<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period___________________ to _________________________ .
Commission file number: 033-80655
---------
MOHEGAN TRIBAL GAMING AUTHORITY
-------------------------------
(Exact name of Registrant as specified in its charter)
N/A 06-1436334
--- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Mohegan Sun Boulevard, Uncasville, CT 06382
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(860)204-7171
-------------
(Registrant's telephone number, including area code)
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q, continued
Indicate by check mark whether the Registrants (1) have filed all reports
required to filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Total number of pages in this report: 19
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
INDEX TO FORM 10-Q
PART I -- FINANCIAL INFORMATION Page
ITEM 1 -- Financial Statements Number
------
Review Report of Independent Public Accountants 1
Financial Information 2
Condensed Balance Sheets of Mohegan Tribal Gaming Authority 3
as of March 31, 1997 (unaudited) and September 30, 1996.
Condensed Statement of Income of Mohegan Tribal Gaming 4
Authority for the Three Months Ended March 31, 1997, and for
the Period October 12, 1996 (date of commencement of
operations), through March 31, 1997 (unaudited).
Condensed Statement of Capital of Mohegan Tribal Gaming 5
Authority for the Period October 12, 1996 (date of
commencement of operations) through March 31, 1997 (unaudited).
Condensed Statement of Cash Flow of Mohegan Tribal Gaming 6
Authority for the Period October 12, 1996 (date of
commencement of operations), through March 31, 1997 (unaudited).
Notes to Condensed Financial Statements of Mohegan Tribal 7-10
Gaming Authority.
ITEM 2 -- Management's Discussion and Analysis of Financial 11-17
Condition and Results of Operations.
PART II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings 18
ITEM 2 -- Changes in Securities 18
ITEM 3 -- Defaults upon Senior Securities 18
ITEM 4 -- Submission of Matters to a Vote of Security 18
Holders
ITEM 5 -- Other Information 18
ITEM 6 -- Exhibits and Reports on Form 8-K 18
Signatures - Mohegan Tribal Gaming Authority 19
<PAGE>
ARTHUR ANDERSEN LLP
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Mohegan Tribal Gaming Authority:
We have reviewed the accompanying condensed balance sheet of Mohegan Tribal
Gaming Authority ("Authority") as of March 31, 1997, and the related
condensed statements of income and capital for the three months ended March
31, 1997, and for the period October 12, 1996 (date of commencement of
operations) through March 31, 1997, and the related condensed statements of
cash flows for the period October 12, 1996 (date of commencement of
operations), through March 31, 1997. These condensed financial statements
are the responsibility of the Authority's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the condensed balance sheet of Mohegan Tribal Gaming Authority as
of September 30, 1996, and the related cash flow for the year then ended (not
presented herein), and, in our report dated November 27, 1996, we expressed
an unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet of Mohegan
Tribal Gaming Authority as of September 30, 1996, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
/s/ Arthur Andersen LLP
Hartford, Connecticut
May 2, 1997
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited condensed financial information as of March 31, 1997, and for the
three-month period ended March 31, 1997, included in this report was reviewed by
Arthur Andersen LLP, independent public accountants, in accordance with the
professional standards and procedures established for such reviews by the
American Institute of Certified Public Accountants.
