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EX-31.2 - EX-31.2 - INN OF THE MOUNTAIN GODS RESORTS & CASINO | p18055exv31w2.htm |
EX-32.1 - EX-32.1 - INN OF THE MOUNTAIN GODS RESORTS & CASINO | p18055exv32w1.htm |
EX-31.1 - EX-31.1 - INN OF THE MOUNTAIN GODS RESORTS & CASINO | p18055exv31w1.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED June 30, 2010
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTER FROM TO
Commission file number 333-113140
INN OF THE MOUNTAIN GODS RESORT AND CASINO
(Exact name of registrant as specified in its charter)
Not Applicable (State or other jurisdiction of incorporation or organization) |
75-3158926 (I.R.S. Employer Identification Number) |
|
287 Carrizo Canyon Road Mescalero, New Mexico (Address of principal executive offices) |
88340 (Zip Code) |
575-464-7777
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
INN OF THE MOUNTAIN GODS RESORT AND CASINO
FORM 10-Q
FOR THE QUARTER ENDED June 30, 2010
INDEX
FORM 10-Q
FOR THE QUARTER ENDED June 30, 2010
INDEX
2
Table of Contents
INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(unaudited)
As of September 30, | As of June 30, | |||||||
2009 | 2010 | |||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 5,629,436 | $ | 11,223,791 | ||||
Accounts receivable, net of allowance for doubtful accounts |
617,433 | 583,186 | ||||||
Inventories, net |
862,251 | 937,414 | ||||||
Prepaid expenses and other assets |
1,321,812 | 824,956 | ||||||
Total current assets |
8,430,932 | 13,569,347 | ||||||
Non-current assets |
||||||||
Property, plant and equipment, net |
189,066,385 | 183,317,181 | ||||||
Other assets |
51,000 | 51,000 | ||||||
Deferred financing cost |
2,078,017 | 742,149 | ||||||
Total assets |
$ | 199,626,334 | $ | 197,679,677 | ||||
Liabilities and deficit |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 1,422,304 | $ | 1,118,283 | ||||
Accrued expenses |
4,604,088 | 4,821,485 | ||||||
Accrued payroll and benefits |
2,806,727 | 1,967,755 | ||||||
Accrued interest |
22,386,667 | 44,175,000 | ||||||
Advance deposits |
413,046 | 1,135,633 | ||||||
Current portion of long-term debt |
202,924,922 | 200,467,694 | ||||||
Total current liabilities |
234,557,754 | 253,685,850 | ||||||
Non-current liabilities |
||||||||
Long-term debt, net of current portion |
395,634 | 65,672 | ||||||
Total liabilities |
234,953,388 | 253,751,522 | ||||||
Deficit |
||||||||
Contributed capital |
(5,389,062 | ) | (20,055,728 | ) | ||||
Accumulated deficit |
(29,937,992 | ) | (36,016,117 | ) | ||||
Total deficit |
(35,327,054 | ) | (56,071,845 | ) | ||||
Total liabilities and deficit |
$ | 199,626,334 | $ | 197,679,677 | ||||
The accompanying notes are an integral part of these statements.
3
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(unaudited)
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
June 30, 2009 | June 30, 2010 | June 30, 2009 | June 30, 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Gaming |
$ | 18,437,030 | $ | 19,145,963 | $ | 52,593,364 | $ | 52,077,452 | ||||||||
Hotel |
2,861,132 | 2,349,505 | 8,098,092 | 6,679,851 | ||||||||||||
Food and beverage |
3,136,992 | 2,894,769 | 8,847,935 | 9,265,107 | ||||||||||||
Recreation and other |
2,366,365 | 2,575,296 | 10,852,343 | 14,605,377 | ||||||||||||
Gross revenue |
26,801,519 | 26,965,533 | 80,391,734 | 82,627,787 | ||||||||||||
Less-promotional allowances |
235,235 | 239,631 | 664,090 | 678,599 | ||||||||||||
Net Revenue |
26,566,284 | 26,725,902 | 79,727,644 | 81,949,188 | ||||||||||||
Operating expenses: |
||||||||||||||||
Gaming |
6,046,156 | 6,120,623 | 18,436,227 | 16,922,240 | ||||||||||||
Hotel expenses |
899,878 | 909,456 | 3,043,690 | 2,558,325 | ||||||||||||
Food and beverage |
2,808,730 | 3,173,431 | 8,968,343 | 9,631,616 | ||||||||||||
Recreation and other |
2,095,793 | 2,442,891 | 7,388,606 | 8,024,316 | ||||||||||||
Marketing |
2,062,495 | 2,073,652 | 5,993,185 | 6,482,059 | ||||||||||||
General and administrative |
3,559,552 | 3,175,056 | 13,108,434 | 11,525,982 | ||||||||||||
Management fees (Note 9) |
| 414,011 | | 579,151 | ||||||||||||
Refinance charges |
| 932,660 | | 1,671,620 | ||||||||||||
Depreciation and amortization |
2,957,827 | 2,744,086 | 9,082,168 | 8,752,754 | ||||||||||||
Insurance reimbursement (Note 11) |
(134,296 | ) | | (4,306,380 | ) | (1,466,658 | ) | |||||||||
Storm costs (Note 11) |
15,925 | 9,126 | 293,118 | 183,647 | ||||||||||||
Gain on disposal of assets |
| (10,460 | ) | (3,163 | ) | (10,460 | ) | |||||||||
Total operating expenses |
20,312,060 | 21,984,532 | 62,004,228 | 64,854,592 | ||||||||||||
Operating income: |
6,254,224 | 4,741,370 | 17,723,416 | 17,094,596 | ||||||||||||
Other income (expense) |
||||||||||||||||
Interest expense |
(6,502,328 | ) | (7,942,402 | ) | (19,569,619 | ) | (23,245,759 | ) | ||||||||
Other income |
4,242 | 31,671 | 27,321 | 73,038 | ||||||||||||
Total other income (expense) |
(6,498,086 | ) | (7,910,731 | ) | (19,542,298 | ) | (23,172,721 | ) | ||||||||
Net loss |
$ | (243,862 | ) | $ | (3,169,361 | ) | $ | (1,818,882 | ) | $ | (6,078,125 | ) | ||||
The accompanying notes are an integral part of these statements.
4
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(unaudited)
Nine months ended | Nine months ended | |||||||
June 30, 2009 | June 30, 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (1,818,882 | ) | $ | (6,078,125 | ) | ||
Adjustments to reconcile net loss to net cash provided
by operating activities: |
||||||||
Depreciation and amortization |
9,082,168 | 8,752,754 | ||||||
Changes in assets and liabilities: |
||||||||
Gain on disposal of assets |
(3,163 | ) | (10,460 | ) | ||||
Accounts receivable |
345,157 | 34,247 | ||||||
Tribal accounts receivable |
166,750 | | ||||||
Inventories |
94,973 | (75,163 | ) | |||||
Prepaid expenses |
795,560 | 496,856 | ||||||
Insurance reimbursement |
1,100,000 | | ||||||
Other long-term assets |
(146,160 | ) | | |||||
Deferred financing costs |
722,057 | 1,335,868 | ||||||
Accounts payable |
(2,249,350 | ) | (304,021 | ) | ||||
Accrued expenses, payroll and benefits |
(292,980 | ) | (621,575 | ) | ||||
Accrued interest payable |
6,000,000 | 21,788,333 | ||||||
Deposits and advanced payments |
189,405 | 722,587 | ||||||
Net cash provided by operating activities |
13,985,535 | 26,041,301 | ||||||
Cash flows from investing activities: |
||||||||
Purchase of property, plant and equipment |
(8,495,073 | ) | (2,993,090 | ) | ||||
Net cash used in investing activities |
(8,495,073 | ) | (2,993,090 | ) | ||||
Cash flows from financing activities: |
||||||||
Principal payments on long-term debt |
(2,844,149 | ) | (2,787,190 | ) | ||||
Distributions to Mescalero Apache Tribe |
(12,703,000 | ) | (14,666,666 | ) | ||||
Net cash used in financing activities |
(15,547,149 | ) | (17,453,856 | ) | ||||
Net (decrease) increase in cash and cash equivalents |
(10,056,687 | ) | 5,594,355 | |||||
Cash and cash equivalents, beginning of period |
16,912,249 | 5,629,436 | ||||||
Cash and cash equivalents, end of period |
$ | 6,855,562 | $ | 11,223,791 | ||||
Supplemental cash flow information: |
||||||||
Cash paid for interest |
$ | 12,350,316 | $ | 121,559 | ||||
Non-cash investing and financing activities |
||||||||
Property, plant and equipment acquired through
reduction in storm recovery receivable |
$ | 3,209,543 | $ | 1,466,658 | ||||
The accompanying notes are an integral part of these statements.
5
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(unaudited)
NOTE 1-BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Change in Fiscal Year
On September 3, 2009, the Management Board (the Board) of IMG Resort and Casino resolved by unanimous consent to change the Companys fiscal year, formerly ending April 30, to a fiscal year end, effective September 30, 2009. This change in fiscal year end makes the Companys year end coincide with the Mescalero Apache Tribes fiscal year end.
This
report contains unaudited three and nine months consolidated statements of operations for the period ended June 30, 2010 and 2009, an unaudited consolidated statement of cash flows for the nine months ended June 30, 2010 and 2009, and includes unaudited consolidated balance sheet information as of September 30, 2009 and June 30, 2010.
Reporting Entity and Operations
The Inn of the Mountain Gods Resort and Casino and subsidiaries (IMG
Resort and Casino or the Company), an unincorporated enterprise of the Mescalero Apache Tribe
(the Tribe), was established April 30, 2003 by the Tribe and manages and owns all resort, hotel and
gaming enterprises of the Tribe including the Inn of the Mountain Gods Resort and Casino (the Resort), a gaming, hotel
and resort complex opened on March 15, 2005, and its wholly-owned subsidiaries, each of which is an unincorporated enterprise of
the Tribe: Casino Apache (the Casino Apache Enterprise), which owned and operated the Tribes former casino,
closed in February 2005; Casino Apache Travel Center (the Travel Center), which owns the Tribes second
casino facility opened in May 2003 (the Travel Center Casino); Ski Apache,
which owns the Tribes ski resort, Ski Apache Resort (Ski Apache); and Inn of the Mountain Gods
(the Inn), which owned the Tribes former resort hotel, Inn of the Mountain Gods (the Inn Hotel).
The Tribe is the sole owner of IMG Resort and Casino. IMG Resort and Casino is a separate legal entity from the Tribe and is managed by the Board.
The Resort, which opened for commercial business on March 15, 2005, is located on tribal land in Mescalero, New Mexico and consists of the Inn of the Mountain Gods Casino offering Class III gaming as defined by the Indian Gaming Regulatory Act (IGRA) and a 273 luxury room resort hotel. The Travel Center Casino, which opened for business on May 22, 2003, also offers Class III gaming as defined by IGRA, on tribal
land in Mescalero. Ski Apache operates the Ski Apache Resort, a ski resort located within the Tribes reservation in Mescalero and on the U.S. Forest Service land.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
IMG Resort and Casino and its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation. These
consolidated financial statements present only the consolidated financial position, results of operations and cash flows of the IMG Resort
and Casino and subsidiaries and are not intended to present fairly the financial position of the Tribe and the results of its operations and cash flows.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company has incurred significant losses and did not generate sufficient cash to make the interest payments on its 12% senior Notes due 2010 (the Notes) since November 15, 2008. This
non-payment of interest constitutes an event of default under the Indenture governing the Notes.
6
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company is currently in discussions with certain of its debtholders regarding these issues. As
of June 30, 2010, the Company had negative working capital of
approximately $240.1 million and a
total deficit of approximately $56.1 million.
The event of default, along with the Companys history of recurring losses, negative working
capital and limited access to capital, has raised substantial doubt regarding the Companys ability
to continue as a going concern. The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Historically, IMG Resort and Casino has not generated sufficient cash flow from operations to
satisfy its capital requirements and relied upon debt financing arrangements to satisfy such
requirements. The current cash flows and capital resources may force IMG Resort and Casino to
reduce or delay activities and capital expenditures if IMG Resort and Casino is unable to refinance
its debt. In the event that IMG Resort and Casino is unable to refinance or restructure its debt,
IMG Resort and Casino will be left without sufficient liquidity and IMG Resort and Casino will not
be able to meet its debt service requirements and repayment obligations.
Reclassifications
Certain reclassifications have been made in the prior years consolidated financial statements to
conform to the current presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the recorded amount of assets and liabilities at the date of the financial statements and the
revenues and expenses during the period. Significant estimates included in the accompanying
financial statements relate to the liability associated with the unredeemed Apache Spirit Club
points, the estimated lives of depreciable assets, the determination of bad debt, inventory
reserves, asset impairment and the capitalization of construction bond interest costs. Actual
results could differ from those estimates.
Cash and Cash Equivalents
Cash includes cash on hand for change drawers and in the vault for daily casino activities and cash
on deposit with financial institutions in demand accounts, savings accounts and short-term
certificates of deposit. For purposes of the statement of cash flows all cash accounts that are not
subject to withdrawal restrictions or penalties and all highly liquid debt instruments purchased
with an original maturity of nine months or less are considered to be cash equivalents.
Accounts Receivable
Accounts receivable consists primarily of hotel and other non-gaming receivables. IMG Resort and
Casino maintains an allowance for doubtful accounts, which is based on managements estimate of the
amount expected to be uncollectible considering historical experience and the information
management obtains regarding the creditworthiness of the non-gaming customer. The collectability of
these receivables could be affected by future business or economic trends.
7
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Inventories
Inventories consist of food and beverage items, fuel, retail merchandise in the golf and pro shop,
ski shop, gift shops and other miscellaneous items, parts and supplies. All inventories are stated
at the lower of cost or market using the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are presented at historical cost, less accumulated depreciation and
amortization. Expenditures for additions, improvements and replacements are capitalized while
maintenance and repairs, which do not improve or extend the service lives of the respective assets,
are expensed as incurred. Interest incurred during the construction period is capitalized at the
borrowing rate for the related loan and is amortized over the life of the related asset. Equipment
sold, or otherwise disposed of, is removed from the accounts with gains or losses on disposal
recorded in the statements of income.
