Mohegan Sun 2004 Annual Report
Total Page：16
File Type：pdf, Size：1020Kb
MOHEGAN TRIBAL GAMING AUTHORITY mohegan sun 2004 ANNUAL REPORT An object in motion tends to stay in motion. So does one of the world’s most acclaimed entertainment destinations. Since 1996, The Mohegan Tribal Gaming Authority has never stopped moving forward. But this past year, we also started moving in a new direction – outward, as we began working with other tribes around the country to write new success stories. It’s just one more way we’re continually evolving – and keeping the Mohegan momentum going stronger than ever. momentum 2004 ANNUAL REPORT What kept our momentum going in 2004? Everything. It’s hard to single out a single part of Mohegan Sun that excelled last year – because they all did. Awe-inspiring entertainment venues. The championship- caliber season of our very own WNBA team, the Connecticut Sun. A world- renowned hotel and spa. Spectacular meeting facilities. Gourmet restaurants. Two of the world’s most successful, world-class casinos. Exclusive shops and boutiques. They all kept our momentum going in 2004. And now, 2005 is already shaping up to be even more, well, momentous. Keep reading to find out what’s on the horizon. 4 “ Between the hottest acts around and the incredible run of the Connecticut Sun, our own basketball team, this year’s been a slam dunk.” Mitchell Grossinger Etess President & Chief Executive Officer | Mohegan Sun 5 6 “We were hot before, but now we’re really cooking.” Gary S. Crowder Sr. Vice President, Food & Beverage | Mohegan Sun 7 8 “The hotel has been a success from the start. But this year, we’re moving to a whole new level.” Jon A. Arnesen Sr. Vice President, Hotel Operations | Mohegan Sun 9 10 “A world-class casino. Increased revenues. Record attendance. I’d say we are on a roll.” Jeffrey E. Hartmann Executive Vice President & Chief Operating Officer | Mohegan Sun 11 12 “ Just like our shoppers, we know what we want and we go for it.” Robert J. Soper Sr. Vice President, Administration | Mohegan Sun 13 14 “We’ve done more than we ever dreamed possible. Now we’re going to do it again.” William J. Velardo Chief Executive Officer | Mohegan Tribal Gaming Authority 15 People have said our success is one-of-a-kind. 16 In just eight years, Mohegan Sun has become not only one of the world’s most profitable casinos, but a world-renowned entertainment destination, offering premier events, shows, sporting events and luxury accommodations. In 2004, the same team that built Mohegan Sun from the ground up began reaching out to other tribes to help them achieve their goals, as well as looking for new opportunities in other parts of the country. People have said our success is one-of-a-kind. The Mohegan Tribal Gaming Authority is about to prove them wrong. 17 LETTER TO OUR BONDHOLDERS & EMPLOYEES We are pleased to announce that fiscal culminating in an increase of 94.8% in 2004 was an extremely successful year entertainment revenues, which has a direct for the Mohegan Tribal Gaming Authority, effect on growth in gaming and other with record revenues of $1.37 billion and property revenues. It is with this success record Adjusted EBITDA of $344.1 million - that the property continues to provide a 6.8% and 10.7% increase over the prior many benefits to the Mohegan Tribe. year, respectively. The 2004 results were highlighted by a $63.8 million, or 6.0%, In keeping with our core value of bottom increase in gaming revenues, which included line performance, we also concentrated a $51.8 million, or 6.8%, increase in net slot on the reduction of our property costs revenues and a $23.4 million, or 8.1%, and expenses through improvements and increase in table games revenues. efficiencies in gaming and non-gaming operations. In 2004, we initiated a cost Our performance has exceeded market reduction program targeting expenditures expectations and evolved with the ever- that grew at substantially faster rates than changing and challenging competitive revenues, such as employee medical environment, guided by our four core values: insurance. We were also successful in reducing operational full time equivalents • Blowing Away the Customer while maintaining our superior level of •Developing Passionate and customer service, which led to lower salary Dedicated Employees and wage costs from our gaming operations •Continuously Striving for Perfection in 2004. These improvements are reflected • Bottom Line Performance in the Adjusted EBITDA margin which increased from 26.4% in the prior year to We believe Mohegan Sun has become one of 27.4% in 2004. the most successful gaming and entertainment properties in the United States. Over the past Looking forward, we realize that our rate year we have been able to utilize the Mohegan of growth may be difficult to sustain with Sun Arena to bring more star headliner just a single