2
<PAGE>
Mohegan Tribal Gaming Authority
Condensed Balance Sheets
(in thousands)
March 31, September 30,
1997 1996
----------- -------------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $36,409 $7,437
Restricted cash 22,788 5,100
Receivables, net 2,720 -
Inventories 4,397 819
Other current assets 6,713 8,035
----------- -------------
Total current assets 73,027 21,391
NON-CURRENT ASSETS:
Capitalized property and equipment, net 288,691 264,918
Other assets, net 18,935 21,172
----------- -------------
Total assets $380,653 $307,481
----------- -------------
----------- -------------
LIABILITIES AND CAPITAL
-----------------------
CURRENT LIABILITIES:
Current maturities of long-term debt
and line of credit $15,210 $4,999
Accounts payable and accrued expenses 44,352 44,250
Accrued interest payable 23,418 15,232
----------- -------------
Total current liabilities 82,980 64,481
NON-CURRENT LIABILITIES:
Long -term debt, net of current maturities 291,707 243,000
----------- -------------
Total liabilities 374,687 307,481
----------- -------------
CAPITAL:
Total capital 5,966 -
----------- -------------
Total liabilities and capital $380,653 $307,481
----------- -------------
----------- -------------
The accompanying accountants' review report and notes to
financial statements should be read in
conjunction with these financial statements
3
<PAGE>
Mohegan Tribal Gaming Authority
Condensed Statements of Income
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the Three For the period October 12, 1996
Months Ended (date of commencement of operations)
March 31, 1997 through March 31, 1997
-------------- ----------------------
<S> <C> <C>
REVENUES:
Gaming $107,016 $197,912
Food and beverage 11,657 21,277
Other 3,458 5,902
-------------- ----------------------
Gross revenues 122,131 225,091
Less - Promotional allowances (9,114) (15,062)
-------------- ----------------------
Net revenues 113,017 210,029
-------------- ----------------------
COST AND EXPENSES:
Gaming 50,671 94,315
Loss from bingo operations 491 1,813
Food and beverage 6,185 12,746
General and administration 21,303 42,898
Depreciation and amortization 7,648 15,312
Management fee 4,846 7,204
Other 2,369 4,769
-------------- ----------------------
Total costs and expenses 93,513 179,057
-------------- ----------------------
Income from operations 19,504 30,972
-------------- ----------------------
NONOPERATING INCOME AND
(EXPENSES):
Interest income and other income 505 740
Interest expense (11,650) (21,386)
-------------- ----------------------
(11,145) (20,646)
-------------- ----------------------
Net income $8,359 $10,326
-------------- ----------------------
-------------- ----------------------
</TABLE>
The accompanying accountants' review report and notes to
financial statements should be read in
conjunction with these financial statements
4
<PAGE>
Mohegan Tribal Gaming Authority
Condensed Statement of Capital
(unaudited)
(in thousands)
For the period October 12, 1996
(date of commencement of operations)
Capital through March 31, 1997
- ------- ----------------------
Balance October 12, 1996 $ -
Net income 10,326
Distribution to Tribe (4,360)
----------------------
Balance March 31, 1997 $ 5,966
----------------------
----------------------
The accompanying accountants' review report and notes to
financial statements should be read in
conjunction with these financial statements
5
<PAGE>
Mohegan Tribal Gaming Authority
Condensed Statement of Cash Flow
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the period October 12, 1996
(date of commencement of operations)
through March 31, 1997
----------------------
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $10,326
Adjustments to reconcile net income to
net cash flow provided by operating activities-
Depreciation and amortization 15,312
Provisions for losses on receivables 99
Changes in operating assets and liabilities
Increase in receivables and other current assets (12,030)
Increase in accounts payable and accrued expenses 44,176
----------------------
Net cash flow provided by operating activities 57,883
----------------------
CASH FLOW TO INVESTING ACTIVITIES:
Purchase of property and equipment (29,893)
Decrease in construction payable (35,888)
----------------------
Net cash flow used in investing activities (65,781)
----------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Distribution to Tribe (4,360)
Increase in short-term borrowings 7,056
Proceeds from equipment financing 37,675
Additional borrowing from Secured Completion Guarantee 23,000
Payments on current maturities of long-term debt (8,813)
----------------------
Net cash flow provided by financing activities 54,558
----------------------
Net increase in cash and cash equivalents 46,660
Cash and Cash Equivalents at October 12, 1996 12,537
----------------------
Cash and Cash Equivalents at December 31, 1996 $59,197
----------------------
----------------------
Cash Paid for Interest $13,753
----------------------
----------------------
</TABLE>
The accompanying accountants' review report and notes to
financial statements should be read in
conjunction with these financial statements
6
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
Basis of Presentation:
The Mohegan Tribal Gaming Authority (the "Authority"), established on July
15, 1995, is an instrumentality of the Mohegan Tribe of Indians of
Connecticut (the "Tribe"). The Authority commenced operation of the gaming
and entertainment facility (the "Mohegan Sun") on October 12, 1996.
Prior to October 12, 1996, the Authority was classified as a Development
Stage enterprise as defined by Statement of Financial Accounting Standards
No. 7.
