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Mohegan Sun Reports Mixed Results

5 May 2005

UNCASVILLE, Connecticut – (PRESS RELEASE) -- The Mohegan Tribal Gaming Authority, or the Authority, the operator of a gaming and entertainment complex located near Uncasville, Connecticut, known as Mohegan Sun, and a harness racetrack located in Wilkes-Barre, Pennsylvania, known as Pocono Downs, announced today its operating results for the quarter ended March 31, 2005.

Results and significant events for the quarter ended March 31, 2005 were as follows:

* Second quarter gaming revenues of $284.4 million, a 3.8% increase over the corresponding period in the prior year

* Gross slot revenues of $200.9 million, a slight decrease from the corresponding period in the prior year

* Table games revenues of $81.0 million, a 4.8% increase over the corresponding period in the prior year

* Non-gaming revenues of $55.6 million, a 2.5% increase over the corresponding period in the prior year

* Income from operations of $58.0 million, an 8.1% decrease from the corresponding period in the prior year

* Net income of $28.3 million, an 18.4% decrease from the corresponding period in the prior year

* Adjusted EBITDA, a non-GAAP measure more fully described below, of $80.4 million, a 7.2% decrease from the corresponding period in the prior year

* On January 25, 2005, completed the approximately $280.0 million purchase of Pocono Downs and five off-track wagering facilities in Pennsylvania, collectively the Pocono Downs entities, and the right to apply for a Category One slot machine license under the Commonwealth of Pennsylvania's Race Horse Development and Gaming Act of 2004

* Completed the offering of $250.0 million 6 1/8% Senior Notes due 2013 and $150.0 million 6 7/8% Senior Subordinated Notes due 2015, the proceeds of which were used to repay amounts outstanding under the Authority's bank credit facility and to pay fees and expenses associated with the issuance of the notes

Second Quarter Operating Results

"Although we experienced several weather-related challenges during the quarter, Mohegan Sun performed admirably overall -- a testament to our management team and great staff," said Mark F. Brown, Chairman of the Authority's Management Board.

Net revenues for the quarter ended March 31, 2005 increased by $9.2 million, or 3.1%, to $312.7 million from $303.5 million for the same period in the prior year. This increase is primarily the result of the continued growth in gaming revenues at Mohegan Sun, principally table games revenues, and the addition of $5.6 million in racing and off-track wagering revenues as a result of the acquisition of the Pocono Downs entities.

Gross slot revenues, which the Authority also refers to as gross slot win, for the quarter ended March 31, 2005 decreased slightly compared to the same period in the prior year. Gross slot hold percentage, or gross slot revenues divided by slot handle, for the quarter ended March 31, 2005 was 8.6% compared to 8.1% for the same period in the prior year. Slot handle for the quarter ended March 31, 2005 decreased by $144.3 million, or 5.8%, to $2.33 billion from $2.48 billion for the same period in the prior year. Gross slot win per unit per day was $357 and $354 for the quarters ended March 31, 2005 and 2004, respectively.

Table games revenues for the quarter ended March 31, 2005 increased by $3.7 million, or 4.8%, to $81.0 million from $77.3 million for the same period in the prior year. Table games hold percentage, or table games revenues divided by table games drop, was 16.0% for the quarters ended March 31, 2005 and 2004. Table games revenue per unit per day was $3,110 and $2,982 for the quarters ended March 31, 2005 and 2004, respectively.

Non-gaming revenues for the quarter ended March 31, 2005 increased by $1.4 million, or 2.5%, to $55.6 million from $54.2 million for the same period in the prior year. Retail, entertainment and other revenues increased by $2.5 million, or 12.1%, to $23.3 million for the quarter ended March 31, 2005 from $20.8 million for the same period in the prior year. This increase is attributable to the increase in gasoline revenues of $1.1 million, or 26.2%, due to the substantial increase in the price per gallon of gasoline at the Mohegan Sun gasoline and convenience center.

Hotel revenues decreased $500,000, or 4.2%, to $11.5 million in the quarter ended March 31, 2005 from $12.0 million in the same period of the prior year. Hotel occupancy increased to 90.6% for the quarter ended March 31, 2005 compared to 81.5% for the quarter ended March 31, 2004. The average daily room rate, or ADR, was $114 for the quarter ended March 31, 2005 compared to an ADR of $129 for the same period in the prior year. The increased occupancy was driven by a higher utilization of the Mohegan Sun hotel by our Players' Club members. Revenue per Available Room, or REVPAR, was $103 for the quarter ended March 31, 2005 compared to $105 for the same period in the prior year.

Income from operations for the quarter ended March 31, 2005 decreased by $5.1 million, or 8.1%, to $58.0 million as compared to $63.1 million for the quarter ended March 31, 2004. Management attributes the decrease in income from operations to a number of factors including several major storms in the northeastern United States during the quarter as well as increases in certain operating costs and expenses. These increases in operating costs and expenses include increases in the reimbursement of gift cards and complimentaries redeemed at the Shops at Mohegan Sun, approximately $2.0 million in one-time expenses relating to the release of a new series of domestic and Asian targeted television commercials that began airing in the northeastern market during the second quarter of fiscal 2005 and increased costs related to the compliance requirements of the Sarbanes Oxley Act of 2002.

