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EX-32.1 - EX-32.1 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex321_245.htm
EX-31.1 - EX-31.1 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex311_246.htm
EX-10.7 - EX-10.7 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex107_57.htm
EX-10.6 - EX-10.6 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex106_56.htm
EX-10.5 - EX-10.5 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex105_60.htm
EX-10.4 - EX-10.4 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex104_59.htm
EX-10.3 - EX-10.3 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex103_61.htm
EX-10.2 - EX-10.2 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex102_44.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

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 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)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each

exchange on which registered

None

 

None

 

None

 

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      No  *

* The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934. Upon filing this report, the registrant will have filed all reports that would have been required during the preceding 12 months had it been subject to such filing requirements.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

 

 

 

 


 

EXPLANATORY NOTE

The registrant relied on the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934, as amended, Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465) (the “Order”) to delay the filing of this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 (“Form 10-Q”) due to circumstances related to COVID-19. The duration and severity of the COVID-19 pandemic has impacted the registrant's operations, and disruptions and changes to the registrant’s business caused by COVID-19 have required the performance of additional analyses relating to COVID-19’s potential impact on the registrant’s condensed consolidated financial statements, including impairment of intangible assets and other analyses. In addition, suspension of in-person operations by the registrant’s internal team and its professional advisors whose input is required to complete the Form 10-Q, as well as reduced staffing by the registrant, all as a result of the COVID-19 pandemic, have limited support from the registrant’s remaining staff and its professional advisors. All of these disruptions, in turn, delayed the registrant’s ability to complete the procedures and analyses necessary for filing the Form 10-Q without unreasonable effort and expense. In order to be compliant with the Order, the registrant would have been required to file this Form 10-Q on or before June 29, 2020. For substantially the same reasons described above, the registrant was unable to file this Form 10-Q without unreasonable effort and expense, on or before such date.

 


 

MOHEGAN TRIBAL GAMING AUTHORITY

INDEX TO FORM 10-Q

 

 

Page

Number

PART I.

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and September 30, 2019 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Loss and Comprehensive Loss for the Three Months and Six Months Ended March 31, 2020 and 2019 (unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Changes in Capital for the Three Months and Six Months Ended March 31, 2020 and 2019 (unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2020 and 2019 (unaudited)

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

32

 

 

 

Item 4.

Controls and Procedures

32

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

33

 

 

 

Item 1A.

Risk Factors

33

 

 

 

Item 5.

Other Information

33

 

 

 

Item 6.

Exhibits

34

 

 

 

Signatures.

Mohegan Tribal Gaming Authority

35

 

 

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) (unaudited)

 

 

 

March 31,

2020

 

 

September 30,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

184,868

 

 

$

130,138

 

Restricted cash and cash equivalents

 

 

1,707

 

 

 

4,960

 

Accounts receivable, net of allowance for doubtful accounts of $13,569 and $11,715, respectively

 

 

37,132

 

 

 

52,764

 

Inventories

 

 

16,740

 

 

 

18,248

 

Due from Ontario Lottery and Gaming Corporation

 

 

8,227

 

 

 

10,946

 

Casino Operating and Services Agreement customer contract asset

 

 

7,803

 

 

 

3,004

 

Other current assets

 

 

36,995

 

 

 

47,276

 

Total current assets

 

 

293,472

 

 

 

267,336

 

Restricted cash and cash equivalents

 

 

110,110

 

 

 

145,631

 

Property and equipment, net

 

 

1,457,080

 

 

 

1,520,687

 

Right-of-use operating lease assets

 

 

334,880

 

 

 

 

Other intangible assets, net

 

 

326,414

 

 

 

455,265

 

Casino Operating and Services Agreement customer contract asset, net of current portion

 

 

113,223

 

 

 

50,192

 

Notes receivable

 

 

2,514

 

 

 

2,514

 

Other assets, net

 

 

79,549

 

 

 

69,971

 

Total assets

 

$

2,717,242

 

 

$

2,511,596

 

LIABILITIES AND CAPITAL

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

73,251

 

