Thursday, July 29, 2010

Editorial: Local Reporting On Mohegan Sun Finances Misleading

Feather News
Updated 2

If a newspaper had to sum up a company's financial performance in one sentence it would include the company's net income figure. It would also include any extraordinary gains or losses, if applicable, but it will always show the bottom line - the net income.

While The Day and the Hartford Courant are hip to this these days the Norwich Bulletin is still in the dark when it comes to financial reporting. In the Norwich Bulletin's website article on the Mohegan Tribal Gaming Authority's third quarter earnings report today the article omits the earnings figure. Huh?

Is the bottom line figure not important? Does a figure in the middle of an income statement and not the bottom of the income statement seem better? And what accounts for the difference between the bottom line numbers and the number a newspaper, like the Norwich Bulletin, chooses to publish? Is that not significant for your reader to understand?

If distributions to the Tribal government are on pace to average $15 million per quarter for fiscal year 2010 and profits are reported at $11 million for the quarter reported upon today then what happens when you deduct $15 million from $11 million? Does the fact that MTGA has about $800 million in debt coming due in the Spring of 2012 lend any perspective to MTGA's financial picture? Currently, MTGA owes about $1 million in interest expense on their debt every three days. That figure is based on the approximately $125 million annual interest expense. Won't that figure increase by at least $50 million annually when MTGA goes to refinance that $800 million debt ($782 million according to MTGA June 2010 presentation at the Jefferies 2010 Global Consumer Conference) and what effect will that have on the earnings? Or the $250 million that comes due the following year in 2013? None of this is significant to your article on MTGA finances? The Feather News has been covering this for a long time, the local media has ignored it.

Yet the Norwich Bulletin draws a picture of MTGA being on the move? Maybe on the move to avoid the oncoming freight train but certainly not in the sense that the Norwich Bulletin is trying to convey.

I'm sorry that Tribal members who read the Norwich Bulletin are being misinformed by that newspaper.

An Internet gambling bill was approved the U.S. House of Representative's Financial Services Committee on Wednesday and analysts are voicing concerns that, if eventually approved by the full Congress, it would cut into casino revenues. Massachusetts Senate Minority Leader Richard Tisei said of the pending Internet gambling bill's effect on proposed casinos in that state, "People are going to be left with a terrible hangover at the end of the day because all of the benefits (of Massachusetts casinos) aren’t going to materialize."

Does anybody really think that if Internet gaming is approved by Congress that it will be beneficial to MTGA as the Norwich Bulletin article leads its readers to believe? Instead of coming to spend money at the Mohegan Sun, customers will be playing poker on their laptops, flat on their couches and in their underwear, chain smoking crippy. How is that going to help MTGA? Or does MTGA plan on supplying something else to this customer other than one of what will be thousands of gambling websites available?

It would also be nice if some local newspapers could do some financial analysis instead of just reprinting numbers or press releases. Ask some questions. Do you have any? What is the story? You folks are being paid for reporting, I'm not.

The press release yesterday does not include the complete set of financial statements for the quarter, like the balance sheet and statement of cash flows, so a thorough analysis on the quarter cannot yet be done. It'll take another month or so until these other statements are made public.

And despite a horrendous profit report where MTGA's profits plummeted by just over fifty percent, the Norwich Bulletin's angle is that of the casino being on the move. Hype must be more important than the bottom line.

I hope the reporter at least gets a comped meal out of the deal. And I'm not talking Season's Buffet. Keep him happy.

Nasty earnings reports also bring about hype. After all, the casino wants to add some color to a dark report. The past two earnings report releases have brought on statements by MTGA officials about hotel development, in Pennsylania last quarter and in Connecticut this quarter, but no details or names of developers are released. Hype. Or as Brokenwing says ... smoke and mirrors.

What happened to the mystery developer of the hotel in Pennsylvania that was mentioned on the same day of the last earnings release three months ago? Are your readers entitled to a follow-up? Just bring up a new mystery developer of a new mystery hotel on new mystery land? Are there any other questions about Pennsylvania that you think are significant to an article on MTGA's finances?

After all, if someone asked you to build and own a hotel but give out the rooms to them what would you say? Build your own goddamn hotel. No money? Okay, then you just might build and own the hotel and make the casino pay up the ass for it, for a long, long time. On bad terms for the casino of course.

It would make sense to acquire more hotel rooms so I'm certainly not saying that talks aren't happening somewhere. Quite possibly on the stalled graveyard hotel.

Here's the Norwich Bull article that got me so irked tonight, mostly for leaving out the profit number but, well, one thought leads to another:

Mohegan Sun on the move despite down profits
Partnership forming for tribal land hotel.
Norwich Bulletin
Posted Jul 29, 2010 @ 01:59 PM

Mohegan, Conn. — Mohegan Sun’s latest quarterly profits are down but the casino is charging ahead into new projects including a partnership on a new local hotel.

The casino suspended its building of an on-site hotel tower in September 2008 after the Great Recession hit. That project remains suspended but executives are optimistic about partnering on a new hotel near the casino on land owned by the Mohegan Tribe.

“We are looking into a third-party hotel,” Chief Operating Officer Jeffrey Hartmann said during an earnings conference call Thursday.

Hartmann said later “We’re looking for somebody other than the tribe to build and own it. We would manage it.”

Hartmann and others declined to name the partner.

“More details will be coming out later,” Mohegan Sun President and CEO Mitchell Grossinger Etess said.

Executives also expressed optimism about siting a casino in western Massachusetts and helping another tribe in Washington state establish a casino there.

“It’s a tremendous project; very viable,” Hartmann said of the Washington effort. He was more cautious about Massachusetts as negotiations in that state’s legislature about legalizing casino gambling have bogged down in recent days.

“We’re monitoring the process,” Hartmann said.

Wednesday’s passage of a bill out of the U.S. House Financial Services Committee that would enable Mohegan Sun to offer poker through its website was applauded by Tribal Chairwoman Lynn Malerba. Malerba testified before the committee earlier this month.

“We’re very pleased,” Malerba said in response to a question during the conference call. “We’ll see how the full vote in the House goes.”

The introduction of table games at Mohegan Sun’s Pocono Downs casino in Pennsylvania is cheering executives with overall business up about 5 percent since the introduction two weeks ago, Hartmann said.

The glum statements came in reviewing fiscal third-quarter operating results. Income from operations at Mohegan Sun fell 17 percent to $45.2 million while net revenues declined 6.6 percent to $286.8 million. Lower table games “hold,” or the amount the casino keeps after paying off winning customers, “significantly impacted” results, Etess said.

“Disappointed does mean discouraged,” he said. “Our entire team continues to move forward with high energy.”

The casino and its tribal owner continues the no-layoff policy that has won it praise from many people including Norwich Mayor Peter Nystrom. Yet the Sun continues a policy of examining every job after a worker leaves voluntarily. This has enabled the casino reduce its workforce by 1,000 since the recession began.

Distributions to tribal members for the nine months ended June 30 are up $2.1 million to $48.7 million. The payouts will total $59 million for the entire fiscal year, the casino forecast. Those payouts will be reduced next year, Chief Financial Officer Leo Chupaska said.

Foxwoods Resort Casino is ending incentive payments to Mashantucket Pequot tribal members at the end of this year because of financial problems at that casino.

“We expect them to be below $59 million,” Chupaska said of the Mohegan payments.