-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DzsGXJFCzXg7iVHFofEYOgTnLLKA8i5qZMT3v9Dplor+yv9ikr58MZkkyGfiNl7i ix1ZCTYrK8uj9O1FunsEDw== 0000912057-97-027667.txt : 19970814 0000912057-97-027667.hdr.sgml : 19970814 ACCESSION NUMBER: 0000912057-97-027667 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOHEGAN TRIBAL GAMING AUTHORITY CENTRAL INDEX KEY: 0001005276 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 061436334 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-80655 FILM NUMBER: 97659653 BUSINESS ADDRESS: STREET 1: 27 CHURCH LANE CITY: UNCASVILLE STATE: CT ZIP: 06382 BUSINESS PHONE: 2038480545 10-Q 1 10-Q 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: June 30, 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 incorporation (I.R.S. Employer or organization) Identification No.) Mohegan Sun Boulevard, Uncasville, CT 06382 (Address of principal executive offices) (Zip Code) (860)204-7171 (Registrant's telephone number, including area code) 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: 20 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 as of June 30, 1997 (unaudited) and September 30, 1996. 3 Condensed Statement of Income of Mohegan Tribal Gaming Authority for the Three Months Ended June 30, 1997, and for the Period October 12, 1996 (date of commencement of operations), through June 30, 1997 (unaudited). 4 Condensed Statement of Capital of Mohegan Tribal Gaming Authority for the Period October 12, 1996 (date of commencement of operations) through June 30, 1997 (unaudited). 5 Condensed Statement of Cash Flow of Mohegan Tribal Gaming Authority for the Period October 12, 1996 (date of commencement of operations), through June 30, 1997 (unaudited). 6 Notes to Condensed Financial Statements of Mohegan Tribal Gaming 7-11 Authority. ITEM 2 -- Management's Discussion and Analysis of Financial Condition 12-18 and Results of Operations. PART II -- OTHER INFORMATION ITEM 1 -- Legal Proceedings 19 ITEM 2 -- Changes in Securities 19 ITEM 3 -- Defaults upon Senior Securities 19 ITEM 4 -- Submission of Matters to a Vote of Security Holders 19 ITEM 5 -- Other Information 19 ITEM 6 -- Exhibits and Reports on Form 8-K 19 Signatures - Mohegan Tribal Gaming Authority 20 [LETTERHEAD] 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 June 30, 1997, and the related condensed statements of income and capital for the three months ended June 30, 1997, and for the period October 12, 1996 (date of commencement of operations) through June 30, 1997, and the related condensed statements of cash flows for the period October 12, 1996 (date of commencement of operations), through June 30, 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 August 4, 1997 PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed financial information as of June 30, 1997, and for the three-month period ended June 30, 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 MOHEGAN TRIBAL GAMING AUTHORITY CONDENSED BALANCE SHEETS (IN THOUSANDS) JUNE 30, SEPTEMBER 30, 1997 1996 ---------- ------------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $36,233 $7,437 Restricted cash 27,952 5,100 Receivables, net 1,911 - Inventories 4,417 819 Other current assets 1,238 8,035 -------- ------- Total current assets 71,751 21,391 NON-CURRENT ASSETS: Capitalized property and equipment, net 286,294 264,918 Other assets, net 14,360 21,172 -------- -------- Total assets $372,405 $307,481 -------- -------- -------- -------- LIABILITIES AND CAPITAL CURRENT LIABILITIES: Current maturities of long-term debt and line of credit $ 9,805 $4,999 Accounts payable and accrued expenses 41,478 44,250 Accrued interest payable 19,674 15,232 -------- -------- Total current liabilities 70,957 64,481 NON-CURRENT LIABILITIES: Long-term debt, net of current maturities 291,653 243,000 -------- -------- Total liabilities 362,610 307,481 -------- -------- CAPITAL: Total capital 9,795 - -------- -------- Total liabilities and capital $372,405 $307,481 -------- -------- -------- -------- The accompanying accountants' review report and notes to financial statements should be read in conjunction with these financial statements 3 MOHEGAN TRIBAL GAMING AUTHORITY CONDENSED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS)