property. With the increasing performances to the property. As a result we competitive pressures caused by the have seen a 30.3% increase in ticket sales and impending spread of gaming throughout a 27.5% increase in average ticket price, the Northeast, we have developed a 18 diversification strategy that will allow us President and Chief Operating Officer of to take advantage of the expanding national Mohegan Sun. We have also hired Paul Brody gaming market. as Vice President of Corporate Development and formed a department to focus solely The recent announcement of our acquisition on diversification activities. Leo Chupaska, of Pocono Downs is the first step in the formerly Chief Financial Officer of the process. With the closing of the transaction Mohegan Tribe, has assumed responsibilities expected to occur in January 2005, we as Chief Financial Officer of the Mohegan look to spread “The Mohegan Sun Way” Tribal Gaming Authority. philosophy to Pocono Downs and expand the property to meet the emerging As evidenced by the contents of this report, Pennsylvania gaming market. 2004 was a very successful year for both the Mohegan Tribe and the Authority. We We also plan to use the knowledge and believe the continued growth of our business experience gained by the Mohegan Tribe has allowed us to emerge in new markets and the Mohegan Tribal Gaming Authority and become a major player in the gaming in operating Mohegan Sun to assist other and entertainment industry for years to American Indian tribes throughout the country come. As always, it is the hard work of our in the development and management of their dedicated and passionate employees that own casino projects, while minimizing our have made us this successful. We look to capital investments. Just recently we have carry the momentum from that success to entered into two such agreements with the our current and future endeavors, building Menominee Indian Tribe and the Cowlitz on our strengths and continuously striving Indian Tribe to develop and manage their for perfection. casino projects in the States of Wisconsin and Washington, respectively. We are very excited about these opportunities and look forward to assisting these tribes in meeting their economic needs through these projects. Mark F. Brown Chairman We do not intend for our strategic plans Mohegan Tribal Gaming Authority to stop with these projects. Over the past Management Board year, we have restructured our executive December 2004 management team to devote more resources to diversification of our business interests outside of Mohegan Sun. The management of Mohegan Sun has been placed into the exceptionally capable hands of Mitchell William J. Velardo Grossinger Etess, now President and Chief Chief Executive Officer Executive Officer of Mohegan Sun, and Mohegan Tribal Gaming Authority Jeffrey E. Hartmann, now Executive Vice December 2004 19 2004 FINANCIAL HIGHLIGHTS $1,250 NET REVENUES AND ADJUSTED EBITDA* GROWTH $1,000 (IN THOUSANDS) $750 ■ ADJUSTED EBITDA* ■ NET REVENUES $500 $250 $0 2002 2003 2004 For the Fiscal Year Ended September 30, 2002 2003 2004 (in thousands) Operating Results: Gross revenues $ 1,121,060 $1,280,440 $ 1,367,933 Promotional allowances 88,167 102,952 111,007 Net revenues 1,032,893 1,177,488 1,256,926 Income from operations 213,680 241,333 246,617 Net income 100,032 95,685 102,887 Other Data: Adjusted EBITDA* 280,525 310,746 344,127 Interest expense, net of capitalized interest 76,635 83,492 78,970 Capital expenditures 224,743 30,277 30,680 Net cash flows provided by operating activities 183,699 195,484 215,053 Balance Sheet Data: Total assets 1,714,055 1,658,511 1,579,705 Long-term debt and capital lease obligations 1,052,173 1,101,649 1,003,051 *A discussion of Adjusted EBITDA and reconciliation of Adjusted EBITDA to net income is included on page 21 of this annual report. 20 Reconciliation of Adjusted EBITDA to Net Income A reconciliation of Adjusted EBITDA to net income, a financial measure determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, is shown below (in thousands): For the Fiscal Year Ended September 30, 2002 2003 2004 Adjusted EBITDA $ 280,525 $ 310,746 $ 344,127 Pre-opening costs and expenses (7,755) — — Depreciation and amortization (78,721) (92,123) (93,595) Relinquishment liability reassessment 19,631 22,710 (3,897) Accretion of discount to the relinquishment liability (36,333) (33,592) (29,939) Interest income 418 269 232 Interest expense, net of capitalized interest (76,635) (83,492) (78,970) Loss on early extinguishment of debt — (27,396) (34,138) Write-off of debt issuance costs (826) (403) — Other expense, net (272) (1,034) (933) Net income $ 100,032 $ 95,685 $102,887 Adjusted EBITDA Explanation Earnings before interest, income taxes, depreciation and amortization, or EBITDA, is a commonly used measure of performance in our industry.