Depreciation and amortization is provided over the estimated service lives of the respective
assets, using the straight-line method based on the following useful lives:
Non gaming equipment, furniture and other |
3 15 years | |||
Gaming equipment |
5 7 years | |||
Leasehold and land improvements, lake and golf course |
5 30 years | |||
Buildings, lifts and snowmaking equipment |
10 39 years |
Deferred Financing and Refinancing Costs
Debt issuance costs incurred in connection with the issuance of the Notes were capitalized and are
being amortized to interest expense using the straight-line method over the stated maturity of the
debt, which approximates the effective interest method. Unamortized deferred financing costs
totaled $2.1 million as of September 30, 2009 and $0.7 million as of June 30, 2010.
Impairment of Long Lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances
indicate the carrying amount of such assets may not be recoverable. In August 2001, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
FASB ASC 360-10, Property, Plant and Equipment, (prior authoritative literature: SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets) (FASB ASC 360-10 (SFAS No. 144))
which established the approach to be used in the determination of impairment. Under the provisions
of FASB ASC 360-10 (SFAS No. 144), a long-lived asset to be abandoned is disposed of when it ceases
to be used. If an entity commits to a plan to abandon a long-lived asset before the end of its
previously estimated useful life, depreciation estimates shall be revised to reflect the use of the
asset over its shortened useful life.
For the three months ended June 30, 2009, IMG Resort and Casino has incurred approximately $15,925
in costs associated with the storm recovery compared to $9,126 for the three months ended June 30,
2010. IMG Resort and Casino has incurred $293,118 in costs associated with the storm recovery for
the nine months ended June 30, 2009, compared to $183,647 for the nine months ended June 30, 2010,
which included payroll, supplies and immediate repairs. (See Note 11)
8
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses, bank financing facilities and capital lease obligations approximate fair value. The fair
value of IMG Resort and Casinos senior Notes were approximately $82.0 million at June 30, 2010,
versus $200.0 million recorded value, based on the most recent quoted market price. The Notes are
not heavily traded, and price quotes ranged from $47.00 to $41.00 per $100 of principal amount
during the three months ended June 30, 2010.
Contributed Capital
Contributed capital represents contributions from the Tribe and consists of (i) cash to fund
certain construction and development of the IMG Resort and Casino, (ii) forgiveness of debt from
the Inn to the Tribe and (iii) allocated costs related to the Mescalero Apache Tribe Defined
Benefit Plan (see Note 7).
Revenues
In accordance with gaming industry practice, we recognize gaming revenues as the net win from
gaming activities, which is the difference between gaming wins and losses. Gaming revenues are net
of accruals for anticipated payouts of progressive slot jackpots and table games. These anticipated
jackpot payments are reflected as current liabilities on our balance sheets. The total accrual for
jackpots and progressives was approximately $150,000 and $94,000 at September 30, 2009 and June 30,
2010, respectively. Net slot win represents all amounts played in the slot machines reduced by the
winnings paid out. Table games net win represents the difference between table game wins and
losses. The table games historical win percentage is reasonably predictable over time, but may vary
considerably during shorter periods. Revenues from food, beverage, rooms, recreation, retail and
other are recognized at the time the related service or sale is completed. Player reward
redemptions for food and beverage, hotel rooms and other items are included in gross revenue at
full retail value.
Promotional Allowances
IMG Resort and Casino periodically rewards rooms and other promotions, including Apache Spirit Club
points and gift certificates, to its customers. The Casinos Apache Spirit Club allows customers to
earn points based on the volume of their gaming activity. These points are redeemable for certain
promotion dollars, complimentary services or merchandise. Points are accrued based upon their
historical redemption rate multiplied by the cash value or the cost of providing the applicable
complimentary services. The retail value of these player rebates is recognized by IMG Resort and
Casino as a reduction from gross revenue. The total vouchers recognized by IMG Resort and Casino
were approximately $235,235 and $239,631 for the three months ended June 30, 2009 and 2010,
respectively. The total vouchers recognized by IMG Resort and Casino were approximately $664,090
and $678,599 for the nine months ended June 30, 2009 and 2010, respectively. The Apache Spirit Club
liability is included in accrued expenses and totaled $884,821 at September 30, 2009 and $803,627
at June 30, 2010.
9
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Emerging Issues Task Force (EITF) FASB ASC 605-50, Revenue Recognition, Customer payments and
Incentives (prior authoritative literature: FASB EITF Issue No. 00-14, Accounting for Certain Sales
Incentives (FASB ASC 605-50 (FAS Issue No. 00-14)), requires that discounts which result in a
reduction in or refund of the selling price of a product or service in a single exchange
transaction be recorded as a reduction of revenues. We adopted FASB ASC 605-50 (FAS Issue No.
00-14) on April 30, 2001. Our accounting policy related to free or discounted food and beverage and
other services already complies with FASB ASC 605-50 (FAS Issue No. 00-14), and those free or
discounted services are generally deducted from gross revenues as promotional allowances. In
January 2001, the EITF reached a consensus on certain issues related to Issue No. 00-22, Accounting
for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for
Reproduces, or Services to be delivered in the future. Effective January 1, 2001, we through our
wholly-owned subsidiaries adopted EITF 00-22, which requires that cash or equivalent amounts
provided or returned to customers as part of a transaction not be shown as an expense, but instead
as an offset to the related revenue.
The estimated cost of providing such promotional allowances, as they relate to operations, was
included in casino expenses as follows:
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2009 | 2010 | 2009 | 2010 | |||||||||||||
Rooms |
$ | 17,385 | $ | 3,406 | $ | 46,738 | $ | 26,063 | ||||||||
Food and beverage |
160,276 | 280,555 | 499,447 | 663,234 | ||||||||||||
Total |
$ | 177,661 | $ | 283,961 | $ | 546,185 | $ | 689,297 | ||||||||
Marketing
IMG Resort and Casinos marketing costs to outside parties are expensed as incurred and for the
three months ended June 30, 2009 and 2010 were $2.1 million and for the nine months ended June 30,
2009 and 2010 were $6.0 million and $6.5 million, respectively.
Tribal Taxes
IMG Resort and Casino is subject to Mescalero Apache Tribal taxes which employs an alternative
minimum tax system. Other than a portion of the operations at Ski Apache, IMG Resort and Casinos
operations are not subject to New Mexico State Gross Receipts Tax. A Tribal tax charge of 10.75% of
room revenue, 6.75% of food and beverage revenue, and 6.5% of other revenue is charged at non-Ski
Apache outlets. Under the tribes alternative minimum tax system, IMG Resort and Casino is assessed
the greater of a fixed rate of $200,000 or the amount collected from sales taxes on a per month
basis. In prior periods the taxes collected were included in net
revenue and tax payments were included
in expenses as opposed to being recorded as a liability and subsequent release of the liability.
Since November 2009, taxes have been collected and recorded as a liability on IMG Resort and Casinos balance
sheet and are not included in net revenue. Excess tax amounts due under the alternative
minimum tax system are expensed in the month they are due. The tax payment is made at the beginning
of the month in which the taxes are being collected. For the three months ended June 30, 2010, IMG
Resort and Casino collected $498,650 in taxes, paid the $600,000 alternative minimum tax due, and
recorded $101,350 in alternative minimum tax expense. For the nine
months ended June 30, 2010, IMG Resort and Casino collected $1,384,896 in
taxes, paid the $1,800,000 alternative minimum tax due, and recorded
$415,104 in alternative minimum tax expense. The following chart highlights IMG Resort and Casinos tribal
tax activity for the three months and nine months
ended June 30, 2010.
Three Months Ended | Nine Months Ended | |||||||
June 30, 2010 | June 30, 2010 | |||||||
Alternative minimum tax due |
$ | 600,000 | $ | 1,800,000 | ||||
Total taxes collected |
(498,650 | ) | (1,384,896 | ) | ||||
Alternative minimum tax expensed |
$ | 101,350 | $ | 415,104 | ||||
10
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Classification of Departmental Costs
Gaming direct costs are comprised of all costs of the Resorts gaming operations, including labor
costs for casino-based supply costs, certain (including costs in operating our players clubs). and
other direct operating costs of the casinos. Food and beverage direct costs are comprised of all
costs of the Resorts food and beverage operations, including labor costs for personnel employed by
the Resorts restaurants and food and beverage, supply costs for all food and beverages served in
the casinos or sold in the Resorts restaurants and other food outlets and other expenses including
other direct operating expenses related to these activities. General and administrative direct
costs are comprised of administrative expenses at our three months, including the salaries of
corporate officers, accounting, finance, legal and other professional expense and occupancy costs
and other indirect costs not included in the direct costs of our operating departments.
Income Taxes
As unincorporated enterprises of the Tribe, IMG Resort and Casino and its subsidiaries are exempt
from federal and state income taxes.
New Accounting Pronouncements
The adjustment to reflect the difference between the fair value and the current carrying amount of
the assets and liabilities for which a company elects fair-value measurement is reported as a
cumulative-effect adjustment to the opening balance of retained earnings upon adoption. Companies
that adopt FASB ASC 825-10 (SFAS 159) early must also adopt all of FASB ASC 825-10s (SFAS 157)
requirements at the early adoption date. The adoption of this standard did not have a material
effect on IMG Resort and Casinos financial statements.
In April 2008, the FASB issued Staff Position FASB ASC 350, Intangible- Goodwill and Other, (Prior
authoritative literature: FASB SFAS 142-3: Determination of the Useful Life of Intangible Assets,
issued April 2008) (FASB ASC 350 (FSP FAS 142-3)). The FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under FASB ASC 350 (SFAS No. 142), Goodwill and Other Intangible
Assets. The intent of the FSP is to improve the consistency between the useful life of a
recognized intangible asset under FASB ASC 350 (SFAS No. 142) and the period of expected cash flows
used to measure the fair value of the asset under other accounting principles generally accepted in
the United States of America. The FSP is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is
prohibited. The Company adopted FASB ASC 350 (SFAS No. 142) at the beginning of fiscal year 2010.
The adoption did not have a significant effect on the Companys financial statements.
In April 2009, the FASB issued FSP No. 107-1 and Accounting Principles Board Opinion No. 28-1,
Interim Disclosures about Fair Value of Financial Instruments (FSP No.107-1). FASB ASC 825-10
(FSP No. 107-1) extends the disclosure requirements of FASB ASC 825-10 (SFAS No. 107), Disclosures
about Fair Value of Financial Instruments, to interim period financial statements, in addition to
the existing requirements for annual periods and reiterates FASB ASC 825-10s (SFAS No. 107)
requirement to disclose the methods and significant assumptions used to estimate fair value. FASB
ASC 825-10 (FSP No.107-1) is effective for interim and annual periods ending after June 15, 2009.
The adoption of this statement did have a material impact on the Companys consolidated financial
position or results of operations.
11
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The FASB issued FASB ASC 105-10, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles (prior authoritative literature: FASB SFAS No. 168, The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles, issued June 2009) (FASB ASC 106-10-65 (SFAS No. 168)), which replaced SFAS No. 162,
and established the sources of authoritative U.S. generally accepted accounting principles (GAAP)
recognized by the FASB to be applied by nongovernmental entities. On the effective date for
financial statements issued for interim and annual periods ending after September 15, 2009, the
Codification superseded all then-existing nonSEC accounting and reporting standards. FASB ASC
106-10 (SFAS No. 168) is effective for fiscal years and interim periods ending after September 15,
2009. The adoption of FASB ASC 105-10 (SFAS 168) did not have a material impact on our consolidated
financial statements.
In April 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2010-16, Entertainment-Casinos (Topic 924): Accruals for Casino Jackpot Liabilities, a
consensus of the FASB Emerging Issues Task Force. This guidance clarifies that an entity should not
accrue jackpot liabilities (or portions thereof) before a jackpot is won if the entity can avoid
paying that jackpot. Jackpots should be accrued and charged to revenue when an entity has the
obligation to pay the jackpot. The guidance applies to both base and progressive jackpots. The
guidance is effective for reporting periods beginning after December 15, 2010. Accordingly, we will
adopt the new guidance in the first quarter of 2011. The adoption of this new guidance is not
expected to have a material impact on our condensed consolidated financial statements.
NOTE 2ALLOWANCE FOR DOUBTFUL ACCOUNTS
IMG Resort and Casino maintains an allowance for doubtful accounts for estimated losses resulting
from the inability of customers to make required payments, which results in bad debt expense. IMG
Resort and Casino determines the adequacy of this allowance by periodically evaluating individual
non-gaming customer receivables and considering its non-gaming customers financial condition,
credit history and current economic conditions. If the financial condition of non-gaming customers
were to deteriorate, resulting in an impairment of their ability to make payments, IMG Resort and
Casino may increase the allowance.
The allowance for doubtful accounts was $44,538 at September 30, 2009 and $90,049 at June 30, 2010.
NOTE 3INVENTORIES
Inventories consist of the following as of:
September 30, 2009 | June 30, 2010 | |||||||
Food and beverage |
$ | 237,361 | $ | 262,444 | ||||
Golf and pro shop |
65,853 | 86,135 | ||||||
Gift shops, fuel and other |
559,037 | 588,835 | ||||||
Inventories, net of reserves |
$ | 862,251 | $ | 937,414 | ||||
12
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment is summarized as follows:
September 30, 2009 | June 30, 2010 | |||||||
Land |
$ | 1,000,473 | $ | 1,000,473 | ||||
Buildings |
210,005,387 | 211,090,409 | ||||||
Lifts and snowmaking equipment |
8,493,368 | 10,993,144 | ||||||
Non-gaming equipment, furniture and other |
52,480,709 | 52,444,815 | ||||||
Gaming equipment |
22,470,190 | 23,675,024 | ||||||
Leasehold and land improvements, lake and golf course |
11,075,633 | 11,075,633 | ||||||
Subtotal |
305,525,760 | 310,279,498 | ||||||
Less accumulated depreciation and amortization |
(119,375,209 | ) | (127,719,320 | ) | ||||
Property, plant and equipment, net |
186,150,551 | 182,560,178 | ||||||
Construction in progress |
2,915,834 | 757,003 | ||||||
Net Property, plant and equipment |
$ | 189,066,385 | $ | 183,317,181 | ||||
NOTE 5LONG-TERM DEBT
On November 3, 2003, IMG Resort and Casino issued $200.0 million of its Notes. The Notes bear
interest at 12% per year, payable on May 15 and November 15 of each year, beginning on May 15,
2004. The Notes will mature on November 15, 2010. The Notes may be redeemed at any time on or after
November 15, 2007 at fixed redemption prices plus accrued and unpaid interest, if any. If a change
in control occurs, holders of the Notes will have the right to require the repurchase of their
Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any. The Notes are guaranteed by all of IMG Resort and Casinos subsidiaries.
