Mohegans release quarterly numbers

UNCASVILLE, Conn. ? The Mohegan Tribal Gaming Authority has posted a 29.8 percent increase in gross revenue over the previous year's corresponding period. The Authority, the tribe's operating and regulatory body for the Mohegan Sun casino and resort, announced on July 26 its operating results for the fiscal quarter ended June 30. The authority's fiscal year begins on Oct. 1.

The tribe's recently completed Project Sunburst, which added a new casino, several retail outlets, a 10,000-seat sports arena, a 1,200-room hotel and other amenities, appears to be paying off already. The growth of the Mohegans' business operations from strictly gaming to a resort and entertainment complex is an excellent example of how tribes can expand and diversify their financial operations with gaming proceeds.

The MTGA's gross revenue for the quarter was $284.2 million, of which $242.4 million came from gaming, $19.4 million from food and beverage sales, and $15.6 million from "retail, entertainment and other." These numbers represented growth rates of 51.1 percent and 11.2 percent, respectively. Also contributing to the bottom line was $6.8 million in revenue from the tribe's new hotel, which opened in April.

Reported promotional allowances for the quarter totaled $20.5 million, while total costs and expenses came to $216.3 million. Income from operations was $47.4 million, while other expenses totaled $26.1 million, leaving MTGA's net income just shy of $21.4 million for the quarter. (Note: numbers may not add correctly due to rounding.)

The authority's quarterly net income actually represented a 47.3 percent decrease from the corresponding year-ago period, due primarily to increased interest expense as well as depreciation and amortization. Higher interest expense "was mainly attributable to higher average debt outstanding," the Authority said in its July 26 press release. Increased depreciation and amortization was result of "the placing in service of assets related to the first phase of Project Sunburst," which included the new casino, retail stores and the arena.

At June 30, the tribe's cumulative expenses related to Project Sunburst construction stood at $1 billion, which includes capitalized interest of $49.6 million and a net of $5 million "expensed or recorded as inventory," the statement said. The Mohegans further plan to open a 19,000-square-foot nightclub, beginning in August.

"With the substantial completion of Project Sunburst, our anticipated free cash flow will allow the Authority to begin the de-leveraging process in fiscal 2003," said Jeffrey E. Hartmann, executive vice president of finance and CFO, in the release.

Revenue from table games for the quarter was $60.3 million, a 45.1 percent jump over the corresponding year-ago quarter. The table games drop at Mohegan Sun grew by 54.5 percent over the previous year's quarter, which was partially offset by a table games hold percentage of 16.1.

The gross slot win at Mohegan Sun jumped 21.2 percent over the year-ago quarter, while gross slot win per unit per day fell to $323 for the quarter ended June 30 as compared to $466 for the year-ago period. The tribe attributed this decrease to "an increase in the weighted average number of slot machines" to 6,199 for the June 30 quarter from 3,546 for the corresponding period last year. The opening of the Casino of the Sky, a part of Project Sunburst, added approximately 2,500 slots to Mohegan Sun.

At June 30, MTGA had cash and cash equivalents of $57.3 million; under its $400-million credit facility, the authority had $220 million outstanding.

In its statement, the Authority's management said it believes that "existing cash balances, financing arrangements and operating cash flow will provide Mohegan Sun with sufficient resources to meet its existing dept obligations, relinquishment payments, the remaining construction payables related to completion of Project Sunburst, foreseeable capital expenditure requirements and tribal distributions with respect to current operations for at least the next 12 months."

The Authority noted that it amended certain terms of its credit facility to increase its Project Sunburst budget; on June 28, it "consummated its offer to exchange all outstanding 2012 Notes for fully registered 8.0 percent Senior Subordinated Notes" due to mature in 2012.

"Our third quarter performance is a tribute to our employees, and now that Project Sunburst is complete, we have all the tools necessary to build momentum as we close fiscal year 2002," said William J. Velardo, President and general manager of the casino, in the press release.

Separately, the Norwich (Conn.) Bulletin reported on July 31 that the Mohegans are seeking an "economic partnership" with another tribe. Such arrangements are still in the preliminary stages, and no specific tribe was mentioned by the Bulletin. Several experts on Indian business and economics applauded the move, the Bulletin said, calling it a means to assist tribes with less business experience and financial fortunes, as well a vehicle thorough which the Mohegans may grow their business ventures.