10-Q 1 a4232593.txt CHOCTAW RESORT DEVELOPMENT ENTERPRISE 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended: June 30, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From ________________________to ____________________ Commission File Number ______________ CHOCTAW RESORT DEVELOPMENT ENTERPRISE (Exact name of registrant as specified in its charter) Mississippi Band of Choctaw Indians 64-0345731 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) PO Box 6260, Choctaw Branch, Philadelphia, MS 39350 (Address of principal executive offices) (Zip code) (601) 650-9294 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 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 X No --- ---

PART I. ~~Financial~~-- ~~Information~~FINANCIAL INFORMATION Item 1 -- Financial Statements ~~CHOCTAW~~Balance ~~RESORT~~Sheets ~~DEVELOPMENT~~as ~~ENTERPRISE~~of ~~BALANCE~~June ~~SHEETS December 31, 2001 and September~~ 30, ~~2001~~2002 ~~-------------------------------------------------------------------------------------------------------------------- December 31, September 30 2001 2001 ------------------- --------------------~~ (~~Unaudited~~unaudited) ~~Assets Current assets: Cash~~ and ~~cash~~September ~~equivalents $122~~30,~~721,346~~ $2001.....................................3 ~~81,822,543~~Statements ~~Short-term investments 6,976,614 81,949,037 Accounts receivable (net~~ of ~~allowance~~Operations ~~of $1,988,669~~ and ~~$1,685,009)~~Comprehensive ~~3,496,756~~Income ~~3,085,106~~for ~~Inventories~~the ~~1,680,423~~Three ~~1,517,052 Prepaid expenses~~ and ~~other~~Nine ~~871,987~~Months ~~1,784,209~~Ended ~~-------------------~~June ~~-------------------- Total current assets 135~~30,~~747,126~~ ~~170,157,947~~2002 ~~Property~~ and ~~equipment,~~2001 ~~net~~(unaudited)..................................................................4 ~~246,702,191~~Statement ~~206,222,932~~of Restricted cash 2,583,935 2,568,256 Deferred loan costs, net 6,381,211 6,595,249 Other assets 1,871,470 1,302,131 ------------------- -------------------- Total assets $393,285,933 $ 386,846,515 ------------------- -------------------- Liabilities and Owner's Equity ~~Current~~for ~~liabilities:~~the ~~Current~~Nine ~~maturities~~Months ofEnded ~~long-term~~June ~~debt $ 300~~30,~~000~~ $2002 ~~300,000 Accounts payable 3,297,183 2,519,767 Construction accounts payable 22,019,591 15,883,132 Due to Tribe 4,127,463 81,401 Accrued liabilities: Accrued payroll and related~~ (unaudited)...........................5~~,346,968~~ ~~5,247,757~~Statements ~~Accrued~~of ~~expenses~~Cash ~~and~~Flows ~~other~~for ~~liabilities~~the ~~7,721,509~~Nine ~~7,991,053~~Months ~~Accrued~~Ended ~~interest~~June ~~expense 4~~30,~~848,097~~ ~~9,597,633~~2002 ~~------------------- -------------------- Total current liabilities 47,660,811 41,620,743 Long term debt, net of current maturities 200,000,000 200,000,000 Commitments~~ and ~~contigencies~~2001 ~~- - Owner's equity: Contributed capital 181,552,126 181,552,126 Retained earnings~~ (~~deficit~~unaudited).........................................................................................6 ~~(35,571,699)~~Notes ~~(35,932,309)~~to ~~Accumulated~~Financial ~~other~~Statements ~~comprehensive loss~~ (~~355,305~~unaudited) ~~(394,045)~~................................................................7 ~~-------------------~~Item 2 --~~------------------~~ ~~Total owner~~Management's ~~equity~~Discussion ~~145,625,122~~and ~~145,225,772~~Analysis ~~-------------------~~of ~~--------------------~~Financial ~~Total~~Condition ~~liabilities~~ and ~~owner's~~Results ~~equity~~of ~~$393,285,933~~Operations..............................................................................16 $Item ~~386,846,515~~3 --~~-----------------~~ ~~--------------------~~Quantitative ~~The~~and ~~accompanying~~Qualitative ~~notes~~Disclosure ~~are~~of anMarket ~~integral~~Risk..................................................24 ~~part~~PART ofII ~~these~~-- ~~financial~~OTHER ~~statements~~INFORMATION.....................................................................................25 Signatures -.....................................................................................................26

PART I. Financial Information Item 1 Financial Statements

CHOCTAW RESORT DEVELOPMENT ENTERPRISE ~~STATEMENTS~~BALANCE OFSHEETS ~~OPERATIONS~~June ~~AND~~30, ~~COMPREHENSIVE~~2002 ~~INCOME~~and ~~For~~September ~~the Three Months Ended December 31~~30, 2001 ~~and 2000~~ --------------------------------------------------------------------------------------------------------------- ~~Three Months Ended December 31,~~ ------------- June 30, September 30, 2002 2001 --------------------- ~~2001 2000~~ ---------------- ----~~------------~~ (Unaudited) ~~(Unaudited)~~Assets ~~Revenue~~Current assets: ~~Casino~~Cash and cash equivalents $ 5350,~~515~~074,~~273~~847 $ 5381,~~307~~822,~~881~~543 ~~Food~~Short-term &investments ~~beverage~~- 581,~~407~~949,~~666~~037 4Accounts receivable (net of allowance of $2,~~904~~311,~~963~~263 ~~Rooms~~and $1,~~990,~~685,009) 2,~~068~~852,~~230~~443 ~~Other~~3,085,106 2Inventories 1,~~101~~647,~~062~~167 21,~~357~~517,~~632~~052 Prepaid expenses and other 1,561,027 1,784,209 ------------------- -------------------- ~~Gross~~Total ~~revenue~~current 63assets 56,~~014~~135,~~686~~484 62170,~~638~~157,~~706~~947 ~~Less:~~Property ~~promotional~~and ~~allowances~~equipment, (5net 361,~~820~~546,~~938)~~629 (206,222,932 Restricted cash 2,606,939 2,568,256 Deferred loan costs, net 5,~~482~~871,~~451)~~740 6,595,249 Other assets 1,446,084 1,302,131 ------------------- -------------------- ~~Net~~Total ~~revenue~~assets 57$427,~~193~~606,~~748~~876 57$ 386,~~156~~846,~~255~~515 ------------------- -------------------- ~~Costs~~Liabilities and ~~expenses~~Owner's Equity Current liabilities: ~~Casino~~Current ~~15,869,377~~maturities ~~15,814,347~~of ~~Food~~long-term &debt ~~beverage~~$ 1300,~~603~~000 $ 300,~~442~~000 Accounts payable 1,~~797~~859,~~768~~205 ~~Rooms 354~~2,~~643 237~~519,~~121~~767 ~~Other~~Construction 1accounts payable 19,~~955~~648,~~082~~925 115,~~681~~883,~~157~~132 ~~Selling~~Due to Tribe 4,625,705 ~~general~~81,401 Accrued liabilities: Accrued payroll and ~~administrative~~related 96,~~841~~721,~~737~~885 85,~~204~~247,~~532~~757 ~~Maintenance~~Accrued expenses and ~~utilities~~other 1liabilities 7,~~356~~346,~~050~~569 17,~~172~~991,~~853~~053 ~~Depreciation~~Accrued 3interest expense 4,~~486~~975,~~418~~294 39,~~001~~597,~~177~~633 ------------------- -------------------- Total 34current liabilities 45,~~466~~477,~~749~~583 3141,~~908~~620,~~955~~743 ~~----------------~~Long ~~----------------~~term ~~Operating~~debt, ~~income~~net 22of current maturities 220,~~726~~000,~~999~~000 25200,~~247~~000,~~300~~000 Commitments and contingencies -~~---------------~~ -~~---------------~~ ~~Other~~Owner's ~~income (expense)~~equity: ~~Interest~~Contributed ~~income~~capital 1183,~~162~~440,~~773~~262 ~~280~~181,~~246 Interest expense~~552,126 ~~net~~Retained ofearnings ~~interest~~(deficit) ~~capitalized~~ (421,~~143~~035,~~186~~750) (135,~~401~~932,~~655~~309) ~~Other~~Accumulated ~~income~~other comprehensive loss (~~expense~~275,219) ~~245,242~~ (~~664~~394,~~557~~045) ---------------- ---~~-------------~~ ~~Total (2,735,171) (1,785,966)~~ ---------------- ----~~------------~~ ~~Net~~Total ~~income~~owner's ~~19,991,828~~equity 23162,~~461~~129,~~334~~293 ~~Other comprehensive income (loss) 38~~145,~~740 (505~~225,~~996)~~772 ------------------- -------------------- ~~Comprehensive~~Total ~~income~~liabilities $and 20owner's equity $427,~~030~~606,~~568~~876 $ 22386,~~955~~846,~~338~~515 ------------------- -------------------- The accompanying notes are an integral part of these financial statements.