 

$

76,909

 

Current portion of finance lease obligations

 

 

1,752

 

 

 

1,133

 

Current portion of right-of-use operating lease obligations

 

 

8,206

 

 

 

 

Trade payables

 

 

27,057

 

 

 

16,672

 

Accrued payroll

 

 

27,778

 

 

 

53,225

 

Construction payables

 

 

45,395

 

 

 

11,888

 

Accrued interest payable

 

 

19,729

 

 

 

19,804

 

Due to Ontario Lottery and Gaming Corporation

 

 

27,407

 

 

 

30,662

 

Other current liabilities

 

 

144,282

 

 

 

174,231

 

Total current liabilities

 

 

374,857

 

 

 

384,524

 

Long-term debt, net of current portion

 

 

1,969,910

 

 

 

1,832,248

 

Finance lease obligations, net of current portion

 

 

27,513

 

 

 

28,561

 

Right-of-use operating lease obligations, net of current portion

 

 

336,344

 

 

 

 

Build-to-suit liability

 

 

 

 

 

90,292

 

Other long-term liabilities

 

 

33,369

 

 

 

38,538

 

Total liabilities

 

 

2,741,993

 

 

 

2,374,163

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Capital:

 

 

 

 

 

 

 

 

Retained earnings (deficit)

 

 

(17,989

)

 

 

137,124

 

Accumulated other comprehensive loss

 

 

(13,589

)

 

 

(6,633

)

Total capital attributable to Mohegan Tribal Gaming Authority

 

 

(31,578

)

 

 

130,491

 

Non-controlling interests

 

 

6,827

 

 

 

6,942

 

Total capital

 

 

(24,751

)

 

 

137,433

 

Total liabilities and capital

 

$

2,717,242

 

 

$

2,511,596

 

 

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

3


 

MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(in thousands) (unaudited)

 

 

 

For the

 

 

For the

 

 

For the

 

 

For the

 

 

 

Three Months

Ended

 

 

Three Months

Ended

 

 

Six Months

Ended

 

 

Six Months

Ended

 

 

 

March 31,

2020

 

 

March 31,

2019

 

 

March 31,

2020

 

 

March 31,

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming

 

$

215,994

 

 

$

211,819

 

 

$

480,263

 

 

$

433,754

 

Food and beverage

 

 

37,557

 

 

 

33,508

 

 

 

88,089

 

 

 

68,314

 

Hotel

 

 

20,115

 

 

 

22,005

 

 

 

47,704

 

 

 

44,982

 

Retail, entertainment and other

 

 

41,035

 

 

 

40,365

 

 

 

97,697

 

 

 

80,147

 

Net revenues

 

 

314,701

 

 

 

307,697

 

 

 

713,753

 

 

 

627,197

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming, including related party transactions of $755, $702, $1,510 and

   $1,404, respectively

 

 

131,178

 

 

 

125,970

 

 

 

288,366

 

 

 

254,634

 

Food and beverage

 

 

32,392

 

 

 

26,084

 

 

 

74,085

 

 

 

52,531

 

Hotel, including related party transactions of $2,161, $2,161, $4,322 and

   $4,322, respectively

 

 

10,473

 

 

 

10,026

 

 

 

22,315

 

 

 

19,829

 

Retail, entertainment and other

 

 

16,166

 

 

 

19,507

 

 

 

41,152

 

 

 

40,269

 

Advertising, general and administrative, including related party transactions

   of $9,046, $11,484, $18,612 and $22,816, respectively

 

 

62,882

 

 

 

47,112

 

 

 

137,096

 

 

 

96,130

 

Corporate, including related party transactions of  $2,128, $1,437, $4,381

   and $2,834, respectively

 

 

10,169

 

 

 

12,464

 

 

 

24,259

 

 

 

24,889

 

Depreciation and amortization

 

 

27,826

 

 

 

42,782

 

 

 

56,370

 

 

 

69,872

 

Impairment of Mohegan Sun Pocono's intangible assets

 

 

126,596

 

 

 

 

 

