Thursday, August 6, 2009

Tribe In The Media: Quarterly Earnings Reported By The Day

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This installment of the Tribe In The Media is an article from The Day newspaper that explains why yesterday's Mohegan gaming authority reported higher profits when compared to the same period last year.

Sun's big gains a bit deceiving
Casino's 2nd quarter profits dwarf 2008's partly because that period's were so bad
By Brian Hallenbeck
The Day
August 6, 2009

Mohegan - Any way you look at it, the “house” performed better in the third quarter. Just not as well as the numbers might suggest.

Citing a significant increase in its table-games “hold” and the continuing benefits of a cost-containment program launched in February, the Mohegan Tribal Gaming Authority reported Wednesday that its net income, or profit, for the three-month period that ended June 30 was more than three-and-a-half times greater than it was for the same period in 2008.

But that, according to Mitchell Etess, the authority's chief executive officer, says more about 2008 than it does 2009.

”It's more attributable to how bad last year was as opposed to some mass turnaround in the market here,” Etess said in a telephone interview Wednesday afternoon. Earlier, during a conference call with investors and industry analysts, he said the results were “contradictory.”

”We're certainly gratified with the results, but when you look at the volumes you understand that they're not really indicative of a huge increase in profitability,” he said in the interview. “Still, what we did for the quarter was very, very good.”

The results show Mohegan Sun and Mohegan Sun at Pocono Downs, the racetrack casino the authority owns in Wilkes-Barre, Pa., had net income of $23.5 million in April, May and June, compared to $5 million during the same three months in 2008. By another measure preferred by some in the casino industry, the authority's adjusted EBITDA - earnings before interest, income taxes, depreciation and amortization - totaled $80.3 million for the quarter, a year-over-year increase of 36.5 percent.

The authority reported that Mohegan Sun table-games revenues were up 5.7 percent for the quarter, with the casino “holding” 15.4 percent of the “drop,” or money wagered. By contrast, the casino's table-games hold was an unusually low 11.6 percent in the third quarter of 2008. (The authority's fiscal year runs from Oct. 1 to Sept. 30.)

Etess said the casino improved its hold percentage, in part, by no longer offering the highest of high-rolling gamblers “super high-end play” because of its “volatility.” But, he added, “We're still catering to “high-end” players.

Slot-machine revenues were down for the quarter, as were nongaming revenues, including those generated by restaurants, hotels and retail shops.

On the expense side of the ledger, the authority reported that its cost-containment efforts yielded some $27 million in savings during the quarter, about 30 percent of which was in salaries and benefits. In February, the authority rolled back salaries and benefits for all employees while avoiding layoffs. In mid-June, it eliminated seven upper-management positions.

Etess said the authority, through attrition, has reduced its work force by nearly 450 full-time employees since the third quarter of 2008.

During the conference call, Jeffrey Hartmann, the authority's chief operating officer, responded to a question about the authority's plan to build a hotel tower at Mohegan Sun, a project suspended last September. He said the authority intends to pursue the project and that demand for its existing hotel rooms exceeds the supply.

”We're still going to figure out how to resume that project one way or another,” he said.