Mohegan Sun Reports Record Results

UNCASVILLE, Connecticut – (PRESS RELEASE) -- The Mohegan Tribal Gaming Authority, or the Authority, the operator of a gaming and entertainment complex located near Uncasville, Connecticut, known as Mohegan Sun, and a harness racetrack located in Plains Township, Pennsylvania, known as Mohegan Sun at Pocono Downs, or Pocono Downs, announced today its operating results for the quarter and fiscal year ended September 30, 2005.

Results for the quarter ended September 30, 2005 were as follows:

* Record gaming revenues of $320.3 million, a 7.9% increase over the corresponding period in the prior year

* Gross slot revenues of $231.4 million, a 4.2% increase over the corresponding period in the prior year

* Table games revenues of $85.5 million, a 9.4% increase over the corresponding period in the prior year

* Non-gaming revenues of $72.0 million, a 4.5% increase over the corresponding period in the prior year

* Loss from operations of $47.8 million, a $117.3 million decrease from income from operations of $69.5 million in the corresponding period in the prior year due to a non-cash relinquishment liability reassessment charge of $123.6 million as more fully described below

* Net loss of $77.4 million, an $86.7 million decrease from net income of $9.3 million in the corresponding period in the prior year due to a non- cash relinquishment liability reassessment charge of $123.6 million as more fully described below

* Record Adjusted EBITDA, a non-GAAP measure more fully described at the end of this press release, of $99.0 million, a 3.4% increase over the corresponding period in the prior year

Results for the fiscal year ended September 30, 2005 were as follows:

* Record gaming revenues of $1.20 billion, a 6.8% increase over the prior fiscal year

* Gross slot revenues of $860.9 million, a 3.4% increase over the prior fiscal year

* Table games revenues of $334.2 million, a 9.1% increase over the prior fiscal year

* Non-gaming revenues of $254.6 million, a 4.8% increase over the prior fiscal year

* Income from operations of $139.4 million, a 43.5% decrease from the prior fiscal year due to a non-cash relinquishment liability reassessment charge of $123.6 million as more fully described below

* Net income of $23.7 million, a 77.0% decrease from the prior fiscal year due to a non-cash relinquishment liability reassessment charge of $123.6 million as more fully described below

* Record Adjusted EBITDA of $352.4 million, a 2.4% increase over the prior fiscal year

Fourth Quarter Operating Results

Net income (loss) for the quarter ended September 30, 2005 decreased by $86.7 million to a net loss of $77.4 million from net income of $9.3 million for the same period in the prior year. The decrease in net income is primarily due to the reassessment of the relinquishment liability in the quarter ended September 30, 2005, as more fully described below. Interest expense increased by $4.2 million to $23.1 million for the quarter ended September 30, 2005 as compared to $18.9 million for the same period in the prior year. The weighted average outstanding debt was $1.27 billion for the quarter ended September 30, 2005 and $1.05 billion for the quarter ended September 30, 2004. The increase in weighted average outstanding debt was due to the acquisition of Pocono Downs and five off track wagering (OTW) facilities in January 2005. The weighted average interest rate was 7.3% for the quarter ended September 30, 2005 compared to 7.2% for the same period in the prior year.

Adjusted EBITDA for the quarter ended September 30, 2005 increased by $3.3 million, or 3.4%, to $99.0 million compared to $95.7 million for the same period in the prior year. The Adjusted EBITDA margin (Adjusted EBITDA as a percentage of net revenues) for the quarter ended September 30, 2005 was 27.7% compared to a 28.6% Adjusted EBITDA margin for the same period in the prior year. The decrease in the Adjusted EBITDA margin for the quarter ended September 30, 2005 was principally attributable to increased general and administrative costs associated with the start-up of the Authority's corporate structure and the addition of Pocono Downs operations beginning in January 2005, which had an Adjusted EBITDA margin of 15.1% for the quarter ended September 30, 2005.

"The entire Management Board is extremely pleased with our fourth quarter performance and remains focused on our long term growth strategy, specifically Mohegan Sun and the opening of Pocono Downs," said Bruce S. Bozsum, Chairman of the Authority's Management Board. "Our commitment in Pennsylvania is a great opportunity for our team to learn and grow in order to provide for the future generations of the Mohegan Tribe."

