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EX-32.1 - EXHIBIT 32.1 - MOHEGAN TRIBAL GAMING AUTHORITYa2014630ex321.htm
EX-31.2 - EXHIBIT 31.2 - MOHEGAN TRIBAL GAMING AUTHORITYa2014630ex312.htm
EX-32.2 - EXHIBIT 32.2 - MOHEGAN TRIBAL GAMING AUTHORITYa2014630ex322.htm
EX-31.1 - EXHIBIT 31.1 - MOHEGAN TRIBAL GAMING AUTHORITYa2014630ex311.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 
_________________________________
FORM 10-Q
 _____________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
OR
o
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 033-80655
 __________________________________________
MOHEGAN TRIBAL GAMING AUTHORITY
(Exact name of registrant as specified in its charter)
 __________________________________________ 
Not Applicable
 
06-1436334
(State or other jurisdiction
of incorporation or organization)
 
(IRS Employer
Identification No.)
 
 
One Mohegan Sun Boulevard, Uncasville, CT
 
06382
(Address of principal executive offices)
 
(Zip Code)
(860) 862-8000
(Registrant’s 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  x    No  ¨
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  x    No  ¨
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  x
Smaller reporting company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):     Yes  ¨    No  x



MOHEGAN TRIBAL GAMING AUTHORITY
INDEX TO FORM 10-Q
 
 
Page
Number
PART I.
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 6.
 
 
 
Signatures.



PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
 
June 30,
2014
 
September 30,
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
71,658

 
$
63,624

Restricted cash
699

 
13,757

Receivables, net
30,464

 
26,142

Inventories
15,703

 
13,990

Other current assets
20,034

 
20,518

Total current assets
138,558

 
138,031

Non-current assets:
 
 
 
Property and equipment, net
1,443,373

 
1,476,175

Goodwill
39,459

 
39,459

Other intangible assets, net
405,211

 
405,518

Other assets, net
75,879

 
76,967

Total assets
$
2,102,480

 
$
2,136,150

LIABILITIES AND CAPITAL
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
46,654

 
$
25,219

Current portion of relinquishment liability
44,819

 
62,947

Due to Mohegan Tribe
2,165

 
6,308

Current portion of capital leases
1,185

 
2,302

Trade payables
18,203

 
10,531

Construction payables
6,366

 
11,011

Accrued interest payable
31,005

 
23,296

Other current liabilities
133,644

 
123,982

Total current liabilities
284,041

 
265,596

Non-current liabilities:
 
 
 
Long-term debt, net of current portion
1,662,478

 
1,628,173

Relinquishment liability, net of current portion

 
11,418

Due to Mohegan Tribe, net of current portion
24,796

 
23,420

Capital leases, net of current portion
2,546

 
3,138

Other long-term liabilities
5,891

 
5,020

Total liabilities
1,979,752

 
1,936,765

Commitments and Contingencies


 


Capital:
 
 
 
Retained earnings
123,000

 
199,236

Mohegan Tribal Gaming Authority capital
123,000

 
199,236

Non-controlling interests
(272
)
 
149

Total capital
122,728

 
199,385

Total liabilities and capital
$
2,102,480

 
$
2,136,150

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


3


MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands)
(unaudited)
 
 
For the
 
For the
 
For the
 
For the
 
Three Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Nine Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
Revenues:
 
 
 
 
 
 
 
Gaming
$
284,801

 
$
304,582

 
$
837,954

 
$
885,602

Food and beverage
23,273

 
22,400

 
68,605

 
63,404

Hotel
12,160

 
10,318

 
34,763

 
30,363

Retail, entertainment and other
31,542

 
32,346

 
87,065

 
84,521

Gross revenues
351,776

 
369,646

 
1,028,387

 
1,063,890

Less-Promotional allowances
(25,440
)
 
(25,401
)
 
(72,545
)
 
(69,195
)
Net revenues
326,336

 
344,245

 
955,842

 
994,695

Operating costs and expenses:
 
 
 
 
 
 
 
Gaming
171,533

 
179,537

 
513,574

 
525,409

Food and beverage
10,359

 
10,231

 
31,207

 
31,035

Hotel
3,950

 
3,743

 
11,744

 
10,674

Retail, entertainment and other
13,318

 
11,858

 
37,446

 
31,314

Advertising, general and administrative
48,929

 
48,038

 
143,740

 
143,271

Corporate
9,259

 
5,933

 
29,551

 
19,624

Depreciation and amortization
20,070

 
20,350

 
60,067

 
60,465

(Gain) loss on disposition of assets
(64
)
 
144

 
(12
)
 
277

Severance

 
51

 

 
29

Pre-opening

 
173

 
1,187

 
245

Total operating costs and expenses
277,354

 
280,058

 
828,504

 
822,343

Income from operations
48,982

 
64,187

 
127,338

 
172,352

Other income (expense):
 
 
 
 
 
 
 
Accretion of discount to the relinquishment liability
(552
)
 
(1,243
)
 
(1,654
)
 
(3,730
)
Interest income
1,701

 
1,533

 
4,947

 
4,421

Interest expense, net of capitalized interest
(36,426
)
 
(42,379
)
 
(111,692
)
 
(128,213
)
Loss on early extinguishment of debt
(2
)
 

 
(62,277
)
 
(403
)
Other income (expense), net
59

 
53

 
(819
)
 
(1,732
)
Total other expense
(35,220
)
 
(42,036
)
 
(171,495
)
 
(129,657
)
Net income (loss)
13,762

 
22,151

 
(44,157
)
 
42,695

Loss attributable to non-controlling interests
130

 
146

 
421

 
2,767

Net income (loss) attributable to Mohegan Tribal Gaming Authority
$
13,892

 
$
22,297

 
$
(43,736
)
 
$
45,462


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


4


MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(in thousands)
(unaudited)
 
 
Total                 
 
Mohegan Tribal  Gaming Authority
 
Non-controlling      
Interests
Balance, March 31, 2014
$
121,466

 
$
121,608

 
$
(142
)
Net income (loss)
13,762

 
13,892

 
(130
)
Distributions to Mohegan Tribe
(12,500
)
 
(12,500
)
 

Balance, June 30, 2014
$
122,728

 
$
123,000

 
$
(272
)
 
 
 
 
 
 
Balance, September 30, 2013
$
199,385

 
$
199,236

 
$
149

Net loss
(44,157
)
 
(43,736
)
 
(421
)
Distributions to Mohegan Tribe
(32,500
)
 
(32,500
)
 

Balance, June 30, 2014
$
122,728

 
$
123,000

 
$
(272
)
 
 
 
 
 
 
Balance, March 31, 2013
$
202,387

 
$
202,075

 
$
312

Net income (loss)
22,151

 
22,297

 
(146
)
Distributions to Mohegan Tribe
(15,000
)
 
(15,000
)
 

Balance, June 30, 2013
$
209,538

 
$
209,372

 
$
166

 
 
 
 
 
 
Balance, September 30, 2012
$
209,263

 
$
208,681

 
$
582

Net income (loss)
42,695

 
45,462

 
(2,767
)
Distributions to Mohegan Tribe
(35,000
)
 
(35,000
)
 

Repurchase of membership interest
(7,420
)
 
(9,771
)
 
2,351

Balance, June 30, 2013
$
209,538

 
$
209,372

 
$
166


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


5


MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
For the Nine Months Ended
 
June 30, 2014
 
June 30, 2013
Cash flows provided by (used in) operating activities:
 
 
 
Net income (loss)
$
(44,157
)
 
$
42,695

Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
 
 
 
Depreciation and amortization
60,067

 
60,465

Accretion of discount to the relinquishment liability
1,654

 
3,730

Cash paid for accretion of discount to the relinquishment liability
(2,071
)
 
(3,927
)
Loss on early extinguishment of debt
58,481

 
403

Payments of tender offer costs and discounts
(48,155
)
 

Amortization of debt issuance costs and accretion of bond discounts
6,164

 
9,184

Amortization of net deferred gain on settlement of derivative instruments

 
(66
)
Provision for losses on receivables
2,953

 
2,574

(Gain) loss on disposition of assets
(12
)
 
277

Loss from unconsolidated affiliates
794

 
1,698

Changes in operating assets and liabilities:
 
 
 
Increase in receivables
(5,389
)
 
(3,754
)
(Increase) decrease in inventories
(1,713
)
 
68

(Increase) decrease in other assets
(4,660
)
 
5,285

Increase (decrease) in trade payables
7,671

 
(2,181
)
Increase (decrease) in accrued interest
7,709

 
(21,967
)
Increase (decrease) in other liabilities
8,987

 
(8,875
)
Net cash flows provided by operating activities
48,323

 
85,609

Cash flows provided by (used in) investing activities:
 
 
 
Purchases of property and equipment, net of increase (decrease) in construction payables of $(4,645) and $3,528, respectively
(28,901
)
 
(39,185
)
Issuance of third-party loans and advances
(1,392
)
 
(1,655
)
Payments received on third-party loans
606

 
103

Decrease in restricted cash, net
14,150

 
21,669

Proceeds from asset sales
105

 
171

Investments in unconsolidated affiliates
(29
)
 
(4,965
)
Net cash flows used in investing activities
(15,461
)
 
(23,862
)
Cash flows provided by (used in) financing activities:
 
 
 
Prior Bank Credit Facility borrowings - Revolving

 
3,000

Prior Bank Credit Facility repayments - Revolving

 
(3,000
)
Prior Bank Credit Facility repayments - Term
(393,000
)
 
(3,000
)
Prior Term Loan Facility repayments, net of discount
(222,103
)
 

Senior Secured Credit Facility borrowings - Revolving
193,000

 

Senior Secured Credit Facility repayments - Revolving
(173,000
)
 