CHOCTAW RESORT DEVELOPMENT ENTERPRISE ~~STATEMENT~~STATEMENTS OF ~~OWNER'S~~OPERATIONS ~~EQUITY~~AND COMPREHENSIVE INCOME For the Three and Nine Months Ended ~~December~~June 3130, ~~2001~~2002 ~~(Unaudited)~~and 2001 ----------------------------------------------------------------------------------------------------------------------------------- ~~Accumulated~~Three ~~Retained~~Months ~~Other~~Ended ~~Total~~Nine ~~Contributed~~Months ~~Earnings~~Ended ~~Comprehensive~~June ~~Owner's~~30, ~~Capital~~June ~~(Deficit)~~30, ~~Loss Equity~~ --------------------------------- ---------------------------------- 2002 2001 2002 2001 ---------------- --------------- ---------------- ---------------- ~~Balances~~(Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue: Casino $ 54,792,271 ~~September~~$ 3054,522,252 ~~2001~~$167,448,156 $168,136,076 ~~181~~Food & beverage 5,~~552~~020,885 5,143,548 16,013,837 15,376,493 Rooms 2,336,567 2,081,706 6,440,302 6,227,209 Other 3,177,117 2,721,690 7,224,180 7,274,485 ---------------- --------------- ---------------- ---------------- Gross revenue 65,326,840 64,469,196 197,126,475 $197,014,263 Less: promotional allowances (354,932,~~309~~607) $(5,376,587) (~~394~~16,~~045~~470,447) ~~$ 145~~(16,~~225~~663,~~772~~590) ~~Net~~---------------- ~~income~~--------------- ---------------- 19---------------- Net revenue 60,~~991~~394,~~828~~233 -59,092,609 19180,~~991~~656,~~828~~028 ~~Contributed~~180,350,673 ~~capital~~ ---------------- --------------- ---------------- ---------------- ~~Distributions~~Costs -and ~~(19~~expenses: Casino 13,~~631~~966,~~218)~~973 -15,514,718 ~~(19~~44,~~631~~990,~~218)~~100 ~~Reclassification~~46,848,555 ~~adjustment~~Food ~~under~~& ~~SFAS~~beverage ~~133~~1,859,098 1,804,004 5,415,359 5,254,891 Rooms 472,223 385,833 1,189,221 1,098,002 Other 2,606,502 1,954,616 6,066,537 5,301,421 Selling, general, and administrative 11,091,317 7,572,617 29,646,455 23,578,791 Maintenance and utilities 1,366,603 1,433,742 3,930,330 3,889,225 Depreciation 2,754,297 3,142,443 9,782,209 9,299,473 ---------------- --------------- 38---------------- ---------------- Total 34,~~740~~117,013 3831,~~740~~807,973 101,020,211 95,270,358 ---------------- --------------- ---------------- ---------------- Operating income 26,277,220 27,284,636 79,635,817 85,080,315 ---------------- --------------- ---------------- ---------------- ~~Balances~~Other income (expense): Interest income 114,093 ~~December~~1,663,116 311,615,355 ~~2001~~2,336,508 $Interest ~~181~~expense,~~552~~ net of interest capitalized (2,~~126~~065,190) $(5,413,168) (359,~~571~~308,~~699~~816) $(8,388,833) Other income (~~355~~expense) 61,~~305~~117 115,794 3,849,330 (1,286,220) $---------------- ~~145~~--------------- ---------------- ---------------- Total (1,~~625~~889,~~122~~980) (3,634,258) (3,844,131) (7,338,545) ---------------- --------------- ---------------- ---------------- Net income 24,387,240 23,650,378 75,791,686 77,741,770 Other comprehensive income (loss) 40,405 37,308 118,826 (432,008) ---------------- --------------- ---------------- ---------------- ~~The~~Comprehensive ~~accompanying~~income ~~notes~~$ ~~are~~24,427,645 an$ ~~integral~~23,687,686 ~~part~~$ of75,910,512 ~~these~~$ ~~financial~~77,309,762 ~~statements.~~---------------- --------------- ---------------- ----------------

The accompanying notes are an integral part of these financial statements. 4

CHOCTAW RESORT DEVELOPMENT ENTERPRISE ~~STATEMENTS~~STATEMENT OF ~~CASH~~OWNER'S ~~FLOWS~~EQUITY For the ~~Three~~Nine Months Ended ~~December~~June 3130, ~~2001~~2002 ~~and~~(Unaudited) ~~2000~~ ------------------------------------------------------------------------------------------------------------------- ~~Three Months Ended December 31,~~ -----------------~~-----------------------~~ ~~2001~~Accumulated ~~2000~~Retained ~~-------------------~~Other ~~-------------------~~Total ~~(Unaudited)~~Contributed ~~(Unaudited)~~Earnings ~~Cash~~Comprehensive ~~flows~~Owner's ~~from~~Capital ~~operating activities: Net income $ 19,991,828 $ 23,461,334 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change -~~ (~~541,847~~Deficit) ~~Depreciation and amortization 4,184,090 3,098,608~~ Loss onEquity ~~disposal of property and equipment 29,507~~ - Change in operating assets and liabilities: Accounts receivable, net (411,650) (538,935) Inventories (163,371) 24,014 Prepaid expenses and other 912,222 (536,595) Other assets (569,339) 100,532 Accounts payable and due to Tribe 322,263 (328,508) Accrued liabilities (4,919,869) 831,107 ----------------~~---~~ ------------------- ~~Net cash provided by operating activities 19,375,681 25,569,710~~ ------------------- ------------------- ~~Cash~~Balances, ~~flows~~September ~~from~~30, ~~investing~~2001 ~~activities:~~$ ~~Acquisitions of property and equipment~~181,552,126 ~~net~~$ ~~of amounts in construction accounts payable~~ (3335,~~357~~932,~~509~~309) $ (2394,~~614,079~~045) ~~Proceeds~~$ ~~from~~145,225,772 ~~sales~~Net ~~and~~income ~~maturities~~- ~~short term investments 74~~75,~~567~~791,~~321~~686 - ~~Restricted cash (15~~75,~~679) (39~~791,~~555)~~686 ~~-------------------~~Contributed ~~-------------------~~capital ~~Net cash provided by (used in) investing activities 41~~1,~~194~~888,~~133~~136 ~~(2,653,634)~~ -~~------------------~~ -~~------------------~~ ~~Cash flows from financing activities: Repayment of long-term debt - (4~~1,~~687~~888,~~500)~~136 Distributions to- ~~Tribe~~ (1960,~~631~~895,~~218~~127) - (1360,~~764~~895,~~151~~127) ~~Loan~~Reclassification ~~fees~~adjustment ~~paid~~under ~~(39,793)~~SFAS -133 -~~------------------~~ -~~------------------~~ ~~Net cash used in financing activities (19~~118,~~671,011)~~826 ~~(18~~118,~~451,651)~~826 ------------------- ------------------- ~~Net increase in cash and cash equivalents 40,898,803 4,464,425 Cash and cash equivalents at beginning of period 81,822,543 34,779,920~~ ------------------- ------------------- ~~Cash and cash equivalents at end of period $ 122~~Balances,~~721,346~~ $June 3930,~~244,345~~ ~~-------------------~~2002 ~~------------------- Supplemental disclosure of cash flow information: Cash paid for interest~~ $ 10183,~~064~~440,~~043~~262 $ 1(21,~~370~~035,~~618~~750) ~~------------------- ------------------- Supplemental disclosure of non-cash investing and financing activities: Contributions of property and equipment from Tribe~~ $ ~~- $ 1~~(275,~~446,678~~219) ~~------------------- ------------------- Due to Tribe for property and equipment~~ $ ~~- $ 198~~162,~~651 ------------------- ------------------- Contributions of other assets from Tribe $ - $ 1~~129,~~756,748~~293 ------------------- ------------------- ~~Accounts payable for construction $ 22,019,591 $~~ - ----------------~~---~~ -----------------~~-- Exchange of property and equipment for a note due to Tribe $ 4,501,215 $ - ------------------- ------------------- The accompanying notes are an integral part of these financial statements.~~

