessee.

Expected fixed future minimum lease payments for leases in place as of December 31, 2015 are as follows:

Several leases contain terms that are based on meeting certain operational criteria. Contingent rentals included in income were $14 million, $8 million and $13 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Residential leases. In October of 2010, the Company began a program to lease a portion of unsold residential condominium units at Veer and Mandarin Oriental with minimum lease terms of one year. For the years ended December 31, 2015, 2014 and 2013 revenue from the real estate leasing program was $0.1 million, $1 million and $3 million, respectively, and was recorded within “Residential” revenue.

	Year Ended December 31,
	2015		2014		2013

Supplemental cash flow disclosures:	(In thousands)
Interest paid	$	68,306	$	95,250	$	205,928
Increase in construction payable related to capital expenditures		-		-		65,502
Increase in due to MGM Resorts International payable related to capital expenditures		4,994		-		-

Non-cash investing and financing activities:
Reclassification of property and equipment, net to residential real estate	$	7,293	$	43,291	$	16,301
Pay-in-kind interest accrued on loans from Members		-		-		31,874
Conversion of Members' notes to equity		-		-		737,511
Non-cash capital contributions		-		-		2,353
Reclassification of receipts related to MGM Resorts International completion guarantee⁽¹⁾		-		-		72,618

In connection with the restated senior credit facility, MGM Resorts entered into a restated completion guarantee (as restated, the “completion guarantee”) that supported the remaining construction payables from the construction of CityCenter. The terms of the completion guarantee required the Company to use $124 million of subsequent net residential sale proceeds to fund construction costs, or to reimburse MGM Resorts for construction costs previously expended. As of December 31, 2014, the Company had received net residential proceeds in excess of the $124 million and was holding $58 million in a condo proceeds account representing the remaining proceeds available to fund completion guarantee obligations or be reimbursed to MGM Resorts. The $58 million in condo proceeds was recorded within “Restricted cash” in the accompanying consolidated balance sheet and was subsequently used to fund amounts due to Perini pursuant to the settlement agreements under the Perini lawsuit. See Note 11 for further discussion of the Perini lawsuit. The completion guarantee was terminated in June 2015 and as of December 31, 2015, MGM Resorts had funded $888 million under the completion guarantee which the Company recorded as equity contributions.

In April 2015, the Company adopted an annual distribution policy and declared and paid a special dividend of $400 million. Under the annual distribution policy, the Company will distribute up to 35% of excess cash flow, subject to the approval of the Company’s board of directors.

The Company and MGM Resorts have entered into agreements whereby MGM Resorts was responsible for management of the design, planning, development and construction of CityCenter and is responsible for the ongoing management of CityCenter and the Company. The LLC Agreement provides for Infinity World’s right to terminate the Operations Management Agreements if MGM Resorts’ ability to perform under those agreements is impacted by its financial condition. MGM Resorts was reimbursed for certain costs incurred in performing the development services and the Company is paying MGM Resorts management fees as stipulated in each of the agreements referenced below.

Operations management agreements. The Company and MGM Resorts entered into the following agreements to provide for the ongoing operations of CityCenter:

During the years ended December 31, 2015, 2014 and 2013, the Company incurred $41 million, $38 million and $38 million, respectively, related to the management fees discussed above. In addition, the Company reimburses MGM Resorts for costs, primarily employee compensation, associated with its management activities. During the years ended December 31, 2015, 2014 and 2013, the Company incurred $393 million, $380 million and $364 million, respectively, for reimbursed costs of management services provided by MGM Resorts. As of December 31, 2015 and 2014, the Company owed MGM Resorts $55 million and $46 million, respectively, for management services and reimbursable costs, at December 31, 2015 such amount included $5 million related to capitalized construction costs.

Aircraft agreement. The Company has an agreement with MGM Resorts whereby MGM Resorts provides the Company the use of its aircraft on a time sharing basis. The Company is charged a rate that is based on Federal Aviation Administration regulations, which provides for reimbursement for specific costs incurred by MGM Resorts without any profit or mark-up. The Company reimbursed MGM Resorts $2 million, $3 million and $3 million for aircraft related expenses in the years ended December 31, 2015, 2014 and 2013, respectively.

		Page
Independent Auditors’ Report		i
Consolidated Balance Sheets as of December 31, 2015 and 2014		1
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013		2
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013		3
Consolidated Statements of Members’ Equity for the years ended December 31, 2015, 2014 and 2013		4
Notes to Consolidated Financial Statements		5

Buildings and improvements			20 to 40 years
Land improvements			10 to 20 years
Furniture and fixtures			3 to 20 years
Equipment			3 to 20 years

	Year Ended December 31,
	2015		2014		2013

	(In thousands)
Rooms	$	22,513	$	22,159	$	24,206
Food and beverage		43,446		44,241		47,188
All other		8,153		8,520		8,872
	$	74,112	$	74,920	$	80,266

	December 31,
	2015			2014

	(In thousands)
Casino	$	112,461		$	116,575
Hotel		30,241			29,933
Other		9,555			9,872
		152,257			156,380
Less: Allowance for doubtful accounts	$	(45,078	)		(49,903	)
	$	107,179		$	106,477

	December 31,
	2015			2014

	(In thousands)
Land	$	1,778,894		$	1,780,416
Buildings, building improvements and land improvements		6,254,349			6,242,163
Furniture, fixtures and equipment		1,457,277			1,434,264
Construction in progress		10,825			12,923
		9,501,345			9,469,766
Less: Accumulated depreciation and amortization		(1,931,746	)		(1,674,043	)
	$	7,569,599		$	7,795,723

For the year ending December 31,	(In thousands)
2016	$	5,167
2017		-
2018		-
2019		-
2020		1,502,583
Thereafter		-
	$	1,507,750