Senior Secured Credit Facility borrowings - Term Loan A, net of discount
124,343

 

Senior Secured Credit Facility repayments - Term Loan A
(1,563
)
 

Senior Secured Credit Facility borrowings - Term Loan B, net of discount
720,952

 

Senior Secured Credit Facility repayments - Term Loan B
(3,650
)
 

Line of Credit borrowings
258,415

 

Line of Credit repayments
(258,415
)
 

Repayments to Mohegan Tribe
(2,750
)
 
(7,462
)
Repayments of other long-term debt
(191,088
)
 
(15,798
)
Principal portion of relinquishment liability payments
(29,129
)
 
(27,951
)
Distributions to Mohegan Tribe
(32,500
)
 
(35,000
)
Payments of financing fees
(12,631
)
 
(3,491
)
Payments on capital lease obligations
(1,709
)
 
(2,838
)
Net cash flows used in financing activities
(24,828
)
 
(95,540
)
Net increase (decrease) in cash and cash equivalents
8,034

 
(33,793
)
Cash and cash equivalents at beginning of period
63,624

 
114,084

Cash and cash equivalents at end of period
$
71,658

 
$
80,291

Supplemental disclosures:
 
 
 
Cash paid during the period for interest
$
97,197

 
$
140,281

Repurchase of membership interest
$

 
$
7,420

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

6


MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1—ORGANIZATION:
The Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe” or the “Tribe”) established the Mohegan Tribal Gaming Authority (the “Authority”) in July 1995 with the exclusive authority to conduct and regulate gaming activities for the Tribe on Tribal lands and the non-exclusive authority to conduct such activities elsewhere. The Tribe is a federally-recognized Indian tribe with an approximately 544-acre reservation situated in southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988, federally-recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal lands, subject to, among other things, the negotiation of a compact with the affected state. The Tribe and the State of Connecticut entered into a compact (the “Mohegan Compact”), which was approved by the United States Secretary of the Interior. The Authority is primarily engaged in the ownership, operation and development of gaming facilities. In October 1996, the Authority opened Mohegan Sun, a gaming and entertainment complex situated on a 185-acre site on the Tribe's reservation. The Authority is governed by a nine-member Management Board, whose members also comprise the Mohegan Tribal Council, the governing body of the Tribe. Any change in the composition of the Mohegan Tribal Council results in a corresponding change in the Authority's Management Board.
As of June 30, 2014, the following subsidiaries were wholly-owned by the Authority: Mohegan Basketball Club, LLC (“MBC”), Mohegan Golf, LLC (“Mohegan Golf”), Mohegan Commercial Ventures-PA, LLC (“MCV-PA”), Mohegan Ventures-Northwest, LLC (“Mohegan Ventures-NW”), Mohegan Ventures Wisconsin, LLC (“MVW”), MTGA Gaming, LLC (“MTGA Gaming”), Downs Lodging, LLC ("Downs Lodging") and Mohegan Gaming Advisors, LLC ("Mohegan Gaming Advisors").
MBC owns and operates the Connecticut Sun, a professional basketball team in the Women's National Basketball Association (the “WNBA”). MBC currently owns a 4.2% membership interest in WNBA, LLC.
Mohegan Golf owns and operates the Mohegan Sun Golf Club in southeastern Connecticut.
MCV-PA holds a 0.01% general partnership interest in each of Downs Racing, L.P., Backside, L.P., Mill Creek Land, L.P. and Northeast Concessions, L.P. (collectively, along with MCV-PA, the “Pocono Downs Subsidiaries”), while the Authority holds the remaining 99.99% limited partnership interest in each entity. Downs Racing, L.P. (“Downs Racing”) owns and operates Mohegan Sun at Pocono Downs, a gaming and entertainment facility situated on a 400-acre site in Plains Township, Pennsylvania, and several off-track wagering facilities located elsewhere in Pennsylvania (collectively, the “Pennsylvania Facilities”). The Authority views Mohegan Sun and the Pennsylvania Facilities as two separate operating segments.
Mohegan Ventures-NW and the Tribe hold 49.15% and 9.85% membership interests in Salishan-Mohegan, LLC (“Salishan-Mohegan”), respectively. Salishan-Mohegan was formed with an unrelated third-party to participate in the development and management of a proposed casino to be owned by the federally-recognized Cowlitz Indian Tribe of Washington (the “Cowlitz Tribe”) and to be located in Clark County, Washington (the “Cowlitz Project”). Salishan-Mohegan holds 100% membership interests in Salishan-Mohegan Two, LLC and Interchange Development Group, LLC, both of which were formed to acquire certain property related to the Cowlitz Project.
MVW holds a 100% membership interest in Wisconsin Tribal Gaming, LLC (“WTG”), which was formed to participate in the development of a proposed casino to be owned by the federally-recognized Menominee Indian Tribe of Wisconsin (the “Menominee Tribe”) and to be located in Kenosha, Wisconsin (the “Menominee Project”).
MTGA Gaming holds a 100% membership interest in Mohegan Gaming & Hospitality, LLC (“MG&H”), an unrestricted subsidiary of the Authority. MG&H holds a 100% membership interest in Mohegan Resorts, LLC (“Mohegan Resorts”). Mohegan Resorts holds a 100% membership interest in Mohegan Resorts Mass, LLC, which was formed to pursue potential gaming opportunities in the Commonwealth of Massachusetts. Mohegan Resorts also holds 100% membership interests in Mohegan Resorts New York, LLC and Mohegan Gaming New York, LLC (collectively, the “Mohegan New York Entities”). The Mohegan New York Entities were formed to pursue potential gaming opportunities in the State of New York.
Downs Lodging, an unrestricted subsidiary of the Authority, was formed to develop, finance and build Project Sunlight, a hotel and convention center located at Mohegan Sun at Pocono Downs.
Mohegan Gaming Advisors, an unrestricted subsidiary of the Authority, was formed to pursue gaming opportunities outside the State of Connecticut, including management contracts and consulting agreements for casino and entertainment properties in the United States. Mohegan Gaming Advisors holds 100% membership interests in MGA Holding NJ, LLC and MGA Gaming NJ, LLC (collectively, the "Mohegan New Jersey Entities"). The Mohegan New Jersey Entities were formed to pursue

7

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

management contracts and consulting agreements in the State of New Jersey. In October 2012, MGA Holding NJ, LLC acquired a 10% ownership interest in Resorts Casino Hotel in Atlantic City, New Jersey.
Mohegan Gaming Advisors also holds 100% membership interests in MGA Holding MA, LLC (“MGA Holding MA”) and MGA Gaming MA, LLC (“MGA Gaming MA”). MGA Holding MA holds a 100% membership interest in MGA Palmer Partners, LLC (“MGA Palmer Partners”). MGA Palmer Partners holds a 100% membership interest in Mohegan Sun Massachusetts, LLC (together with MGA Holding MA, MGA Gaming MA and MGA Palmer Partners, the “Mohegan MA Entities”). The Mohegan MA Entities were formed to pursue potential gaming opportunities in the Commonwealth of Massachusetts.
In addition, Mohegan Gaming Advisors holds 100% membership interests in MGA Holding PA, LLC and MGA Gaming PA, LLC (collectively, the “Mohegan PA Entities”). The Mohegan PA Entities were formed to pursue potential gaming opportunities in the Commonwealth of Pennsylvania.
Additionally, Mohegan Gaming Advisors holds a 100% membership interest in MGA Holding FL, LLC (“MGA Holding FL”). MGA Holding FL holds a 100% membership interest in MGA Miami, LLC (together with MGA Holding FL, the “Mohegan FL Entities”). The Mohegan FL Entities were formed to pursue potential gaming opportunities in the State of Florida.

NOTE 2—BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In management's opinion, all adjustments, including normal recurring accruals and adjustments, necessary for a fair statement of the Authority's operating results for the interim period, have been included.
The gaming market in the Northeastern United States is seasonal in nature, with peak gaming activities often occurring at Mohegan Sun and Mohegan Sun at Pocono Downs during the months of May through August. Accordingly, the Authority's operating results for the three months and nine months ended June 30, 2014 are not necessarily indicative of operating results for other interim periods or an entire fiscal year.
The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Authority's Annual Report on Form 10-K for the fiscal year ended September 30, 2013.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Authority and its majority and wholly-owned subsidiaries and entities. In accordance with authoritative guidance issued by the Financial Accounting Standards Board (the “FASB”) pertaining to consolidation of variable interest entities, the accounts of Salishan-Mohegan are consolidated into the accounts of Mohegan Ventures-NW, as Mohegan Ventures-NW is deemed to be the primary beneficiary. In consolidation, all intercompany balances and transactions were eliminated.
Revision
The Authority recorded an adjustment to correct an error in the classification of its 2004 7 1/8% Senior Subordinated Notes due August 2014 as of September 30, 2013, which was incorrectly included within long-term debt, net of current portion, in the Authority's previously reported September 30, 2013 balance sheet. The Authority correctly disclosed the current portion of long-term debt within the debt maturities schedule accompanying Note 6 to its previously reported September 30, 2013 balance sheet, however, inadvertently included these notes within long-term debt, net of current portion, in the previously reported September 30, 2013 balance sheet. The effect of this revision on the September 30, 2013 balance sheet was a decrease in long-term debt, net of current portion, and an increase in current portion of long-term debt of $21.2 million. The supplemental condensed consolidating balance sheet within Note 8 also has been revised to reflect this adjustment. The Authority concluded that this error was not material to the previously issued financial statements.
In addition, certain amounts in the accompanying 2013 condensed consolidated financial statements have been reclassified to conform to 2014 presentation.