The accompanying notes are an integral part of these financial statements. 5

~~Three~~CHOCTAW RESORT DEVELOPMENT ENTERPRISE STATEMENTS OF CASH FLOWS For the Nine Months Ended ~~December~~June 3130, 2002 and 2001 ------------------------------------------------------------------------------------------------------------------------------------ ~~2001~~Nine ~~2000~~Months Ended June 30, ---------------------------------------- 2002 2001 ------------------- ~~Food~~------------------- ~~and~~(Unaudited) ~~beverage~~(Unaudited) Cash flows from operating activities: Net income $ 475,~~166~~791,~~093~~686 $ 77,741,770 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change - (541,847) Depreciation and amortization 10,099,893 10,427,700 Gain on disposal of property and equipment (599,401) - Change in operating assets and liabilities: Accounts receivable, net 232,663 1,390,777 Inventories (130,115) (183,771) Prepaid expenses and other 223,182 (1,159,483) Other assets (143,953) 2,465 Accounts payable and due to Tribe (617,473) (6,315,023) Accrued liabilities (3,~~882~~792,~~914~~695) ~~Rooms~~6,418,492 ~~854~~------------------- ------------------- Net cash provided by operating activities 81,~~703~~063,787 87,781,080 ------------------- ------------------- Cash flows from investing activities: Acquisitions of property and equipment, net of amounts in construction accounts payable (156,929,412) (16,648,380) Proceeds from disposal of property and equipment 689,915 - Decrease (increase) in short term investments 82,513,481 (87,436,862) Restricted cash (38,683) (101,618) ------------------- ------------------- Net cash used in investing activities (73,764,699) (104,186,860) ------------------- ------------------- Cash flows from financing activities: Proceeds from issuance of bonds - 200,000,000 Borrowing under credit facilities 20,000,000 - Repayment of long-term debt - (62,500,000) Contributions of cash from Tribe 1,888,136 22,110,727 Distributions to Tribe (60,895,127) (70,600,110) Loan fees paid (39,793) (5,323,694) ------------------- ------------------- Net cash (used in) provided by financing activities (39,046,784) 83,~~655~~686,923 ~~Other~~------------------- ~~581~~------------------- Net (decrease) increase in cash and cash equivalents (31,~~999~~747,696) ~~726~~67,~~611~~281,143 Cash and cash equivalents at beginning of period 81,822,543 34,779,920 ------------------- ------------------- ~~Total~~Cash and cash equivalents at end of period $ 550,~~602~~074,~~795~~847 $ 5102,~~394~~061,~~180~~063 ------------------- ------------------- Supplemental disclosure of cash flow information: Cash paid for interest $ 20,420,929 $ 2,925,085 ------------------- ------------------- Supplemental disclosure of non-cash investing and financing activities: Contributions of property and equipment from Tribe $ - $ 3,156,740 ------------------- ------------------- Due to Tribe for property and equipment $ - $ 816,468 ------------------- ------------------- Contributions of other assets from Tribe $ - $ 1,843,927 ------------------- ------------------- Accounts payable for construction $ 19,648,925 $ 9,182,914 ------------------- ------------------- Exchange of property and equipment for a note due to Tribe $ 4,501,215 $ - ------------------- -------------------

The accompanying notes are an integral part of these financial statements. 6 CHOCTAW RESORT DEVELOPMENT ENTERPRISE NOTES TO FINANCIAL STATEMENTS (Unaudited) -------------------------------------------------------------------------------- Note 1--Summary of Significant Accounting Policies Description of Operations The Choctaw Resort Development Enterprise (the "Enterprise") is an enterprise of the Mississippi Band of Choctaw Indians (the "Tribe"). The Enterprise was established on October 12, 1999 by the Tribe for the purpose of managing the existing and future Tribal gaming and other resort operations at the Tribe's Pearl River Community. Prior to July 1, 2001, the Silver Star Hotel and Casino (the "Silver Star") was the sole operating entity of the Enterprise. The Silver Star commenced operations of a gaming, hotel, conference center and restaurant complex near Philadelphia, Mississippi on trust lands of the Tribe on July 1, 1994. In addition, the Enterprise is currently developing a second hotel and casino, the Golden Moon (the "Golden Moon"), to be located adjacent to the Silver Star. In connection with the development of the Silver Star, the Tribe entered into a seven-year management agreement (the "Management Agreement") with Boyd Mississippi, Inc., a subsidiary of Boyd Gaming Corporation ("Boyd"), to construct and operate the Silver Star. The Tribe entered into a termination agreement (the "Termination Agreement") with Boyd to terminate the Management Agreement on January 31, 2000. Pursuant to the provisions of the Termination Agreement, the Enterprise made a one-time termination payment to Boyd (the "Termination Fee") in the amount of $72 million on February 1, 2000. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended September 30, 2002. The interim financial statements and notes thereto should be read in conjunction with the Enterprise's audited financial statements and notes thereto for the year ended September 30, 2001. Effective July 1, 2001, the Tribe contributed Dancing Rabbit Golf Club (the "Dancing Rabbit") to the Enterprise. Prior to its contribution to the Enterprise, the Dancing Rabbit operated as a separate, wholly owned unincorporated business enterprise of the Tribe. Due to common control of the Dancing Rabbit and the Enterprise the contribution was accounted for as a reorganization of entities under common control. The financial statements of the Enterprise for all periods are presented as if the contribution described above occurred at the beginning of the earliest period presented and include the accounts of the Enterprise and the Dancing Rabbit on a historical cost basis, in a manner similar to a pooling of interests. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and on deposit with banks and other financial institutions. The Enterprise considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. 7 CHOCTAW RESORT DEVELOPMENT ENTERPRISE NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited) ------------------------------------------------------------------------------- Short-term Investments Short-term investments include debt securities and other investments, which mature within one year but do not qualify as cash equivalents. All short-term investments are classified as held-to-maturity because the Enterprise has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. Inventories Inventories, consisting primarily of food, beverage, and gift shop merchandise, are stated at the lower of cost or market. Cost is determined using the first-in, first-out inventory method. Property and Equipment Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Costs of major construction, including interest incurred during construction of new facilities, are capitalized; costs of normal repairs and maintenance are charged to expense as incurred. Gains or losses on disposals of assets are recognized as incurred. Deferred Loan Costs Deferred loan costs consist of costs incurred in the issuance of long-term debt. Amortization of deferred loan costs is computed using the interest method over the stated maturity of long-term debt. Accumulated amortization of the deferred loan costs is $1,329,243 and $565,941 at June 30, 2002 and September 30, 2001, respectively. Accounting for Derivative Instruments and Hedging Activities On October 1, 2000, the Enterprise adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging Activities", as amended by Statement of Financial Accounting Standards No. 138. See Note 4. Contributed Capital Contributed capital consists of (i) equipment and facilities related primarily to various construction and expansion projects since the Silver Star opened which have been funded by the Tribe and contributed upon their completion at the Tribe's cost, (ii) certain development costs for the Golden Moon, also funded by the Tribe and contributed at the Tribe's cost, (iii) cash to fund Golden Moon construction and development and (iv) cash to fund construction and development of Geyser Falls, a water theme park proximate to the Silver Star. Casino and Other Revenue Casino revenue is net win from gaming activities, which is the difference between gaming wins and losses. Gross revenues include the estimated retail value of rooms, food and beverage, and other goods and services provided to customers on a complimentary basis. Such amounts are then deducted as promotional allowances. The estimated cost of providing these promotional allowances is charged to the casino department in the following amounts: 8

Three Months Ended ~~December~~Nine 31Months Ended June 30, June 30, ------------------------------- ---------------------------------- 2002 2001 ~~2000~~2002 2001 -------------- --------------- ---------------- ---------------- Food and beverage $ 43,~~016~~429,~~300~~843 $ 3,~~505~~935,~~195~~891 $11,718,646 $11,899,187 Rooms 1888,~~252~~372 822,~~735~~058 12,~~227~~575,~~574~~635 2,501,616 Other ~~551~~467,~~903~~821 ~~749~~617,~~682~~946 1,510,664 1,885,239 -------------- --------------- ---------------- ---------------- Total $ 54,~~820~~786,~~938~~036 $ 5,~~482~~375,~~451~~895 $15,804,945 $16,286,042 -------------- --------------- ---------------- ----------------

Complimentary revenues have been earned in the following casino departments as follows:

~~Useful~~Three ~~Lives~~Months ~~December~~Ended 31Nine Months Ended June 30, ~~September~~June 30, ~~(Years)~~------------------------------- ---------------------------------- 2002 2001 2002 2001 -------------- -- ------------- ----- ----------- ---------------- ~~Land~~Food and ~~improvements~~beverage $ 163,~~799~~383,~~809~~536 $16 3,~~799~~785,~~809~~665 ~~Buildings and improvements 20-40 127~~$11,~~271~~714,~~300~~399 ~~124~~$11,~~375~~575,~~524~~988 ~~Golf~~Rooms ~~course improvements 5-15 2~~1,~~723~~212,~~984~~745 21,~~723~~239,~~984~~702 ~~Furniture and equipment 5-10 66~~3,~~065~~683,~~773~~039 633,~~447~~738,~~006~~633 ~~Aircraft~~Other 10336,326 4351,~~551,215~~220 ~~- Vehicles 3 928~~1,~~506~~073,009 ~~928~~1,~~407~~348,969 --------------~~----~~ ----------------- ~~218,340,587 208,274,730 Less accumulated depreciation 69,202,744 65,804,004~~ ------------------ ----------------- ~~149~~Total $ 4,~~137~~932,~~843~~607 ~~142~~$ 5,~~470~~376,~~726~~587 ~~Construction in progress 97~~$16,~~564~~470,~~348~~447 63$16,~~752~~663,~~206~~590 --------------~~----~~ ----------------- ~~$246,702,191 $ 206,222,932~~ ------------------ -----------------

