Mohegan Tribal Gaming Authority Reports Q1 Results

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Results and significant events for the quarter ended December 31, 2005 were as follows:

* Record first quarter gaming revenues of $315.5 million, a 9.5% increase over the corresponding period in the prior year

* Gross slot revenues of $216.2 million, a 3.8% increase over the corresponding period in the prior year

* Table games revenues of $95.3 million, a 13.4% increase over the corresponding period in the prior year

* Non-gaming revenues of $71.3 million, a 16.8% increase over the corresponding period in the prior year

* Income from operations of $68.4 million, a 13.1% increase over the corresponding period in the prior year

* Net income of $38.3 million, a 11.9% increase over the corresponding period in the prior year

* Record first quarter Adjusted EBITDA, a non-GAAP measure more fully described at the end of this press release, of $91.0 million, a 11.2% increase over the corresponding period in the prior year

* Submitted applications for a conditional and permanent slot machine license with the Pennsylvania Gaming Control Board in December 2005

First Quarter Operating Results

Adjusted EBITDA for the quarter ended December 31, 2005 increased by $9.2 million, or 11.2%, to $91.0 million compared to $81.8 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 December 31, 2005 was 25.8% compared to a 25.6% Adjusted EBITDA margin for the same period in the prior year. The slight increase in the Adjusted EBITDA margin for the quarter ended December 31, 2005 was principally attributable to an increase in the Adjusted EBITDA margin for Mohegan Sun as described below.

Net income for the quarter ended December 31, 2005 increased by $4.1 million, or 11.9%, to $38.3 million from net income of $34.2 million for the same period in the prior year. The increase in net income is primarily due to the increase in income from operations offset by the increase in interest expense. Interest expense increased by $3.6 million to $22.8 million for the quarter ended December 31, 2005 as compared to $19.2 million for the same period in the prior year due to an increase in weighted average outstanding debt. The weighted average outstanding debt was $1.25 billion for the quarter ended December 31, 2005 and $1.05 billion for the quarter ended December 31, 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 7.4% for the quarter ended December 31, 2005 compared to 7.3% for the same period in the prior year.

Speaking for the Authority's Management Board, Chairman Bruce Bozsum said, "The Board was delighted with the results of the quarter. Each of our gaming and non-gaming product offerings showed outstanding growth as compared to last year." He further commented, "The Management Board believes that the results are directly related to the superior performance by our dedicated work force at Mohegan Sun and Mohegan Sun at Pocono Downs."

Mohegan Sun

Net revenues for the quarter ended December 31, 2005 increased by $26.4 million, or 8.3%, to $345.7 million from $319.3 million for the same period in the prior year. This increase is the result of a 7.1% growth in gaming revenues and a 15.5% 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 December 31, 2005 increased by $7.9 million, or 3.8%, to $216.2 million from $208.3 million for the same period in the prior year. The State of Connecticut reported slot revenues of $407.1 million and $401.2 million for the quarters ended December 31, 2005 and 2004, respectively, representing an increase of 1.5%. Mohegan Sun increased its slot market share to 53.1% of the Connecticut market versus 51.9% in the quarter ended December 31, 2004. Gross slot hold percentage, or gross slot revenues divided by slot handle, for the quarter ended December 31, 2005 was 8.4% compared to 8.1% for the same period in the prior year. Gross slot win per unit per day was $379 and $363 for the quarters ended December 31, 2005 and 2004, respectively.

Table games revenues for the quarter ended December 31, 2005 increased by $11.2 million, or 13.4%, to $95.3 million from $84.1 million for the same period in the prior year. Table games hold percentage, or table games revenues divided by table games drop, was 17.0% and 16.4% for the quarters ended December 31, 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 $3,437 and $3,153 for the quarters ended December 31, 2005 and 2004, respectively.

Food and beverage revenues increased by $1.6 million, or 6.8%, to $24.0 million for the quarter ended December 31, 2005 from $22.4 million for the same period in the prior year. The increase in revenues is primarily attributable to a 6.7% increase in the number of meals served, or food covers. The increase in food covers was partially due to the opening of the 285-seat Uncas American Indian Grill to the public in July 2005.

Hotel revenues increased by $700,000, or 5.6%, to $12.6 million for the quarter ended December 31, 2005 from $11.9 million for the same period in the prior year. Hotel occupancy increased to 91.2% for the quarter ended December 31, 2005 compared to 87.1% for the quarter ended December 31, 2004. The increase in hotel revenue is attributable to the increase in hotel occupancy in addition to the increase in the average daily room rate, or ADR, to $122 for the quarter ended December 31, 2005 compared to $120 for the same period in the prior year. Revenue per Available Room, or REVPAR, increased to $111 for the quarter ended December 31, 2005 compared to $105 for the same period in the prior year. Our yield management strategy to optimize hotel revenue continues to be successful, as the increased hotel occupancy was believed to contribute to the growth in gaming, food and beverage and retail, entertainment and other revenues.

Retail, entertainment and other revenues increased by $7.3 million, or 27.2%, to $34.0 million for the quarter ended December 31, 2005 from $26.7 million for the same period in the prior year. The increase is attributable to the increase in entertainment revenues of $7.7 million, or 104.5%, which is due to an increase in the number of arena events and a substantial increase in the average price per ticket of 59.6% to $66.76 for the quarter ended December 31, 2005 from $41.83 for the same period in the prior year due to a change in the headliners performing at the Arena.