Mohegan Sun

Net revenues for the quarter ended September 30, 2005 increased by $13.1 million, or 3.9%, to $347.6 million from $334.5 million for the same period in the prior year. This increase is the result of a 5.1% growth in gaming revenues and a 2.8% growth in non-gaming revenues at Mohegan Sun. Gross slot revenues, which the Authority also refers to as gross slot win, for the quarter ended September 30, 2005, increased by $9.3 million, or 4.2%, to $231.4 million from $222.1 million for the same period in the prior year. Gross slot hold percentage, or gross slot revenue divided by slot handle, for the quarter ended September 30, 2005 was 8.4% compared to 8.0% for the same period in the prior year. Gross slot win per unit per day was $405 and $386 for the quarters ended September 30, 2005 and 2004, respectively.

Table games revenues for the quarter ended September 30, 2005 increased by $7.3 million, or 9.4%, to $85.5 million from $78.2 million for the same period in the prior year. Table games hold percentage, or table games revenues divided by table games drop, was 15.2% and 15.3% for the quarters ended September 30, 2005 and 2004, respectively. Table games hold percentage is relatively predictable over long periods of time but can fluctuate significantly over shorter periods. Table games revenue per unit per day was $3,079 and $2,925 for the quarters ended September 30, 2005 and 2004, respectively.

Food and beverage revenues increased by $1.0 million, or 4.2%, to $24.6 million in the quarter ended September 30, 2005 from $23.6 million in the same period in the prior year. The increase in revenues is attributable to an increase in the number of meals served, or food covers, of 2.9%. During the quarter, the Authority opened the 285-seat Uncas American Indian Grill to the public.

Hotel occupancy increased to 98% for the quarter ended September 30, 2005 compared to 95% for the quarter ended September 30, 2004. Hotel room availability was effectively optimized to Player's Club members, which is reflected in the decrease in Revenue per Available Room, or REVPAR, to $119 for the quarter ended September 30, 2005 compared to $126 for the same period in the prior year and a decrease in the average daily room rate, or ADR, to $122 for the quarter ended September 30, 2005 compared to $133 for the same period in the prior year. Hotel revenues decreased by $495,000, or 3.5%, to $13.7 million in the quarter ended September 30, 2005 from $14.2 million for the same period in the prior year. Despite this drop in revenues, our strategy to optimize overall revenues was successful as the increased hotel occupancy was believed to contribute to growth in gaming, food and beverage and retail, entertainment and other revenues.

Retail, entertainment and other revenues increased by $1.4 million, or 4.6%, to $32.5 million for the quarter ended September 30, 2005 from $31.1 million for the same period in the prior year. A significant portion of the increase is attributable to the increase in fuel revenues of $2.1 million, or 37.3%, which resulted from the substantial increase in the price per gallon of fuel at the Mohegan Sun gasoline and convenience center.

Income (loss) from operations for the quarter ended September 30, 2005 decreased by $115.1 million to a loss from operations of $44.1 million from income from operations of $71.0 million for the quarter ended September 30, 2004. This decrease is attributable to a non-cash relinquishment liability reassessment charge of $123.6 million for the quarter ended September 30, 2005, as more fully described below, which had the effect of substantially increasing operating expenses, partially offset by the growth in net revenues.

The Authority's accounting policy is to reassess the relinquishment liability at least annually in conjunction with the Authority's budgeting process or when necessary upon an event which, in the Authority's estimation, would materially increase or decrease projected revenues over the relinquishment period. On May 13, 2005, the United States Interior Board of Indian Appeals, or IBIA, overturned the federal recognition of the Historic Eastern Pequot Tribe and the Schaghticoke Tribe of Kent, Connecticut. These decisions were remanded to the United States Secretary of the Interior for reconsideration. The Authority concluded this ruling was not substantive enough to warrant a reassessment of the relinquishment liability at that time. On October 12, 2005, the Bureau of Indian Affairs, or BIA, upon reconsideration denied the federal recognition of these two Indian tribes which had expressed interest in building casinos in the close proximity of Mohegan Sun in Connecticut. As a result of this decision and other developments involving the revaluation of the impact to future Mohegan Sun revenues from potential competition in the Northeast gaming market, the Authority concluded events had occurred which are projected to increase revenues at Mohegan Sun over the remaining relinquishment period by approximately $3.2 billion and, therefore, substantially increase the related relinquishment liability, causing the Authority to account for a non-cash relinquishment liability charge of $123.6 million for the quarter ended September 30, 2005.

Adjusted EBITDA at Mohegan Sun for the quarter ended September 30, 2005 increased by $3.5 million, or 3.6%, to $100.7 million compared to $97.2 million for the same period in the prior year. The Adjusted EBITDA margin at Mohegan Sun for the quarter ended September 30, 2005 was 29.0% compared to a 29.1% Adjusted EBITDA margin for the same period in the prior year.