The Indenture governing the Notes (the Indenture) contains covenants that limit, among other
things, IMG Resort and Casino and the guarantors ability to pay dividends and make distributions
to the Tribe; make investments; incur additional debt; create liens; sell equity interests in
subsidiaries; enter into transactions with affiliates; enter into sale and leaseback transactions;
engage in other businesses; transfer or sell assets; and merge or consolidate with or into other
entities.
The Company has not made the scheduled $12.0 million interest payments on the Companys Notes since
November 15, 2008. Under the terms of the Indenture, the Company had a 30 day grace period with
respect to each interest payment but did not make these payments. Failure to make the May 15, 2009,
November 15, 2009 and May 15, 2010 interest payments on or before June 15, 2009, December 15, 2009
and June 15, 2010, respectively, constituted separate events of default under the Indenture. Upon
the occurrence of an event of default, the trustee or holders of at least 25% of the outstanding
principal amount of the Notes could declare all of the Notes immediately due and payable.
Pursuant to the Indenture, the Company is obligated to pay penalty interest on overdue principal at
the rate equal to 1% per annum in excess of the applicable interest rate on the Notes (12%), and to
pay interest on overdue installments of interest payable on the Notes at the same rate. As of June
30, 2010, total accrued interest was $44.2 million, of which $2.5 million was penalty interest
accrued.
The Tribe has engaged financial advisors, and negotiations between the Mescalero Apache Tribal
Council and holders of the Notes continue. If the Notes are declared immediately due and payable,
it would constitute a default under the terms of the Companys furniture and equipment loan and the
lenders thereunder could declare the outstanding loan to be immediately due and payable. Due to the
events of default, the Notes have been classified as current in the accompanying consolidated
balance sheet.
13
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On June 15, 2004, IMG Resort and Casino entered into a $15.0 million fixed credit facility with an
equipment finance company. The fixed credit facility is fully amortizable over five years and bears
fixed interest rates ranging from 7.55% to 8.18%. Proceeds from the loan were used to fund
furniture, fixtures and equipment for the Resort. As of September 30, 2009 and June 30, 2010, $2.5
million and $35,286, respectively, remained outstanding on this facility.
Long-term debt at September 30, 2009 and June 30, 2010 is summarized as follows:
September 30, 2009 | June 30, 2010 | |||||||
Senior Notes, bearing interest at a fixed rate of 12%, maturing in 2010 |
$ | 200,000,000 | $ | 200,000,000 | ||||
Bureau of Indian Affairs (BIA), unsecured notes payable with payments of
$27,100 per month, including interest at 8.5%, maturing in 2011 |
560,554 | 346,352 | ||||||
Capital Equipment Loans with Key Equipment, Five (5) year term, 7.65% interest |
2,519,922 | 35,286 | ||||||
Xerox (3) year term |
240,080 | 151,728 | ||||||
Total |
203,320,556 | 200,533,366 | ||||||
Less current portion |
(202,924,922 | ) | (200,467,694 | ) | ||||
Long-term portion |
$ | 395,634 | $ | 65,672 | ||||
The maturities of long-term debt as of June 30, 2010 are as follows:
2010 |
$ | 200,106,593 | ||
2011 |
426,773 | |||
$ | 200,533,366 | |||
NOTE 6GAMING REVENUE SHARING AND REGULATORY FEES
The Tribe regulates IMG Resort and Casinos gaming activities through the Mescalero Apache Tribe
Gaming Regulatory Commission, an agency of the Tribe (the Commission). The Commission reports
directly to the Tribal Council of the Tribe. A regulatory fee is paid to the Tribe as reimbursement
for the cost of regulating the gaming activities. IMG Resort and Casino also pays a federal
regulatory fee. All tribal and federal regulatory fees due and payable have been properly accrued.
On June 1, 2004 the Tribe and the State of New Mexico (the State) entered into a Tribal-State
Compact (the Compact") to govern gaming on the Mescalero Apache Reservation. The terms of the
Compact subject the Casino to various regulatory fees and revenues sharing payable to the State.
On June 22, 2004, the Department of the Interior approved the 2001 Compact. The 2001 Compact
provides for a revenue sharing amount equal to 8% of net win from gaming machines, payable no
later than 25 days after the last day of each calendar month and an annual regulatory fee of
$100,000 paid in quarterly installments of $25,000 on the first day of each calendar month. As of
September 30, 2009 and June 30, 2010, the amounts payable to the State were $1,546,113 and
$1,369,510, respectively, for regulatory fees.
14
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 EMPLOYEE BENEFITS
In connection with the issuance of the Notes, IMG Resort and Casino and the Tribe entered into an
employee benefits cost allocation agreement (see Note 10), which provides that the Tribe will
continue to provide IMG Resort and Casino and its resort enterprises with certain employee benefits
in accordance with past practice, including group health benefits, workers compensation insurance,
disability insurance, unemployment benefits and pension benefits. IMG Resort and Casino reimburses
the Tribe for its employees direct costs for coverage as billed by the third party.
On May 1, 2009, the Tribe suspended the 4% matching contribution under our 401(k) plan as a cost
saving measure. The total amount of match made by IMG Resort and Casino was $42,950 for the three
months ended June 30, 2009 and $0 for the three months ended June 30, 2010. The total amount of
match made by IMG Resort and Casino was $472,561 for the nine months ended June 30, 2009 and $0 for
the nine months ended June 30, 2010. The IRS sets the maximum allowed each year for qualified
401(k) plans. The maximum the IRS allows for an employee deferral amount for 2009 and 2010 for an
employee, who is under 50 years old, is $15,500, and for an employee who is over 50 years old, is
$20,500.
NOTE 8 RISK MANAGEMENT
IMG Resort and Casino manages the exposure to the risk of most losses through various commercial
insurance policies. There have been no reductions in insurance coverage. Settlement amounts have
not exceeded insurance coverage for the period ended June 30, 2010.
The Tribe is self-insured for employee health and accident insurance. IMG Resort and Casinos
employees are covered by the Tribes policy and remit amounts to the Tribe for their share of the
self-insurance costs. The total amounts reimbursed to the Tribe were approximately $804,402 and
$648,671 for the three months ended June 30, 2009 and 2010, respectively. The total amounts
reimbursed to the Tribe were approximately $2,625,083 and $2,082,481 for the nine months ended June
30, 2009 and 2010, respectively.
The Tribe maintains workers compensation insurance coverage under a retrospective rated policy
whereby premiums and catastrophic cases are accrued based on the loss experience of the Tribe and
its various enterprises. The IMG Resort and Casinos employees are covered under this plan. Under
this policy, premiums may be adjusted at the end of the coverage period based on loss experience
for the coverage period. Management of the Tribe and the IMG Resort and Casino have monitored their
claims and loss experiences. Workers compensation insurance coverage, combined with the Tribe and
IMG Resort and Casinos causality and liability claims, have been below projected levels and have
been properly accrued for.
NOTE 9 COMMITMENTS AND CONTINGENCIES
Legal Matters
The IMG Resort and Casino and the Resorts are involved in various legal actions incident to their
operations that, in the opinion of management, are not expected to materially affect the IMG Resort
and Casinos financial position or the results of its operations.
15
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Occupancy Fee
A special use permit was obtained from the United States Department of Agriculture Forest Service
for Ski Apaches use of 80 acres of land in Lincoln National Forest. The permit is dated April 23,
1985, and has a term of 30 years with an annual occupancy fee based on revenue and gross fixed
assets. Occupancy fees for the three months ended June 30, 2009 and June 30, 2010 were $0 and
$1,086, respectively. Occupancy fees for the nine months ended June 30, 2009 were $29,317 and
$30,196 for the nine months ended June 30, 2010.
Employment Agreements
The Board for IMG has discontinued the general practice of employment agreements for the Company.
Consulting Agreement and Management Agreement
On January 6, 2010, Inn of the Mountain Gods Resort and Casino (the Registrant), a tribal
enterprise wholly-owned by the Tribe, a federally-recognized Indian tribe, along with the
Registrants tribally-chartered subsidiaries, Casino Apache Travel Center and Ski Apache
(collectively, the Tribal Parties), entered into a management agreement (the Management
Agreement) with WG-IMG, LLC (the Manager), a Nevada limited liability company. The majority
owner of the Manager, William W. Warner, and the Tribe each signed a joinder to the Management
Agreement. The Management Agreement became effective following approval by the National Indian
Gaming Commission (NIGC) in a letter dated January 19, 2010.
The Management Agreement grants the Manager the exclusive right and obligation to manage, operate
and maintain the casino and other businesses of the Registrant and its subsidiaries and to train
the Tribe in the operation and maintenance thereof during the term of the Management Agreement. The
Manager has a duty to physically maintain the facilities, operate the facilities consistent with
4-star/4-diamond hospitality standards, pay bills and expenses, advertise and provide security.
The Manager may enter into contracts on behalf of the Registrant or its subsidiaries provided that
it receives approval in advance for contracts with a value, or potential exposure, in excess of
$50,000 from the management board of the Registrant, as selected by the Tribe (the Management
Board). The Manager is entitled to receive a management fee for its services under the Management
Agreement. This management fee is calculated based on the earnings before interest, taxes,
depreciation and amortization (EBITDA) of the businesses of the Registrant, but shall be no less
than $60,000 per month.
The term of the Management Agreement is five years from the date the NIGC approved the Management
Agreement. The Tribal Parties may terminate the Management Agreement if, among other things, the
Manager breaches the Management Agreement, including a change of ownership of the Manager. After
two years, the Registrant may terminate the Management Agreement by paying the Manager an amount
equal to the discounted value of the future fees the Manager was entitled to receive under the
Management Agreement. The Manager may terminate the Management Agreement if, among other things, a
Tribal Party fails to pay any amount due to the Manager, if a Tribal Party breaches the Management
Agreement, or if the Manager does not receive its minimal monthly fee for three consecutive months.
The Manager also has the right to terminate the Management Agreement within 60 days of a legally
required suspension of gaming operations.
The foregoing description of the Management Agreement is not complete and is subject to and
qualified in its entirety by reference to the Management Agreement, a copy of which is attached as
Exhibit 10.1 to the Companys Form 10-Q filed with the Securities and Exchange Commission on
February 16, 2010.
16
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 10RELATED-PARTY TRANSACTIONS
The Tribe operates other entities and enterprises in various industries, including
telecommunication, timber and forest products, gas and convenience store; in addition, the Tribe
has a housing authority, school and nursing facility. Financial results of the Tribe and its other
enterprises and entities are not included in these consolidated financial statements.
The Tribe provides certain shared services which it administers for all of its enterprises. IMG
Resort and Casino uses Mescalero Apache Telecommunications for some of its telecommunications
related services. IMG Resort and Casino paid Mescalero Apache Telecommunications approximately
$51,240 and $55,029 for the three months ended June 30, 2009 and 2010, respectively. IMG Resort and
Casino paid Mescalero Apache Telecommunications approximately $128,073 and $154,984 for the nine
months ended June 30, 2009 and 2010, respectively.
Shared Services and Cost Allocations
In connection with the issuance of the Notes, IMG Resort and Casino and the Tribe entered into a
service and cost allocation agreement, which provides that the Tribe or its enterprises will
continue to provide IMG Resort and Casino and its resort enterprises the following services in
accordance with past practice: (i) insurance; (ii) telecommunications; (iii) propane; and (iv)
gaming regulation, and that IMG Resort and Casino and its resort enterprises will pay, on behalf of
the Tribe, for (a) revenue sharing and regulatory fee obligations required under the 2001 Compact
or any new compact, (b) federal regulatory fees required by IGRA, (c) an amount equal to the
monthly payments required under the promissory note dated September 1, 1982, in favor of the
Department of Interior, Bureau of Indian Affairs (See Note 5) and (d) amounts for certain other
miscellaneous liabilities. IMG Resort and Casino reimburses the Tribe for its direct costs as
billed by the third party.
Employee Benefits Cost Allocations
In connection with the issuance of the Notes, IMG Resort and Casino and the Tribe entered into an
employee benefits cost allocation agreement, which provides that the Tribe will continue to provide
IMG Resort and Casino and its resort enterprises with certain employee benefits in accordance with
past practice, including group health benefits, workers compensation insurance, disability
insurance, unemployment benefits and pension benefits. IMG reimburses the Tribe for its employees
direct costs for coverage as billed by the third party.
The Tribe provides employee benefits to the IMG Resort and Casino, which reimburses the Tribe for
all costs and expenses associated with this health and dental insurance. IMG Resort and Casino paid
the Tribe $804,402 and $648,671 for the three months ended June 30, 2009 and 2010, respectively.
The total amounts reimbursed to the Tribe were approximately $2,625,083 and $2,082,481 for the nine
months ended June 30, 2009 and 2010, respectively.
NOTE 11INSURANCE RECOVERIES
In late July 2008, the remnants of Hurricane Dolly brought torrential rain and caused significant
flash flood damage at Ski Apache and the Inn of the Mountain Gods Championship Golf Course,
damaging buildings, land, and equipment. A majority of assets that were damaged or destroyed were
fully or nearly fully depreciated. IMG Resort and Casinos insurance carrier agreed to provide
approximately $4.7 million of coverage for the damage that
occurred as a result of the flooding. Additionally, FEMA
deemed the area a Federal Disaster area and has assured financial assistance of at least the
deductible on our insurance policy, which is $100,000.