 

126,596

 

 

 

 

Other, net

 

 

3,274

 

 

 

1,526

 

 

 

6,344

 

 

 

3,447

 

Total operating costs and expenses

 

 

420,956

 

 

 

285,471

 

 

 

776,583

 

 

 

561,601

 

Income (loss) from operations

 

 

(106,255

)

 

 

22,226

 

 

 

(62,830

)

 

 

65,596

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

528

 

 

 

1,051

 

 

 

1,279

 

 

 

4,490

 

Interest expense, net of capitalized interest

 

 

(30,996

)

 

 

(35,132

)

 

 

(66,352

)

 

 

(71,142

)

Other, net

 

 

(2,432

)

 

 

(298

)

 

 

(3,024

)

 

 

(328

)

Total other expense

 

 

(32,900

)

 

 

(34,379

)

 

 

(68,097

)

 

 

(66,980

)

Loss before income tax

 

 

(139,155

)

 

 

(12,153

)

 

 

(130,927

)

 

 

(1,384

)

Income tax benefit (provision)

 

 

(876

)

 

 

(131

)

 

 

320

 

 

 

(192

)

Net loss

 

 

(140,031

)

 

 

(12,284

)

 

 

(130,607

)

 

 

(1,576

)

Income attributable to non-controlling interests

 

 

(63

)

 

 

(74

)

 

 

(93

)

 

 

(160

)

Net loss attributable to Mohegan Tribal Gaming Authority

 

 

(140,094

)

 

 

(12,358

)

 

 

(130,700

)

 

 

(1,736

)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(18,581

)

 

 

(6,204

)

 

 

(7,164

)

 

 

(4,305

)

Other

 

 

 

 

 

44

 

 

 

 

 

 

44

 

Other comprehensive loss

 

 

(18,581

)

 

 

(6,160

)

 

 

(7,164

)

 

 

(4,261

)

Other comprehensive loss attributable to non-controlling interests

 

 

739

 

 

 

310

 

 

 

208

 

 

 

215

 

Other comprehensive loss attributable to Mohegan Tribal Gaming Authority

 

 

(17,842

)

 

 

(5,850

)

 

 

(6,956

)

 

 

(4,046

)

Comprehensive loss attributable to Mohegan Tribal Gaming Authority

 

$

(157,936

)

 

$

(18,208

)

 

$

(137,656

)

 

$

(5,782

)

 

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)

 

 

 

Retained

Earnings

(Deficit)

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Capital

Attributable

to Mohegan

Tribal

Gaming

Authority

 

 

Non-

controlling

Interests

 

 

Total

Capital

 

Balance, December 31, 2019

 

$

134,205

 

 

$

4,253

 

 

$

138,458

 

 

$

7,503

 

 

$

145,961

 

Net income (loss)

 

 

(140,094

)

 

 

 

 

 

(140,094

)

 

 

63

 

 

 

(140,031

)

Foreign currency translation adjustment

 

 

 

 

 

(17,842

)

 

 

(17,842

)

 

 

(739

)

 

 

(18,581

)

Distributions to Mohegan Tribe

 

 

(12,000

)

 

 

 

 

 

(12,000

)

 

 

 

 

 

(12,000

)

Distributions to Salishan Company, LLC related to the Cowlitz

   Project

 

 

(100

)

 

 

 

 

 

(100

)

 

 

 

 

 

(100

)

Balance, March 31, 2020

 

$

(17,989

)

 

$

(13,589

)

 

$

(31,578

)

 

$

6,827

 

 

$

(24,751

)

Balance, September 30, 2019

 

$

137,124

 

 

$

(6,633

)

 

$

130,491

 

 

$

6,942

 

 

$

137,433

 

Net income (loss)

 

 

(130,700

)

 

 

 

 

 

(130,700

)

 

 

93

 

 

 

(130,607

)

Foreign currency translation adjustment

 

 

 

 

 

(6,956

)

 

 

(6,956

)

 

 

(208

)

 

 

(7,164

)

Distributions to Mohegan Tribe

 

 