"Our fourth quarter Adjusted EBITDA is a tribute to the exceptional teamwork of our 9,000 employees," said Jeffrey E. Hartmann, Executive Vice President and Chief Operating Officer of Mohegan Sun. "Record hotel occupancy levels, over 40 exciting arena events including the Connecticut Sun, incredible shopping, and the outstanding dining options also drove our fourth quarter results."

Mohegan Sun at Pocono Downs

Results for Pocono Downs and the five OTWs for the quarter ended September 30, 2005 consisted of racing revenues of $8.2 million, net revenues of $9.4 million, loss from operations of $458,000 and Adjusted EBITDA of $1.4 million.

The loss from operations at Pocono Downs for the quarter ended September 30, 2005 includes $1.3 million in pre-opening costs and expenses comprised of personnel, consulting and other costs associated with the development plans mentioned below.

In July 2005, the Mohegan Tribal Gaming Authority issued a press release announcing plans for the development of Mohegan Sun at Pocono Downs, a proposed 400,000 square foot gaming and entertainment facility to be constructed on the existing grounds of the Pocono Downs racetrack on Route 315 in Plains Township, Pennsylvania. The plans provide for approximately 2,000 slot machines, 3 full-service restaurants, a 300 seat buffet, a 15,000 square foot food court, several bars and lounges, an 18,000 square foot nightclub, a "Kid's Quest" center, 20,000 square feet of retail space, new parking facilities and an enhanced employee services area.

Construction of the new facility will begin following the issuance of a conditional slot license by the Pennsylvania Gaming Control Board, anticipated in the spring of 2006. The opening date is projected to be approximately 14 months from the beginning of construction. Estimated cost of construction for the facility is between $140.0 million and $160.0 million. The Authority will also pay a one-time $50 million fee to the Commonwealth of Pennsylvania once the license is granted.

In addition to the development of the new gaming and entertainment facility, the Authority plans to make significant improvements and additions to the existing Pocono Downs Clubhouse and Grandstand including a new simulcast facility, improvements to the Grandstand for the installation of approximately 1,000 slot machines (upon receipt of a conditional license) and a new 10,000 square foot food court. These improvements are estimated to cost up to $47.0 million. Construction began in September 2005 and is estimated to take approximately six months to complete.

"We are diligently executing our strategic plan to prepare for slots at Pocono Downs," said Robert J. Soper, Chief Executive Officer of Mohegan Sun at Pocono Downs. "We are developing an outstanding team of dedicated and passionate employees."

Fiscal Year 2005 Operating Results

Net income for the fiscal year ended September 30, 2005 decreased by $79.2 million, or 77.0%, to $23.7 million from $102.9 million for the prior fiscal year. The decrease in net income is primarily due to the decrease in income from operations, resulting from the reassessment of the relinquishment liability as more fully described above, as well as an increase in interest expense of $9.0 million, which is offset by a decrease in the loss on early extinguishment of debt of $33.9 million. The loss on early extinguishment of debt of $34.1 million in the fiscal year ended September 30, 2004 was a result of the repurchase of the Authority's 8 1/8% senior notes due 2006 and 8 3/8% senior subordinated notes due 2011. Interest expense increased by 11.4% to $88.0 million for the fiscal year ended September 30, 2005 from $79.0 million in the prior fiscal year. The weighted average outstanding debt increased to $1.21 billion in the year ended September 30, 2005 from $1.09 billion for the prior fiscal year due to the acquisition of Pocono Downs mentioned above. The weighted average interest rate was 7.3% for the fiscal years ended September 30, 2005 and 2004.

Adjusted EBITDA for the fiscal year ended September 30, 2005 totaled $352.4 million compared to $344.1 million for the fiscal year ended September 30, 2004. The Adjusted EBITDA margin for the fiscal year ended September 30, 2005 was 26.5% compared to a 27.4% Adjusted EBITDA margin for the prior year. The decrease in the Adjusted EBITDA margin for the fiscal year ended September 30, 2005 was principally attributable to increased general and administrative costs associated with the start-up of the Authority's corporate structure and function, expenditures associated with compliance requirements of the Sarbanes Oxley Act of 2002, and the addition of Pocono Downs operations beginning in January 2005, which had an Adjusted EBITDA margin of 11.4% for the fiscal year ended September 30, 2005.

"2005 was a very good year for the Authority," said William J. Velardo, Chief Executive Officer of the Authority. "Congratulations to all of our employees for a job well done."

Mohegan Sun

Net revenues for the fiscal year ended September 30, 2005 increased by $48.8 million, or 3.9%, to $1.31 billion from $1.26 billion for the prior fiscal year. This increase is primarily the result of a 4.8% growth in gaming revenues and a 3.6% growth in non-gaming revenues at Mohegan Sun.