17
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For the three months ended June 30, 2009, IMG Resort and Casino has incurred approximately $15,925
in costs associated with the storm recovery compared to $9,126 for the three months ended June 30,
2010. IMG Resort and Casino has incurred $293,118 in costs associated with the storm recovery for
the nine months ended June 30, 2009, compared to $183,647 for the nine months ended June 30, 2010,
which included payroll, supplies and immediate repairs.
On the morning of November 7, 2008, Ski Apache experienced a fire. The fire was confined to a
single metal building used largely for maintenance and repair parts for ski operations related
equipment. The IMG Resort and Casino carries an insurance policy with a $100,000 deductible on all
property losses. The actual insured value of the maintenance building is $1,012,492. The contents
have an insured value of $62,312. IMG Resort and Casino believes that the replacement costs for the
damaged building, its contents, other large equipment, and vehicles affected are adequately insured
to cover the replacement costs and/or actual cash value after the deductible is paid.
NOTE 12 OPERATING SEGMENTS
The IMG Resort and Casino has four operating segments and a consolidating segment: Gaming at the
IMG Resort and Casino, Gaming at the Travel Center, Ski, and all other non-gaming. The Gaming
segments include the activities of the two casinos. The Ski segment includes Ski lifts and Ski
school at Ski Apache. The Non-Gaming segment includes the hotel, hunts, golf, food and beverage,
banquets, conferences, retail shops, convenience store and truck stop fuel sales. As a result of
realigning its operations, the resulting reporting of the segments has changed. Due to the change
in fiscal year, the Company has restated prior years segment information to be consistent with the
current reporting and operating structure in place today. Assets and liabilities have been
consolidated under the non-segment group, and as a result, depreciation and interest expenses are
not broken out separately by segment, which is consistent with the internal decision makers
information requirements.
These operating segments represent distinct business activities, which are managed separately from
a profit and loss perspective, but jointly from a balance sheet perspective.
18
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
SELECTED OPERATING SEGMENT FINANCIAL INFORMATION
(unaudited, in thousands)
(unaudited, in thousands)
Gaming | Gaming | |||||||||||||||||||||||
IMG | Travel Ctr | Ski | Non Gaming | Non Segment | Consolidated | |||||||||||||||||||
Three months ended June 30, 2009 |
||||||||||||||||||||||||
Net Revenue |
$ | 11,424 | $ | 6,952 | $ | | $ | 8,440 | $ | (250 | ) | $ | 26,566 | |||||||||||
Operating Income (Loss) |
9,069 | 5,645 | (8 | ) | 2,652 | (11,104 | ) | 6,254 | ||||||||||||||||
Depreciation Expense |
| | | | 2,958 | 2,958 | ||||||||||||||||||
Interest Expense |
| | | | (6,502 | ) | (6,502 | ) | ||||||||||||||||
Interest Income and Other |
| | | | 4 | 4 | ||||||||||||||||||
Three months ended June 30, 2010 |
||||||||||||||||||||||||
Net Revenue |
$ | 11,448 | $ | 7,589 | $ | 41 | $ | 7,612 | $ | 36 | $ | 26,726 | ||||||||||||
Operating Income (Loss) |
9,076 | 6,287 | (4 | ) | 1,376 | (11,994 | ) | 4,741 | ||||||||||||||||
Depreciation Expense |
| | | | 2,744 | 2,744 | ||||||||||||||||||
Interest Expense |
| | | | (7,942 | ) | (7,942 | ) | ||||||||||||||||
Interest Income and Other |
| | | | 32 | 32 | ||||||||||||||||||
Nine months ended
June 30, 2009 |
||||||||||||||||||||||||
Net Revenue |
$ | 31,641 | $ | 20,755 | $ | 921 | $ | 22,660 | $ | 3,751 | $ | 79,728 | ||||||||||||
Operating Income (Loss) |
24,054 | 16,478 | 8 | 5,133 | (27,950 | ) | 17,723 | |||||||||||||||||
Depreciation Expense |
| | | | 9,082 | 9,082 | ||||||||||||||||||
Interest Expense |
| | | | (19,570 | ) | (19,570 | ) | ||||||||||||||||
Interest Income and Other |
| | | | 27 | 27 | ||||||||||||||||||
Nine months ended
June 30, 2010 |
||||||||||||||||||||||||
Net Revenue |
$ | 31,544 | $ | 20,283 | $ | 1,466 | $ | 21,208 | $ | 7,448 | $ | 81,949 | ||||||||||||
Operating Income (Loss) |
24,800 | 16,681 | 399 | 3,761 | (28,546 | ) | 17,095 | |||||||||||||||||
Depreciation Expense |
| | | | 8,753 | 8,753 | ||||||||||||||||||
Interest Expense |
| | | | (23,246 | ) | (23,246 | ) | ||||||||||||||||
Interest Income and Other |
| | | | 73 | 73 |
NOTE 13CONSOLIDATING INFORMATION
In connection with IMG Resort and Casinos issuance in November 2003 of the Notes, IMG Resort and
Casinos subsidiaries, Casino Apache, the Inn, the Travel Center and Ski Apache (wholly-owned
Guarantors) have, jointly and severally, fully and unconditionally guaranteed the Notes. These
guarantees were secured only until the completion of the Resort in 2005 and thereafter unsecured.
Pursuant to Rule 3-10 of Regulation S-X, the following consolidating information is for IMG Resort
and Casino and the wholly-owned Guarantors of the Notes. This consolidating financial information
has been prepared from the books and records maintained by IMG Resort and Casino and the
wholly-owned Guarantors. The consolidating financial information may not necessarily be indicative
of results of operations or financial position had the wholly-owned Guarantors operated as
independent entities. The separate financial statements of the wholly-owned Guarantors are not
presented because management has determined they would not be material to investors. The following
consolidating information is presented as of September 30, 2009 and June 30, 2010 and for the three
and nine months ended June 30, 2009 and 2010.
19
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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
As of June 30, 2010
(unaudited)
CONSOLIDATING BALANCE SHEET
As of June 30, 2010
(unaudited)
Wholly-owned | ||||||||||||||||
IMGRC | Guarantors | Eliminations | Consolidated | |||||||||||||
Cash and cash equivalents |
$ | 6,314,151 | $ | 4,909,640 | $ | | $ | 11,223,791 | ||||||||
Accounts receivable |
251,552 | 331,634 | | 583,186 | ||||||||||||
Inventories |
214,520 | 722,894 | | 937,414 | ||||||||||||
Prepaid expenses |
824,956 | | | 824,956 | ||||||||||||
Total current assets |
7,605,179 | 5,964,168 | | 13,569,347 | ||||||||||||
Property, plant and equipment, net |
| 183,317,181 | | 183,317,181 | ||||||||||||
Other assets |
51,000 | | | 51,000 | ||||||||||||
Deferred financing costs |
742,149 | | | 742,149 | ||||||||||||
Advances to subsidiaries |
7,081,900 | 19,575,753 | (26,657,653 | ) | | |||||||||||
Investment in subsidiaries |
198,632,656 | | (198,632,656 | ) | | |||||||||||
Total Assets |
$ | 214,112,884 | $ | 208,857,102 | $ | (225,290,309 | ) | $ | 197,679,677 | |||||||
Accounts payable |
$ | 1,118,283 | $ | | $ | | $ | 1,118,283 | ||||||||
Accrued expenses |
3,160,924 | 1,660,561 | | 4,821,485 | ||||||||||||
Accrued payroll and benefits |
1,967,755 | | | 1,967,755 | ||||||||||||
Accrued interest |
44,175,000 | | | 44,175,000 | ||||||||||||
Advance deposits |
| 1,135,633 | | 1,135,633 | ||||||||||||
Current portion of long-term debt |
200,163,073 | 304,621 | | 200,467,694 | ||||||||||||
Total current liabilities |
250,585,035 | 3,100,815 | | 253,685,850 | ||||||||||||
Non current liabilities: |
||||||||||||||||
Advances from subsidiaries |
19,575,753 | 7,081,900 | (26,657,653 | ) | | |||||||||||
Long-term debt, net of current portion |
23,941 | 41,731 | | 65,672 | ||||||||||||
Total liabilities |
270,184,729 | 10,224,446 | (26,657,653 | ) | 253,751,522 | |||||||||||
Contributed capital |
(20,055,728 | ) | (6,012,897 | ) | 6,012,897 | (20,055,728 | ) | |||||||||
Retained earnings (deficit) |
(36,016,117 | ) | 204,645,553 | (204,645,553 | ) | (36,016,117 | ) | |||||||||
Total equity (deficit) |
(56,071,845 | ) | 198,632,656 | (198,632,656 | ) | (56,071,845 | ) | |||||||||
Total liabilities and equity (deficit) |
$ | 214,112,884 | $ | 208,857,102 | $ | (225,290,309 | ) | $ | 197,679,677 | |||||||
20
Table of Contents
INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2010
(unaudited)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2010
(unaudited)
Guarantor | ||||||||||||||||
IMGRC | Subsidiaries | Eliminations | Consolidated | |||||||||||||
Revenues: |
||||||||||||||||
Gaming |
$ | | $ | 19,145,963 | $ | | $ | 19,145,963 | ||||||||
Hotel |
| 2,349,505 | | 2,349,505 | ||||||||||||
Food and beverage |
| 2,894,769 | | 2,894,769 | ||||||||||||
Recreation and other |
| 2,575,296 | | 2,575,296 | ||||||||||||
Gross revenue |
| 26,965,533 | | 26,965,533 | ||||||||||||
Less-promotional allowances |
8,466 | 231,165 | | 239,631 | ||||||||||||
Net revenue |
(8,466 | ) | 26,734,368 | | 26,725,902 | |||||||||||
Operating expenses |
||||||||||||||||
Gaming |
| 6,120,623 | | 6,120,623 | ||||||||||||
Hotel |
| 909,456 | | 909,456 | ||||||||||||
Food and beverage |
| 3,173,431 | | 3,173,431 | ||||||||||||
Recreation and other |
| 2,442,891 | | 2,442,891 | ||||||||||||
Marketing |
| 2,073,652 | | 2,073,652 | ||||||||||||
General and administrative |
| 3,175,056 | | 3,175,056 | ||||||||||||
Management fees (Note 9) |
414,011 | | | 414,011 | ||||||||||||
Refinance Charges |
932,660 | | | 932,660 | ||||||||||||
Depreciation and amortization |
| 2,744,086 | | 2,744,086 | ||||||||||||
Storm costs (Note 11) |
9,126 | | | 9,126 | ||||||||||||
Gain on disposal of assets |
| (10,460 | ) | | (10,460 | ) | ||||||||||
Total operating expenses |
1,355,797 | 20,628,735 | | 21,984,532 | ||||||||||||
Operating income (loss) |
(1,364,263 | ) | 6,105,633 | | 4,741,370 | |||||||||||
Other income (expense) |
||||||||||||||||
Interest expense |
(7,942,402 | ) | | | (7,942,402 | ) | ||||||||||
Income from subsidiaries |
6,105,633 | | (6,105,633 | ) | | |||||||||||
Other income |
31,671 | | | 31,671 | ||||||||||||
Total other expense |
(1,805,098 | ) | | (6,105,633 | ) | (7,910,731 | ) | |||||||||
Net income (loss) |
$ | (3,169,361 | ) | $ | 6,105,633 | $ | (6,105,633 | ) | $ | (3,169,361 | ) | |||||
21
Table of Contents
INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended June 30, 2010
(unaudited)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended June 30, 2010
(unaudited)
Guarantor | ||||||||||||||||
IMGRC | Subsidiaries | Eliminations | Consolidated | |||||||||||||
Revenues: |
||||||||||||||||
Gaming |
$ | | $ | 52,077,452 | $ | | $ | 52,077,452 | ||||||||
Hotel |
| 6,679,851 | | 6,679,851 | ||||||||||||
Food and beverage |
| 9,265,107 | | 9,265,107 | ||||||||||||
Recreation and other |
| 14,605,377 | | 14,605,377 | ||||||||||||
Gross revenue |
| 82,627,787 | | 82,627,787 | ||||||||||||
Less-promotional allowances |
46,739 | 631,860 | | 678,599 | ||||||||||||
Net revenue |
(46,739 | ) | 81,995,927 | | 81,949,188 | |||||||||||
Operating expenses |
||||||||||||||||
Gaming |
| 16,922,240 | | 16,922,240 | ||||||||||||
Hotel |
| 2,558,325 | | 2,558,325 | ||||||||||||
Food and beverage |
| 9,631,616 | | 9,631,616 | ||||||||||||
Recreation and other |
| 8,024,316 | | 8,024,316 | ||||||||||||
Marketing |
| 6,482,059 | | 6,482,059 | ||||||||||||
General and administrative |
| 11,525,982 | | 11,525,982 | ||||||||||||
Management fees (Note 9) |
579,151 | | | 579,151 | ||||||||||||
Refinance Charges |
1,671,620 | | | 1,671,620 | ||||||||||||
Depreciation and amortization |
| 8,752,754 | | 8,752,754 | ||||||||||||
Insurance reimbursement (Note 11) |
| (1,466,658 | ) | | (1,466,658 | ) | ||||||||||
Storm costs (Note 11) |
183,647 | | | 183,647 | ||||||||||||
Gain on disposal of assets |
| (10,460 | ) | | (10,460 | ) | ||||||||||
Total operating expenses |
2,434,418 | 64,480,174 | | 64,854,592 | ||||||||||||
Operating income (loss) |
(2,481,157 | ) | 19,575,753 | | 17,094,596 | |||||||||||
Other income (expense) |
||||||||||||||||
Interest expense |
(23,245,759 | ) | | | (23,245,759 | ) | ||||||||||
Income from subsidiaries |
19,575,753 | | (19,575,753 | ) | | |||||||||||
Other income |
73,038 | | | 73,038 | ||||||||||||
Total other expense |
(3,596,968 | ) | | (19,575,753 | ) | (23,172,721 | ) | |||||||||
Net income (loss) |
$ | (6,078,125 | ) | $ | 19,575,753 | $ | (19,575,753 | ) | $ | (6,078,125 | ) | |||||
22
Table of Contents
INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 2010
(unaudited)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 2010
(unaudited)
Guarantor | ||||||||||||||||