(24,000

)

 

 

 

 

 

(24,000

)

 

 

 

 

 

(24,000

)

Distributions to Salishan Company, LLC related to the Cowlitz

   Project

 

 

(413

)

 

 

 

 

 

(413

)

 

 

 

 

 

(413

)

Balance, March 31, 2020

 

$

(17,989

)

 

$

(13,589

)

 

$

(31,578

)

 

$

6,827

 

 

$

(24,751

)

Balance, December 31, 2018

 

$

203,255

 

 

$

12,866

 

 

$

216,121

 

 

$

13,780

 

 

$

229,901

 

Net income (loss)

 

 

(12,358

)

 

 

 

 

 

(12,358

)

 

 

74

 

 

 

(12,284

)

Foreign currency translation adjustment

 

 

 

 

 

(5,894

)

 

 

(5,894

)

 

 

(310

)

 

 

(6,204

)

Distributions to Mohegan Tribe

 

 

(12,000

)

 

 

 

 

 

(12,000

)

 

 

 

 

 

(12,000

)

Distributions to Mohegan Tribe related to the Cowlitz

   Project

 

 

(730

)

 

 

 

 

 

(730

)

 

 

 

 

 

(730

)

Redemption of Mohegan Tribe membership interest in the Cowlitz

   Project

 

 

(4,114

)

 

 

 

 

 

(4,114

)

 

 

(5,886

)

 

 

(10,000

)

Other

 

 

 

 

 

44

 

 

 

44

 

 

 

 

 

 

44

 

Balance, March 31, 2019

 

$

174,053

 

 

$

7,016

 

 

$

181,069

 

 

$

7,658

 

 

$

188,727

 

Balance, September 30, 2018

 

$

250,707

 

 

$

11,062

 

 

$

261,769

 

 

$

9,025

 

 

$

270,794

 

Cumulative-effect adjustment for the adoption of ASC 606 "Revenue

   from Contracts with Customers"

 

 

(41,575

)

 

 

 

 

 

(41,575

)

 

 

 

 

 

(41,575

)

Net income (loss)

 

 

(1,736

)

 

 

 

 

 

(1,736

)

 

 

160

 

 

 

(1,576

)

Foreign currency translation adjustment

 

 

 

 

 

(4,090

)

 

 

(4,090

)

 

 

(215

)

 

 

(4,305

)

Distributions to Mohegan Tribe

 

 

(24,000

)

 

 

 

 

 

(24,000

)

 

 

 

 

 

(24,000

)

Distributions to Mohegan Tribe related to the Cowlitz Project

 

 

(730

)

 

 

 

 

 

(730

)

 

 

 

 

 

(730

)

Redemption of Mohegan Tribe membership interest in the Cowlitz

   Project

 

 

(4,114

)

 

 

 

 

 

(4,114

)

 

 

(5,886

)

 

 

(10,000

)

Redemption of membership interest related to the New England Black

   Wolves franchise

 

 

(4,499

)

 

 

 

 

 

(4,499

)

 

 

4,574

 

 

 

75

 

Other

 

 

 

 

 

44

 

 

 

44

 

 

 

 

 

 

44

 

Balance, March 31, 2019

 

$

174,053

 

 

$

7,016

 

 

$

181,069

 

 

$

7,658

 

 

$

188,727

 

 

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

 

 

For the

 

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Cash flows provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(130,607

)

 

$

(1,576

)

Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

56,370

 

 

 

69,872

 

Non-cash operating lease expense

 

 

6,403

 

 

 

 

Accretion of discounts

 

 

584

 

 

 

523

 

Amortization of discounts and debt issuance costs

 

 

9,256

 

 

 

9,663

 

Provision for losses on receivables

 

 

1,977

 

 

 

490

 

Impairment of Mohegan Sun Pocono's intangible assets

 

 

126,596

 

 

 

 

Deferred income tax provision

 

 

(484

)

 

 

 

Other, net

 

 

1,063

 

 

 

(357

)

Changes in operating assets and liabilities, net of effect of the MGE Niagara Resorts acquisition:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