Income Taxes The Enterprise is a business enterprise owned by the Mississippi Band of Choctaw Indians, a federally recognized Indian Tribe located on reservation land held in trust by the United States of America; therefore, the Enterprise was not subject to federal or state income taxes for the three or nine months ended June 30, 2002 and 2001. Advertising Expense Advertising is expensed as incurred and is included in selling, general, and administrative expense and casino costs and expenses. Advertising expense was $1,017,238 and $1,008,379 for the three months ended June 30, 2002 and 2001, respectively, and $2,719,116 and $3,557,461 for the nine months ended June 30, 2002 and 2001, respectively. 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 reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used by the Enterprise include the estimated useful lives of depreciable assets and the estimated allowance for doubtful accounts receivable. Actual results could differ from those estimates. 9 Preopening Expenses Preopening costs are expensed as incurred and are included in selling, general, and administrative cost. Preopening costs incurred during the three months ended June 30, 2002 and 2001 were $1,278,283 and $252,862, respectively. Preopening costs incurred during the nine months ended June 30, 2002 and 2001 were $1,718,865 and $252,862, respectively. Note 2--Property and Equipment Property and equipment consists of the following:

At June 30, 2002, construction in progress consists of $185,879,935 incurred related to the development of the Golden Moon and $3,759,690 incurred related to development of Geyser Falls Water Theme Park ("Geyser Falls"). Construction in progress for Golden Moon includes $8,478,848 of interest capitalized as of June 30, 2002. The Enterprise capitalized interest in the amount of $3,412,561 and $7,253,076 in the three and nine months ended June 30, 2002, respectively. The Enterprise capitalized interest in the amount of $486,775 in the three and nine months ended June 30, 2001. Note 3--Restricted Cash The Enterprise had $ 2,606,939 and $ 2,568,256 of restricted cash as of June 30, 2002 and September 30, 2001, respectively. The balances at June 30, 2002 and September 30, 2001 are required by the Management Agreement for employment, workers compensation and other third party claims not otherwise covered by insurance proceeds (the "Claims Reserve") that may be filed or become due after the Management Agreement termination date. The Claims Reserve will survive for three years after the Termination Agreement and is governed by the terms of the Management Agreement. Any unused portion of the Claims Reserve at the end of the three-year period will become unrestricted. Note 4--Long-Term Debt In March 2001, the Enterprise issued unsecured senior notes (the "Notes") in the amount of $200,000,000. The proceeds of the offering were used to retire a $75 million term loan and are being used to finance the construction of the Golden Moon. The Notes bear interest at 9 1/4% and require semiannual payments of interest beginning with the first payment on October 1, 2001 with the Notes maturing on April 1, 2009. The indenture governing the Notes (the "Indenture") contains certain financial covenants which restrict our ability to borrow money, pay dividends or make distributions, make investments, create liens, enter into certain transactions with affiliates and sell specific assets or merge with or into another entity. Under specific circumstances, the covenant limiting our ability to make certain payments, distributions and investments will be suspended. 10 After April 1, 2005, the Enterprise may redeem all or a part of the Notes at specified redemption prices plus accrued and unpaid interest on the redemption date. The Notes are subject to redemption requirements imposed by certain gaming laws and regulations. On December 29, 2000, the Enterprise entered into a $125 million reducing revolving credit facility (the "Facility"). The Facility will be used by the Enterprise to (i) finance the construction of the Golden Moon, (ii) provide working capital, (iii) finance permitted capital expenditures, and (iv) for general purposes of the Enterprise. At June 30, 2002, a total of $20,000,000 was drawn and outstanding on the Facility. For the three and nine months ended June 30, 2002, the Enterprise paid commitment fees totaling $145,347 and $416,555, respectively, on the Facility. Advances on the Facility bear interest at LIBOR plus a margin rate of 2.5%. At June 21, 2002 (the date of the initial draw under the Facility), LIBOR was 1.86%. The Facility is collateralized by the personal property of and the revenue generated by the Silver Star and the Golden Moon. The Facility has a maturity date of December 28, 2005. Borrowings available under the Facility will reduce quarterly beginning on the earlier of December 31, 2002 or the last day of the first full fiscal quarter following the completion of the Golden Moon, in the amount of $6.25 million per quarter, until the amount of the Facility has been reduced to $40 million. The interest rate on the facility varies based upon the Enterprise's total recourse debt to gaming EBITDA ratio, as defined. The Facility contains certain affirmative and negative covenants, including limiting the Enterprise's Total Leverage Ratio and Fixed Charge Coverage Ratio, as defined, during the term of the agreement. Additionally, the Enterprise is not permitted to expend more than $325 million for the completion of the Golden Moon project and has agreed to cause the Golden Moon to be open and available for gaming patrons by September 30, 2002. On October 26, 1999, the Enterprise entered into a note agreement with MBCI Resort and Capital Fund, a related party, in the amount of $300,000 that is payable on demand with annual interest of 6% due monthly. As of June 30, 2002, management believes that the Enterprise is in compliance with all debt covenants under the Notes and the Facility. The Enterprise entered into an interest rate swap agreement for the purpose of fixing interest rates on the term loan which was retired with proceeds from the notes, thus reducing exposure to interest rate fluctuations. At June 30, 2002, the Enterprise's interest rate swap had a notional amount of $31,250,000. This agreement effectively fixed the interest rate on the term loan at 8.25%. The notional amount does not represent amounts exchanged by the parties, and thus is not a measure of exposure to the Enterprise. The amount exchanged is based on the notional amount. The term of the interest rate swap agreement is through January 31, 2004. The term loan was repaid on April 24, 2001, however, the Enterprise did not concurrently settle the interest rate swap agreement. The differences to be paid or received by the Enterprise under the terms of the interest rate swap agreement are recognized as an adjustment to interest expense. The agreement is with a major financial institution, which is expected to fully perform under the terms of the agreement. Effective October 1, 2000, the Enterprise adopted SFAS 133. The interest rate swap agreement described above is defined as a derivative instrument under SFAS 133. In accordance with the transition provisions of SFAS 133, the Enterprise recorded a cumulative-effect-type transition adjustment of $541,847 in other comprehensive loss and in accrued expenses and other liabilities to recognize the fair value of the Enterprise's liability under this swap agreement on October 1, 2000. Although the Enterprise had designated this swap agreement as a hedge since its inception on February 1, 2000, the Enterprise did not elect to seek hedge accounting for this agreement upon adoption of SFAS 133. Accordingly, during the period from October 1, 2001 through June 30, 2002, the Enterprise recognized other income of $826,008 and a related decrease in accrued expenses and other liabilities representing the effect during this period of interest rate changes. Reclassifications to other comprehensive income during the period from October 1, 2001 through June 30, 2002 are $118,826. 11 Note 5--Fair Value of Financial Instruments The carrying values of the Enterprise's cash and cash equivalents, accounts receivable, note payable, and accounts payable approximate fair value because of the short maturity of those instruments. Estimated fair value of the Notes is $206,000,000 at June 30, 2002 based on quoted market prices on or about June 30, 2002. Fair value of the Enterprise's interest rate swap agreement is based on the termination value of the agreement using quotes from the Enterprise's counterparty. The fair value liability of the Enterprise's interest rate swap at June 30, 2002 was $1,288,012 and is included in accrued expenses and other liabilities. Note 6--Enterprise Licensing and Regulation The Mississippi Band of Choctaw Indians, by vote of the Tribal members, authorized casino gaming on Tribal lands located in Mississippi. In accordance with the Indian Gaming Regulatory Act, the Tribe signed a Tribal-State Compact with the State of Mississippi on December 4, 1992 and enacted ordinances authorizing bingo (Class II) and casino-type (Class III) gaming. The Tribal Council created the Choctaw Gaming Commission and authorized it as the regulatory agency responsible for the licensing of the Casino and the on-site regulation of the gaming operations. The Choctaw Gaming Commission has promulgated regulations that govern the gaming operations. Note 7--Related Party Transactions Net distributions to the Tribe were $17,689,072 and $28,440,299 for the three months ended June 30, 2002 and 2001, respectively and $60,895,127 and $70,600,110 for the nine months ended June 30, 2002 and 2001, respectively. Subsequent to January 31, 2000, the Enterprise makes distributions to the Tribe at the Tribe's discretion subject to the distribution restrictions under the Notes described in Note 4. Employees of the Enterprise are provided health coverage through the Tribe's health plan. The Enterprise and its employees paid $2,142,691 and $2,012,987 to the Tribe under this arrangement for the three months ended June 30, 2002 and 2001, respectively and $6,405,583 and $5,843,247 for the nine months ended June 30, 2002 and 2001, respectively. The Enterprise collects and remits a 7% sales tax to the Tribe on rooms, food, beverage, sundry and entertainment revenue. The total sales tax paid was $248,051 and $199,663 for the three months ended June 30, 2002 and 2001, respectively. The Enterprise paid sales tax of $639,664 and $593,456 for the nine months ended June 30, 2002 and 2001, respectively. During the three and nine months ended June 30, 2002, the Enterprise also paid rent for office space and purchased certain goods and services from the Tribe and its businesses in the amounts of $1,078,534 and $3,059,184, respectively. For the three and nine months ended June 30, 2001, the Enterprise paid rent for office space and purchased certain goods and services from the Tribe and its businesses in the amounts of $1,061,224 and $9,326,183 respectively. The amount for the nine months ended June 30, 2001 includes $6,577,227 for the construction of a parking garage. 