IMGRC | Subsidiaries | Eliminations | Consolidated | |||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net income (loss) |
$ | (6,078,125 | ) | $ | 19,575,753 | $ | (19,575,753 | ) | $ | (6,078,125 | ) | |||||
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
||||||||||||||||
Depreciation and amortization |
| 8,752,754 | | 8,752,754 | ||||||||||||
Gain on disposal of fixed assets |
| (10,460 | ) | | (10,460 | ) | ||||||||||
Changes in assets and liabilities: |
||||||||||||||||
Accounts receivable |
(263,857 | ) | 298,104 | | 34,247 | |||||||||||
Inventories |
9,301 | (84,464 | ) | | (75,163 | ) | ||||||||||
Prepaid expenses |
496,856 | | | 496,856 | ||||||||||||
Deferred financing cost |
1,335,868 | | | 1,335,868 | ||||||||||||
Accounts payable |
(304,021 | ) | | | (304,021 | ) | ||||||||||
Accrued expenses, payroll and benefits |
(399,227 | ) | (222,348 | ) | | (621,575 | ) | |||||||||
Accrued interest |
21,788,333 | | | 21,788,333 | ||||||||||||
Deposits and advance payments |
| 722,587 | | 722,587 | ||||||||||||
Net cash provided by (used in) operating activities |
16,585,128 | (29,031,926 | ) | (19,575,753 | ) | 26,041,301 | ||||||||||
Cash flows from investing activities: |
||||||||||||||||
Purchase of property, plant and equipment |
| (2,993,090 | ) | | (2,993,090 | ) | ||||||||||
Investment in subsidiaries |
(19,575,753 | ) | | 19,575,753 | | |||||||||||
Net cash provided by (used in) investing activities |
(19,575,753 | ) | (2,993,090 | ) | 19,575,753 | (2,993,090 | ) | |||||||||
Cash flows from financing activities: |
||||||||||||||||
Advances to (from) affiliates |
24,572,180 | (24,572,180 | ) | | | |||||||||||
Principal payments on debt |
(2,572,988 | ) | (214,202 | ) | | (2,787,190 | ) | |||||||||
Distributions to Mescalero Apache Tribe |
(14,666,666 | ) | | | (14,666,666 | ) | ||||||||||
Net cash provided by (used in) financing activities |
7,332,526 | (24,786,382 | ) | | (17,453,856 | ) | ||||||||||
Net increase in cash and cash equivalents |
4,341,901 | 1,252,454 | | 5,594,355 | ||||||||||||
Cash and cash equivalents, beginning of period |
1,972,250 | 3,657,186 | | 5,629,436 | ||||||||||||
Cash and cash equivalents, end of period |
$ | 6,314,151 | $ | 4,909,640 | $ | | $ | 11,223,791 | ||||||||
23
Table of Contents
INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of September 30, 2009
(unaudited)
CONSOLIDATING BALANCE SHEETS
As of September 30, 2009
(unaudited)
Wholly-owned | ||||||||||||||||
IMGRC | Guarantors | Eliminations | Consolidated | |||||||||||||
Cash and cash equivalents |
$ | 1,972,250 | $ | 3,657,186 | $ | | $ | 5,629,436 | ||||||||
Accounts receivable |
(12,305 | ) | 629,738 | | 617,433 | |||||||||||
Inventories |
223,821 | 638,430 | | 862,251 | ||||||||||||
Prepaid expenses |
1,321,812 | | | 1,321,812 | ||||||||||||
Total current assets |
3,505,578 | 4,925,354 | | 8,430,932 | ||||||||||||
Property, plant and equipment, net |
| 189,066,385 | | 189,066,385 | ||||||||||||
Other assets |
51,000 | | | 51,000 | ||||||||||||
Deferred financing costs |
2,078,017 | | | 2,078,017 | ||||||||||||
Advances to subsidiaries |
26,423,434 | 14,345,107 | (40,768,541 | ) | | |||||||||||
Investment in subsidiaries |
179,056,903 | | (179,056,903 | ) | | |||||||||||
Total Assets |
$ | 211,114,932 | $ | 208,336,846 | $ | (219,825,444 | ) | $ | 199,626,334 | |||||||
Accounts payable |
$ | 1,422,304 | $ | | $ | | $ | 1,422,304 | ||||||||
Accrued expenses |
2,721,179 | 1,882,909 | | 4,604,088 | ||||||||||||
Accrued payroll and benefits |
2,806,727 | | | 2,806,727 | ||||||||||||
Accrued interest |
22,386,667 | | | 22,386,667 | ||||||||||||
Advance deposits |
| 413,046 | | 413,046 | ||||||||||||
Current portion of long-term debt |
202,630,139 | 294,783 | | 202,924,922 | ||||||||||||
Total current liabilities |
231,967,016 | 2,590,738 | | 234,557,754 | ||||||||||||
Non current liabilities: |
||||||||||||||||
Advances from subsidiaries |
14,345,107 | 26,423,434 | (40,768,541 | ) | | |||||||||||
Long-term debt, net of current portion |
129,863 | 265,771 | | 395,634 | ||||||||||||
Total liabilities |
246,441,986 | 29,279,943 | (40,768,541 | ) | 234,953,388 | |||||||||||
Contributed capital |
(5,389,062 | ) | (6,012,897 | ) | 6,012,897 | (5,389,062 | ) | |||||||||
Retained earnings (deficit) |
(29,937,992 | ) | 185,069,800 | (185,069,800 | ) | (29,937,992 | ) | |||||||||
Total equity (deficit) |
(35,327,054 | ) | 179,056,903 | (179,056,903 | ) | (35,327,054 | ) | |||||||||
Total liabilities and equity (deficit) |
$ | 211,114,932 | $ | 208,336,846 | $ | (219,825,444 | ) | $ | 199,626,334 | |||||||
24
Table of Contents
INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2009
(unaudited)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2009
(unaudited)
Guarantor | ||||||||||||||||
IMGRC | Subsidiaries | Eliminations | Consolidated | |||||||||||||
Revenues: |
||||||||||||||||
Gaming |
$ | | $ | 18,437,030 | $ | | $ | 18,437,030 | ||||||||
Hotel |
| 2,861,132 | | 2,861,132 | ||||||||||||
Food and beverage |
| 3,136,992 | | 3,136,992 | ||||||||||||
Recreation and other |
| 2,366,365 | | 2,366,365 | ||||||||||||
Gross revenue |
| 26,801,519 | | 26,801,519 | ||||||||||||
Less-promotional allowances |
30,738 | 204,497 | | 235,235 | ||||||||||||
Net revenue |
(30,738 | ) | 26,597,022 | | 26,566,284 | |||||||||||
Operating expenses |
||||||||||||||||
Gaming |
| 6,046,156 | | 6,046,156 | ||||||||||||
Hotel |
| 899,878 | | 899,878 | ||||||||||||
Food and beverage |
| 2,808,730 | | 2,808,730 | ||||||||||||
Recreation and other |
| 2,095,793 | | 2,095,793 | ||||||||||||
Marketing |
| 2,062,495 | | 2,062,495 | ||||||||||||
General and administrative |
| 3,559,552 | | 3,559,552 | ||||||||||||
Depreciation and amortization |
| 2,957,827 | | 2,957,827 | ||||||||||||
Insurance reimbursement |
(134,296 | ) | | | (134,296 | ) | ||||||||||
Storm costs |
15,925 | | | 15,925 | ||||||||||||
Total operating expenses |
(118,371 | ) | 20,430,431 | | 20,312,060 | |||||||||||
Operating income |
87,633 | 6,166,591 | | 6,254,224 | ||||||||||||
Other income (expense)
Interest expense |
(6,502,328 | ) | | | (6,502,328 | ) | ||||||||||
Income from subsidiaries |
6,166,591 | | (6,166,591 | ) | | |||||||||||
Other income |
4,242 | | | 4,242 | ||||||||||||
Total other expense |
(331,495 | ) | | (6,166,591 | ) | (6,498,086 | ) | |||||||||
Net income (loss) |
$ | (243,862 | ) | $ | 6,166,591 | $ | (6,166,591 | ) | $ | (243,862 | ) | |||||
25
Table of Contents
INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended June 30, 2009
(unaudited)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended June 30, 2009
(unaudited)
Guarantor | ||||||||||||||||
IMGRC | Subsidiaries | Eliminations | Consolidated | |||||||||||||
Revenues: |
||||||||||||||||
Gaming
|
$ | | $ | 52,593,364 | $ | | $ | 52,593,364 | ||||||||
Hotel
|
| 8,098,092 | | 8,098,092 | ||||||||||||
Food and beverage
|
| 8,847,935 | | 8,847,935 | ||||||||||||
Recreation and other
|
| 10,852,343 | | 10,852,343 | ||||||||||||
Gross revenue
|
| 80,391,734 | | 80,391,734 | ||||||||||||
Less-promotional allowances
|
50,220 | 613,870 | | 664,090 | ||||||||||||
Net revenue
|
(50,220 | ) | 79,777,864 | | 79,727,644 | |||||||||||
Operating expenses |
||||||||||||||||
Gaming
|
| 18,436,227 | | 18,436,227 | ||||||||||||
Hotel
|
| 3,043,690 | | 3,043,690 | ||||||||||||
Food and beverage
|
| 8,968,343 | | 8,968,343 | ||||||||||||
Recreation and other
|
| 7,388,606 | | 7,388,606 | ||||||||||||
Marketing
|
| 5,993,185 | | 5,993,185 | ||||||||||||
General and administrative
|
| 13,108,434 | | 13,108,434 | ||||||||||||
Depreciation and amortization
|
| 9,082,168 | | 9,082,168 | ||||||||||||
Insurance reimbursement
|
(4,306,380 | ) | | | (4,306,380 | ) | ||||||||||
Storm costs
|
293,118 | | | 293,118 | ||||||||||||
Loss on disposal of assets
|
| (3,163 | ) | | (3,163 | ) | ||||||||||
Total operating expenses
|
(4,013,262 | ) | 66,017,490 | | 62,004,228 | |||||||||||
Operating income
|
3,963,042 | 13,760,374 | | 17,723,416 | ||||||||||||
Other income (expense) |
||||||||||||||||
Interest expense
|
(19,569,619 | ) | | | (19,569,619 | ) | ||||||||||
Income from subsidiaries
|
13,760,374 | | (13,760,374 | ) | | |||||||||||
Other income
|
27,321 | | | 27,321 | ||||||||||||
Total other expense
|
(5,781,924 | ) | | (13,760,374 | ) | (19,542,298 | ) | |||||||||
Net income (loss)
|
$ | (1,818,882 | ) | $ | 13,760,374 | $ | (13,760,374 | ) | $ | (1,818,882 | ) | |||||
26
Table of Contents
INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 2009
(unaudited)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 2009
(unaudited)
Guarantor | ||||||||||||||||
IMGRC | Subsidiaries | Eliminations | Consolidated | |||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net income (loss)
|
$ | (1,818,882 | ) | $ | 13,760,374 | $ | (13,760,374 | ) | $ | (1,818,882 | ) | |||||
Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |
||||||||||||||||
Depreciation and amortization
|
| 9,082,168 | | 9,082,168 | ||||||||||||
Gain on disposal of fixed assets
|
| (3,163 | ) | | (3,163 | ) | ||||||||||
Changes in assets and liabilities: |
||||||||||||||||
Accounts receivable
|
47,575 | 297,582 | | 345,157 | ||||||||||||
Tribal accounts receivable
|
166,750 | | | 166,750 | ||||||||||||
Inventories
|
(4,274 | ) | 99,247 | | 94,973 | |||||||||||
Prepaid expenses
|
795,560 | | | 795,560 | ||||||||||||
Deferred financing cost
|
722,057 | | | 722,057 | ||||||||||||
Insurance reimbursement
|
1,100,000 | | | 1,100,000 | ||||||||||||
Other long term assets
|
(235,110 | ) | 88,950 | | (146,160 | ) | ||||||||||
Accounts payable
|
(2,249,350 | ) | | | (2,249,350 | ) | ||||||||||
Accrued expenses, payroll and benefits
|
56,184 | (349,164 | ) | | (292,980 | ) | ||||||||||
Accrued interest
|
6,000,000 | | | 6,000,000 | ||||||||||||
Deposits and advance payments
|
| 189,405 | | 189,405 | ||||||||||||
Net cash provided by (used in) operating activities
|
4,580,510 | 23,165,399 | (13,760,374 | ) | 13,985,535 | |||||||||||
Cash flows from investing activities: |
||||||||||||||||
Purchase of property, plant and equipment
|
| (8,495,073 | ) | | (8,495,073 | ) | ||||||||||
Investment in subsidiaries
|
(13,760,374 | ) | | 13,760,374 | | |||||||||||
Net cash provided by (used in) investing activities
|
(13,760,374 | ) | (8,495,073 | ) | 13,760,374 | (8,495,073 | ) | |||||||||
Cash flows from financing activities: |
||||||||||||||||
Advances to (from) affiliates
|
15,016,003 | (15,016,003 | ) | | | |||||||||||
Principal payments on debt
|
(2,639,124 | ) | (205,025 | ) | | (2,844,149 | ) | |||||||||
Distributions to Mescalero Apache Tribe
|
(12,703,000 | ) | | | (12,703,000 | ) | ||||||||||
Net cash used in financing activities
|
(326,121 | ) | (15,221,028 | ) | | (15,547,149 | ) | |||||||||
Net decrease in cash and cash equivalents
|
(9,505,985 | ) | (550,702 | ) | | (10,056,687 | ) | |||||||||
Cash and cash equivalents, beginning of period
|
12,782,806 | 4,129,443 | | 16,912,249 | ||||||||||||
Cash and cash equivalents, end of period
|
$ | 3,276,821 | $ | 3,578,741 | $ | | $ | 6,855,562 | ||||||||
27
Table of Contents
FORWARDLOOKING STATEMENTS
This Form 10-Q includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements regarding our expected financial condition,
results of operations, business, strategies and financing plans under the heading Managements
Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this
Form 10-Q are forward-looking statements. In addition, in those and other portions of this Form
10-Q, the words anticipate, expect, plan, intend, will, designed, estimate, adjust
and similar expressions, as they relate to us or our management, indicate forward-looking
statements. These forward-looking statements may prove to be incorrect. Important factors that
could cause actual results to differ materially from these forward-looking statements disclosed in
this Form 10-Q include, without limitation, risks relating to the following: (a) our levels of
leverage and ability to meet our debt service obligations; (b) our financial performance; (c)
restrictive covenants in our debt instruments; (d) realizing the benefits of our business plan and
business strategies; (e) changes in gaming laws or regulations, including potential legalization of
gaming in certain jurisdictions; (f) the impact of competition in our markets; (g) our ability to
attract increasing numbers of customers; and (h) general local, domestic and global economic
conditions.