13,057

 

 

 

304

 

Accrued interest on notes receivable related to the Cowlitz Project

 

 

 

 

 

72,001

 

Inventories

 

 

1,297

 

 

 

585

 

Due from Ontario Lottery and Gaming Corporation

 

 

1,910

 

 

 

 

Casino Operating and Services Agreement customer contract asset

 

 

(76,290

)

 

 

 

Other assets

 

 

8,847

 

 

 

(4,921

)

Trade payables

 

 

10,755

 

 

 

1,663

 

Accrued interest

 

 

(55

)

 

 

170

 

Due to Ontario Lottery and Gaming Corporation

 

 

1,868

 

 

 

 

Operating lease liabilities

 

 

(3,861

)

 

 

 

Other liabilities

 

 

(45,549

)

 

 

(4,309

)

Net cash flows provided by (used in) operating activities

 

 

(16,863

)

 

 

144,108

 

Cash flows used in investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(54,630

)

 

 

(36,364

)

Acquisition of the MGE Niagara Resorts, net of cash acquired

 

 

(1,666

)

 

 

 

Proceeds from notes receivable related to the Cowlitz Project

 

 

 

 

 

32,026

 

Investment in Mohegan Hotel Holding, LLC

 

 

(10,750

)

 

 

 

Other, net

 

 

(1,172

)

 

 

(1,205

)

Net cash flows used in investing activities

 

 

(68,218

)

 

 

(5,543

)

Cash flows provided by (used in) financing activities:

 

 

 

 

 

 

 

 

Senior secured credit facility borrowings - revolving and line of credit

 

 

665,725

 

 

 

641,230

 

Senior secured credit facility repayments - revolving and line of credit

 

 

(520,725

)

 

 

(652,230

)

Senior secured credit facility repayments - term loans A and B

 

 

(26,590

)

 

 

(37,715

)

MGE Niagara Resorts credit facility borrowings - revolving and line of credit

 

 

77,537

 

 

 

 

MGE Niagara Resorts credit facility repayments - revolving and line of credit

 

 

(51,110

)

 

 

 

MGE Niagara Resorts credit facility repayments - term loan

 

 

(1,848

)

 

 

 

Other borrowings

 

 

 

 

 

11,335

 

Other repayments

 

 

(11,617

)

 

 

(2,784

)

Payments on finance lease obligations

 

 

(828

)

 

 

 

Distributions to Mohegan Tribe

 

 

(24,000

)

 

 

(24,000

)

Distributions to Salishan Company, LLC related to the Cowlitz Project

 

 

(413

)

 

 

(730

)

Redemption of Mohegan Tribe membership interest in the Cowlitz Project

 

 

 

 

 

(10,000

)

Other, net

 

 

(1,527

)

 

 

(1,776

)

Net cash flows provided by (used in) financing activities

 

 

104,604

 

 

 

(76,670

)

Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

19,523

 

 

 

61,895

 

Effect of exchange rate on cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

(3,567

)

 

 

(3,706

)

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period

 

 

280,729

 

 

 

234,626

 

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period

 

$

296,685

 

 

$

292,815

 

Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents to the condensed consolidated

   balance sheets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

184,868

 

 

$

91,396

 

Restricted cash and cash equivalents, current

 

 

1,707

 

 

 

1,314

 

Restricted cash and cash equivalents, non-current

 

 

110,110

 

 

 

200,105

 

Cash, cash equivalents, restricted cash and restricted cash equivalents

 

$

296,685

 

 

$

292,815

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

61,583

 

 

$

61,310

 

Non-cash transactions:

 

 

 

 

 

 

 

 

Right-of-use operating lease assets

 

$

360,257

 

 

$

 

Right-of-use operating lease obligations

 

$

360,402

 

 

$

 

Finance lease assets and obligations

 

 

2,206

 

 

 

 

Construction payables

 

$

45,395

 

 

$

12,808

 

Senior secured credit facility reductions

 

$

10,514

 

 

$

13,295

 

Payment by third-party for interactive gaming license

 