FOR THE THREE FOR THE PERIOD OCTOBER 12, 1996 MONTHS ENDED (DATE OF COMMENCEMENT OF OPERATIONS) JUNE 30, 1997 THROUGH JUNE 30, 1997 -------------- ------------------------------------ REVENUES: Gaming $116,960 $314,872 Food and beverage 12,272 33,549 Other 4,413 10,315 --------- ---------- Gross revenues 133,645 358,736 Less - Promotional allowances (10,531) (25,593) --------- ---------- Net revenues 123,114 333,143 --------- ---------- COST AND EXPENSES: Gaming 55,108 149,423 Loss from bingo operations 230 2,043 Food and beverage 5,460 18,207 General and administration 23,834 66,732 Depreciation and amortization 7,683 22,995 Management fee 6,608 13,812 Other 2,512 7,280 --------- ---------- Total costs and expenses 101,435 280,492 --------- ---------- Income from operations 21,679 52,651 --------- ---------- NONOPERATING INCOME AND (EXPENSES): Interest and other income 464 1,204 Interest expense (11,800) (33,186) --------- ---------- (11,336) (31,982) --------- ---------- Net income $10,343 $20,669 --------- ---------- --------- ----------
The accompanying accountants' review report and notes to financial statements should be read in conjunction with these financial statements 4 MOHEGAN TRIBAL GAMING AUTHORITY CONDENSED STATEMENT OF CAPITAL (UNAUDITED) (IN THOUSANDS) FOR THE PERIOD OCTOBER 12, 1996 (DATE OF COMMENCEMENT OF OPERATIONS) CAPITAL THROUGH JUNE 30, 1997 - ------- ------------------------------------ Balance, October 12, 1996 $ - Net income 20,669 Distributions to Tribe (10,874) ----------- Balance, June 30, 1997 $ 9,795 ----------- ----------- The accompanying accountants' review report and notes to financial statements should be read in conjunction with these financial statements 5 MOHEGAN TRIBAL GAMING AUTHORITY CONDENSED STATEMENT OF CASH FLOW (UNAUDITED) (IN THOUSANDS)
FOR THE PERIOD OCTOBER 12, 1996 (DATE OF COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30, 1997 ------------------------------------- CASH FLOW FROM OPERATING ACTIVITIES: Net income $20,669 Adjustments to reconcile net income to net cash flow provided by operating activities- Depreciation and amortization 22,995 Provision for losses on receivables 180 Changes in operating assets and liabilities Increase in receivables and other current assets (5,900) Increase in accounts payable and accrued expenses 38,848 Decrease in construction payable (37,178) -------- Net cash flow provided by operating activities 39,614 -------- CASH FLOW USED IN INVESTING ACTIVITIES: Purchase of property and equipment (30,551) -------- Net cash flow used in investing activities (30,551) -------- CASH FLOW FROM FINANCING ACTIVITIES: Distributions to Tribe (10,874) Increase in short-term borrowings 7,056 Proceeds from equipment financing 40,391 Additional borrowing from Secured Completion Guarantee 23,000 Payments on current maturities of long-term debt (16,988) -------- Net cash flow provided by financing activities 42,585 -------- Net increase in cash and cash equivalents 51,648 Cash and Cash Equivalents at October 12, 1996 12,537 -------- Cash and Cash Equivalents at June 30, 1997 $64,185 -------- -------- Cash Paid for Interest $26,535 -------- --------
The accompanying accountants' review report and notes to financial statements should be read in conjunction with these financial statements 6 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO CONDENSED FINANCIAL STATEMENTS JUNE 30, 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. Certain amounts in the condensed financial statements have been reclassified. The reclassification has no effect on net income. 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 third 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: June 30, 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) 650 4,749 Equipment Financing (D) 35,808 - Other - 1,250 -------- --------- 301,458 247,999 Less - Current Maturities 9,805 4,999 -------- --------- $291,653 $243,000 -------- -------- -------- -------- 7 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO CONDENSED FINANCIAL STATEMENTS JUNE 30, 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 for the four prior consecutive quarters. 