8

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Long-Term Receivables
Long-term receivables consist primarily of receivables from affiliates and tenants and others. The following table presents a reconciliation of long-term receivables, including current portions, and the related reserves for doubtful collection of these long-term receivables (in thousands):
 
Long-Term Receivables
 
Affiliates
 
Tenants and Others
 
Total
Balance, March 31, 2014 (1)
$
62,002

 
$
2,669

 
$
64,671

Additions:
 
 
 
 
 
   Issuance of affiliate advances and tenant and other loans, including interest receivable
2,088

 
103

 
2,191

Deductions:
 
 
 
 
 
   Payments received

 
(105
)
 
(105
)
Balance, June 30, 2014 (1)
$
64,090

 
$
2,667

 
$
66,757

 
 
 
 
 
 
Balance, September 30, 2013 (1)
$
57,782

 
$
3,530

 
$
61,312

Additions:
 
 
 
 
 
   Issuance of affiliate advances and tenant and other loans, including interest receivable
6,308

 
103

 
6,411

Deductions:
 
 
 
 
 
   Payments received

 
(966
)
 
(966
)
Balance, June 30, 2014 (1)
$
64,090

 
$
2,667

 
$
66,757

__________
(1)
Includes interest receivable of $33.6 million, $32.0 million and $29.1 million as of June 30, 2014, March 31, 2014 and September 30, 2013, respectively. The WTG receivables no longer accrue interest pursuant to a release and reimbursement agreement entered into in September 2010.
 
Reserves for Doubtful Collection of Long-Term Receivables
 
Affiliates        
 
Tenants and Others        
 
Total             
Balance, March 31, 2014
$
25,455

 
$
57

 
$
25,512

Additions:
 
 
 
 
 
   Charges to bad debt expense
627

 

 
627

Deductions:
 
 
 
 
 
   Adjustments

 
(3
)
 
(3
)
Balance, June 30, 2014
$
26,082

 
$
54

 
$
26,136

 
 
 
 
 
 
Balance, September 30, 2013
$
24,189

 
$
61

 
$
24,250

Additions:
 
 
 
 
 
   Charges to bad debt expense
1,893

 

 
1,893

Deductions:
 
 
 
 
 
   Adjustments

 
(7
)
 
(7
)
Balance, June 30, 2014
$
26,082

 
$
54

 
$
26,136

Fair Value of Financial Instruments
The fair value amounts presented below are reported to satisfy disclosure requirements pursuant to authoritative guidance issued by the FASB pertaining to disclosures about fair values of financial instruments and are not necessarily indicative of amounts that the Authority could realize in a current market transaction.
The Authority applies the following fair value hierarchy, which prioritizes the inputs utilized to measure fair value into three levels:
Level 1 - Quoted prices for identical assets or liabilities in active markets;
Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets or valuations based on models where the significant inputs are observable or can be corroborated by observable market data; and
Level 3 - Valuations based on models where the significant inputs are unobservable. The unobservable inputs reflect the Authority's estimates or assumptions that market participants would utilize in pricing such assets or liabilities.
The Authority's assessment of the significance of a particular input requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy.

9

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

The carrying amount of cash and cash equivalents, receivables, trade payables and promissory notes and certain credit facilities approximates fair value. The estimated fair value of the Authority's financing facilities and notes were as follows (in thousands):
 
June 30, 2014
 
Carrying Value         
 
Fair Value         
Senior Secured Credit Facility - Revolving
$
20,000

 
$
19,700

Senior Secured Credit Facility - Term Loan A
$
121,313

 
$
121,723

Senior Secured Credit Facility - Term Loan B
$
717,509

 
$
738,153

2013 9 3/4% Senior Unsecured Notes
$
500,000

 
$
560,000

2004 7 1/8% Senior Subordinated Notes
$
21,156

 
$
21,103

2005 6 7/8% Senior Subordinated Notes
$
9,654

 
$
9,485

2012 11% Senior Subordinated Notes
$
271,511

 
$
277,254

The estimated fair values of the Authority's financing facilities and notes were based on Level 2 inputs (quoted market prices or prices of similar instruments) on or about June 30, 2014.
Severance Costs and Expenses
In September 2012, the Authority implemented a workforce reduction of approximately 330 positions in Uncasville, Connecticut, in an effort to further streamline its organization and better align operating costs with current market and business conditions. The costs associated with related post-employment severance benefits were expensed at the time the termination was communicated to the employees. Cash payments commenced in October 2012 and are anticipated to be completed in September 2014. The Authority does not anticipate incurring any additional severance charges in connection with this workforce reduction, other than charges that may arise from adjustments to the initial estimates utilized under the plan. The following table presents a reconciliation of the related severance liability (in thousands):
 
Mohegan Sun
Balance, March 31, 2014
$
692

Cash payments
(338
)
Balance, June 30, 2014
$
354

 
 
Balance, September 30, 2013
$
1,417

Cash payments
(1,063
)
Balance, June 30, 2014
$
354

New Accounting Standard
In May 2014, the FASB issued an accounting standard update on revenue recognition that will be applied to all contracts with customers. The update requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This guidance will be required to be applied on a retrospective basis, using one of two methodologies, and will be effective for annual reporting periods beginning after December 15, 2016, with early application not being permitted. The Authority is currently evaluating the impact that this guidance will have on its financial position and results of operations.













10

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

NOTE 3—LONG-TERM DEBT:
Long-term debt consisted of the following (in thousands, including current maturities):
 
June 30,
2014
 
September 30,
2013
Prior Bank Credit Facility
$

 
$
393,000

Prior Term Loan Facility, net of discount of $3,005

 
221,995

Senior Secured Credit Facility - Revolving, due June 2018
20,000

 

Senior Secured Credit Facility - Term Loan A, due June 2018, net of discount of $562
121,313

 

Senior Secured Credit Facility - Term Loan B, due June 2018, net of discount of $8,841
717,509

 

2009 11 1/2% Second Lien Senior Secured Notes, net of discount of $5

 
195

2012 11 1/2% Second Lien Senior Secured Notes, net of discount of $8,898

 
190,902

2013 9 3/4% Senior Unsecured Notes, due September 2021
500,000

 
500,000

2004 7 1/8% Senior Subordinated Notes, due August 2014
21,156

 
21,156

2005 6 7/8% Senior Subordinated Notes, due February 2015
9,654

 
9,654

2012 11 % Senior Subordinated Notes, due September 2018, net of discount of $3,679 and $4,168, respectively
271,511

 
271,022

2009 Mohegan Tribe Promissory Note, due September 2015
1,750

 
3,500

2012 Mohegan Tribe Minor's Trust Promissory Note, due March 2017
17,000

 
18,000

2013 Mohegan Tribe Promissory Note, due December 2018
7,420

 
7,420

Downs Lodging Credit Facility, due July 2016
45,000

 
45,000

Other
2,990

 
468

Long-term debt, excluding capital leases
1,735,303

 
1,682,312

Less: current portion of long-term debt
(48,029
)
 
(30,719
)
Long-term debt, net of current portion
$
1,687,274

 
$
1,651,593


Maturities of long-term debt are as follows (in thousands, including current maturities):
Less than 1 year
$
48,029

1-3 years
101,020

3-5 years
1,098,293

More than 5 years
501,043

Total
$
1,748,385


In November 2013, the Authority completed a series of refinancing transactions relating to its Prior Bank Credit Facilities and 2009 and 2012 Second Lien Senior Secured Notes, including the repayment and termination of the Prior Bank Credit Facilities and the repurchase or redemption of the 2009 and 2012 Second Lien Senior Secured Notes with proceeds from new Senior Secured Credit Facilities (all further discussed below).
The Authority incurred approximately $61.1 million in costs in connection with these refinancing transactions, consisting primarily of consulting, legal and tender and consent fees. Previously deferred debt issuance costs and debt discounts totaling $22.4 million, as well as $39.9 million in new transaction costs were expensed and recorded as a loss on early extinguishment of debt in the accompanying condensed consolidated statement of loss for the nine months ended June 30, 2014. New debt issuance costs totaling $11.5 million were capitalized and included in other assets, net, in the accompanying condensed consolidated balance sheet as of June 30, 2014 and will be amortized over the term of the related debt. The remaining $9.7 million in new costs was reflected as debt discount and included in long-term debt, net of current portion, in the accompanying consolidated balance sheet as of June 30, 2014 and will be amortized over the term of the related debt.
Prior Bank Credit Facilities
First Lien, First Out Credit Facility
In March 2012, the Authority entered into a Fourth Amended and Restated Bank Credit Facility providing for a $400.0 million term loan and a revolving loan with letter of credit and borrowing capacity of up to $75.0 million from a syndicate of financial institutions and commercial banks, with Bank of America, N.A. serving as Administrative Agent (the "Prior Bank Credit Facility"). In November 2013, the Authority repaid and terminated the Prior Bank Credit Facility with proceeds from new Senior