The Authority has engaged Trading Cove Associates ("TCA") to manage the
development, construction and operation of the Mohegan Sun. TCA is 50% owned
by Sun Cove Ltd., an affiliate of Sun International Hotels Limited ("Sun
International"), and 50% owned by Waterford Gaming, LLC.
The condensed financial statements have been prepared in accordance with the
accounting policies described in the Authority's 1996 Annual Report on Form
10-K and should be read in conjunction with the Notes to Condensed Financial
Statements which appear in that report. The condensed Balance Sheet at
September 30, 1996, contained herein was derived from audited financial
statements, but does not include all disclosures contained in the Form 10-K
and applicable under generally accepted accounting principles.
In the opinion of the Authority, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for
the interim periods have been included. The results reflected in the
condensed financial statements for the second quarter of 1997 are not
necessarily indicative of expected results for the full year, as the casino
industry in Connecticut is seasonal in nature.
The Authority's operation of a casino in Connecticut is subject to
significant regulatory controls which affect virtually all of its operations.
2. Long-Term Debt:
Long-term debt consists of the following:
March 31, September 30,
1997 1996
--------- -------------
(000's) (000's)
Senior Secured Notes (A) $175,000 $175,000
Subordinated Notes (B) 90,000 67,000
Lines of Credit (working capital) (C) 6,806 4,749
Equipment Financing (D) 35,111 -
Other - 1,250
-------- --------
306,917 247,999
Less - Current Maturities 15,210 4,999
-------- --------
$291,707 $243,000
-------- --------
-------- --------
7
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
2. Long-Term Debt continued:
A. On September 29, 1995, the Authority issued $175 million in Senior
Secured Notes due 2002 (the "Senior Notes") with fixed interest payable at a
rate of 13.50% per annum and Cash Flow Participation Interest, as defined, in
an aggregate amount of 5.0% of the Authority's Cash Flow up to a limit,
during any two consecutive semi-annual periods, ending September 30, of $250
million of the Authority's Cash Flow. Fixed interest is payable
semi-annually and commenced May 15, 1996. The aggregate amount of Cash Flow
Participation Interest payable will be reduced pro rata for reductions in
outstanding principal amount of Senior Notes. The payment of Cash Flow
Participation Interest may be deferred if the Authority's Fixed Charge
Coverage Ratio is less than 2 to 1. The Senior Notes are redeemable at set
prices as set forth in the Senior Notes after November 15, 1999, at the
option of the Authority. Upon the occurrence of certain events (as specified
in the Indenture for the Senior Notes) each holder of Senior Notes can
require the Authority to repurchase the notes at prices specified in the
Senior Notes. Beginning with the fiscal year ending September 30, 1997, the
Authority will be required, under certain circumstances, to offer to
purchase, at set prices, certain amounts of Senior Notes then outstanding.
B. The Authority has obtained $90.0 million of subordinated financing from
Sun International and Waterford Gaming LLC in the form of notes. The
Authority has issued $20.0 million of subordinated notes to each of Sun
International and Waterford Gaming LLC (Subordinated Notes), which notes bear
interest at 15.0% per year, payable semi-annually. Interest on the
Subordinated Notes is being deferred and will not be paid until at least half
of the Senior Notes have been retired (or offered to be retired, pursuant to
the terms of the Indenture governing the Senior Notes) and certain other
conditions have been fulfilled. The Authority also has issued $50.0 million
in subordinated notes to Sun International evidencing draws made by the
Authority under the $50.0 million secured completion guarantee provided by
Sun International (Secured Completion Guarantee). Each subordinated note
issued under the Secured Completion Guarantee will bear interest at the rate
per annum then most recently announced by Chemical Bank of New York as its
prime rate plus 1%, which shall be set and revised at intervals of six
months. All such notes are due 2003; however, principal cannot be paid until
the Senior Notes have been paid in full, unless certain conditions are met.
C. The Authority has obtained two lines of credit totaling $13.2 million.
The line of credit for $12.5 million, obtained from Fleet National Bank,
provides for interest based on various floating indexes (9.50% as of March
31, 1997). The second line of credit for $650,000 was obtained from Norwich
Savings Society and bears interest at a rate of 7.75%. As of March 31,
1997, $6.8 million was outstanding under both lines of credit.