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 obtained $90.0 million of subordinated financing from Sun International and Waterford Gaming LLC in the form of notes (the "Subordinated Notes"). The Authority issued $20.0 million of Subordinated Notes to each of Sun International and Waterford Gaming LLC, 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 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 (the "Secured Completion Guarantee"). Each Subordinated Note issued under the Secured Completion Guarantee bears 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 Subordinated Notes are due 2003; however, principal cannot be paid until the Senior Notes have been paid in full, unless certain conditions are met. 8 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO CONDENSED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) 2. LONG-TERM DEBT CONTINUED: 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, provided for interest based on various floating indexes (9.50% as of June 30, 1997). As of June 30, 1997 there is no outstanding working capital under the Fleet National Bank line of credit. 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 June 30, 1997, $650,000 was outstanding under the Norwich Savings Society line of credit. 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 9.35%. Principal payments will be over 48 months and commenced November 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 has received equipment financing of $3.0 million from Fleet Capital Corporation. The agreement provides that borrowings bear interest of 9.30%. Principal payments will be made over 48 months and will commence July 1997. The Authority received working capital financing of $500,000 from New Horizon Kids Quest IV, Inc. The agreement provides for an interest rate of 2% over prime. Principal payments will be over 36 months, which commenced October 1996. 9 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO CONDENSED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) 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 first agreement, with a fixed monthly payment of $253,000, commenced October 1996. The second lease agreement, with a fixed monthly payment of $95,000, commenced November 1996. Both agreements require lease payments over 48 months. The third agreement with Pitney Bowes Credit Corp., with a fixed monthly payment of $114,000, is over 42 months and commenced January 1997. The fourth agreement with New England Capital Corporation, with a fixed monthly payment of $42,000, is over 48 months and commenced March 1997. Fleet Capital Corporation holds the fifth and sixth operating lease agreements for equipment with the Authority. The fifth agreement contains a fixed monthly payment of $88,000. The sixth agreement contains a fixed monthly payment of $58,000. Both agreements require lease payments over 36 months and commenced in June 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. 10 MOHEGAN TRIBAL GAMING AUTHORITY NOTES TO CONDENSED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) 4. COMMITMENTS CONTINUED: 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 $57,644,000 of gaming expense in its financial statements for the required Slot Win Contribution payments to the State of Connecticut for the period from October 12, 1996 through June 30, 1997. As Mohegan Sun commenced operations in October 1996, the Minimum Contribution for the State fiscal year ending June 30, 1997 has been prorated in accordance with the Tribe's Compact with the State of Connecticut. Slot Win Contribution expense to the State of Connecticut for the quarter ended June 30, 1997, totaled $22,455,000. 5. RELATED PARTY TRANSACTIONS: The Tribe provides Governmental and Administrative services to the Authority in conjunction with the operation of Mohegan Sun. For the period October 12, 1996 through June 30, 1997, the Authority incurred $5,540,000 of expense for such services of which $5,518,000 was paid as of June 30, 1997. The Authority incurred third quarterservices of $2,256,000, of which $2,234,000 was paid as of June 30, 1997. In addition, the Tribe, through one of its limited liability companies, has entered into various land lease agreements with the Authority. Amounts paid by the Authority under these agreements to the limited liability companies were $140,000 for the period October 12, 1996 through June 30, 1997. The Authority paid $66,000 for the third quarter ended June 30, 1997. 11 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 June 30, 1997, cash provided by operations was $76,792,000. 