11

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Secured Credit Facilities (further discussed below). As of September 30, 2013, accrued interest, including commitment fees, on the Prior Bank Credit Facility was $61,000.
First Lien, Second Out Term Loan Facility
In March 2012, the Authority entered into a loan agreement providing for a $225.0 million first lien, second out term loan with Wells Fargo Gaming Capital, LLC serving as Administrative Agent (the "Prior Term Loan Facility" and, together with the Prior Bank Credit Facility, the "Prior Bank Credit Facilities"). In November 2013, the Authority repaid and terminated the Prior Term Loan Facility with proceeds from new Senior Secured Credit Facilities (further discussed below). As of September 30, 2013, accrued interest on the Prior Term Loan Facility was $1.1 million.
Senior Secured Credit Facilities
In November 2013, the Authority entered into a loan agreement among the Authority, the Tribe, the Guarantors as defined below, RBS Citizens, N.A. as Administrative and Collateral Agent and the other lenders and financial institutions party thereto, providing for $955.0 million in aggregate principal amount of senior secured credit facilities (the “Senior Secured Credit Facilities”), comprised of a $100.0 million senior secured revolving credit facility (the “Revolving Facility”), a $125.0 million senior secured term loan A facility (the “Term Loan A Facility”) and a $730.0 million senior secured term loan B facility (the “Term Loan B Facility"). The Senior Secured Credit Facilities mature on June 15, 2018, subject to extension based on the satisfaction of certain conditions to November 19, 2018 (in the case of the Revolving Facility and the Term Loan A Facility) and November 19, 2019 (in the case of the Term Loan B Facility).
The Term Loan A Facility amortizes in equal quarterly installments in an aggregate annual amount equal to 5.0% of the original principal amount for the first year after the closing date, 7.5% of the original principal amount for the second year after the closing date and 10.0% of the original principal amount in each year thereafter, with the balance payable on the maturity date of the Term Loan A Facility. The Term Loan B Facility amortizes in equal quarterly installments in an aggregate annual amount equal to 1.0% of the original principal amount. Amortization of the Term Loan A Facility and Term Loan B Facility begins with the first full fiscal quarter after the closing date. The proceeds from the Term Loan A Facility and Term Loan B Facility, together with a drawing under the Revolving Facility, were used to satisfy in full all amounts due under the Authority's Prior Bank Credit Facilities, to repurchase or redeem all of the Authority's outstanding 2009 and 2012 Second Lien Senior Secured Notes and to otherwise satisfy and discharge the obligations in respect of such notes and to pay related fees and expenses. The Revolving Facility will otherwise be available for general corporate purposes.
As of June 30, 2014, amounts outstanding under the Revolving Facility, Term Loan A Facility and Term Loan B Facility totaled $20.0 million, $121.9 million and $726.4 million, respectively. As of June 30, 2014, letters of credit issued under the Revolving Facility totaled $2.9 million, of which no amount was drawn. Inclusive of letters of credit, which reduce borrowing availability under the Revolving Facility, and after taking into account restrictive financial covenant requirements, the Authority had approximately $76.2 million of borrowing capacity under its Revolving Facility and Line of Credit as of June 30, 2014.
Borrowings under the Senior Secured Credit Facilities incur interest as follows: (i) for base rate loans under the Revolving Facility and Term Loan A Facility, a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 basis points and (c) the one-month LIBOR rate plus 100 basis points (the highest of (a), (b) and (c), the “base rate”), plus a leverage-based margin of 250 to 350 basis points; (ii) for Eurodollar rate loans under the Revolving Facility and Term Loan A Facility, the applicable LIBOR rate plus a leverage-based margin of 350 to 450 basis points; (iii) for base rate loans under the Term Loan B Facility, the base rate (subject to a 2.0% floor) plus 350 basis points; and (iv) for Eurodollar rate loans under the Term Loan B Facility, the applicable LIBOR rate (subject to a 1.0% floor) plus 450 basis points. The Authority also is required to pay a leverage-based commitment fee of between 37.5 and 50 basis points for unused commitments under the Revolving Facility. Interest on base rate loans is payable quarterly in arrears. Interest on Eurodollar rate loans of three months or less is payable at the end of each applicable interest period and for Eurodollar rate loans of more than three months, interest is payable at intervals of three months duration after the beginning of such interest period.
As of June 30, 2014, the $20.0 million outstanding under the Revolving Facility was comprised of a $20.0 million Eurodollar rate loan based on a Eurodollar rate of 0.16% plus 450 basis points. The commitment fee was 0.50% as of June 30, 2014. As of June 30, 2014, the $121.9 million outstanding under the Term Loan A Facility was based on a Eurodollar rate of 0.23% plus 450 basis points. As of June 30, 2014, the $726.4 million outstanding under the Term Loan B Facility was based on the Eurodollar rate floor of 1.0% plus 450 basis points. As of June 30, 2014, accrued interest, including commitment fees, on the Senior Secured Credit Facilities was $1.7 million.
The Authority's obligations under the Senior Secured Credit Facilities are fully and unconditionally guaranteed, jointly and severally, by the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming

12

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

(collectively, the “Guarantors”). The Senior Secured Credit Facilities are collateralized by a first priority lien on substantially all of the Authority's property and assets and those of the Guarantors (other than MBC), including the assets that comprise Mohegan Sun at Pocono Downs and a leasehold mortgage on the land and improvements that comprise Mohegan Sun (the Authority and the Guarantors, other than MBC, are collectively referred to herein as the “Grantors”). The Grantors also are required to pledge additional assets as collateral for the Senior Secured Credit Facilities as they and future guarantor subsidiaries acquire them.
The Senior Secured Credit Facilities contain customary covenants applicable to the Authority and its restricted subsidiaries, including covenants governing: incurrence of indebtedness, incurrence of liens, payment of dividends and other distributions, investments, asset sales, affiliate transactions, mergers or consolidations and capital expenditures. Additionally, the Senior Secured Credit Facilities include financial maintenance covenants pertaining to total leverage, secured leverage and minimum fixed charge coverage.
As of June 30, 2014, the Authority and the Tribe were in compliance with all respective covenant requirements under the Senior Secured Credit Facilities.
The Authority continues to monitor revenues and expenditures to ensure continued compliance with its financial covenant requirements under the Senior Secured Credit Facilities. While the Authority anticipates that it will remain in compliance with all covenant requirements under its Senior Secured Credit Facilities for all periods prior to maturity, it may need to increase revenues or offset any future declines in revenues by implementing additional cost saving and other initiatives to ensure compliance with these financial covenant requirements. If the Authority is unable to satisfy its financial covenant requirements, it would need to obtain waivers or consents under the Senior Secured Credit Facilities; however, the Authority can provide no assurance that it would be able to obtain such waivers or consents. If the Authority is unable to obtain such waivers or consents, it would be in default under its Senior Secured Credit Facilities, which may result in cross-defaults under its other outstanding indebtedness and allow its lenders and creditors to exercise their rights and remedies as defined under their respective agreements, including their right to accelerate the repayment of the Authority's outstanding indebtedness. If such acceleration were to occur, the Authority can provide no assurance that it would be able to obtain the financing necessary to repay such accelerated indebtedness.
Senior Secured Notes
2009 11  1/2% Second Lien Senior Secured Notes
In October 2009, the Authority issued $200.0 million Second Lien Senior Secured Notes with fixed interest payable at a rate of 11.5% per annum (the “2009 Second Lien Notes”). In March 2012, the Authority completed a private exchange offer and consent solicitation pursuant to which an aggregate principal amount of $199.8 million 2009 Second Lien Notes were tendered and exchanged, leaving an aggregate principal amount of $200,000 2009 Second Lien Notes outstanding. The 2009 Second Lien Notes were scheduled to mature on November 1, 2017. The first call date for the 2009 Second Lien Notes was November 1, 2013. In November 2013, the Authority called for redemption all $200,000 of its outstanding 2009 Second Lien Notes. The 2009 Second Lien Notes were redeemed on December 19, 2013. As of September 30, 2013, accrued interest on the 2009 Second Lien Notes was $10,000.
2012 11 ½% Second Lien Senior Secured Notes
In March 2012, the Authority issued $199.8 million Second Lien Senior Secured Notes with fixed interest payable at a rate of 11.5% per annum (the “2012 Second Lien Notes”) in exchange for an equal amount of 2009 Second Lien Notes. The 2012 Second Lien Notes were scheduled to mature on November 1, 2017. Subsequent to November 1, 2014, the Authority was entitled to redeem the 2012 Second Lien Notes, in whole or in part, at a premium decreasing ratably to zero, plus accrued interest. In November 2013, the Authority completed a tender offer and consent solicitation for its outstanding 2012 Second Lien Notes. As part of the tender offer, the Authority solicited and received requisite consents from tendering holders to certain amendments to the indentures governing the 2012 Second Lien Notes, which eliminated certain restrictive covenants under the notes and related indenture. Pursuant to this transaction, the Authority repurchased or redeemed all of its outstanding 2012 Second Lien Notes in the aggregate principal amount of $199.8 million. As of September 30, 2013, accrued interest on the 2012 Second Lien Notes was $9.6 million.
Senior Unsecured Notes
2013 9 3/4% Senior Unsecured Notes
In August 2013, the Authority issued $500.0 million Senior Unsecured Notes with fixed interest payable at a rate of 9.75% per annum (the “2013 Senior Unsecured Notes”). The net proceeds from this transaction, together with borrowings under the Prior Bank Credit Facility, were used to repurchase or redeem all of the Authority's then outstanding 2012 10.5% Third Lien Senior Secured Notes, to repurchase $69.0 million of the Authority's outstanding 2012 11.0% Senior Subordinated Notes and to pay