8
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
2. Long-Term Debt continued:
These amounts were used for working capital purposes.
D. The Authority has received gaming equipment financing of $23.0 million
from CIT-Group/Equipment Financing, Inc. ("CIT Group"). The terms of this
agreement provide that borrowings bear interest of 2% over prime, commencing
from the date of delivery of the equipment. Principal payments will be over
48 months and commenced December 1996.
The Authority has received equipment financing of $9.0 million from the CIT
Group and Phoenixcor, Inc. ("Phoenixcor"). The CIT Group agreement provides
for funding of $5.0 million with an interest rate of 9.17%. Principal
payments will be over 48 months and commenced December 1996. The Phoenixcor
agreement provides for funding of $4.0 million with an interest rate of
8.95%. Principal payments will be over 48 months and commenced December
1996.
The Authority has received equipment financing of $5.1 million from PDS
Financial Corporation. The terms of this agreement provide that borrowings
bear interest of 12%. Principal payments will be over 48 months and
commenced January 1997.
The Authority received working capital financing of $500,000 from New Horizon
Kids Quest IV, Inc. The terms consist of an interest rate of 2% over prime.
Principal payments will be over 36 months, which commenced October 1996.
3. Operating Leases:
The Authority has entered into numerous operating leases, the most
significant of which are as follows:
The PDS Financial Corporation has two operating leases for equipment with
the Authority. The proceeds of the first agreement are $10.4 million with a
fixed monthly payment of $253,000. The lease payments will be over 48
months and commenced October 1996. The proceeds of the second lease
agreement are $4.1 million with a fixed monthly payment of $95,000. The
lease payments will be over 48 months and commenced November 1996.
9
<PAGE>
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
3. Operating Leases continued:
The third agreement with Pitney Bowes Credit Corp. provided proceeds of $4.0
million with a fixed monthly payment of $112,000. The lease payments will be
over 42 months and commenced January 1997.
The fourth agreement with New England Capital Corporation provided proceeds
of $1.5 million with a fixed monthly payment of $42,000. The lease payments
will be over 48 months and commenced March 1997.
4. Commitments:
The Tribe's Compact with the State of Connecticut stipulates that a portion
of the revenues earned on slot machines must be paid to the State of
Connecticut ("Slot Win contribution"). For each twelve-month period
commencing July 1, 1995, the minimum contribution of the Tribe to the State
of Connecticut shall be the lesser of (a) 30% of gross revenues from slot
machines, or (b) the greater of (i) 25% of gross revenues from slot machines
or (ii) $80,000,000. These payments will not be required if the State of
Connecticut legalizes any other gaming operations with slot machines to be
operated in the State of Connecticut (other than on certain Indian lands).
The Authority has reflected $35,189,000 of gaming expense in its financial
statements for the required Slot Win Contribution payments to the State of
Connecticut for the fiscal period ended March 31, 1997. Slot Win
Contribution payments to the State of Connecticut for the quarter ended March
31, 1997, totaled $23,288,000.
5. Related Party Transactions:
The Tribe provided Governmental and Administrative services to the Authority
in conjunction with the operation of Mohegan Sun. For the period October 12,
1996 through March 31, 1997, the Authority incurred $2,934,000 of expense for
such services of which $2,925,000 was paid. The Authority's second quarter
services incurred to the Tribe totaled $1,563,000 of which $1,554,000 was
paid as of March 31, 1997.
In addition, the Tribe, through two of its limited liability companies, has
entered into various land lease agreements with the Authority. Amounts paid
by the Authority under these lease agreements to the limited liability
companies was $2,456,116 for the fiscal period ended March 31, 1997. The
Authority paid, under the lease agreements to the limited liability
companies, $1,554,116 for the second quarter ended March 31, 1997.
10
<PAGE>
ITEM 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operation
RESULTS OF OPERATIONS
CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY
The Mohegan Sun commenced operations on October 12, 1996. During the period
from October 12 through March 31, 1997, cash provided by operations was
$57,883,000. On November 15, 1996, Mohegan Sun made an interest payment of
$11,813,000 to the holders of the Senior Notes. This interest payment
consisted of $9,304,000, which was funded from the Authority's pre-opening
construction account (funds available before operations commenced on October
12, 1996) and $2,509,000 which was funded from the operational cash flow.