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. On May 15, 1997 Mohegan Sun made a second interest payment to the holders of the Senior Notes in the amount of $14,517,000 which consisted of $11,813,000 Senior Note interest and $2,704,000 for the 5% cash flow participation interest which was funded from operational cash flow. The Authority historically has funded its operations through the issuance of debt. On September 29, 1995, the Authority issued $175 million of Senior Secured Notes due 2002 (the "Senior Notes") with fixed interest payable at a rate of 13.5% per annum and cash flow 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. The Authority obtained $90.0 million of subordinated financing from Sun International and Waterford Gaming LLC in the form of notes (the "Subordinated Notes"). On September 29, 1995, the Authority issued $40.0 million of Subordinated Notes to Sun International. Subsequent to issuance, Sun International resold fifty percent of such Subordinated Notes, in a principal amount equal to $20.0 million, to Waterford Gaming LLC. Such Subordinated 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 12 RESULTS OF OPERATIONS CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY continued have been fulfilled. The Authority also 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 (the "Secured Completion Guarantee") for completion of construction of the facility. Each Subordinated Note issued under the Secured Completion Guarantee bears interest at the rate per annum then most recently announced by Chemical Bank of New York as its prime rate plus 1%, which is set and revised at intervals of six months. All Subordinated Notes are due 2003; however, principal cannot be paid until the Senior Notes have been paid in full, unless certain conditions are met. The Authority's capital expenditures associated with the development of the facility totaled $67,729,000 for the period from October 12, 1996, through June 30, 1997. Including land and capitalized interest, the Mohegan Sun is expected to cost approximately $305 million. As of June 30, 1997, the Authority had incurred expenditures of approximately $301.2 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 advanced 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 expenditures, those for post-opening enhancement projects at the facility totaled $7,382,000 for the period from October 12, 1996, through June 30, 1997. Capital spending will increase over the last quarter 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 had a $12.5 million line of credit which expires on September 24, 1997. Borrowings under this line incur interest at various rates. As of June 30, 1997, there is no outstanding working capital under the Fleet National Bank line of credit. The Authority also has a $650,000 line of credit which expires on July 31, 1997. As of June 30, 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. 13 RESULTS OF OPERATIONS CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY continued The Authority entered into equipment financing arrangements with several finance companies, under varying terms. As of June 30, 1997, the Authority had outstanding borrowings under these arrangements of $20.0 million, at an interest rate of 2% over prime; $4.4 million, at an interest rate of 9.17%; $3.4 million, at an interest rate of 8.95%; $4.6 million at an interest rate of 12.0%, $408,000 at an interest rate of 2% over prime and $3.0 million at an interest rate of 9.3%. All of such amounts are being repaid by the Authority over a period from 36 to 48 months. 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 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 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). 14 OPERATING RESULTS FOR THE THREE MONTHS ENDING JUNE 30, 1997- OPERATING REVENUES AND EXPENSES: Mohegan Sun has 150,000 square feet of gaming space, 2,962 slot machines and 186 gaming tables, dining, entertainment, and retail shopping. The facility had 5,270 employees as of June 30, 1997. Mohegan Sun is approximately a two hour drive from New York City and Boston. Gaming revenues were $116,960,000 for the three months ending June 30, 1997. The third quarter reflects 91 days of gaming activity. Slot revenues were $84,481,000 for the three months ending June 30, 1997 and reflects a win per unit per day of $328 for the third quarter. Table game revenues were $32,479,000 for the three months ending June 30, 1997. Other revenues were $16,685,000 for the three months ending June 30, 1997. Other revenues primarily represent revenues from food and beverage and retail operations. Gaming costs and expenses were $55,108,000 for the three months ending June 30, 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 June 30, 1997, $22,455,000 was recorded as gaming expenses. Loss from Bingo operations of $230,000 reflects the operating results, excluding depreciation, amortization and interest of $91,000 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 $4,564,000 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 June 30, 1997, the management fee incurred was $6,608,000, of which $4,466,000 was paid as of June 30, 1997. 