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Mohegan Sun Posts Profits Plunge More Than Two Thirds

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Published on:
Jul/31/2012
Mohegan Sun Posts Lackluster 3rd Quarter Profit

By STEPHEN SINGER

(Associated Press) - The parent company of the Mohegan Sun casinos in Connecticut and Pennsylvania reported Tuesday that third-quarter profit plunged more than two-thirds as new casinos in the Northeast lured away gamblers and remaining customers reduced spending.

The Mohegan Tribal Gaming Authority said that net income for the April-June period was $9.4 million, down nearly 68 percent from the same period last year. Revenue of $344.4 million was down 4.7 percent.

Mitchell Grossinger Etess, the Indian casinos' chief executive officer, called the results "lackluster."

He said the financial performance suffered in comparison with last year's third quarter, which posted a 150 percent increase in profit. He also blamed the weak economy and rising competition — particularly New York's Aqueduct racino — for declines in profit and revenue.

Etess said Pennsylvania's Mohegan Sun at Pocono Downs performed well. Ground was recently broken for a hotel and convention center that he says will boost profit.

"There's no doubt our third quarter results were lackluster," he told investor analysts and reporters on a conference call. "Frankly, our table games are being impacted more by Aqueduct than we anticipated," he said.

The Genting Group, one of the world's largest gambling companies, has opened a gambling parlor at the popular horse track in Queens, one of New York's outer boroughs. It's limited to 4,500 video slot machines and 500 other electronic table games, but is pulling in millions.

Aqueduct is a short distance from John F. Kennedy International Airport and millions of local workers and residents.

Etess said the Mohegan Sun did not anticipate what he called the "acceptance of non-live table games" as a replacement for the Mohegan Sun's table games in eastern Connecticut.

"There may be a time when people are less accepting of the video games and want live table games and come back here," he said.

Table game and slot customers, particularly wealthier patrons, also are feeling the impact of the weak economy, he said, and are hesitant to spend money as the Obama administration and Congress consider renewing tax cuts signed into law by President George W. Bush a decade ago.

"Some of our customers have even used the term 'frightened' when discussing the economic situation," Etess said.

Analyst Susan Berliner at J.P. Morgan said in a note to investors that the Mohegan Sun "slightly outperformed" neighboring Foxwoods Resort Casino in the quarter, picking up market share.

"We believe that both properties are likely feeling the impact from Aqueduct. ... We remain somewhat concerned over the talks of further gaming expansion in the Northeast, although we are relieved that Massachusetts gaming continues to be delayed," she said.

The Pocono Downs site has outperformed Pennsylvania's overall gambling market, but underperformed nearby competitors in northeast Pennsylvania, Berliner said. That could be because competitors offer hotels, but a planned 238-room hotel at the Mohegan Sun site by the end of next year should help it to be more competitive, she said.

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