12 The Enterprise purchases coarse paper and janitorial supplies from Choctaw Paper Company, Inc. in the ordinary course of business. Choctaw Paper Company, Inc. is majority owned by a member of the Enterprises' board of directors. During the three and nine months ended June 30, 2002 the Enterprise made purchases of $235,907 and $624,135 from Choctaw Paper Company, Inc. The Enterprise paid $62,500 to the Tribal/State Tourism Fund for the promotion of tourism in Mississippi for each of the three-month periods ended June 30, 2002 and 2001 under the Tribal-State Compact. The Choctaw Gaming Commission was paid $590,043 and $545,223 for the three months ended June 30, 2002 and 2001, respectively, and $1,692,359 and $1,681,361 for the nine months ended June 30, 2002 and 2001, respectively, for fees assessed at 1% of gaming revenues per the Tribal Code. Amounts paid to the Choctaw Gaming Commission along with amounts paid the Tribal/State Tourism fund are included in selling, general and administrative expense for the three and nine months ended June 30, 2002 and 2001. The Enterprise paid Choctaw Development Enterprise $-0- and $1,021,202 for the construction of administrative offices and a hospitality institute and $ -0- and $57,000 for construction related to the Golden Moon project during the three and nine months ended June 30, 2002, respectively. During the three and nine months ended June 30, 2002 the Tribe did not contribute property and equipment or other assets to the Enterprise, however during the three months ended June 30, 2002 the Tribe did contribute $1,888,136 in cash related to construction and development of Geyser Falls. In addition, the Tribe advanced $2,000,000 to the Enterprise for construction of Geyser Falls which is included in Due to Tribe at June 30, 2002. During the nine months ended June 30, 2001, the Tribe contributed property and equipment to the Enterprise at the Tribe's cost of $3,156,740 . During the nine months ended June 30, 2001, the Tribe contributed other assets to the Enterprise at the Tribe's cost of $1,843,927. During November 2001, the Tribe purchased on behalf of the Enterprise a 2000 model King Air aircraft. The total purchase price of this aircraft was $4,551,215, of which $4,501,215 was paid by the Tribe. At the time of purchase, the aircraft was contributed to the Enterprise and a corresponding non-interest bearing payable to the Tribe was established. Repayment to the Tribe is to occur in 12 equal monthly installments commencing in December 2001. During the three and nine months ended June 30, 2002 the Enterprise has made payments to the Tribe totaling $750,204 and $1,875,510, respectively, in connection with this purchase. Note 8--Employee Benefit Plans Employees of the Enterprise are eligible to participate in the Tribe's 401(k) plan. The Enterprise expensed contributions of $504,442 and $418,809 for the three months ended June 30, 2002 and 2001, respectively, and $1,464,773 and $1,280,567 for the nine months ended June 30, 2002 and 2001, respectively. The Enterprise has no formal commitments to provide post-retirement health care benefits to retirees. 13 Note 9 --Contingencies The Enterprise is subject to various claims and litigation in the normal course of business. In the opinion of management, all pending legal matters are either adequately covered by insurance or, if not insured, will not have a material adverse impact on the Enterprise's financial position, results of operations or cash flows. On July 26, 2001, a lawsuit was filed in a Mississippi state court by Eddie Fears, "a citizen and taxpayer", against Ronnie Musgrove, Governor of the State of Mississippi, the Mississippi Gaming Commission and members of the Mississippi Gaming Commission. The lawsuit alleged that the Tribal-State Compact entered into by the State of Mississippi and the Tribe is invalid for a number of reasons, including that the then-Governor of the State of Mississippi did not have the legal power to bind the State to the terms of the Compact. On February 21, 2002 this lawsuit was dismissed upon the filing of a notice of dismissal by the Plaintiff in the Chancery Court of Hinds County, Mississippi. Note 10--Subsequent Events On July 8, 2002, July 12, 2002 and August 6, 2002, the Enterprise made distributions of $5,000,000, $2,829,212 and $7,384,031 respectively, to the Tribe. On July 23, 2002 the Enterprise drew an additional $20,000,000 on the Facility referred to in Note 4. Note 11--Insurance Proceeds On January 10, 2002 a settlement agreement for the insurance claim related to the April 2001 flood was entered into between the Enterprise and the insurance carriers. The Enterprise received $3,023,322, which represents the entire amount of the settlement, during the quarter ended March 31, 2002. During the quarter ended March 31, 2002 the Enterprise recognized $2,473,293 of other income and $550,029 as a gain on disposal of assets related to the insurance settlement. Note 12--Recently Issued Accounting Pronouncements On January 1, 2001, the Enterprise adopted Emerging Issues Task Force Issues 00-14 and 00-22 ("EITF 00-14 and 00-22"). EITF 00-14 and 00-22 require that cash discounts and other cash incentives related to gaming play be recorded as a reduction to gross casino revenues. The adoption of EITF 00-14 and 00-22 did not have a material effect on the Enterprise's financial statements. There is no effect on previously reported net income. In August 2001, the Financial Accounting Standards Board ("FASB") approved SFAS No. 144. "Accounting for the Impairment or Disposal of Long-Lived Assets." The Statement requires that long-lived assets to be disposed of other than by sale be accounted for under the requirements of SFAS No. 121 which requires that such assets be measured at the lower of carrying amounts or fair value less cost to sell and to cease depreciation. SFAS No. 144 requires a probability-weighted cash flow estimation approach with situations in which alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range of possible future cash flow amounts are estimated. As a result, discontinued operations will no longer be measured on a net realizable basis, and future operating losses will no longer be recognized before they occur. Additionally, goodwill will be removed from the scope of SFAS No. 144 and as a result will no longer be required to be allocated to long-lived assets to be tested for impairment. The Statement is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Enterprise is not currently affected by the Statement's requirements. 14 On April 30, 2002 the FASB issued SFAS No. 145 (SFAS 145), Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. In rescinding FASB Statement No. 4 (SFAS 4), Reporting Gains and Losses from Extinguishment of Debt, and FASB Statement 64 (SFAS 64), Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements, SFAS 145 eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. However, pursuant to SFAS 145, an entity would not be prohibited for classifying such gains and losses as extraordinary items so long as they meet the criteria in paragraph 20 of Accounting Principles Board Opinion No. 30 (APB 30), Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS 145 is effective for transactions occurring after May 15, 2002. The Enterprise has adopted the provisions of SFAS 145 which have had no effect on the financial statements. 15 Management's Discussion And Analysis Of Financial Condition And Results Of Operations Three and Nine Months Ended June 30, 2002 Compared to Three and Nine Months Ended June 30, 2001 -------------------------------------------------------------------------------- The following discussion and analysis of the financial condition and results of operations should be read together with the financial statements and notes thereto. Net Revenues. Net revenues were $60.4 million for the quarter ended June 30, 2002 compared to $59.1 million for the quarter ended June 30, 2001. The $1.3 million, or 2.2% increase in net revenue was primarily due to an increase in gaming, room and other revenue. Net revenues were $180.7 million for the nine months ended June 30, 2002 compared to $180.4 million for the nine months ended June 30, 2001 representing a $0.3 million, or 0.2% increase in net revenue. Complimentary revenues are included in gross revenues but are deducted as a promotional allowance to arrive at net revenues. Casino. Casino revenues increased $0.3 million, or 0.6%, to $54.8 million for the quarter ended June 30, 2002 from $54.5 million for the quarter ended June 30, 2001. Casino revenues were $167.4 million for the nine months ended June 30, 2002 compared to $168.1 million for the nine months ended June 30, 2001, a decrease of $ 0.7 million, or 0.4%. Table game activity decreased as reflected in table games drop. The table game drop was $38.8 million for the quarter ended June 30, 2002 compared to table game drop of $39.5 million for the quarter ended June 30, 2001. This reflects a decrease in table activity of $0.7 million or 1.7% over the corresponding period in 2001. Table game revenue was $6.8 million for the quarter ended June 30, 2002 compared to $7.5 million for the quarter ended June 30, 2001, a decrease of $0.7 million, or 9.3%. The decrease in revenue is primarily due to the decrease in table game drop combined with a lower hold percentage for the quarter ended June 30, 2002 as compared to the quarter ended June 30, 2001. Table game hold percentage was 17.5% for the quarter ended June 30, 2002 compared to 19.0% for the quarter ended June 30, 2001. The table game drop was $124.7 million for the nine months ended June 30, 2002 compared to table game drop of $129.6 million for the nine months ended June 30, 2001. This reflects a decrease in table activity of $4.9 million or 3.8% over the corresponding period in 2001. Table game revenue was $23.0 million for the nine months ended June 30, 2002 compared to $26.2 million for the nine months ended June 30, 2001, a decrease of $3.2 million, or 12.2%. The decrease in revenue is primarily due to the decrease in table game drop combined with a lower hold percentage for the nine months ended June 30, 2002 as