The Authority historically has funded its operations through the issuance of
debt. On September 29, 1995, the Authority issued $175 million in principal
amount of Senior Secured Notes due 2002 (the "Senior Notes") with fixed
interest payable at a rate of 13.5% per annum and participation interest
equal to 5.0% of the Authority's cash flow up to a limit, during any two
consecutive semi-annual periods ending on September 30, of $250 million of
the Authority's cash flow. Fixed interest is payable semi-annually on May 15
and November 15. The Senior Notes are redeemable after November 15, 1999, at
the option of the Authority, at prices set forth in the Senior Notes. Upon
the occurrence of certain events (as specified in the Indenture for the
Senior Notes), each holder of Senior Notes can require the Authority to
repurchase the Notes at prices specified in the Senior Notes. Beginning with
the current fiscal year, the Authority will be required, under certain
circumstances, to offer to purchase, at set prices, certain amounts of Senior
Notes then outstanding. The Indenture governing the Senior Notes contains
certain convenants restricting the Authority's ability to, among other
things, make certain cash payments, incur liens or additional indebtedness,
sell assets, lease property, enter into transactions with affiliates or
effect any merger, consolidation or any transfer or sale of substantially all
of its assets. The Authority believes it currently is in compliance with all
of the convenants and restrictions contained in the Indenture.
On September 29, 1995, the Authority had issued $40.0 million of subordinated
notes (the "Subordinated Notes") to Sun International. Subsequent to
issuance, Sun International resold fifty-percent of the Subordinated Notes,
with a principal amount equal to $20.0 million, to Waterford Gaming, LLC.
The Subordinated Notes bear interest at 15% per year, payable semi-annually,
and are due in 2003; however, principal cannot be paid until the Senior Notes
have been paid in full, unless certain conditions are met. Interest on the
Subordinated Notes is being deferred and will not be paid until at least half
of the Senior Notes have been retired (or offered to be retired, pursuant to
the terms of the Indenture governing the Senior Notes) and certain other
conditions have been fulfilled.
11
<PAGE>
RESULTS OF OPERATIONS
CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY continued
The Authority's capital spending associated with the development of the
facility totaled $65,781,000 for the period from October 12, 1996, through
March 31, 1997. Including land and capitalized interest, the Mohegan Sun is
expected to cost approximately $305 million. As of March 31, 1997, the
Authority had incurred expenditures of approximately $299.8 million with the
development of the facility. The Authority may not obligate itself to pay
development costs in excess of $325 million without the further consent of
the National Indian Gaming Commission (the "NIGC"). In the event final
development costs exceed $325 million, the Authority would require additional
consent of the NIGC, and there can be no assurances such consent would be
given. Based upon its review of the budget and the open cost items, the
Authority believes that the total cost of developing, constructing, equipping
and opening the Mohegan Sun will not exceed the sum of the proceeds from the
sale of the Senior Notes and the Subordinated Notes, amounts available under
the Secured Completion Guarantee, the Equipment Financing and the Working
Capital Financing and cash flow from operations. However, there is no
assurance that such costs will not exceed budgeted amounts.
Of the Authority's total capital spending, capital expenditures for
post-opening enhancement projects at the facility totaled $3,640,000 for the
period from October 12, 1996, through March 31, 1997. Capital spending will
increase over the remaining two quarters of the fiscal year. The additional
expenditures will represent capital projects at the facility, that in the
Authority's opinion, will further enhance the guest's experience at the
facility. The Authority believes that borrowings under its existing
financing agreements and cash flow from operations will be sufficient to fund
its currently planned capital expenditures.
The Authority has a $12.5 million line of credit which expires on September
24, 1997. Borrowings under this line bear interest at various rates. As of
March 31, 1997, approximately $6.2 million was outstanding under this line at
an interest rate of 9.25%. The Authority also has a $650,000 line of credit
which expires on July 31, 1997. As of March 31, 1997, approximately $650,000
was outstanding under this line at an interest rate of 7.75%. The funds were
used for the initial working capital needs in conjunction with the opening of
the facility.