Net income for the quarter ended March 31, 2005 decreased by $6.4 million, or 18.4%, to $28.3 million from $34.7 million for the same period in the prior year. The decrease in net income is primarily due to the decrease in income from operations and a $1.6 million increase in interest expense, which totaled $22.3 million for the quarter ended March 31, 2005 compared to $20.7 million for the same period in the prior year. The weighted average outstanding debt was $1.23 billion for the quarter ended March 31, 2005 and $1.11 billion for the quarter ended March 31, 2004. The weighted average interest rate was 7.2% for the quarter ended March 31, 2005 compared to 7.5% for the same period in the prior year.

Adjusted EBITDA

Adjusted EBITDA for the quarter ended March 31, 2005 decreased by $6.2 million, or 7.2%, to $80.4 million compared to $86.6 million for the same period in the prior year. The Adjusted EBITDA margin (Adjusted EBITDA as a percentage of net revenues) for the quarter ended March 31, 2005 was 25.7% compared to a 28.6% Adjusted EBITDA margin for the same period in the prior year. The decrease in the Adjusted EBITDA margin was principally attributable to a negative impact on business operations from conditions previously discussed above for the quarter ended March 31, 2005.

Pocono Downs

On January 25, 2005, the Authority and its wholly-owned subsidiary, Mohegan Commercial Ventures PA, LLC, completed their acquisition of the entities owning Pocono Downs, a harness racing facility located on approximately 400 acres in Wilkes-Barre, Pennsylvania as well as five Pennsylvania off-track wagering (OTW) facilities located in Carbondale, East Stroudsburg, Erie, Hazleton and Lehigh Valley (Allentown). The Lehigh Valley (Allentown) OTW is a 28,000 square-foot facility and is the largest OTW in the state of Pennsylvania.

With the completion of the transaction, the Authority has the right to apply for a Category One slot machine license under the Commonwealth of Pennsylvania's Race Horse Development and Gaming Act of 2004. If the license application is approved, the Act permits the initial installation and operation of up to 3,000 slot machines at the Pocono Downs property. Upon receipt of the license, the Authority plans to develop a new slot machine facility at the Pocono Downs site, which will include restaurants, retail stores, lounges and a small entertainment venue. The Authority also anticipates that it will spend up to $175 million on the construction, furnishing and equipping of the new facility, anticipated to open in 2007, in addition to paying a one-time $50 million fee to the Commonwealth of Pennsylvania once the license is granted.

The Authority paid approximately $280 million for the Pocono Downs entities which was funded through draws on the Authority's bank credit facility. In accordance with the terms of the acquisition agreement, the Authority has retained certain post-closing termination rights in the event of certain materially adverse legislative or regulatory events.

Results for Pocono Downs and the five OTW's from the purchase date to March 31, 2005 consisted of racing revenues of $5.6 million, net revenues of $6.2 million and Adjusted EBITDA of $738,000.

Commenting on the completion of the Pocono Downs acquisition, William J. Velardo stated, "We are pleased with the successful acquisition of the Pocono Downs entities. Our Pocono Downs team, under the leadership of Robert Soper, continues the master planning process for the Pocono Downs site and eagerly awaits commencement of the licensing process in Pennsylvania."

Liquidity, Capital Resources and Capital Spending

As of March 31, 2005, the Authority held cash and cash equivalents of $74.9 million, an increase of $14.1 million from $60.8 million as of September 30, 2004.

In February 2005, the Authority issued $250 million 6 1/8% Senior Notes due 2013 and $150 million 6 7/8% Senior Subordinated Notes due 2015. The Authority used the net proceeds from this offering to repay amounts outstanding under its bank credit facility, including the full amount of its $150.0 million term loan, which is no longer outstanding and available for borrowings, and to pay fees and expenses associated with the issuance.

As of March 31, 2005, $36.0 million was outstanding under the Authority's $450.0 million bank credit facility revolving loan. The Authority had $413.7 million of available credit under the facility as of March 31, 2005. The Authority's total debt as of March 31, 2005 was approximately $1.29 billion.

"Completion of the Pocono Downs acquisition, our first acquisition under our diversification program, was a significant milestone for the Mohegan Tribe and the Authority," commented Leo M. Chupaska, Chief Financial Officer of the Authority. "Additionally, our successful bond issuances, with record low interest rate coupons for the Authority, certainly were among the highlights of this quarter."

Distributions to the Mohegan Tribe of Indians of Connecticut (the "Tribe") totaled $33.4 million for the six months ended March 31, 2005. Distributions to the Tribe are anticipated to total $67.5 million for fiscal year 2005.

Capital expenditures totaled $21.3 million for the six months ended March 31, 2005 versus $21.8 million for the same period in the prior year. Capital expenditures at Mohegan Sun are anticipated to be approximately $45.0 million for the 2005 fiscal year, comprised primarily of anticipated maintenance capital expenditures. Capital expenditures for the recently acquired Pocono Downs racetrack site are anticipated to be approximately $10.0 million for the 2005 fiscal year, comprised primarily of design fees for the planned slot machine facility.

Management believes that existing cash balances, financing arrangements and operating cash flows will provide the Authority with sufficient resources to meet its existing debt obligations, relinquishment payments, foreseeable capital expenditure requirements with respect to current operations and distributions to the Tribe for at least the next twelve months. Future investments in Pocono Downs related to the payment of a one-time slot machine license fee and the development of a slot machine facility at the racetrack are anticipated to be funded through the bank credit facility.

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Mohegan Sun Reports Mixed Results is republished from Online.CasinoCity.com.