13

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

related fees and expenses. The 2013 Senior Unsecured Notes mature on September 1, 2021. The Authority may redeem the 2013 Senior Unsecured Notes, in whole or in part, at any time prior to September 1, 2016 at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest to the date of redemption. On or after September 1, 2016, the Authority may redeem the 2013 Senior Unsecured Notes, in whole or in part, at specified redemption prices, together with accrued interest to the date of redemption. If the Authority experiences specific kinds of change of control triggering events, the Authority must offer to repurchase the 2013 Senior Unsecured Notes at a price equal to 101% of the principal amount thereof, plus accrued interest to the purchase date. In addition, if the Authority undertakes certain types of asset sales and does not use the related sale proceeds for specified purposes, the Authority may be required to offer to repurchase the 2013 Senior Unsecured Notes at a price equal to 100% of the principal amount, plus accrued interest. Interest on the 2013 Senior Unsecured Notes is payable semi-annually on March 1st and September 1st, commencing March 1, 2014. On March 11, 2014, the Authority completed an offer to exchange the 2013 Senior Unsecured Notes for a new issue of substantially identical debt securities registered under the Securities Act of 1933, with all outstanding notes being exchanged. As of June 30, 2014 and September 30, 2013, accrued interest on the 2013 Senior Unsecured Notes was $16.3 million and $6.2 million, respectively.
The 2013 Senior Unsecured Notes are uncollateralized general obligations of the Authority and are effectively subordinated to all of the Authority’s and the Guarantors' and future guarantor subsidiaries' senior secured indebtedness, including the Senior Secured Credit Facilities, to the extent of the value of the collateral securing such indebtedness. The 2013 Senior Unsecured Notes also are effectively subordinated to any indebtedness and other liabilities (including trade payables) of the Authority’s subsidiaries that do not guarantee the 2013 Senior Unsecured Notes. The 2013 Senior Unsecured Notes rank equally in right of payment with the Authority’s other unsecured, unsubordinated indebtedness, including trade payables and the senior portion of the Authority’s payment obligations under its Relinquishment Agreement. The 2013 Senior Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.
The 2013 Senior Unsecured Notes indenture contains certain covenants that, subject to certain significant exceptions, limit, among other things, the Authority’s and Guarantors’ ability to incur additional debt, pay dividends or distributions, make certain investments, create liens on assets, enter into transactions with affiliates, merge or consolidate with another company or transfer and sell assets. The 2013 Senior Unsecured Notes indenture includes customary events of default, including, but not limited to, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay certain other indebtedness, the occurrence of which is caused by a failure to pay principal, premium or interest or results in the acceleration of such indebtedness, certain events of bankruptcy and insolvency and certain judgment defaults.
Senior Subordinated Notes
2004 7 1/8% Senior Subordinated Notes
In August 2004, the Authority issued $225.0 million Senior Subordinated Notes with fixed interest payable at a rate of 7.125% per annum (the “2004 Senior Subordinated Notes”). The 2004 Senior Subordinated Notes mature on August 15, 2014. The 2004 Senior Subordinated Notes are callable at the Authority's option at par. Interest on the 2004 Senior Subordinated Notes is payable semi-annually on February 15th and August 15th.
In March 2012, the Authority completed a private exchange offer and consent solicitation for any or all of its outstanding 2004 Senior Subordinated Notes. As part of the exchange offer, the Authority solicited and received consents from tendering holders to certain amendments to the indentures governing the 2004 Senior Subordinated Notes, which eliminated certain restrictive covenants under the notes and related indenture. The aggregate principal amount of 2004 Senior Subordinated Notes tendered and exchanged was $203.8 million. An aggregate principal amount of $21.2 million 2004 Senior Subordinated Notes remains outstanding as of June 30, 2014. The Authority plans to repay the outstanding 2004 Senior Subordinated Notes, including accrued interest, at maturity with cash on hand and drawings under the Revolving Facility. As of June 30, 2014 and September 30, 2013, accrued interest on the 2004 Senior Subordinated Notes was $565,000 and $188,000, respectively.
2005 6 7/8% Senior Subordinated Notes
In February 2005, the Authority issued $150.0 million Senior Subordinated Notes with fixed interest payable at a rate of 6.875% per annum (the “2005 Senior Subordinated Notes”). The 2005 Senior Subordinated Notes mature on February 15, 2015. The 2005 Senior Subordinated Notes are callable at the Authority's option at par. Interest on the 2005 Senior Subordinated Notes is payable semi-annually on February 15th and August 15th.
In March 2012, the Authority completed a private exchange offer and consent solicitation for any or all of its outstanding 2005 Senior Subordinated Notes. As part of the exchange offer, the Authority solicited and received consents from tendering holders to certain amendments to the indentures governing the 2005 Senior Subordinated Notes, which eliminated certain covenants under the notes and related indenture. The aggregate principal amount of 2005 Senior Subordinated Notes tendered and exchanged

14

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

was $140.3 million. An aggregate principal amount of $9.7 million 2005 Senior Subordinated Notes remains outstanding as of June 30, 2014. As of June 30, 2014 and September 30, 2013, accrued interest on the 2005 Senior Subordinated Notes was $249,000 and $83,000, respectively.
2012 11% Senior Subordinated Notes
In March 2012, the Authority issued $344.2 million Senior Subordinated Toggle Notes with fixed interest payable at a rate of 11% per annum (the “2012 Senior Subordinated Notes”) in exchange for $203.8 million of 2004 Senior Subordinated Notes and $140.3 million of 2005 Senior Subordinated Notes. The 2012 Senior Subordinated Notes mature on September 15, 2018. The Authority may redeem the 2012 Senior Subordinated Notes, in whole or in part, at any time, at a price equal to 100% of the principal amount plus accrued interest. If a change of control of the Authority occurs, the Authority must offer to repurchase the 2012 Senior Subordinated Notes at a price equal to 101% of the principal amount, plus accrued interest. In addition, if the Authority undertakes certain types of asset sales or suffers events of loss, and the Authority does not use the related sale or insurance proceeds for specified purposes, the Authority may be required to offer to repurchase the 2012 Senior Subordinated Notes at a price equal to 100% of the principal amount, plus accrued interest. Interest on the 2012 Senior Subordinated Notes is payable semi-annually on March 15th and September 15th. The initial interest payment on the 2012 Senior Subordinated Notes was payable entirely in cash. For any subsequent interest payment period through March 15, 2018, the Authority may, at its option, elect to pay interest on the 2012 Senior Subordinated Notes either entirely in cash or by paying up to 2% in 2012 Senior Subordinated Notes (“PIK Interest”). If the Authority elects to pay PIK Interest, such election will increase the principal amount of the 2012 Senior Subordinated Notes in an amount equal to the amount of PIK Interest for the applicable interest payment period to holders of 2012 Senior Subordinated Notes on the relevant record date.
In August 2013, the Authority repurchased an aggregate principal amount of $69.0 million 2012 Senior Subordinated Notes. An aggregate principal amount of $275.2 million 2012 Senior Subordinated Notes remains outstanding as of June 30, 2014. As of June 30, 2014 and September 30, 2013, accrued interest on the 2012 Senior Subordinated Notes was $8.9 million and $1.3 million, respectively.
The 2012 Senior Subordinated Notes and guarantees have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.
The Authority's senior subordinated notes are uncollateralized general obligations of the Authority and are subordinated to borrowings under the Senior Secured Credit Facilities and 2013 Senior Unsecured Notes. The senior subordinated notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.
The senior and senior subordinated note indentures contain certain non-financial and financial covenant requirements with which the Authority and the Tribe must comply. The non-financial covenant requirements include, among other things, reporting obligations, compliance with laws and regulations, maintenance of licenses and insurances and continued existence of the Authority. The financial covenant requirements include, among other things, subject to certain exceptions, limitations on the Authority's and the Guarantors' ability to incur additional indebtedness, pay dividends or distributions, make certain investments, create liens on assets, enter into transactions with affiliates, merge or consolidate with another company, transfer or sell assets or impair assets constituting collateral.
As of June 30, 2014, the Authority and the Tribe were in compliance with all respective covenant requirements under the senior and senior subordinated note indentures.
The Authority or its affiliates may, from time to time, seek to purchase or otherwise retire outstanding indebtedness for cash in open market purchases, privately negotiated transactions or otherwise. Any such transaction will depend on prevailing market conditions and the Authority's liquidity and covenant requirement restrictions, among other factors.
Line of Credit
In November 2013, in connection with the new Senior Secured Credit Facilities, the Authority entered into a new $16.5 million revolving credit facility with Bank of America, N.A. (the “Line of Credit”). The Line of Credit is coterminous with the Senior Secured Credit Facilities. Pursuant to provisions of the Senior Secured Credit Facilities, under certain circumstances, the Line of Credit may be converted into loans under the Senior Secured Credit Facilities. Under the Line of Credit, each advance accrues interest on the basis of a one-month LIBOR Rate plus an applicable margin based on the Authority's total leverage ratio, as each term is defined under the Line of Credit. As of June 30, 2014, no amount was drawn on the Line of Credit. Borrowings under the Line of Credit are uncollateralized obligations. The Line of Credit contains negative covenants and financial maintenance covenants that are substantially the same as those contained in the Senior Secured Credit Facilities. As of June 30, 2014, the