compared to the nine months ended June 30, 2001. Table game hold percentage was 18.4% for the nine months ended June 30, 2002 compared to 20.2% for the nine months ended June 30, 2001. Slot revenues were $49.4 million for the quarter ended June 30, 2002 compared to $46.8 million for the quarter ended June 30, 2001, an increase of $2.6 million or 5.6%. The increase is due to an increase in hold percentage for the quarter ended June 30, 2002. Slot revenues were $143.4 million for the nine months ended June 30, 2002 compared to $141.0 million for the nine months ended June 30, 2001, an increase of $2.4 million or 1.7%. The increase is primarily due to an increase in coin-in for the nine months ended June 30, 2002, compared to the same period in the prior year. Food and Beverage. For the quarter ended June 30, 2002, food and beverage revenues were $5.0 million, a decrease of approximately $0.1 million, or 2.0%, from $5.1 million for the quarter ended June 30, 2001. During the quarter ended June 30, 2002, the Silver Star turned 344,500 covers with an average revenue per cover of $11.29 compared to 334,200 covers with an average revenue per cover of $11.85 during the quarter ended June 30, 2001. For the nine months ended June 30, 2002, food and 16 Management's Discussion And Analysis Of Financial Condition And Results Of Operations Three and Nine Months Ended June 30, 2002 Compared to Three and Nine Months Ended June 30, 2001 (Continued) ------------------------------------------------------------------------------- beverage revenues were $16.0 million, an increase of approximately $0.6 million, or 3.9%, from $15.4 million for the nine months ended June 30, 2001. During the nine months ended June 30, 2002, the Silver Star turned 1,017,000 covers with an average revenue per cover of $11.93 compared to 985,100 covers with an average revenue per cover of $11.79 during the nine months ended June 30, 2001. Rooms. Room revenues were $2.3 million for the quarter ended June 30, 2002 compared to $2.1 million for the quarter ended June 30, 2001. There was an increase in the average daily room rate to $56.22 for the quarter ended June 30, 2002 from $51.93 for the quarter ended June 30, 2001. Our occupancy rate was 92.7% for the quarter ended June 30, 2002 compared to 90.5% for the quarter ended June 30, 2001. During the quarter ended June 30, 2002, 52.7% of our hotel revenue was attributable to rooms occupied by Silver Star customers on a complimentary basis compared to 59.0% for the quarter ended June 30, 2001. Room revenues were $6.4 million for the nine months ended June 30, 2002 compared to $6.2 million for the nine months ended June 30, 2001. Other. Other revenues increased $500,000 to $3.2 million for the quarter ended June 30, 2002 from $2.7 million for the quarter ended June 30, 2001. The increase in other revenue is attributable to increases in sales from our various retail outlets and convention center during the three months ended June 30, 2002. Other revenues decreased $100,000 to $7.2 million for the nine months ended June 30, 2002 from $7.3 million for the nine months ended June 30, 2001. The decrease in other revenue is attributable to declines in sales from our various retail outlet during the nine months ended June 30, 2002. Other revenues are comprised primarily of revenue from our various retail outlets, the convention center, fees earned from cash advances to customers and other miscellaneous items. Also included in other revenue is the revenue from the Dancing Rabbit. Golf revenues were $1,430,000 for the quarter ended June 30, 2002 compared to $1,418,000 for the quarter ended June 30, 2001, an increase of $12,000 or 0.8%. Golf revenues were $2,785,000 for the nine months ended June 30, 2002 compared to $2,760,000 for the nine months ended June 30, 2001, an increase of $26,000 or 0.9%. Slight golf revenue increases in both the three months and nine months ended June 30, 2002 were the result of increased golf rounds coupled with lower per round pricing associated with golf packages and special promotions. Promotional Allowances. Promotional allowances totaled $4.9 million for the quarter ended June 30, 2002, representing a $500,000 or 9.2% decrease over promotional allowances of $5.4 million for the quarter ended June 30, 2001. During the quarter ended June 30, 2002 promotional allowances were 8.9% of casino revenues compared to 9.9% for the quarter ended June 30, 2001. Promotional allowances were $16.5 million for the nine months ended June 30, 2002, representing a $200,000 or 1.2% decrease over promotional allowances of $16.7 million for the nine months ended June 30, 2001. During the nine months ended June 30, 2002 and 2001, promotional allowances remained constant at 9.9% of casino revenues. Costs and Expenses. Total costs and expenses were $34.1 million for the quarter ended June 30, 2002 compared to $31.8 million for the quarter ended June 30, 2001, an increase of $2.3 million or 7.2%. Total costs and expenses were $101.0 million for the nine months ended June 30, 2002 compared to $95.3 million for the nine months ended June 30, 2001, an increase of $5.7 million or 6.0%. The increase for both periods is primarily due to the increase in selling, general and administrative expenses that are described below. 17 Management's Discussion And Analysis Of Financial Condition And Results Of Operations Three and Nine Months Ended June 30, 2002 Compared to Three and Nine Months Ended June 30, 2001 (Continued) ------------------------------------------------------------------------------- Casino. Casino costs and expenses were $14.0 million for the quarter ended June 30, 2002, compared to $15.5 million for the quarter ended June 30, 2001, a decrease of $1,500,000 or 9.7%. Casino costs and expenses were $45.0 million for the nine months ended June 30, 2002, compared to $46.8 million for the nine months ended June 30, 2001, a decrease of $1,800,000 or 3.9%. The decrease for both the quarter and nine-month period is attributable to the decline in table game activity as well as management's effort to control operating costs and expense. Other. Other costs and expenses were $2.6 million for the three months ended June 30, 2002, compared to $2.0 million for the three months ended June 30, 2001, an increase of $600,000, or 30.0%. Other costs and expenses were $6.1 million for the nine months ended June 30, 2002, compared to $5.3 million for the nine months ended June 30, 2001, an increase of $800,000, or 15.1%. Other expenses are comprised of the costs related to the operation of retail outlets and the convention center. Also included in other expenses are the operating expenses of the Dancing Rabbit. Golf operating expenses were $1,276,000 for the three months ended June 30, 2002 and $1,171,000 for the three months ended June 30, 2001, an increase of $105,000, or 9.0%. Golf operating expenses were $3.2 million for the nine months ended June 30, 2002 compared to $2.9 million for the nine months ended June 30, 2001, an increase of $300,000 or 10.3%. The increase in golf operating expenses is attributable to increased golf rounds. Selling, General and Administrative. Selling, general and administrative costs and expenses were $11.1 million for the quarter ended June 30, 2002 compared to $7.6 million for the quarter ended June 30, 2001, an increase of $3.5 million or 46.1%. Approximately $1.0 million of the increase is attributable to pre-opening expenses incurred during the quarter ended June 30, 2002 that are included in selling, general and administrative costs and expenses. There were $1.3 million and $0.3 million of pre-opening expenses incurred for the quarters ended June 30, 2002 and June 30, 2001, respectively. Selling, general and administrative costs and expenses related to the Silver Star were $8.3 million for the quarter ended June 30, 2002 compared to $7.1 million for the quarter ended June 30, 2001. The $1.2 million, or 16.9% increase in selling, general and administrative expenses for the Silver Star is primarily attributable to increased promotional activity related to our slot customers and an increase in the employee incentive bonus program expense. Selling, general and administrative costs and expenses related to the operations of the Enterprise administrative office and training center were $1.4 million for the quarter ended June 30, 2002 compared to $0.2 million for the quarter ended June 30, 2001, an increase of $1.2 million. The training center was opened on November 9, 2001 and the administrative office has 130 employees as of June 30, 2002 compared to none at June 30, 2001. Selling, general and administrative costs and expenses were $29.6 million for the nine months ended June 30, 2002 compared to $23.6 million for the nine months ended June 30, 2001, an increase of $6.0 million, or 25.4%. Approximately $1.0 million of this increase is due to the payment during the nine months ended June 30, 2002 as required by the "Settlement and General Release Agreement" with the former Chief Executive Officer of the Silver Star. Approximately $1.4 million of the increase is attributable to pre-opening expenses incurred during the nine months ended June 30, 2002 that are included in selling, general and administrative costs and expenses. There were $1.7 million and $0.3 million of pre-opening expenses incurred for the nine months ended June 30, 2002 and June 30, 2001, respectively. Selling, general and administrative costs and expenses related to the Silver Star (excluding the $1.0 million described above) were $24.3 million for the nine months ended June 30, 2002 compared to $22.9 million for the nine months ended June 30, 2001. The $1.4 million or 6.1% increase in selling, general and administrative expense for the Silver Star is primarily attributable to the increased promotional activity related to our slot customers and an increase in the employee incentive bonus program expense. Selling, general and administrative costs and expenses related to the operations of the Enterprise administrative office and training center were $2.6 million for the nine months ended June 30, 2002 compared to $0.4 million for the nine months ended June 30, 2001, an increase of $2.2 million. The training center was opened on November 9, 2001 and the administrative office has 130 employees as of June 30, 2002 compared to none at June 30, 2001. 