Gross slot revenues for the fiscal year ended September 30, 2005 were $860.9 million compared to $832.8 million in the prior fiscal year. Mohegan Sun exceeded the Connecticut slot revenue market growth rate for the fiscal year, since the Authority experienced an increase in gross slot revenues of 3.4% over the prior fiscal year. The State of Connecticut reported slot revenues of $1.68 billion and $1.63 billion for the fiscal years ended September 30, 2005 and 2004, respectively, representing an increase of 2.9%. Gross slot hold percentage was 8.5% for the fiscal year ended September 30, 2005 compared to 8.1% in the prior fiscal year. Gross slot win per unit per day was $379 and $366 for the fiscal years ended September 30, 2005 and 2004, respectively.

Table games revenues for the fiscal year ended September 30, 2005 increased by $27.8 million, or 9.1%, to $334.2 million from $306.4 million for the prior fiscal year. Table games hold percentage was 16.0% for the fiscal year ended September 30, 2005, compared to 15.7% for the prior fiscal year. Table games revenue per unit per day was $3,114 and $2,938 for the fiscal years ended September 30, 2005 and 2004, respectively.

Food and beverage revenues increased by $415,000, or 0.5%, to $90.3 million in the fiscal year ended September 30, 2005 from $89.9 million in the prior fiscal year. The increase in revenues is attributable to a 5.8% increase in beverage revenues due to increased visitation at Mohegan Sun in fiscal 2005, offset by a 0.4% decrease in food revenues due to the closure of two restaurants in the Casino of the Earth. The new Uncas American Indian Grill opened to the public in July 2005 in the space formerly occupied by the Mohegan Territory and Chief's Deli restaurants.

Hotel occupancy increased to 93% for the fiscal year ended September 30, 2005 compared to 87% for the fiscal year ended September 30, 2004. The number of occupied room nights for the fiscal year ended September 30, 2005 increased by approximately 24,000, or 6.4%, to 399,000 from 375,000 in the prior fiscal year. Hotel revenues decreased by 3.8% to $50.1 million in the fiscal year ended September 30, 2005 from $52.0 million for the prior fiscal year. In 2005, Mohegan Sun continued to optimize hotel room availability to casino patrons, which led to the decrease in REVPAR to $110 for the fiscal year ended September 30, 2005 compared to $115 for the prior fiscal year and a decrease in ADR to $118 for the fiscal year ended September 30, 2005 compared to $132 for the prior fiscal year. The optimization of hotel inventory to rated casino patrons is believed to have contributed to growth in gaming revenues that more than offsets the declines in ADR and REVPAR.

Retail, entertainment and other revenues for the fiscal year ended September 30, 2005 increased by $10.3 million, or 10.2 %, to $111.2 million from $100.9 million for the prior fiscal year. The increase was principally the result of an $8.8 million, or 17.3%, increase in retail revenues primarily driven by a $6.0 million increase in fuel revenues due to the substantial increase in the price per gallon of fuel at the Mohegan Sun gasoline and convenience center.

Income from operations for the fiscal year ended September 30, 2005 decreased by $100.6 million, or 40.0%, to $150.9 million from $251.5 million for the prior fiscal year. This decrease is attributable to a non-cash relinquishment liability reassessment charge as more fully described above of $123.6 million for the quarter ended September 30, 2005, which had the effect of substantially increasing operating expenses, partially offset by an increase in net revenues.

Adjusted EBITDA at Mohegan Sun for the fiscal year ended September 30, 2005 increased by $11.5 million, or 3.3%, to $360.4 million compared to $348.9 million in the prior fiscal year. The Adjusted EBITDA margin at Mohegan Sun for the fiscal year ended September 30, 2005 was 27.6% compared to a 27.8% Adjusted EBITDA margin for the prior fiscal year.

"We are delighted with the fiscal 2005 results," said Mitchell Etess, Mohegan Sun President and CEO, "but we are more excited about moving forward with many strategic initiatives in the upcoming fiscal year. We are particularly proud of the creative approach that is going to provide quality health coverage to our employees, without the necessity of an employee contribution, and stemming the rapidly escalating expenses in this area."

Mohegan Sun at Pocono Downs

Results for Pocono Downs and the five OTWs from the date of acquisition in January 2005 to September 30, 2005 consisted of racing revenues of $22.9 million, net revenues of $25.9 million, loss from operations of $67,000 and Adjusted EBITDA of $2.9 million. The loss from operations includes $1.3 million in pre-opening costs and expenses associated with developing the planned gaming and entertainment facility previously described.