You are urged to consider these factors carefully in evaluating the forward-looking statements
contained in this Form 10-Q. All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in their entirety by our
cautionary statements. The forward-looking statements included in this Form 10-Q are made only as
of the date of this Form 10-Q. We do not intend, and undertake no obligation, to update these
forward-looking statements.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Reference in this Quarterly report on Form 10-Q (this Form 10-Q or this Report) to (a) the
Tribe refers to the Mescalero Apache Tribe, a federally recognized Indian tribe, (b) IMG Resort
and Casino or the Company refers to Inn of the Mountain Gods Resort and Casino, a business
enterprise of the Tribe, (c) Resort refers to the Inn of the Mountain Gods Resort and Casino, (d)
Casino Apache refers to Casino Apache, a business enterprise of the Tribe, (e) the Inn refers
to Inn of the Mountain Gods, a business enterprise of the Tribe, (f) the Travel Center refers to
Casino Apache Travel Center, a business enterprise of the Tribe and (g) Ski Apache refers to Ski
Apache, a business enterprise of the Tribe. Each of Casino Apache, the Inn, the Travel Center and
Ski Apache is a wholly-owned subsidiary of IMG Resort and Casino. Reference in this Form 10-Q to
we, our, and us refer to IMG Resort and Casino.
On September 3, 2009, the Board of IMG Resort and Casino resolved by unanimous consent to
change the Companys fiscal year, formerly ending April 30, to a fiscal year ending September 30.
This change in fiscal year makes the Companys year-end coincide with the Tribes fiscal year end.
This quarterly report covers the three month period ended June 30, 2010.
The accompanying consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of assets and the
liquidation of liabilities in the normal course of business. The Company has incurred significant
losses and did not generate sufficient cash to make the interest payments on its 12% senior notes
due 2010 (the Notes) since November 15, 2008. These non-payments of interest constituted events
of default under the Indenture governing the Notes. As of September 30, 2009, the Company had
negative working capital of $226 million and a total deficit of approximately $35.3 million. As of
June 30, 2010, the Company had negative working capital of approximately $240.1 million and a total
deficit of approximately $56.1 million. The event of default, along with the Companys history of
recurring losses, negative working capital and limited access to capital, has raised substantial
doubt regarding the Companys ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
We have not made the scheduled $12.0 million interest payments on the Notes since November 15,
2008. Our failure to make the interest payments on or before June 15, 2009, December 15, 2009 and
June 15, 2010 constituted separate events of default under the Indenture governing the Notes and
the trustee or holders of at least 25% of the outstanding principal amount of the Notes could
declare all of the Notes immediately due and payable. Pursuant to the Indenture, we are obligated to pay interest on
overdue principal at the rate equal to 1% per
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annum in excess of the applicable interest rate on the Notes (12%), and to pay interest on overdue
installments of interest payable on the Notes at the same rate. The Tribe has engaged financial
advisors, and negotiations between the Mescalero Apache Tribal Council and holders of the Notes
continue. If the Notes are declared immediately due and payable, it would constitute a default
under the terms of our furniture and equipment loan and the lenders thereunder could declare the
outstanding loan to be immediately due and payable and may enforce their rights to the collateral
securing the loan.
Historically, we have not generated sufficient cash flow from operations to satisfy our
capital requirements and have instead relied upon debt financing arrangements to satisfy such
requirements. The current cash flows and capital resources may be insufficient to meet both our
short and long-term debt obligations and commitments, and we may be forced to reduce or delay
activities and capital expenditures if we are unable to refinance our debt. In the event that we
are unable to refinance or restructure our debt, we will be left without sufficient liquidity and
will not be able to meet our debt service requirements and repayment obligations.
We are undergoing a comprehensive review of our operations to determine ways to improve
revenues, reduce operating and non-operating expenses and limit our uses of cash. We expect to
realize the benefits of certain of these measures immediately, while the benefit of others will not
be realized until future periods. However, we can give no assurance that the expected benefits will
be realized in the amount or at the times we anticipate, or at all.
We believe that our ability to fund our operations, make planned capital expenditures, and
make scheduled payments depends on our future operating performance and success in seeking to
increase operating efficiencies and reduce operating expenses, which are subject to economic,
financial, business and other conditions, some of which are beyond our control.
If our expected operating performance or success in increasing operating efficiencies and
reducing operating expenses does not meet management expectations, we may need to arrange for
additional sources of funding in the form of additional borrowings or contributions from the Tribe,
which sources of funding cannot be assured.
Overview
We are an unincorporated business enterprise of the Tribe. The Tribe formed IMG Resort and
Casino to operate its resort enterprises, comprised of, the Inn, Casino Apache Travel Center and
Ski Apache, each of which is an unincorporated Tribal business enterprise wholly-owned by IMG
Resort and Casino. The combined activities of these enterprises comprise our operations. Our four
primary areas of operation are:
Gaming. Our gaming activities are authorized by the Indian Gaming Regulatory Act of 1988
(IGRA), our gaming compact with the State of New Mexico and a Tribal gaming ordinance. As of June
30, 2010, we had 55,000-square feet of combined gaming space featuring 1,309 slot machines and 31
table games between our facilities at the Resort, opened in March 2005, and Casino Apache Travel
Center (the Travel Center Casino), opened in May 2003.
Food and Beverage. The Resort features: Wendells, a 116-seat casual and fine dining
restaurant; Gathering of Nations Buffet, a 260-seat buffet style restaurant; a 72-seat sports bar;
an 80-seat night club featuring live entertainment, dancing and DJ music; Wendells Lounge, a
piano lounge featuring an oversized fireplace; and the Apache Summit BBQ, an 88-seat casual
restaurant in the golf clubhouse which operates as a seasonal dining alternative catering primarily
to guests at the Resorts golf course. Casino Apache Travel Center features Smokey Bs, a 130-seat
casual dining restaurant and one sports bar. Ski Apache operates one main restaurant and five
satellite food and beverage outlets.
Hotel. On March 15, 2005, we opened the Resort which features 273 luxury hotel rooms. The
hotel varies between four and eight stories in height, depending upon the location along the hotel
corridor, and allows for easy traveling distance to and from the casino and events center. Our
over-sized deluxe guest rooms are either 480 square feet or 610 square feet and our suites are
1,200 square feet (with the ability to connect to a 480 square foot deluxe guest room, providing a
total of 1,680 square feet in that configuration). In-room amenities include high-speed Internet
access, coffee makers, ironing boards and irons, mini-bars, toiletries, free and pay-per-view
movies and other standard and premium channels. All rooms feature a balcony view of Lake
Mescalero, Sierra Blanca Mountain or the forest-lined golf course. The hotel also
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features an indoor swimming pool and fitness
center, steam and sauna facilities for both men and women and a family locker area.
Recreation and Other. Our all-season recreational operations include: Ski Apache which has 11
ski lifts covering 55 trails over 750 acres and is the second largest in New Mexico, an 18-hole
championship golf course, seasonal big-game hunts, a shooting range, horseback riding and boating
and fishing on Lake Mescalero. Our ski resort is typically open from Thanksgiving until Easter,
while our golf course generally operates from April through November. Our retail outlets include a
gift shop, golf and pro shop and ski shop, as well as a 2,500-square foot convenience store, a fuel
station with 12 gasoline and eight diesel pumping stations at the Casino Apache Travel Center and
laundry and shower facilities.
Market Conditions and Outlook. The strength of the economy in our target market is the primary
determinant of our customer volume and revenue. Gaming and other leisure activities we offer
represent discretionary expenditures and participation in such activities may decline during
economic downturns, during which consumers generally earn less disposable income. These and other
uncertainties have and could continue to adversely affect our results of operations.
Uncertain economic conditions in our target markets continue to affect our customers spending
levels. Travel and travel-related expenditures have been particularly affected as businesses and
consumers have altered their spending patterns which have led to decreases in visitor volumes and
customer spending. In addition, reductions in discretionary consumer spending have resulted in
lower spend per visit and lower hotel occupancy rates, which has adversely affected our revenues.
We believe we will continue to experience challenges in these areas until the consumer confidence
and discretionary spending increases.
During periods of economic difficulty such as the current period, our revenues may decrease
while some of our costs remain fixed or even increase, resulting in decreased earnings and cash
flow. However, in response to these challenges, we have increasingly focused on managing costs and
continue to review all areas of operations for efficiencies. In particular, we have implemented
several steps intended to control variable costs to attempt to match expected customer volumes. We
continually manage staffing levels for all our operations and have reduced our salaried management
positions. In addition, we suspended Company contributions to our 401(k) plan and restructured our
benefit plans, rescinded cost of living increases for employees in 2008 and matching 401(k) plan
contributions.
Revenue Drivers. Our primary revenue driver is the strength of the economy in our target
markets. Our primary target markets are western Texas and eastern New Mexico, where oil and gas is
the predominant industry. As oil and gas prices have decreased in recent periods, we have
experienced challenges in attracting customers from these areas.
Our revenues are also impacted by weather and our direct marketing activities. In recent
years, snowfall was scarce and ski revenue was depressed during those years. However, we
experienced strong snowfall during the winter of 2009-2010, which increased revenue at Ski Apache
through increased customer volume and spending. We have also recently implemented several new
direct marketing strategies. We believe these efforts have resulted in increased customer volumes
in 2010. As we continue to sharpen our understanding of our customer base, we anticipate improved
results from our marketing activities.
Expense Drivers. Salaries and employee costs represent our primary expenses. We typically
experience our highest customer volumes during the summer and winter months. We monitor our
staffing levels and overtime activity on a weekly basis to attempt to match our staffing levels to
expected customer volume.
Other significant variable expenses consist of food and beverage and marketing expenses.
Marketing expenses are directly tied to initiatives to increase revenues and, as such, these
expenses typically fluctuate with revenue levels. Food and beverage expenses are driven primarily
by fluctuations in customer volume and spend as well as prices in underlying commodities and
services. We recently commenced a review of our vendor contracts to attempt to improve pricing,
service, and flexibility.
Collection of Tribal Taxes. We collect tribal taxes on behalf of the Tribe and send these
amounts, plus any gross-up under the Tribes alternative minimum tax system, to the Tribe. In
prior periods the tribal taxes collected were included in net revenue and tribal tax payments
(including any gross-up under the Tribes alternative minimum tax system) were included in expenses
as opposed to being recorded as a liability and subsequent release of the liability. Since
November 2009, tribal taxes have been collected and recorded as a liability on our balance sheet
and are not included in net revenue. Similarly, since November 2009, tribal tax payments
(including any gross-up under the Tribes alternative minimum tax system) have been paid and
recorded as a subsequent release of a liability on our balance sheet and are not included in
expenses. See note 1 to our consolidated financial statements included elsewhere in this 10-Q.
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Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the recorded amount of assets and liabilities at the date of the financial statements and
revenues and expenses during the period. Significant accounting policies employed by us, including
the use of estimates and assumptions, are presented in the notes to our consolidated financial
statements included elsewhere in this Form 10-Q. Our management bases its estimates on its
historical experience, together with other relevant factors, in order to form the basis for making
judgments that will affect the carrying value of assets and liabilities. On an ongoing basis,
management evaluates its estimates and makes changes to carrying values as deemed necessary and
appropriate. Actual results could differ from those estimates.
Revenue Recognition. In accordance with gaming industry practice, we recognize gaming revenues
as the net win from gaming activities, which is the difference between gaming wins and losses.
Gaming revenues are net of accruals for anticipated payouts of progressive slot jackpots and table
games. These anticipated jackpot payments are reflected as current liabilities on our balance
sheets. Net slot win represents all amounts played in the slot machines reduced by the winnings
paid out. Table games net win represents the difference between table game wins and losses. The
table games historical win percentage is reasonably predictable over time, but may vary
considerably during shorter periods. Revenues from food, beverage, rooms, recreation, retail and
other are recognized at the time the related service or sale is completed. Player reward
redemptions for food and beverage, hotel rooms and other items are included in gross revenue at
full retail value.
Promotional Allowances. We periodically reward rooms and other promotions, including Apache
Spirit Club points and gift certificates, to our customers. The retail value of these player
rebates are recognized by us as a reduction from gross revenue.
The Casinos Apache Spirit Club allows customers to earn points based on the volume of their
gaming activity. These points are redeemable for certain services or merchandise. Points are
accrued based upon their historical redemption rate multiplied by the cash value or the cost of
providing the applicable rewards services.
Emerging Issues Task Force (EITF) FASB ASC 605-50, Revenue Recognition, Customer payments
and Incentives (prior authoritative literature: FASB EITF Issue No. 00-14, Accounting for Certain
Sales Incentives)(FASB ASC 605-50 (FAS Issue No. 00-14)), requires that discounts which result in
a reduction in or refund of the selling price of a product or service in a single exchange
transaction be recorded as a reduction of revenues. We adopted FASB ASC 605-50 (FAS Issue No.
00-14) on April 30, 2001. Our accounting policy related to free or discounted food and beverage and
other services already complies with FASB ASC 605-50 (FAS Issue No. 00-14), and those free or
discounted services are generally deducted from gross revenues as promotional allowances. In
January 2001, the EITF reached a consensus on certain issues related to Issue No. 00-22, Accounting
for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for
Reproduces, or Services to be delivered in the future. Effective January 1, 2001, we, through our
wholly-owned subsidiaries, adopted EITF 00-22, which requires that cash or equivalent amounts
provided or returned to customers as part of a transaction not be shown as an expense, but instead
as an offset to the related revenue.