15

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Authority was in compliance with all covenant requirements under the Line of Credit. As of June 30, 2014, accrued interest on the Line of Credit was $13,000. As of September 30, 2013, there was no accrued interest on the Line of Credit.
2009 Mohegan Tribe Promissory Note
In September 2009, the Tribe made a $10.0 million loan to Salishan-Mohegan (the “2009 Mohegan Tribe Promissory Note”). The 2009 Mohegan Tribe Promissory Note was amended in June 2014 to extend the maturity date to September 30, 2015. The 2009 Mohegan Tribe Promissory Note accrues interest at an annual rate of 10.0%. As amended, accrued interest is payable as follows: (i) $1.2 million per quarter, commencing December 31, 2013 through March 31, 2014 and (ii) $1.3 million on June 30, 2015, with the balance of accrued and unpaid interest due at maturity. As amended, principal outstanding under the 2009 Mohegan Tribe Promissory Note amortizes as follows: (i) $1.625 million per quarter, commencing December 31, 2012 through September 30, 2013, (ii) $875,000 per quarter, commencing December 31, 2013 through March 31, 2014, (iii) $875,000 on June 30, 2015 and (iv) $875,000 at maturity. As of June 30, 2014 and September 30, 2013, accrued interest on the Mohegan Tribe Promissory Note was $2.5 million and $4.7 million, respectively.
2012 Mohegan Tribe Minor's Trust Promissory Note
In March 2012, Comerica Bank & Trust, N.A., Trustee f/b/o The Mohegan Tribe of Indians of Connecticut Minor's Trust, made a $20.0 million loan to Salishan-Mohegan (the “2012 Mohegan Tribe Minor's Trust Promissory Note”). The 2012 Mohegan Tribe Minor's Trust Promissory Note was amended in June 2014 to extend the maturity date to March 31, 2017. The 2012 Mohegan Tribe Minor's Trust Promissory Note accrues interest at an annual rate of 10.0%. As amended, accrued interest is payable as follows: (i) quarterly, commencing June 30, 2012 through March 31, 2014, (ii) on July 1, 2014 on the unpaid balance for the period April 1, 2014 through June 30, 2014, (iii) $800,000 per quarter, commencing September 30, 2015 through March 31, 2016 and (iv) quarterly, thereafter on the unpaid balance. As amended, principal outstanding under the 2012 Mohegan Tribe Minor's Trust Promissory Note amortizes as follows: (i) $500,000 per quarter, commencing December 31, 2012 through March 31, 2014, (ii) $500,000 on July 1, 2014 and September 30, 2015, (iii) $1.5 million per quarter, commencing December 31, 2015 through September 30, 2016 and (iv) $10.0 million at maturity. As of June 30, 2014 and September 30, 2013, accrued interest on the 2012 Mohegan Tribe Minor's Trust Promissory Note was $428,000 and $5,000, respectively.
2013 Mohegan Tribe Promissory Note
In March 2013, MG&H purchased and acquired all of the Tribe's membership interest in MG&H in exchange for a promissory note in the principal amount of $7.4 million (the “2013 Mohegan Tribe Promissory Note”). The 2013 Mohegan Tribe Promissory Note matures on December 31, 2018. The 2013 Mohegan Tribe Promissory Note accrues interest at an annual rate of 4.0% payable quarterly. As of June 30, 2014 and September 30, 2013, accrued interest on the 2013 Mohegan Tribe Promissory Note was $1,000.
Downs Lodging Credit Facility
In July 2012, Downs Lodging, a single purpose entity and wholly-owned unrestricted subsidiary of the Authority, entered into a credit agreement providing for a $45.0 million term loan from a third-party lender (the “Downs Lodging Credit Facility”). The proceeds from the Downs Lodging Credit Facility were used by Downs Lodging to fund Project Sunlight, a hotel and convention center expansion project at Mohegan Sun at Pocono Downs. The Downs Lodging Credit Facility matures on July 12, 2016 and accrues interest at an annual rate of 13.0%. Under the terms of the Downs Lodging Credit Facility, accrued interest of 10.0% is payable monthly in cash during the term of the loan, with the remaining 3.0% due at maturity. In addition, a 3.0% exit fee is payable upon repayment of the loan principal. The Downs Lodging Credit Facility is a senior secured obligation of Downs Lodging, collateralized by all existing and future assets of Downs Lodging. The Downs Lodging Credit Facility subjects Downs Lodging to certain covenant requirements customarily found in loan agreements for similar transactions. As of June 30, 2014, Downs Lodging was in compliance with all covenant requirements under the Downs Lodging Credit Facility. As of June 30, 2014, accrued interest on the Downs Lodging Credit Facility was $375,000. As of September 30, 2013, there was no accrued interest on the Downs Lodging Credit Facility.


NOTE 4—RELATED PARTY TRANSACTIONS:
Distributions to the Tribe totaled $12.5 million and $15.0 million for the three months ended June 30, 2014 and 2013, respectively, and $32.5 million and $35.0 million for the nine months ended June 30, 2014 and 2013, respectively.

16

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

The Tribe provides certain governmental and administrative services in connection with the operation of Mohegan Sun. The Authority incurred expenses for such services totaling $6.2 million and $7.0 million for the three months ended June 30, 2014 and 2013, respectively, and $20.5 million and $21.0 million for the nine months ended June 30, 2014 and 2013, respectively.
The Authority purchases most of its utilities, including electricity, gas, water and waste water services, from an instrumentality of the Tribe, the Mohegan Tribal Utility Authority. The Authority incurred costs for such utilities totaling $4.4 million and $3.9 million for the three months ended June 30, 2014 and 2013, respectively, and $15.2 million and $12.9 million for the nine months ended June 30, 2014 and 2013, respectively.
The Authority incurred interest expense associated with borrowings from the Mohegan Tribe totaling $541,000 and $741,000 for the three months ended June 30, 2014 and 2013, respectively, and $1.7 million and $2.3 million for the nine months ended June 30, 2014 and 2013, respectively.
As of June 30, 2014 and September 30, 2013, outstanding payables to the Tribe totaled $790,000 and $808,000, respectively, and were included in "Current liabilities - Due to Mohegan Tribe" in the accompanying condensed consolidated balance sheets.

NOTE 5—COMMITMENTS AND CONTINGENCIES:
Slot Win and Free Promotional Slot Play Contributions
In May 1994, the Tribe and the State of Connecticut entered into a Memorandum of Understanding (“MOU”), which sets forth certain matters regarding implementation of the Mohegan Compact. The MOU stipulates that a portion of revenues from slot machines must be paid to the State of Connecticut (“Slot Win Contribution”). Slot Win Contribution payments are not required if the State of Connecticut legalizes any other gaming operation with slot machines, video facsimiles of games of chance or other commercial casino games within the State of Connecticut, except those consented to by the Tribe and the Mashantucket Pequot Tribe (the “MPT”). For each 12-month period commencing July 1, 1995, Slot Win Contribution payments shall be the lesser of: (1) 30% of gross revenues from slot machines, or (2) the greater of (a) 25% of gross revenues from slot machines or (b) $80.0 million.
In September 2009, the Authority entered into a settlement agreement with the State of Connecticut regarding contribution payments on the Authority's free promotional slot play program. Under the terms of the settlement agreement, effective July 1, 2009, the State of Connecticut agreed that no value shall be attributed to free promotional slot plays utilized by patrons at Mohegan Sun for purposes of calculating monthly contribution payments, provided that the aggregate amount of free promotional slot plays during any month does not exceed a certain threshold of gross revenues from slot machines for such month. In the event free promotional slot plays granted by the Authority exceed such threshold, contribution payments are required on such excess face amount of free promotional slot plays at the same rate as Slot Win Contribution payments, or 25%. The threshold before contribution payments on free promotional slot plays are required is currently 11% of gross revenues from slot machines.
The Authority reflected expenses associated with the combined Slot Win Contribution and free promotional slot play contribution totaling $36.6 million and $40.2 million for the three months ended June 30, 2014 and 2013, respectively, and $107.6 million and $115.1 million for the nine months ended June 30, 2014 and 2013, respectively. As of June 30, 2014 and September 30, 2013, the combined outstanding Slot Win Contribution and free promotional slot play contribution totaled $11.7 million and $12.7 million, respectively.
Pennsylvania Slot Machine Tax
Downs Racing holds a Category One slot machine license issued by the Pennsylvania Gaming Control Board (the “PGCB”) for the operation of slot machines at Mohegan Sun at Pocono Downs. This license permits Downs Racing to install and operate up to 3,000 slot machines at Mohegan Sun at Pocono Downs, expandable to up to a total of 5,000 slot machines upon request and approval of the PGCB.
The Pennsylvania Race Horse Development and Gaming Act stipulates that holders of Category One slot machine licenses must pay a portion of revenues from slot machines to the PGCB on a daily basis (“Pennsylvania Slot Machine Tax”), which includes local share assessments to be paid to the cities and municipalities hosting Mohegan Sun at Pocono Downs and amounts to be paid to the Pennsylvania Harness Horsemen's Association, Inc. (the “PHHA”). The Pennsylvania Slot Machine Tax is currently 55% of gross revenues from slot machines, 2% of which is subject to a $10.0 million minimum annual threshold to ensure that the host cities and municipalities receive an annual minimum of $10.0 million in local share assessments. Downs Racing maintains a $1.5 million escrow deposit in the name of the Commonwealth of Pennsylvania for Pennsylvania Slot Machine Tax payments, which was included in "Other assets, net," in the accompanying condensed consolidated balance sheets.
    