15 OPERATING RESULTS FOR THE THREE MONTHS ENDING JUNE 30, 1997- OPERATING REVENUES AND EXPENSES CONTINUED Income from operations was $21,679,000 for the three months ending June 30, 1997. Earnings before depreciation and interest for the third quarter were $29,362,000. Net interest expense was $11,336,000 for the three months ending June 30, 1997. The interest expense reflects interest on working capital debt, both fixed and participating interest on the Senior Secured Notes, and interest on the Equipment Financing and Subordinated Notes. 16 OPERATING RESULTS FOR THE PERIOD OCTOBER 12, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30, 1997- OPERATING REVENUES AND EXPENSES Gaming revenues were $314,872,000 for the period October 12, 1996, through June 30, 1997. The fiscal period ending June 30, 1997, reflects 265 days of gaming activity. Table games and slot machines were in operation for 262 and 265 days respectively for the fiscal period ending June 30, 1997. Slot revenues were $222,354,000 for the period October 12, 1996, through June 30, 1997 and reflects a win per unit per day of $314 for such period. Table game revenues were $92,518,000 for the period October 12, 1996, through June 30, 1997. Other revenues were $43,864,000 for the period October 12, 1996, through June 30, 1997. Other revenues primarily represent revenues from food and beverage and retail operations. Gaming costs and expenses were $149,423,000 for the period October 12, 1996, through June 30, 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 June 30, 1997, $57,644,000 was recorded as gaming expenses for slot win contributions. Loss from Bingo operations of $2,043,000 reflects the operating results, excluding depreciation, amortization and interest of $257,000, 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 $13,640,000 associated with the development of Mohegan Sun. 17 OPERATING RESULTS FOR THE PERIOD OCTOBER 12, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH JUNE 30, 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 June 30, 1997, management fees incurred were $13,812,000 of which $11,669,000 were paid as of June 30, 1997. Income from operations was $52,651,000 for the period October 12, 1996, through June 30, 1997. Earnings before depreciation and interest for the period October 12, 1996 through June 30, 1997 were $75,646,000. Net interest expense was $31,982,000 for the period October 12, 1996, through June 30, 1997. The interest expense reflects interest on working capital debt, both fixed and participating interest on the Senior Secured Notes, and interest on the Equipment Financing and Subordinated Notes. 18 Part II - OTHER INFORMATION: Item I -- LEGAL PROCEEDINGS: The Authority is involved in various legal proceedings arising in the ordinary course of business. Additionally, the Authority is involved in two construction related cases brought by subcontractors. 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: On December 30, 1996, Jeffrey E. Hartmann was appointed Senior Vice President of Finance and the Chief Financial Officer of the Authority. Mr. Hartmann has six years of experience in the casino and hotel industry. Prior to joining the Authority, Mr. Hartmann worked for Foxwoods Resort Casino from August 1991 to December 1996, most recently as its Vice President of Finance for Foxwoods Management Company. Mr. Hartmann was employed by Coopers and Lybrand as an Audit Manager from 1984 to 1991. Mr. Hartmann is a certified public accountant. 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 19 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: 8-8-97 By: /s/ William J. Velardo, --------------------------------- William J. Velardo, Executive Vice President Date: 8-8-97 By: /s/ Jeffrey E. Hartmann -------------------------------------------- Jeffrey E. Hartmann, Chief Financial Officer and Senior Vice President of Finance (Principal Financial and Accounting Officer) 20 EX-27 2 EXHIBIT 27 - FDS
5 1,000 OTHER SEP-30-1997 OCT-12-1996 JUN-30-1997 64,185 0 1,911 0 4,417 71,751 286,294 0 372,405 79,957 265,000 0 0 0 0 372,405 0 358,736 0 280,492 33,186 0 33,186 20,669 0 20,669 0 0 0 20,669 0 0
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