Classification of Departmental Costs. Gaming direct costs are comprised of all costs of our
gaming operations, including labor costs for casino-based supply costs, certain and other direct
operating costs (including costs in operating our players clubs) of the casinos. Food and beverage
direct costs are comprised of all costs of our food and beverage operations, including labor costs
for personnel employed by our restaurants and food and beverage, supply costs for all food and
beverages served in the casinos or sold in our restaurants and other food outlets and other
expenses including other direct operating expenses related to these activities. General and
administrative direct costs are comprised of administrative expenses, including the salaries of
corporate officers, accounting, finance, legal and other professional expense and occupancy costs
and other indirect costs not included in the direct costs of our operating departments. Legal
expenses in the current year have increased significantly due to the ongoing negotiations with the
holders of the Notes.
Deferred Financing and Refinancing Costs. Debt issuance costs incurred in connection with the
issuance of the Notes were capitalized and are being amortized to interest expense using the
straight-line method over the stated maturity of the debt, which approximates the effective
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interest method. Unamortized deferred
financing costs totaled $2.1 million as of September 30, 2009 and $0.7 million as of June 30, 2010.
Impairment of Long Lived Assets. Management reviews long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying amount of such assets may not be
recoverable. In August 2001, the Financial Accounting Standards Board issued Statement of
Accounting Standards FASB ASC 360-10, Property, Plant and Equipment, (prior authoritative
literature SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets) (FASB ASC
360-10 (SFAS No. 144)), which established the approach to be used in the determination of
impairment.
Under the provisions of FASB ASC 360-10 (SFAS No. 144), a long-lived asset to be abandoned is
disposed of when it ceases to be used. If an entity commits to a plan to abandon a long-lived asset
before the end of its previously estimated useful life, depreciation estimates shall be revised to
reflect the use of the asset over its shortened useful life.
Results of Operations
Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2010.
Net Revenues. Net revenues increased $0.1 million, to $26.7 million for the three months ended
June 30, 2010 from $26.6 million for the three months ended June 30, 2009. Revenue increases were
driven by a $0.7 million increase in Gaming revenues, as well as a $0.2 million increase in
Recreation and Other revenues resulting from an increase in customer volume and spend at our Ski
Apache recreation facilities. The increases in revenues from Ski Apache were due to an increase in
natural snowfall and our ability to commence skiing operations earlier compared to the previous
year. These increases were partially offset by decreases in Hotel revenues and Food and Beverage
revenues of $0.5 million as a direct result of the change in accounting for Tribal Taxes as
described in note 1 to our consolidated financial statements included elsewhere in this 10-Q. In prior periods the taxes collected
were included in net revenue and tax payments were included in expenses as opposed to being recorded as
a liability and subsequent release of the liability. Since November 2009, taxes have been collected and
recorded as a liability on IMG Resort and Casinos balance sheet and are not included in net
revenue. In addition, Gaming revenues, Food and Beverage revenues and Hotel revenues have been
adversely impacted by the decrease in leisure and business travel, as well as reduced consumer
spending of our guests.
Gaming. Net Gaming revenues increased $0.7 million to $19.1 million for the three months ended
June 30, 2010 from $18.4 million for the three months ended June 30, 2009, due to an increase in
slot revenue partially offset by a decrease in table games. Slot revenues increased to $16.9
million for the three months ended June 30, 2010 from $16.0 million for the three months ended June
30, 2009, an increase of $0.9 million. Slot win per unit, per
day was $142 for the three months
ended June 30, 2010 compared to $134 for the three months ended June 30, 2009 while the weighted
average number of machines declined to 1,309 for the three months ended June 30, 2010 from 1,317
for the three months ended June 30, 2009 attributable to a repositioning of the gaming floor at
each property. Table games revenue decreased $0.2 million to $2.2 million for the three months
ended June 30, 2010 from $2.4 million for the three months ended June 30, 2009. Daily Net Win per
Table for the three months ended June 30, 2010 was $659 as
compared to $586 for the same period a
year ago, a 12% increase, due to a reduction in tables resulting from the repositioning of the
gaming floors of both properties. Slot revenue increases were a result of a combination of direct
marketing efforts and the repositioning of IMG Resort and Casinos gaming floors in April 2010.
Hotel. Hotel revenue for the three months ended June 30, 2010 decreased $0.6 million to $2.3
million from $2.9 million from the three months ended June 30, 2009. Of this decrease, $0.3 million
was related to a change in accounting for Tribal Taxes described in note 1 to our consolidated
financial statements included elsewhere in this 10-Q. In prior periods the taxes collected were included in net revenue and tax
payments were included in expenses as opposed to being recorded as a liability and subsequent release of
the liability. Since November 2009, taxes have been collected and recorded as a liability on IMG Resort and
Casinos balance sheet and are not included in net revenue. This reduction in revenues due to
the accounting change in Tribal Taxes was partially offset by a corresponding decrease in operating
expenses. In addition to this accounting change, Hotel revenues have been adversely affected by a
decrease in leisure and business spending by our guests. Occupancy rates averaged 80%, an increase
of 2%, for the three months ended June 30, 2010, compared to the same three month period in the
prior year. The average daily rate decreased to $137,
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for the three months ended June 30, 2010, as compared to $164 for the same period a year ago.
Revenue per available room decreased to $110 for the three months ended June 30, 2010 from $128 for
the three months ended June 30, 2009. Both average daily rate and revenue per available room were
negatively impacted by the change in accounting for Tribal Taxes.
Food and Beverage. Food and Beverage revenues decreased $0.2 million, or 6%, to $2.9 million
for the three months ended June 30, 2010 from $3.1 million for the three months ended June 30,
2009. Of this decrease, $0.2 million was related to a change in accounting for Tribal Taxes
described in note 1 to our consolidated financial statements included elsewhere in this Form 10-Q. In prior periods
the taxes
collected were included in net revenue and tax payments were included in expenses as opposed to being
recorded as a liability and subsequent release of the liability. Since November 2009, taxes have been
collected and recorded as a liability on IMG Resort and Casinos balance sheet and are not included in net revenue. This reduction in revenues due to the accounting change in Tribal Taxes
was partially offset by a corresponding decrease in operating expenses.
Recreation and Other. Recreation and Other revenues increased $0.2 million, or 8% to $2.6
million for the three months ended June 30, 2010 compared to $2.4 million for the three months
ended June 30, 2009 due to an increase in customer volume at our Ski Apache recreation facilities
in April 2010, compared to the same period in 2009.
Promotional Allowances. Promotional Allowances remained flat at $0.2 million for the three
months ended June 30, 2010 and 2009.
Total Operating
Expenses. Total operating expenses increased $1.7 million to $22.0 million for
the three months ended June 30, 2010 from $20.3 million for the three months ended June 30, 2009.
This increase was driven by an increase in legal and restructuring related costs of $0.9 million,
as well as a $0.7 million increase in expenses related to benefits, salaries, wages and cost of
sales related to Food and Beverage at Ski Apache, compared to the same period last year.
Gaming. Gaming
expenses increased to $6.1 million for the three months ended June 30, 2010,
from $6.0 million for the three months ended June 30, 2009, due to an increase in payroll expenses.
Hotel. Hotel expenses remained flat at $0.9 million for the three months ended June 30, 2010
and 2009.
Food and Beverage.
Food and Beverage expenses increased $0.4 million, or 14%, to $3.2 million
for the three months ended June 30, 2010 from $2.8 million for the three months ended June 30,
2009. Of this increase, $ million was related to Food and Beverage operations at Ski Apache and
is a direct result of increased revenues.
Recreation and Other. Recreation and Other costs increased $0.3 million, or 14% to $2.4
million for the three months ended June 30, 2010 from $2.1 million for the three months ended June
30, 2009, due to an increase in customer volume and spending at our Ski Apache recreation
facilities.
Marketing. Marketing costs remained flat at $2.1 million for the three months ended June 30,
2010 and 2009. Between 2009 and 2010, marketing efforts changed and more emphasis was placed on
direct mail efforts. Although Marketing costs remained flat, the composition of Marketing costs
shifted away from broad-based marketing efforts to more targeted, database-oriented efforts.
General and Administrative. General and administrative expenses decreased $0.4 million to $3.2
million for the three months ended June 30, 2010 from $3.6 million for the three months ended June
30, 2009, due to a decrease in Tribal Regulatory fees.
Management Fees. Since January 20, 2010, following approval by the NIGC of our management
agreement with Warner Gaming, these expenses include management fees paid under our management
agreement. These expenses were $414,011 for the three months ended June 30, 2010.
Restructuring Costs. Restructuring costs were $0.9 million for the three months ended June 30,
2010 and $0.0 for the three months ended June 30, 2009. Restructuring costs include legal and other
costs related to the restructuring of our debt.
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Depreciation. Depreciation expense decreased $0.3 million to $2.7 million for the three months
ended June 30, 2010 from $3.0 million for the three months ended June 30, 2009 due to our property
and equipment assets being fully depreciated.
Insurance Reimbursement. Insurance reimbursements were $0 for the three months ended June
30, 2010 and $134,296 for the three months ended June 30, 2009. In late July 2008, the remnants of
Hurricane Dolly brought torrential rain and caused significant flash flood damage at Ski Apache and
the Inn of the Mountain Gods Championship Golf Course, damaging buildings, land, and equipment. A
majority of assets that were damaged or destroyed were fully or nearly fully depreciated. IMG
Resort and Casinos insurance carrier agreed to provide approximately $4.7 million of coverage for
the damage that occurred as a result of the flooding. Additionally, FEMA deemed the area a Federal
Disaster area and has assured financial assistance of at least the deductible on our insurance
policy, which is $100,000.
Storm Costs. Storm costs were $9,126 for the three months ended June 30, 2010 and $15,925 for
the three months ended June 30, 2009. Storm costs consisted of costs related to damage caused by
Hurricane Dolly in 2008.
Other Income (Expenses). Other non-operating expenses were $7.9 million for the three months
ended June 30, 2010 and $6.5 million for the three months ended June 30, 2009. Other income
(expenses) is comprised primarily of interest income and interest expense, along with other
expenses.
Nine Months Ended June 30, 2009 Compared to Nine Months Ended June 30, 2010.
Net Revenues. Net revenues increased $2.2 million, or 3%, to $81.9 million for the nine months
ended June 30, 2010 from $79.7 million for the nine months ended June 30, 2009. Revenue increases
were driven by a $0.5 million increase in Food and Beverage revenues, as well as a $3.7 million
increase in Recreation and Other revenues resulting from an increase in customer volume and spend
at our Ski Apache recreation facilities. Ski Apache benefitted from an increase in natural snowfall
and our ability to commence operations earlier than the prior year. Hotel revenues and Food and
Beverage revenues declined by $1.4 million as a direct result of the change in accounting for
Tribal Taxes as described in note 1 of our consolidated financial statements included elsewhere in this 10-Q. In
prior periods the
taxes collected were included in net revenue and tax payments were included in expenses as opposed to
being recorded as a liability and subsequent release of the liability. Since November 2009, taxes have been
collected and recorded as a liability on IMG Resort and Casinos balance sheet and are not
included in net revenue. For the nine months ended June 30, 2010, Gaming revenues were $52.1
million, a decrease of $0.5 million from the prior year. While increased snowfall benefits
operations at Ski Apache, these weather conditions adversely affected Gaming revenues as driving to
the facilities was more difficult. In addition to each of the factors described above, we have noted a decrease in leisure and
business travel and discretionary spending from our guests.
Gaming. Net gaming revenues decreased $0.5 million to $52.1 million for the nine months ended
June 30, 2010 from $52.6 million for the nine months ended June 30, 2009. This can be attributed to
the factors described above, including the adverse weather conditions, particularly during the
three months ended March 31, 2010, and a decrease in discretionary spending by our guests. Slot
revenues increased $0.3 million to $45.7 million for the nine months ended June 30, 2010 from $45.4
million for the nine months ended June 30, 2009. Slot win per unit, per day was $129 for the nine
months ended June 30, 2010 compared to $120 for the nine months ended June 30, 2009; the weighted
average number of machines declined to 1,283 for the nine months ended June 30, 2010 from 1,376 for
the nine months ended June 30, 2009 due to a repositioning of the gaming floor at each property.
Table games revenue decreased $0.9 million to $6.4 million for the nine months ended June 30, 2010
from $7.2 million for the nine months ended June 30, 2009. Daily Net Win per Table for the nine
months ended June 30, 2010 was $590 as compared to $545 for the same period a year ago, an 8%
increase, due to a reduction in tables, related to the repositioning of the gaming floors of
both properties. Slot revenue increases were a result of a combination of direct marketing efforts
and the repositioning of IMG Resort and Casinos gaming floors in April 2010.
Hotel. Hotel revenue for the nine months ended June 30, 2010 decreased $1.4 million to $6.7
million from $8.1 million from the nine months ended June 30, 2009. Of the decrease, $0.7 million
related to a change in accounting for Tribal Taxes described in note 1 to our consolidated
financial statements included elsewhere in this 10-Q. In prior periods the taxes collected were
included in net revenue and tax
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payments were included in expenses as opposed to being recorded as
a liability and subsequent release of the liability. Since November 2009, taxes have been collected and
recorded as a liability on IMG Resort and Casinos balance sheet and are not included in net
revenue. This reduction related to the accounting for Tribal Taxes was offset by a corresponding
decrease in operating expenses. The remaining decline in revenues is due to an overall
decrease in leisure and business travel and a reduction in discretionary spending by our
guests. Occupancy rates averaged 75%, an increase of 12%, for the nine months ended June
30, 2010, the average daily rate decreased to $141, for the nine months ended June 30, 2010, as
compared to $167 for the same period a year ago. Revenue per available room decreased to $106 for
the nine months ended June 30, 2010 from $112 for the nine months ended June 30, 2009. Both average
daily rate and revenue per available room were negatively impacted by the change in accounting for
Tribal Taxes.
Food and Beverage. Food and Beverage revenues increased $0.5 million, or 6%, to $9.3 million
for the nine months ended June 30, 2010 from $8.8 million for the nine months ended June 30, 2009
primarily due to an increase in customer volume and spend at our Ski Apache recreation facilities.