17

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

The Authority reflected expenses associated with the Pennsylvania Slot Machine Tax totaling $31.4 million and $31.8 million for the three months ended June 30, 2014 and 2013, respectively, and $91.8 million and $93.0 million for the nine months ended June 30, 2014 and 2013, respectively. As of June 30, 2014 and September 30, 2013, outstanding Pennsylvania Slot Machine Tax payments totaled $4.2 million and $5.5 million, respectively.
Pennsylvania Table Game Tax
In January 2010, the Commonwealth of Pennsylvania amended the Pennsylvania Race Horse Development and Gaming Act to allow slot machine operators in the Commonwealth of Pennsylvania to obtain a table game operation certificate and operate certain table games, including poker. Under the amended law, holders of table game operation certificates must pay a portion of revenues from table games to the PGCB on a weekly basis (“Pennsylvania Table Game Tax”). The Pennsylvania Table Game Tax is currently 12%, plus the 2% local share assessments.
The Authority reflected expenses associated with the Pennsylvania Table Game Tax totaling $1.6 million for each of the three months ended June 30, 2014 and 2013 and $4.6 million and $4.5 million for the nine months ended June 30, 2014 and 2013, respectively. As of June 30, 2014 and September 30, 2013, outstanding Pennsylvania Table Game Tax payments totaled $161,000 and $127,000, respectively.
Pennsylvania Regulatory Fee
Slot machine licensees in the Commonwealth of Pennsylvania are required to reimburse state gaming regulatory agencies for various administrative and operating expenses (“Pennsylvania Regulatory Fee”) at a rate of 1.5% of gross revenues from slot machines and table games. The Commonwealth of Pennsylvania temporarily suspended this assessment in May and June 2013.
The Authority reflected expenses associated with the Pennsylvania Regulatory Fee totaling $1.2 million and $431,000 for the three months ended June 30, 2014 and 2013, respectively, and $3.5 million and $2.9 million for the nine months ended June 30, 2014 and 2013, respectively. As of June 30, 2014 and September 30, 2013, outstanding Pennsylvania Regulatory Fee payments to the PGCB totaled $146,000 and $132,000, respectively.
Pennsylvania Gaming Control Board Loans
The PGCB was initially granted $36.1 million in loans to fund start-up costs for gaming in the Commonwealth of Pennsylvania, which are to be repaid by slot machine licensees (the "Initial Loans"). The PGCB was subsequently granted an additional $63.8 million in loans to fund ongoing gaming oversight costs, which also are to be repaid by slot machine licensees (the "Subsequent Loans"). Repayment of the Initial Loans will commence when all 14 authorized gaming facilities are opened in the Commonwealth of Pennsylvania. Currently, 12 of the 14 authorized gaming facilities have commenced operations. As of June 30, 2014, the Authority has concluded that a repayment contingency for the Initial Loans is probable but not reasonably estimable since the PGCB has not yet established a method of assessment of repayment for the Initial Loans and, as such, the Authority has not recorded a related accrual for such repayment. In June 2011, the PGCB adopted a method of assessment of repayment for the Subsequent Loans pursuant to which repayment commenced on January 1, 2012 and will continue over a 10-year period in accordance with a formula based on a combination of a single fiscal year and cumulative gross revenues from slot machines for each operating slot machine licensee.
The Authority reflected expenses associated with this repayment schedule totaling $159,000 and $160,000 for the three months ended June 30, 2014 and 2013, respectively, and $479,000 and $484,000 for the nine months ended June 30, 2014 and 2013, respectively.
Horsemen’s Agreement
Downs Racing and the PHHA are parties to an agreement that governs all live harness racing and simulcasting and account wagering at the Pennsylvania Facilities through December 31, 2014. As of June 30, 2014 and September 30, 2013, outstanding payments to the PHHA for purses earned by horsemen, but not yet paid, and other fees totaled $7.0 million and $7.8 million, respectively.
Priority Distribution Agreement
In August 2001, the Authority and the Tribe entered into an agreement (the “Priority Distribution Agreement”), which stipulates that the Authority must make monthly payments to the Tribe to the extent of the Authority's Net Cash Flow, as defined under the Priority Distribution Agreement. The Priority Distribution Agreement, which has a perpetual term, limits the maximum aggregate priority distribution payments in each calendar year to $14.0 million, as adjusted annually in accordance with a formula

18

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

specified in the Priority Distribution Agreement to reflect the effects of inflation. Payments under the Priority Distribution Agreement: (1) do not reduce the Authority's obligations to reimburse the Tribe for governmental and administrative services provided by the Tribe or to make payments under any other agreements with the Tribe; (2) are limited obligations of the Authority and are payable only to the extent of the Authority's Net Cash Flow, as defined under the Priority Distribution Agreement; and (3) are not secured by a lien or encumbrance on any of the Authority's assets or properties.

The Authority reflected payments associated with the Priority Distribution Agreement totaling $4.9 million and $4.8 million for the three months ended June 30, 2014 and 2013, respectively, and $14.6 million and $14.4 million for the nine months ended June 30, 2014 and 2013, respectively.
Litigation
The Authority is a defendant in various litigation matters resulting from its normal course of business. In management's opinion, the aggregate liability, if any, arising from such litigations will not have a material impact on the Authority's financial position, results of operations or cash flows.


NOTE 6—RELINQUISHMENT AGREEMENT:
In February 1998, the Authority and Trading Cove Associates (“TCA”) entered into a relinquishment agreement (the “Relinquishment Agreement”). Effective January 1, 2000 (the “Relinquishment Date”), the Relinquishment Agreement superseded a then-existing management agreement with TCA. The Relinquishment Agreement provides, among other things, that the Authority make certain payments to TCA out of, and determined as a percentage of, Revenues, as defined under the Relinquishment Agreement, generated by Mohegan Sun over a 15-year period commencing on the Relinquishment Date. The payments (“Senior Relinquishment Payments” and “Junior Relinquishment Payments”) have separate schedules and priorities. Senior Relinquishment Payments commenced on April 25, 2000, 25 days following the end of the first three-month period after the Relinquishment Date, and continue at the end of each three-month period thereafter until January 25, 2015. Junior Relinquishment Payments commenced on July 25, 2000, 25 days following the end of the first six-month period after the Relinquishment Date, and continue at the end of each six-month period thereafter until January 25, 2015. Each Senior and Junior Relinquishment Payment is 2.5% of Revenues generated by Mohegan Sun over the immediate preceding three-month or six-month payment period, as the case may be. Revenues are defined under the Relinquishment Agreement as gross gaming revenues, other than Class II Gaming revenues, and all other revenues, as defined, including, without limitation, hotel revenues, room service revenues, food and beverage revenues, ticket revenues, fees or receipts from the convention/events center and all rental revenues or other receipts from lessees and concessionaires, but not the gross receipts of such lessees, licenses and concessionaires, derived directly or indirectly from the facilities, as defined. Revenues under the Relinquishment Agreement exclude revenues generated from certain expansion areas of Mohegan Sun, such as Casino of the Wind, as such areas do not constitute facilities as defined under the Relinquishment Agreement.
In the event of any bankruptcy, liquidation, reorganization or similar proceeding relating to the Authority, the Relinquishment Agreement provides that Senior and Junior Relinquishment Payments then due and owing are subordinated in right of payment to the Authority's senior secured indebtedness and capital lease obligations, and that Junior Relinquishment Payments then due and owing are further subordinated in right of payment to all of the Authority's other senior indebtedness. The Relinquishment Agreement also provides that all relinquishment payments are subordinated in right of payment to minimum priority distribution payments, which are required monthly payments made by the Authority to the Tribe under the Priority Distribution Agreement, to the extent then due. The Authority, in accordance with authoritative guidance issued by the FASB pertaining to the accounting for contingencies, recorded a $549.1 million relinquishment liability at September 30, 1998 based on the estimated present value of its obligations under the Relinquishment Agreement.
As of June 30, 2014 and September 30, 2013, the carrying amount of the relinquishment liability was $44.8 million and $74.4 million, respectively. The decrease in the relinquishment liability during the nine months ended June 30, 2014 was due to $31.2 million in relinquishment payments. This reduction in the liability was offset by $1.6 million representing the accretion of discount to the relinquishment liability.





19

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Relinquishment payments consisted of the following (in millions):
 
For the Nine Months Ended
 
June 30, 2014
 
June 30, 2013
Principal
$
29.1

 
$
28.0

Accretion of discount
2.1

 
3.9

Total
$
31.2

 
$
31.9

The accretion of discount to the relinquishment liability reflects the accretion of the discount to the present value of the relinquishment liability for the impact of the time value of money. As of June 30, 2014 and September 30, 2013, relinquishment payments earned but unpaid were $18.3 million and $13.3 million, respectively.


NOTE 7—SEGMENT REPORTING:
As of June 30, 2014, the Authority owns and operates, either directly or through wholly-owned subsidiaries, Mohegan Sun, the Connecticut Sun franchise, and the Mohegan Sun Golf Club (collectively, the “Connecticut Facilities”), and the Pennsylvania Facilities. Substantially all of the Authority's revenues are derived from these operations. The Connecticut Sun franchise and the Mohegan Sun Golf Club are aggregated with the Mohegan Sun operating segment because these operations all share similar economic characteristics, which is to generate gaming and entertainment revenues by attracting patrons to Mohegan Sun. The Authority's executive officers review and assess the performance and operating results and determine the proper allocation of resources to the Connecticut Facilities and the Pennsylvania Facilities on a separate basis. Accordingly, the Authority has two separate reportable segments: (1) Mohegan Sun, which includes the operations of the Connecticut Facilities, and (2) Mohegan Sun at Pocono Downs, which includes the operations of the Pennsylvania Facilities. The Authority's operations related to investments in unconsolidated affiliates and certain other corporate and management operations have not been identified as separate reportable segments, therefore, these operations are included in corporate and other in the following segment disclosures to reconcile to consolidated results.
 