Income from operations for the quarter ended December 31, 2005 increased by $9.7 million, or 15.4%, to $72.5 million from $62.8 million for the quarter ended December 31, 2004.

Adjusted EBITDA at Mohegan Sun for the quarter ended December 31, 2005 increased by $9.3 million, or 11.0%, to $93.4 million compared to $84.1 million for the same period in the prior year. The Adjusted EBITDA margin at Mohegan Sun for the quarter ended December 31, 2005 was 27.0% compared to a 26.3% Adjusted EBITDA margin for the same period in the prior year. The increase in the Adjusted EBITDA margin was principally attributable to a change in guest denomination preference in slots which has resulted in higher slot hold percentage, higher table games hold percentage and lower promotional costs.

"We are delighted by the outstanding performance or our team here at Mohegan Sun. This is evidenced by the growth in Adjusted EBITDA, operating margin and market share over the prior year," said Mitchell Etess, Mohegan Sun President and CEO. "We will continue our focus on improving operating efficiency and customer service throughout 2006."

Mohegan Sun at Pocono Downs

Results for Pocono Downs and the five OTWs for the quarter ended December 31, 2005 consisted of racing revenues of $6.8 million, net revenues of $7.6 million, loss from operations of $2.0 million and Adjusted EBITDA of $(231,000).

The loss from operations at Pocono Downs for the quarter ended December 31, 2005 includes $1.1 million in pre-opening costs and expenses comprised of personnel, consulting and other costs associated with the development plans mentioned below.

The Authority previously announced 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 current 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. The scope and timing for development continue to be refined through the Authority's rigorous planning process.

Construction of the new facility will begin following the issuance of a conditional or permanent slot license by the Pennsylvania Gaming Control Board, or PGCB, anticipated in the summer of 2006. The opening date of the new facility 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.

Downs Racing, L.P., a subsidiary of the Authority and the owner and operator of Mohegan Sun at Pocono Downs, submitted an application for a conditional slot license with the PGCB on December 8, 2005 and for a permanent slot license on December 28, 2005. Upon receipt of a conditional or permanent license, the Authority will also pay a one-time $50 million fee to the Commonwealth of Pennsylvania. As required in the licensing regulations, the Authority established a letter of credit commitment of $50 million in December 2005 to support the future payment of the license fee.

In addition to the development of the new gaming and entertainment facility, the Authority is making 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 be completed in the spring of 2006.

"We were very pleased to have submitted our licensing application in December," said Robert J. Soper, President and Chief Executive Officer of Mohegan Sun at Pocono Downs. "We continue to be excited about our opportunity for gaming at Pocono Downs. As was the case prior to and during the Authority's prior expansions of Mohegan Sun, we will keep you informed as to any material changes in our expansion plans for Pocono Downs."

Liquidity, Capital Resources and Capital Spending

As of December 31, 2005, the Authority held cash and cash equivalents of $93.1 million, an increase of $20.7 million from $72.4 million as of September 30, 2005. As of December 31, 2005, there were no outstanding draws under the Authority's $450.0 million bank credit facility revolving loan. In December 2005, the Authority received the requisite consent from its lenders to amend the bank credit facility to permit the Authority to increase the maximum amount available under letters of credit to $60.0 million, enabling the Authority to establish the $50.0 million letter of credit necessary for the Pennsylvania slot license applications mentioned above. Taking into effect this and other letters of credit, which offset amounts available to be borrowed, the Authority had approximately $399.7 million available for borrowing under the bank credit facility as of December 31, 2005. The Authority's total debt was approximately $1.24 billion as of December 31, 2005.

Capital expenditures totaled $25.2 million for the quarter ended December 31, 2005 versus $7.4 million for the same period in the prior year, comprised primarily of Pocono Downs construction expenditures of $10.6 million and maintenance capital expenditures at Mohegan Sun of $14.6 million.

Capital expenditures at Mohegan Sun are anticipated to be approximately $51.0 million for the 2006 fiscal year, comprised primarily of anticipated maintenance capital expenditures, customer relationship management software and related hardware, slot machine replacements and information systems enhancements and upgrades.

Capital expenditures for the Pocono Downs racetrack site are anticipated to be approximately $94.0 million for the 2006 fiscal year, comprised primarily of design fees and construction costs for the planned slot machine facility and the improvements to the existing Clubhouse and Grandstand.

Distributions to the Mohegan Tribe of Indians of Connecticut, or the Tribe, totaled $17.8 million and $16.4 million for the quarter ended December 31, 2005 and 2004, respectively. Distributions to the Tribe are anticipated to total approximately $72.5 million for fiscal year 2006.

Management believes that existing cash balances, financing arrangements and operating cash flows will provide the Authority with sufficient resources to meet its existing debt obligations, relinquishment payments, foreseeable capital expenditure requirements with respect to current operations and distributions to the Tribe for at least the next twelve months. Future investments in Pocono Downs related to the improvement of the existing facility and the development of a slot machine facility at the racetrack, in addition to the payment of a one-time slot machine license fee, are anticipated to be funded through the bank credit facility and additional borrowings, as necessary.