18 Management's Discussion And Analysis Of Financial Condition And Results Of Operations Three and Nine Months Ended June 30, 2002 Compared to Three and Nine Months Ended June 30, 2001 (Continued) ------------------------------------------------------------------------------- Operating Income (loss). Operating income was $26.3 million for the quarter ended June 30, 2002 compared to $27.3 million for the quarter ended June 30, 2001, a decrease of $1.0 million, or 3.7%. Operating income was $79.6 million for the nine months ended June 30, 2002 compared to $85.1 million for the nine months ended June 30, 2001, a decrease of $5.5 million, or 6.5%. The decrease for the both periods was primarily due to the revenue and expense variations previously discussed. Other Income (Expense). Other expense was $1.9 million for the quarter ended June 30, 2002 compared to other expense of $3.6 million for the quarter ended June 30, 2001, representing a decrease in expense of $1.7 million which is primarily attributed to a decrease in interest expense of approximately $3.3 million and a decrease in interest income of $1.6 million. The decrease in interest expense is primarily due to capitalization of interest in the amount of $3.4 million during the quarter ended June 30, 2002 compared to $0.5 million for the quarter ended June 30, 2001. The decrease in interest income is due to decreased cash and investment balances which were used to fund Golden Moon construction. Other expense was $3.8 million for the nine months ended June 30, 2002 compared to other expense of approximately $7.3 million for the nine months ended June 30, 2001, representing a decrease in expense of $3.5 million which is attributed to an increase in interest expense of approximately $0.9 million, a decrease in interest income of $0.7 million, the recognition of $3.0 million of other income due to the insurance settlement described below and $2.1 million increase in other income related to the effect of interest rate changes on the interest swap agreement. Interest capitalized for the nine months ended June 30, 2002 was $7.3 million compared to $0.5 million for the nine months ended June 30, 2001. The decrease in interest income is due to decreased cash and investment balances that were used to fund Golden Moon construction. Other income (expense) is comprised of interest income minus interest expense (net of capitalized interest) and other expense. On January 10, 2002 a settlement agreement for the insurance claim related to the April 2000 flood was entered into between the Enterprise and the insurance carriers. During the quarter ended March 31, 2002, the Enterprise received $3.0 million which represents the entire amount of the settlement. During the quarter ended March 31, 2002 the Enterprise recognized $2.5 million of other income and $0.5 million as a gain on disposal of assets related to the insurance settlement. Effective October 1, 2000, the Enterprise adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging Activities", as amended by Statement of Financial Accounting Standards No. 138. The interest rate swap agreement referred to above is defined as a derivative instrument under SFAS 133. Although the Enterprise had designated this interest rate swap agreement as a hedge since its inception on February 1, 2000, the Enterprise did not elect to seek hedge accounting for this agreement upon adoption of SFAS 133. Accordingly, during the three months ended June 30, 2002 and 2001, the Enterprise recognized other income of $126,000 and other expense of $800,000, respectively, attributed to the effect of interest rate changes on the interest rate swap agreement. During the nine months ended June 30, 2002 and 2001, the Enterprise recognized other income of $826,000 and other expense of $1.3 million, respectively, attributed to the effect of interest rate changes on the interest rate swap agreement. 19 Management's Discussion And Analysis Of Financial Condition And Results Of Operations Three and Nine Months Ended June 30, 2002 Compared to Three and Nine Months Ended June 30, 2001 (Continued) ------------------------------------------------------------------------------- Critical Accounting Policies The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 the Enterprise, including the use of estimates and assumptions are presented in the Notes to the Consolidated Financial Statements. Management bases its estimates on it historical experience, together with other relevant factors, in order to form the basis for making judgments which 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. The Enterprise believes that estimates related to the following areas involve a high degree of judgment and/or complexity; The allowance for doubtful accounts receivable, estimated accruals for jackpots and slot club bonus points, self insurance related to employee health plans and contingencies related to customer claims in the ordinary course of business. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, which results in bad debt expense. We determine the adequacy of this allowance by periodically evaluating individual customer receivables and considering the customer's financial condition, credit history and current economic conditions. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, we may increase the allowance. We maintain accruals for health and workers compensation self-insurance and slot club point redemption, which are classified as accrued liabilities in the balance sheets. We determine the adequacy of these accruals by periodically evaluating the historical experience and projected trends related to these accruals. If such information indicates that these accruals are overstated or understated, we will adjust the assumptions utilized in the methodologies and reduce or provide for additional accruals as appropriate. We are subject to various claims and legal actions in the ordinary course of business. Some of these matters include personal injuries to customers and damage to customers' personal assets. We estimate guest claims and accrue for such liability based on historical experience in accrued liabilities in the balance sheets. Liquidity and Capital Resources As of June 30, 2002, we held cash and cash equivalents of $50.1 million. Our principal sources of liquidity have consisted of cash provided by operating activities and debt financing. Cash provided by operating activities was $81.1 million in the nine months ended June 30, 2002 compared to $87.8 million in the nine months ended June 30, 2001. The decrease of $6.7 million was due primarily to the decrease in net income to $75.8 million in the nine months ended June 30, 2002 from $77.7 million in the nine months ended June 30, 2001. 20 Management's Discussion And Analysis Of Financial Condition And Results Of Operations Three and Nine Months Ended June 30, 2002 Compared to Three and Nine Months Ended June 30, 2001 (Continued) ------------------------------------------------------------------------------- Cash used in investing activities in the nine months ended June 30, 2002 for capital expenditures totaled $156.9 million. The Enterprise received $82.5 million from the sale of short-term investments in the nine months ended June 30, 2002. Cash used in investing activities in the nine months ended June 30, 2001 was primarily for changes in restricted cash, capital expenditures and purchases of short term investments totaling $0.1 million, $16.6 million and $87.4 million respectively. Our outstanding revolving credit facility restricts our ability to make capital expenditures. We may not spend more than $10 million on capital expenditures and improvements in any fiscal year for each of the Silver Star and Golden Moon (following its opening). In addition, we are limited to a maximum construction expenditure, exclusive of the Golden Moon project, which includes the parking garage adjacent to the Silver Star, of $25 million during the term of this loan. In the ordinary course of business, we will continue to maintain and improve the Silver Star as necessary to continue to provide a competitive and attractive facility to our customers. We intend to make capital expenditures up to the amounts permitted under our credit facilities to maintain the property. We had $2.6 million of restricted cash as of June 30, 2002 and September 30, 2001. The balances are required by the Management Agreement for employment, workers compensation and other third party claims not otherwise covered by insurance proceeds that may be filed or become due after the date the Management Agreement was terminated. The claims reserve will survive until January 31, 2003. Any unused portion of the claims reserve at the end of the three-year period will become unrestricted. Cash used in financing activities was $39.0 million in the nine months ended June 30, 2002 compared to $83.7 million cash provided in the nine months ended June 30, 2001. The primary use of cash in each period was distributions to the Tribe of $60.9 million and $70.6 million in the nine months ended June 30, 2002 and 2001, respectively. The primary source of cash provided in the nine months ended June 30, 2001 was proceeds from the issuance of $200 million of long-term debt. During the nine months ended June 30, 2001, the Enterprise also repaid $62.5 million of long-term debt. Pursuant to the Indenture, we used a portion of the proceeds from the offering of the notes to repay the remaining outstanding balance under the term loan and used the remaining proceeds to finance the construction of the Golden Moon. On December 19, 2000, we entered into a $125.0 million reducing senior secured revolving credit facility and amended our outstanding amortizing senior secured term loan. At June 30, 2002 a total of $20,000,000 was drawn and outstanding on this facility. On July 23, 2002 the Enterprise drew an additional $20,000,000 on the Facility. We anticipate that it will be necessary to make additional draws from this facility to complete the Golden Moon. The terms of the notes and the revolving credit facility restrict our ability to sell or dispose of assets, incur additional debt or contingent obligations, extend credit, make investments, commingle our assets with the assets of other Tribal business enterprises, require us to maintain certain financial ratios, limit our ability to make distributions to the Tribe and limit the amount of capital expenditures we may incur related to the Silver Star. Through June 30, 2002, $195.8 million of the budgeted $290.6 million Golden Moon construction has been completed through proceeds from the $200.0 million note offering, and contributions of cash and property and equipment from the Tribe. We anticipate the remaining $94.8 million of budgeted expenditures to be financed from cash on hand and short-term investments, which includes the balance of the proceeds from the $200.0 million note offering and the $125.0 million revolving credit facility. The Golden Moon is expected to be completed and opened on August 26, 2002. 