For the Three Months Ended
 
For the Nine Months Ended
(in thousands)
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
Net revenues:
 
 
 
 
 
 
 
Mohegan Sun
$
248,866

 
$
266,699

 
$
734,277

 
$
772,571

Mohegan Sun at Pocono Downs
77,194

 
77,228

 
220,863

 
221,155

Corporate and other
1,549

 
318

 
3,780

 
969

Inter-segment revenues
(1,273
)
 

 
(3,078
)
 

Total
$
326,336

 
$
344,245

 
$
955,842

 
$
994,695

Income (loss) from operations:
 
 
 
 
 
 
 
Mohegan Sun
$
47,088

 
$
57,396

 
$
127,459

 
$
158,654

Mohegan Sun at Pocono Downs
9,936

 
12,435

 
26,555

 
32,441

Corporate and other
(8,042
)
 
(5,644
)
 
(26,676
)
 
(18,743
)
Total
48,982

 
64,187

 
127,338

 
172,352

Accretion of discount to the relinquishment liability
(552
)
 
(1,243
)
 
(1,654
)
 
(3,730
)
Interest income
1,701

 
1,533

 
4,947

 
4,421

Interest expense, net of capitalized interest
(36,426
)
 
(42,379
)
 
(111,692
)
 
(128,213
)
Loss on early extinguishment of debt
(2
)
 

 
(62,277
)
 
(403
)
Other income (expense), net
59

 
53

 
(819
)
 
(1,732
)
Net income (loss)
13,762

 
22,151

 
(44,157
)
 
42,695

Loss attributable to non-controlling interests
130

 
146

 
421

 
2,767

Net income (loss) attributable to Mohegan Tribal Gaming Authority
$
13,892

 
$
22,297

 
$
(43,736
)
 
$
45,462



20

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
For the Nine Months Ended
 
June 30, 2014
 
June 30, 2013
Capital expenditures incurred:
 
 
 
Mohegan Sun
$
15,204

 
$
16,821

Mohegan Sun at Pocono Downs
2,808

 
3,260

Corporate and other
8,972

 
23,140

Total
$
26,984

 
$
43,221

 
 
 
 
 
June 30, 2014
 
September 30, 2013
Total assets:
 
 
 
Mohegan Sun
$
1,392,204

 
$
1,425,152

Mohegan Sun at Pocono Downs
551,995

 
558,700

Corporate and other
158,281

 
152,298

Total
$
2,102,480

 
$
2,136,150



NOTE 8—SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION:
As of June 30, 2014, substantially all of the Authority's outstanding debt is fully and unconditionally guaranteed, on a joint and several basis, by the following 100% owned subsidiaries of the Authority: the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming. Separate financial statements and other disclosures concerning the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming are not presented below because the Authority believes that the summarized financial information provided below and in Note 7 are adequate for investor analysis of these subsidiaries. Condensed consolidating financial statement information for the Authority, its 100% owned guarantor subsidiaries and its non-guarantor subsidiaries and entities as of June 30, 2014 and September 30, 2013 and for the three months and nine months ended June 30, 2014 and 2013 is as follows (in thousands):































21

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)


CONDENSED CONSOLIDATING BALANCE SHEETS
 
June 30, 2014
 
Authority
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor
Subsidiaries and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
56,213

 
$
11,897

 
$
3,548

 
$

 
$
71,658

Restricted cash
62

 
637

 

 

 
699

Receivables, net
25,711

 
4,383

 
975

 
(605
)
 
30,464

Inventories
14,270

 
1,433

 

 

 
15,703

Other current assets
16,873

 
1,346

 
1,815

 

 
20,034

Total current assets
113,129

 
19,696

 
6,338

 
(605
)
 
138,558

Non-current assets:
 
 
 
 
 
 
 
 
 
Property and equipment, net
1,159,324

 
224,567

 
59,482

 

 
1,443,373

Goodwill

 
39,459

 

 

 
39,459

Other intangible assets, net
120,423

 
284,788

 

 

 
405,211

Other assets, net
30,770

 
3,961

 
47,342

 
(6,194
)
 
75,879

Intercompany receivables
252,258

 
61,544

 

 
(313,802
)
 

Investment in subsidiaries
305,468

 

 

 
(305,468
)
 

Total assets
$
1,981,372

 
$
634,015

 
$
113,162

 
$
(626,069
)
 
$
2,102,480

LIABILITIES AND CAPITAL
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
46,226

 
$

 
$
428

 
$

 
$
46,654

Current portion of relinquishment liability
44,819

 

 

 

 
44,819

Due to Mohegan Tribe
784

 

 
1,381

 

 
2,165

Current portion of capital leases
1,185

 
50

 

 
(50
)
 
1,185

Trade payables
15,189

 
2,995

 
19

 

 
18,203

Construction payables
4,069

 
501

 
1,796

 

 
6,366

Accrued interest payable
27,730

 

 
3,275

 

 
31,005

Other current liabilities
95,514

 
33,128

 
5,557

 
(555
)
 
133,644

Total current liabilities
235,516

 
36,674

 
12,456

 
(605
)
 
284,041

Non-current liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt, net of current portion
1,617,478

 

 
45,000

 

 
1,662,478

Relinquishment liability, net of current portion

 

 

 

 

Due to Mohegan Tribe, net of current portion

 

 
24,796

 

 
24,796

Capital leases, net of current portion
2,546

 
5,990

 

 
(5,990
)
 
2,546

Other long-term liabilities
2,516

 

 
3,375

 

 
5,891

Intercompany payables

 
249,462

 
64,340

 
(313,802
)
 

Accumulated losses in excess of investment in subsidiaries

 
24,271

 

 
(24,271
)
 

Total liabilities
1,858,056

 
316,397

 
149,967

 
(344,668
)
 
1,979,752

Capital:
 
 
 
 
 
 
 
 
 
Retained earnings
123,316

 
317,618

 
(36,805
)
 
(281,129
)
 
123,000

Mohegan Tribal Gaming Authority capital
123,316

 
317,618

 
(36,805
)
 
(281,129
)
 
123,000

Non-controlling interests

 

 

 
(272
)
 
(272
)
Total capital
123,316

 
317,618

 
(36,805
)
 
(281,401
)
 
122,728

Total liabilities and capital
$
1,981,372

 
$
634,015

 
$
113,162

 
$
(626,069
)
 
$
2,102,480

___________
(1)   Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)   Includes MGA and subsidiaries, Downs Lodging, Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.

22

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
September 30, 2013
 
Authority
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor
Subsidiaries and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
44,060

 
$
18,655

 
$
909

 
$

 
$
63,624

Restricted cash

 
1,714

 
12,043

 

 
13,757

Receivables, net
23,186

 
2,717

 
239

 

 
26,142

Inventories
12,928

 
1,062

 

 

 
13,990

Other current assets
18,125

 
1,197

 
1,196

 

 
20,518

Total current assets
98,299

 
25,345

 
14,387

 

 
138,031

Non-current assets:
 
 
 
 
 
 
 
 
 
Property and equipment, net
1,193,676

 
225,263

 
57,236

 

 
1,476,175

Goodwill

 
39,459

 

 

 
39,459

Other intangible assets, net
120,508

 
285,010

 

 

 
405,518

Other assets, net
35,159

 
3,891

 
38,127

 
(210
)
 
76,967

Intercompany receivables
238,545

 
37,149

 

 
(275,694
)
 

Investment in subsidiaries
332,737

 

 

 
(332,737
)
 

Total assets
$
2,018,924

 
$
616,117

 
$
109,750

 
$
(608,641
)
 
$
2,136,150

LIABILITIES AND CAPITAL
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
25,156

 
$

 
$
63

 
$

 
$
25,219

Current portion of relinquishment liability
62,947

 

 

 

 
62,947

Due to Mohegan Tribe
808

 

 
5,500

 

 
6,308

Current portion of capital leases
2,302

 

 

 

 
2,302

Trade payables
8,901

 
1,613

 
17

 

 
10,531

Construction payables
6,790

 
558

 
3,663

 

 
11,011

Accrued interest payable
18,616

 

 
4,680

 

 
23,296

Other current liabilities
93,377

 
29,580

 
1,025

 

 
123,982

Total current liabilities
218,897

 
31,751

 
14,948

 

 
265,596

Non-current liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt, net of current portion
1,582,768

 

 
45,405

 

 
1,628,173

Relinquishment liability, net of current portion
11,418

 

 

 

 
11,418

Due to Mohegan Tribe, net of current portion

 

 
23,420

 

 
23,420

Capital leases, net of current portion
3,138

 

 

 

 
3,138

Other long-term liabilities
2,941

 

 
2,079

 

 
5,020

Intercompany payables

 
236,772

 
38,922

 
(275,694
)
 

Accumulated losses in excess of investment in subsidiaries

 
6,832

 

 
(6,832
)
 

Total liabilities
1,819,162

 
275,355

 
124,774

 
(282,526
)
 
1,936,765

Capital:
 
 
 
 
 
 
 
 
 
Retained earnings
199,762

 
340,762

 
(15,024
)
 
(326,264
)
 
199,236

Mohegan Tribal Gaming Authority capital
199,762

 
340,762

 
(15,024
)
 
(326,264
)
 
199,236

Non-controlling interests

 

 

 
149

 
149

Total capital
199,762

 
340,762

 
(15,024
)
 
(326,115
)
 
199,385

Total liabilities and capital
$
2,018,924

 
$
616,117

 
$
109,750

 
$
(608,641
)
 
$
2,136,150

___________
(1)   Includes the Pocono Downs Subsidiaries, MBC, Mohegan Golf, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)   Includes MGA and subsidiaries, Downs Lodging, Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.


23

MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
 
For the Three Months Ended June 30, 2014
 
Authority  
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non-Guarantor
Subsidiaries and Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Gaming
$
213,600

 
$
71,201

 
$

 
$

 
$
284,801

Food and beverage
15,512

 
7,761

 

 

 
23,273

Hotel
10,855

 
1,305

 

 

 
12,160

Retail, entertainment and other
24,888

 
6,359

 
1,568

 
(1,273
)
 
31,542

Gross revenues
264,855

 
86,626

 
1,568

 
(1,273
)
 
351,776

Less-Promotional allowances
(18,959
)
 
(5,500
)
 
(6
)
 
(975
)
 
(25,440
)
Net revenues
245,896

 
81,126

 
1,562

 
(2,248
)
 
326,336

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Gaming
120,236

 
51,297

 

 

 
171,533

Food and beverage
7,921

 
2,438

 

 

 
10,359

Hotel
3,809

 
1,354

 

 
(1,213
)
 
3,950

Retail, entertainment and other
11,961

 
2,309

 

 
(952
)
 
13,318

Advertising, general and administrative
39,261

 
9,709

 
5,703

 
(5,744
)
 
48,929

Corporate
3,598

 

 

 
5,661

 
9,259

Depreciation and amortization
16,397

 
3,420

 
253

 

 
20,070

(Gain) loss on disposition of assets
(66
)
 
2