12
<PAGE>
RESULTS OF OPERATIONS
CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY continued
The Authority entered into $37.7 million of equipment leasing arrangements
with several finance companies, under varying terms. As of March 31, 1997,
the Authority had outstanding borrowings under these arrangements of $21.4
million, at an interest rate of 2% over prime; $4.6 million, at an interest
rate of 9.17%; $3.7 million, at an interest rate of 8.95%; $4.9 million at an
interest rate of 12.0% and $500,000 at an interest rate of 2% over prime and
$2.6 million of other various leases. All of such amounts are being repaid
by the Authority over the 48 months commencing with December 1996.
The Authority, for the quarter ending March 31, 1997, borrowed the final $8
million, for a total of $50.0 million, which was available under the Secured
Completion Guarantee to fund construction development costs associated with
the completion of the facility.
The Authority believes that existing cash balances and operating cash flow
will provide the Authority with sufficient resources to meet its existing
debt obligations and capital expenditure requirements. However, the ability
of the Authority to meet its debt service requirements will be entirely
dependent upon the completion and future successful performance of the
Mohegan Sun, which is subject to financial, economic, political, competitive,
and other factors, many of which are beyond the Authority's control.
Private Securities Litigation Reform Act
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this Form
10-Q filed by the Authority with the Securities and Exchange Commission
contains statements that are forward-looking, such as statements relating to
plans for future expansion and other business development activities, ability
to meet existing debt obligations, as well as other capital spending,
financing sources and the effects of regulation (including gaming and tax
regulation) and competition. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements made by or on behalf of the
Authority. These risks and uncertainties include, but are not limited to,
those relating to development and construction activities, dependence on
existing management, leverage and debt service (including sensitivity to
fluctuations in interest rates), competition for gaming patrons in the
northeastern United States domestic or global economic conditions, changes in
federal tax laws or the administration of such laws and changes in gaming
laws or regulations (including the legalization of gaming in certain
jurisdictions).
13
<PAGE>
Operating Results for the Three Months Ending March 31, 1997-
Operating Revenues and Expenses:
Mohegan Sun has 150,000 square feet of gaming space, 2,680 slot machines and
181 gaming tables, dining, entertainment, and retail shopping. The facility
had 5,260 employees as of March 31, 1997. Mohegan Sun is approximately a two
hour drive from New York City and Boston.
Gaming revenues were $107,016,000 for the three months ending March 31, 1997.
The second quarter reflects 90 days of gaming activity.
Slot revenues were $73,180,000 for the three months ending March 31, 1997 and
reflects a win per unit per day of $304 for the second quarter.
Table game revenues were $33,836,000 for the three months ending March 31,
1997.
Other revenues were $15,115,000 for the three months ending March 31, 1997.
Other revenues primarily represent revenues from food and beverage and retail
operations.
Gaming costs and expenses were $50,671,000 for the three months ending March
31, 1997, which reflects costs and expenses associated with table games, slot
operations, slot win contribution expense and promotional allowances given to
patrons.
Under its Tribal-State Compact, the Authority is required to pay Slot Win
contributions to the State of Connecticut equal to the lesser of (i) 30% of
gross operating revenues derived from slot machines during the State's fiscal
year, or (ii) the greater of 25% of gross operating revenues from such
devices during the State's fiscal year or $80,000,000. For the three months
ending March 31, 1997, $23,288,000 was paid by the Authority in accordance
with the agreement and recorded as gaming expenses.
Loss from Bingo operations reflects the operating results, excluding
depreciation, amortization and interest of $89,000 of the Mohegan Sun's
Bingo operations. Bingo is operated by the Mohegan Tribal Gaming Authority
and is not managed by Trading Cove Associates.
Depreciation and amortization includes amortization of $4,483,000 of
pre-opening costs associated with the development of Mohegan Sun.
Management fee reflects Trading Cove Associates management fee associated
with net revenue of Mohegan Sun before bingo operations, which is operated
directly by the Mohegan Tribal Gaming Authority and not managed by Trading
Cove Associates. For the three months ending March 31, 1997, the management
fee incurred was $4,846,000, of which $2,022,000 was paid as of March 31,
1997.