21 Management's Discussion And Analysis Of Financial Condition And Results Of Operations Three and Nine Months Ended June 30, 2002 Compared to Three and Nine Months Ended June 30, 2001 (Continued) ------------------------------------------------------------------------------- The notes contain certain covenants that restrict our ability to borrow additional money, pay dividends or make other distributions, make investments, create liens, enter into certain transactions with affiliates, and sell certain assets or merge with or into another person. Under specific circumstances, the covenant limiting our ability to make certain payments, distributions and investments will be suspended. The indenture prescribes that the Enterprise may make an annual distribution to the Tribe (the "Annual Service Payment") in the amount of $55 million per year (payable in equal monthly installments), which amount is increased annually on each September 30, commencing with September 30, 2001, by 5% per annum. Any distributions to the Tribe are made at the Tribe's discretion, but distributions other than the Annual Service Payment (referred to as "Restricted Payments") are limited by the covenants of the Indenture. The most significant of such covenants limit Restricted Payments such that the cumulative Restricted Payments from inception of the Indenture shall not exceed 50% of the Enterprise's cumulative net income (with measurement commencing on January 1, 2001) plus $75 million. Restricted Payments are further limited by the Indenture's requirement for the Enterprise to maintain a minimum Fixed Charge Coverage Ratio (as defined) of 2.5 to 1 (increasing to 3.0 to 1 after December 31, 2001), and thus limiting the Enterprise's ability to incur additional debt to make Restricted Payments. As of June 30, 2002 and September 30, 2001 the Tribe had outstanding liabilities of $4.7 million and $5.5 million, respectively, under credit facilities with $3.9 million and $8.0 million, respectively, available in borrowings, which did not preclude recourse to assets held by the Enterprise. We believe that existing cash balances, operating cash flow and anticipated borrowings under the credit facilities and the offering of the Notes will provide sufficient resources to fund operations and to meet our debt payment obligations and expected distributions to the Tribe, foreseeable capital expenditure requirements at the Silver Star and construction, development and opening costs of the Golden Moon. During March 2002 the Tribe began construction of a water theme park. Construction of the water theme park was completed in early July 2002 and the park was opened to the public on July 9, 2002. The total estimated cost of construction is estimated at $19.9 million of which a total of $3.8 million has been incurred by the Enterprise through June 30, 2002. Of the total $3.8 million construction cost incurred through June 30, 2002, the Enterprise has received contributed capital of $1.8 million from the Tribe. It is anticipated that the Enterprise will receive reimbursement for the balance of construction and preopening costs incurred as well as any remaining construction and preopening costs incurred subsequent to June 30, 2002. Impact of Inflation Absent changes in competitive and economic conditions or in specific prices affecting the industry, we do not expect that inflation will have a significant impact on our operations. Changes in specific prices, such as fuel and transportation prices, relative to the general rate of inflation may have a material adverse effect on the hotel and casino industry in general. 22 Management's Discussion And Analysis Of Financial Condition And Results Of Operations Three and Nine Months Ended June 30, 2002 Compared to Three and Nine Months Ended June 30, 2001 (Continued) ------------------------------------------------------------------------------- Regulation and Taxes The Silver Star is subject to extensive regulation by the Choctaw Gaming Commission and the Golden Moon will also be subject to such regulation. Changes in applicable laws or regulations could have a significant impact on our operations. The Enterprise is owned by the Tribe, a federally recognized Indian Tribe located on reservation land held in trust by the United States of America; therefore, the Enterprise was not subject to federal or state income taxes for the three or nine month periods ended June 30, 2002 or 2001, nor is it anticipated that the Enterprise will be subject to such taxes in the future. Various efforts have been made in the United States Congress over the past several years to enact legislation that would subject the income of tribal business entities, such as the Enterprise, 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 affect on our cash flows from operations. Disclosure Regarding Forward-Looking Statements Certain information included in this Quarterly report and other materials filed or to be filed by the Enterprise with the Securities and Exchange Commission contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934. Such statements include information relating to plans for future expansion and other business development activities as well as other capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Enterprise. These risks and uncertainties include, but are not limited to, those relating to development and construction activities, dependence on existing management, leverage and debt service, domestic or global economic conditions, pending litigation, changes in federal tax laws or the administration of such laws and changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions). 23 Item 3. Quantitative and Qualitative Disclosure About Market Risk ------------------------------------------------------------------------------- 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. Our primary exposure to market risk is interest rate risk associated with our long-term debt. We had previously entered into an interest rate swap agreement to fix the interest rate on our term loan at 8.25%. Pursuant to the Indenture dated March 30, 2001, we used a portion of the proceeds from the offering of the Notes, which bear interest at a fixed rate of 9.25%, to repay the remaining outstanding balance under the Loan. Upon the prepayment of the related installment note agreement we did not settle the existing interest rate swap agreement. At June 30, 2002, the interest rate swap agreement had a notional amount of $31.3 million. The notional amount does not represent amounts exchanged by the parties, and thus is not a measure of exposure to the Enterprise. The amount exchanged is based on the notional amount. The term of the interest rate swap agreement is through January 31, 2004. The fair value liability of our interest rate swap is based on the cash termination value of the agreement using quotes from our counter-party and was approximately $1.3 million at June 30, 2002. If the floating rate increased 25 basis points, interest expense under the swap agreement for the three and nine months ended June 30, 2002 would have been lower by $20,540 and $70,291 respectively. Current borrowings under the revolving credit facility bear interest at the LIBOR base rate plus a margin rate of 2.5%. If the LIBOR base rate had increased 25 basis points, interest expense under the revolving credit facility would been higher by $ 1,389 during the three and nine months ended June 30, 2002. Management has and will continue to limit our exposure to interest rate risk by maintaining a conservative ratio of fixed rate, long-term debt to total debt such that variable rate exposure is kept at an acceptable level and fixing certain long-term variable rate debt through the use of interest rate swaps or interest rate caps with appropriately matching maturities. 24 PART II Other Information -------------------------------------------------------------------------------- Item 1. Legal Proceedings. The Enterprise is subject to various claims and litigation in the normal course of business. In the opinion of management, all pending legal matters are either adequately covered by insurance or, if not insured, will not have a material adverse impact on the Enterprise's financial position, results of operations or cash flows. On July 26, 2001, a lawsuit was filed in a Mississippi state court by Eddie Fears, "a citizen and taxpayer", against Ronnie Musgrove, Governor of the State of Mississippi, the Mississippi Gaming Commission and members of the Mississippi Gaming Commission. The lawsuit alleged that the Tribal-State Compact entered into by the State of Mississippi and the Tribe is invalid for a number of reasons, including that the then-Governor of the State of Mississippi did not have the legal power to bind the State to the terms of the Compact. On February 21, 2002 this lawsuit was dismissed upon the filing of a notice of dismissal by the Plaintiff in the Chancery Court of Hinds County, Mississippi. Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. Not applicable Note 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits. None (b) Reports on Form 8-K. None 25 SIGNATURES ------------------------------------------------------------------------------- Pursuant to the requirements of the Indenture, the Enterprise has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 13, 2002 Choctaw Resort Development Enterprise By: /s/ Jay Dorris ---------------------------- Jay Dorris President Choctaw Resort Development Enterprise By: /s/ Michael A. Donald ----------------------------- Michael A. Donald, CPA Vice President of Resort Finance Choctaw Resort Development Enterprise (Principal Financial and Accounting Officer) Certification of President Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Choctaw Resort Development Enterprise (the "Enterprise) hereby certifies, to the best of such officer's knowledge, that: (i) the Quarterly Report on Form 10-Q of the Enterprise for the quarterly period ended June 30, 2002 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Enterprise. August 13, 2002 /s/ Jay Dorris ---------------- Jay Dorris President 26 Certification of Vice President of Resort Finance Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Choctaw Resort Development Enterprise (the "Enterprise) hereby certifies, to the best of such officer's knowledge, that: (i) the Quarterly Report on Form 10-Q of the Enterprise for the quarterly period ended June 30, 2002 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Enterprise. August 13, 2002 /s/ Michael A. Donald ----------------------- Michael A. Donald Vice President of Resort Finance 27

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