For the nine months ended June 30, 2010, these increases were due to an increase in natural
snowfall and our ability to commence operations at Ski Apache earlier compared to the previous
year. In addition, Food and Beverage revenues increased as a result of higher customer volumes at
IMG Resort and Casino.
Recreation and Other. Recreation and Other revenues increased $3.7 million, or 34% to $14.6
million for the nine months ended June 30, 2010 compared to $10.9 million for the nine months ended
June 30, 2009 due to an increase in customer volume at our Ski Apache recreation facilities for the
nine months ended June 30, 2010, compared to the nine months ended June 30, 2009.
Promotional Allowances. Promotional Allowances remained flat at $0.7 million for the nine
months ended June 30, 2010 and 2009.
Total Operating
Expenses. Total operating expenses increased $2.9 million to $64.9 million for
the nine months ended June 30, 2010 from $62.0 million for the nine months ended June 30, 2009.
This increase was driven by increases in legal and other costs of $1.7 million related to the
restructuring of our debt, $0.6 million in management fees and an increase of $1.2 million related
to benefits, salaries and wages and Food and Beverage cost of sales at Ski Apache compared to the
same period last year.
Gaming. Gaming expenses decreased $1.5 million, or 8%, for the nine months ended June 30, 2010
to $16.9 million from $18.4 million for the nine months ended June 30, 2009 due to a decrease in
head count, wages, benefits, supplies and regulatory fees associated with a decrease in gaming
revenue as well as cost containment efforts.
Hotel. Hotel expenses decreased $0.4 million to $2.6 million for the nine months ended June
30, 2010 from $3.0 million for the nine months ended June 30, 2009, resulting from a decrease in
cost of sales, salaries, wages, benefits and other expense.
Food and Beverage. Food and Beverage expenses increased $0.6 million, or 7%, to $9.6 million
for the nine months ended June 30, 2010 from $9.0 million for the nine months ended June 30, 2009
due to an increase in customer volume and spend at our Ski Apache recreation facilities. Of the
increase, $0.4 million was related to Food and Beverage operations at Ski Apache and is a direct
result of increased revenues.
Recreation and Other. Recreation and Other costs increased $0.6 million, or 8% to $8.0 million
for the nine months ended June 30, 2010 from $7.4 million for the nine months ended June 30, 2009
due to an increase in customer volume and spend at our Ski Apache recreation facilities.
Marketing. Marketing costs increased $0.5 million to $6.5 million for the nine months ended
June 30, 2010 from $6.0 million for the nine months ended June 30, 2009 due to an increase in
direct marketing costs associated with gaming and hotel offers. The composition of Marketing costs
shifted away from broad-based marketing efforts to more targeted, database-oriented efforts.
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General and Administrative. General and administrative expenses decreased $1.6 million to
$11.5 million for the nine months ended June 30, 2010 from $13.1 million for the nine months ended
June 30, 2009 due to a decrease in benefits, salaries and wages of $0.6 million, repairs and
maintenance $0.3 million and liability insurance of $0.9 million. These decreases were partially
off set by an increase in utilities expense of $0.2 million.
Management Fees. Since January 20, 2010, following approval by the NIGC of our management
agreement with Warner Gaming, these expenses include management fees paid under our management
agreement. These expenses were $579,151 for the nine months ended June 30, 2010. Before January 20,
2010 fees paid under our management agreement with Warner Gaming were accounted for as consulting
fees in General and Administrative Expenses.
Restructuring Costs. Restructuring costs were $1.7 million for the nine months ended June 30,
2010 and $0.0 for the nine months ended June 30, 2009. Restructuring costs include legal and other
costs related to the restructuring of our debt.
Insurance Reimbursement. Insurance reimbursements in the nine months ended June 30, 2009
reflected a recovery of approximately $4.3 million, compared to $1.5 million for the nine months
ended June 30, 2010. In late July 2008, the remnants of Hurricane Dolly brought torrential rain and
caused significant flash flood damage at Ski Apache and the Inn of the Mountain Gods Championship
Golf Course, damaging buildings, land, and equipment. A majority of assets that were damaged or
destroyed were fully or nearly fully depreciated. IMG Resort and Casinos insurance carrier agreed
to provide approximately $4.7 million of coverage for the damage that occurred as a result of the
flooding. Additionally, FEMA deemed the area a Federal Disaster area and has assured financial
assistance of at least the deductible on our insurance policy, which is $100,000.
Depreciation. Depreciation expense decreased $0.3 million to $8.8 million for the nine months
ended June 30, 2010 from $9.1 million for the nine months ended June 30, 2009 due to our property
and equipment assets being fully depreciated.
Storm Costs. Storm costs were $183,647 for the nine months ended June 30, 2010 and $293,118
for the nine months ended June 30, 2009. Storm costs consisted of costs related to damage caused by
Hurricane Dolly in 2008.
Income from Operations. Income from operations decreased $0.6 million, or 3%, to $17.1 million
for the nine months ended June 30, 2010 from $17.7 million for the nine months ended June 30, 2009.
This decline was influenced by all of the factors described above, but most significantly by the
$1.7 million of costs related to the restructuring of our debt.
Other Income (Expenses). Other non-operating expenses were $23.2 million for the nine months
ended June 30, 2010 and $19.5 million for the nine months ended June 30, 2009. Other income
(expenses) is comprised primarily of interest income and interest expense, along with other
expenses.
Liquidity and Capital Resources
As of September 30, 2009 and June 30, 2010, we had cash and cash equivalents of $5.6 million
and $11.2 million, respectively. Our principal source of liquidity for the nine months ended June
30, 2010 was cash provided by operating activities of $26.0 million primarily due to not making the
November 15, 2009 and the May 15, 2010 $12.0 million required interest payments as well as the
increase in operating income due to cost savings measures and new marketing strategies to improve
revenues experienced during the first and second quarters of the fiscal year.
Cash used in investing activities for the nine months ended June 30, 2010 was $3.0 million
which included capital expenditures in the form of general maintenance capital expenditures of $1.9
million, consisting of purchases of gaming equipment and non-gaming equipment. In addition, the
re-building of the maintenance building destroyed in a fire represented $1.1 million in capital
expenditures.
Cash used in financing activities for the nine months ended June 30, 2010 was $17.5 million,
which primarily consisted of $13.0 million transferred to the
Tribes reserve account, $1.7 million in direct distributions to the Tribe and $2.8 million in
principal payments on our capital equipment loan. Our understanding is that the Tribe has approximately $22.1 million in a reserve account as of June 30, 2010.
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Our ability to fund our operations, make planned capital expenditures, and make scheduled
payments depends on our ability to refinance our long-term debt, as well as our future operating
performance and success in seeking to increase operating efficiencies and reduce operating
expenses, which are subject to economic, financial, business and other conditions, some of which
are beyond our control.
We currently have outstanding $200.0 million aggregate principal amount of 12% Senior Notes
due 2010. We have not made the scheduled $12.0 million interest payments on the Notes since
November 15, 2008.
Additionally, our ability to incur additional indebtedness is limited under the terms of the
Indenture governing the Notes. If our operating performance or success in increasing operating
efficiencies and reducing operating expenses does not meet management expectations, we may need to
arrange for additional sources of funding in the form of borrowings under our Indenture or
contributions from the Tribe, which sources of funding cannot be assured.
Description of Indebtedness
The Senior Notes
On November 3, 2003, we issued $200.0 million senior Notes, with fixed interest payable at a
rate of 12% per annum. Interest on the Notes is payable semi-annually on May 15 and November 15.
The Notes mature on November 15, 2010. As of June 30, 2010, accrued interest payable on the Notes
was $44.2 million, including penalty interest as described below.
The Senior Notes rank senior in right of payment to all of our future indebtedness or other
obligations that are, by their terms, expressly subordinated in right of payment to the Notes. In
addition, the Notes rank equal in right of payment to all of our existing and future senior
unsecured indebtedness and other obligations that are not, by their terms, expressly subordinated
in right of payment to the Notes. Each of our wholly-owned subsidiaries are guarantors of the
Notes.
We have not made the scheduled $12.0 million interest payments on the Notes since November 15,
2008. Our failure to make the interest payments on or before June 15, 2009, December 15, 2009 and
June 15, 2010 constituted separate events of default under the Indenture governing the Notes and
the trustee or holders of at least 25% of the outstanding principal amount of the Notes could
declare all of the Notes immediately due and payable.
Pursuant to the Indenture, we are obligated to pay penalty interest on overdue principal at
the rate equal to 1% per annum in excess of the applicable interest rate on the Notes (12%), and to
pay interest on overdue installments of interest payable on the Notes at the same rate. As of June
30, 2010 the penalty interest accrued as a result was $2,476,932.
The Tribe has engaged financial advisors, and negotiations between the Mescalero Apache Tribal
Council and holders of the Notes continue. If the Notes are declared immediately due and payable,
it would constitute a default under the terms of the Companys furniture and equipment loan and the
lenders thereunder could declare the outstanding loan to be immediately due and payable and may
enforce their rights to the collateral securing the loan. Due to the events of default, the Notes
have been classified as current in the accompanying consolidated balance sheet.
General Indebtedness
The Tribe, for the benefit of the Inn of the Mountain Gods, a wholly-owned subsidiary of IMG
Resort and Casino, executed a promissory note dated September 1, 1982, (the BIA Note) in favor of
the Department of Interior, Bureau of Indian Affairs in the amount of approximately $3.5 million.
The BIA Note accrues interest at the rate of 8.5% per annum payable annually from the date of the
BIA Note until paid in full on September 1, 2011. As of June 30, 2010, there was approximately $0.3
million outstanding on the BIA Note.
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Credit Facility
On June 15, 2004, we entered into a $15.0 million fixed credit facility with an equipment
finance company. The fixed rate loan is fully amortizable over five years. Proceeds from the
interest rate loan were used to fund furniture, fixtures and equipment for the Resort. As of June
30, 2010, approximately $35,286 remains outstanding.
As discussed above, we have not made the scheduled $12.0 million interest payments on the
Notes since November 15, 2008. If the Notes are declared immediately due and payable, it would
constitute a default under the terms of our furniture and equipment loan and the lenders thereunder
could declare the outstanding loan to be immediately due and payable and may enforce their rights
to the collateral securing the loan.
Credit Rating
On August 14, 2009, Moodys Investor Service lowered IMG Resort and Casino probability of
default rating to Ca/LD from Ca. The Ca/LD probability of default rating recognizes a payment
default under the $200 million 12% Senior Notes due November 2010. The last rating action by
Moodys Investor Service was on March 20, 2009, at which time they lowered IMG Resort and Casinos
rating from Caa2 to Ca.
On August 5, 2010,
Standard and Poors withdrew its D issuer credit and issue-level ratings
for IMG Resort and Casino.
Off-Balance Sheet Arrangements
As of June 30, 2010, we had no off-balance sheet arrangements that affect our financial
condition, liquidity and results of operation.
Regulation and Taxes
We are subject to extensive regulation by the Mescalero Apache Tribal Gaming Commission, the
National Indian Gaming Commission, the NIGC, and, to a lesser extent, the New Mexico Gaming Control
Board. Changes in applicable laws or regulations could have a significant impact on our operations.
We are an unincorporated Tribal business enterprise, directly owned by the Tribe, a federally
recognized Indian tribe, and are located on reservation land held in trust by the United States of
America; therefore, we were not subject to federal or state income taxes for the periods ended June
30, 2010 or 2009, nor is it anticipated that we will be subject to such taxes for the foreseeable
future. Various efforts have been made in the U.S. Congress over the past several years to enact
legislation that would subject the income of tribal business entities, such as us, to federal
income tax. Although no such legislation has been enacted, similar legislation could be passed in
the future. A change in our non-taxable status could have a material adverse effect on our cash
flows from operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the risk of loss arising from adverse changes in market rates and prices, such
as interest rates, foreign currency exchange rates and commodity prices. As of June 30, 2010, we
had no variable rate debt outstanding.
As of June 30, 2010, we held no derivative instruments.
Item 4T. Controls and Procedures.
Disclosure Controls and Procedures.
Our Chief Operating Officer and Chief Financial Officer, after evaluating the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(c) of the
Securities Exchange Act of 1934) as of the end of the period covered by this Report, have concluded
that as of the date, our disclosure controls and procedures were effective.
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Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in
connection with the evaluation required by Exchange Act Rules 13a-15(d) that occurred during the
period covered by this Report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
See Notes to Consolidated Financial Statements (unaudited) Note 9 Commitments and
Contingencies Legal Matters.
Item 1A. Risk Factors.
There were no material changes during the three months ended June 30, 2010 to our risk factors
disclosed in our Annual Report on Form 10-K for the year ended April 30, 2009, except as noted
below:
Our Chief Financial Officer has given notice of his resignation. It may be difficult for us to
find a new Chief Financial Officer with the appropriate level of experience.
On August 3, 2010, Ben Martinez, our Chief Financial Officer and a member of our Management Board,
gave notice of his intention to resign. It may be difficult to locate candidates to replace this
position with the appropriate level of knowledge and experience. We can not assure you that we
will be able to locate a qualified replacement candidate at all or on terms acceptable to us.
Failure to timely recruit and retain a qualified candidate could result in management, operating
and financial reporting difficulties, which could have an adverse effect on our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None, other than as previously disclosed with respect to the Notes.
Item 4. (Removed and Reserved)
Item 5. Other Information.
None.
Item 6. Exhibits.
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Exhibit No. | Description | |
31.1
|
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2
|
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1
|
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this three months report to be signed on its behalf by the undersigned, thereunto duly authorized.
INN OF THE MOUNTAIN GODS RESORT AND CASINO |
||||
Date: August 20, 2010 | By | /s/ Scott Eldredge | ||
Name: | Scott Eldredge | |||
Its: Chief Operating Officer (Principal Executive Officer) |
||||
Date: August 20, 2010 | By | /s/ Ben Martinez | ||
Name: | Ben Martinez | |||
Its: Chief Financial Officer (Principal Financial Officer) |
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INDEX TO EXHIBITS
Exhibit No. | Description | |
31.1
|
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2
|
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1
|
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
42