14
<PAGE>
Operating Results for the Three Months Ending March 31, 1997-
Operating Revenues and Expenses continued
Income from operations was $19,504,000 for the three months ending March 31,
1997. Earnings before depreciation, interest, and taxes for the second
quarter were $27,152,000.
Net interest expense was $11,145,000 for the three months ending March 31,
1997. The interest expense reflects both fixed and participating interest
from the Senior Secured Notes, Equipment Financing and Subordinated Notes.
15
<PAGE>
Operating Results for the Period October 12, 1996 (commencement of operations)
through March 31, 1997-
Operating Revenues and Expenses continued
Gaming revenues were $197,912,000 for the period October 12, 1996, through
March 31, 1997. The fiscal period ending March 31, 1997, reflects 174 days
of gaming activity. Table games and slot machines were in operation for 171
and 174 days respectively for the fiscal period ending March 31, 1997.
Slot revenues were $137,872,000 for the period October 12, 1996, through
March 31, 1997 and reflects a win per unit per day of $306 for the fiscal
period ending March 31, 1997.
Table game revenues were $60,040,000 for the period October 12, 1996, through
March 31, 1997.
Other revenues were $27,179,000 for the period October 12, 1996, through
March 31, 1997. Other revenues primarily represent revenues from food and
beverage and retail operations.
Gaming costs and expenses were $94,315,000 for the period October 12, 1996,
through March 31, 1997, which reflects costs and expenses associated with
table games, slot operations, slot win contribution expense and promotional
allowances given to patrons.
Under its Tribal-State Compact, the Authority is required to pay Slot Win
contributions to the State of Connecticut equal to the lesser of (i) 30% of
gross operating revenues derived from slot machines during the State's fiscal
year, or (ii) the greater of 25% of gross operating revenues from such
devices during the State's fiscal year or $80,000,000. For the period
October 12, 1996 through March 31, 1997, $40,000,000 was paid by the
Authority in accordance with the agreement and recorded as gaming expenses.
Loss from Bingo operations reflects the operating results, excluding
depreciation, amortization and interest of $166,000 of the Mohegan Sun's
Bingo operations. Bingo is operated by the Mohegan Tribal Gaming Authority
and not managed by Trading Cove Associates.
Depreciation and amortization includes amortization of pre-opening costs
amounting to $9,076,000 associated with the development of Mohegan Sun.
16
<PAGE>
Operating Results for the Period October 12, 1996 (commencement of operations)
through March 31, 1997-
Operating Revenues and Expenses continued
Management fee reflects Trading Cove Associates management fee associated
with net revenue of Mohegan Sun before bingo operations, which is operated
directly by the Mohegan Tribal Gaming Authority and not managed by Trading
Cove Associates. For the period October 12, 1996, through March 31, 1997,
management fee payments were $7,204,000.
Income from operations was $30,972,000 for the period October 12, 1996,
through March 31, 1997. Earnings before depreciation, interest, and taxes
for the second quarter were $46,284,000.
Net interest expense was $20,646,000 for the period October 12, 1996, through
March 31, 1997. The interest expense reflects both fixed and participating
interest from the Senior Secured Notes, Equipment Financing and Subordinated
Notes.
17
<PAGE>
Part II - Other Information:
Item I -- Legal Proceedings:
The Authority is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Authority's consolidated financial condition or results of operations.
Item 2 -- Changes in Securities:
None
Item 3 -- Defaults Upon Senior Securities:
None
Item 4 -- Submission of Matters to a Vote of Security Holders:
None
Item 5 -- Other Information:
None
Item 6 -- Exhibits and Reports on Form 8-K:
a. Exhibits: 27 Financial Data Schedule for Mohegan Tribal Gaming
Authority
b. Current reports on Form 8-K: None
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
MOHEGAN TRIBAL GAMING AUTHORITY
Date: 5-9-97 By: /s/ William J. Velardo
-------------------- ------------------------------------
William J. Velardo,
Executive Vice President
Date: May 9, 1997 By: /s/ Jeffrey E. Hartmann
-------------------- ------------------------------------
Jeffrey E. Hartmann, Chief Financial Officer
and Senior Vice President of Finance
(Principal Financial and Accounting Officer)
19
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<PAGE>
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<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-12-1996
<PERIOD-END> MAR-31-1997
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0
0
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