$

 

 

$

8,000

 

MGE Niagara Resorts - derecognition of build-to-suit asset and liability

 

 

90,675

 

 

 

 

 

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 AND BASIS OF PRESENTATION:

Organization

The Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe”) established the Mohegan Tribal Gaming Authority in July 1995 with the exclusive authority to conduct and regulate gaming activities for the Mohegan Tribe on tribal lands and the non-exclusive authority to conduct such activities elsewhere. The Mohegan Tribe is a sovereign Indian nation with independent legal jurisdiction over its people and land. Like other sovereign governments, the Mohegan Tribe and its entities, including the Mohegan Tribal Gaming Authority, are generally not subject to federal, state or local income taxes. However, MGE Niagara Entertainment Inc. (“MGE Niagara”), a wholly-owned subsidiary, is subject to tax in Ontario, Canada, and certain non-tribal entities are subject to state or local income taxes in the United States. The Mohegan Tribal Gaming Authority d/b/a Mohegan Gaming & Entertainment (the “Company”) is primarily engaged in the ownership, operation and development of integrated entertainment facilities both domestically and internationally, including Mohegan Sun, a gaming and entertainment complex located on an approximately 196-acre site in Uncasville, Connecticut, and Mohegan Sun Pocono, a gaming and entertainment facility located on an approximately 400-acre site in Plains Township, Pennsylvania.

In September 2018, MGE Niagara was selected by the Ontario Lottery and Gaming Corporation (the “OLG”) to be the service provider for the Niagara Fallsview Casino Resort, Casino Niagara and the 5,000-seat Niagara Falls Entertainment Centre, all in Niagara Falls, Canada (collectively, the “MGE Niagara Resorts”). On June 11, 2019 (the “Closing Date”), MGE Niagara completed the acquisition of the MGE Niagara Resorts (the “Acquisition”) and assumed the day-to-day operations of the properties under the terms of a 21-year Casino Operating and Services Agreement (the “COSA”) with the OLG.

The Company also (i) owns 100% of Salishan-Mohegan, LLC (“Salishan-Mohegan”), which developed and currently manages ilani Casino Resort in Clark County, Washington, a gaming and entertainment facility owned by the federally-recognized Cowlitz Indian Tribe and the Cowlitz Tribal Gaming Authority, (ii) holds the development rights to any future development at ilani Casino Resort through Salishan-Mohegan Development Company, LLC, a majority-owned subsidiary of Salishan-Mohegan, (iii) manages Resorts Casino Hotel in Atlantic City, New Jersey and owns 10% of the casino’s holding company and its subsidiaries, including those conducting or licensing online gaming and retail sports wagering in New Jersey, (iv) manages Paragon Casino Resort in Marksville, Louisiana and (v) owns 100% of Inspire Integrated Resort Co., Ltd. and MGA Korea, LLC, which were formed to develop and construct an integrated resort and casino project to be located adjacent to the Incheon International Airport in South Korea.

Impact of the COVID-19 Pandemic and Company Response

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and the United States federal government declared it a national emergency. The spread of COVID-19 has affected most segments of the global economy, including the Company’s operations. On March 18, 2020, the Company announced the temporary suspension of operations at its North American owned, operated and managed properties to ensure the health and safety of its employees, guests and the surrounding communities in which the Company operates, consistent with directives from various government bodies. As of March 31, 2020, these properties remained closed.

The following properties subsequently reopened as follows: (i) Paragon Casino Resort on May 20, 2020, (ii) ilani Casino Resort on May 28, 2020, (iii) Mohegan Sun on June 1, 2020, (iv) Mohegan Sun Pocono on June 22, 2020 and (v) Resorts Casino Hotel on July 2, 2020. As of the date of the filing of this Quarterly Report on Form 10-Q, the MGE Niagara Resorts remain temporarily closed. Like other integrated resort operators, these business disruptions have had a material adverse impact on the Company’s financial condition, results of operations and cash flows.

 

7


MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

 

While some of the Company's properties have reopened, it cannot predict when its remaining closed properties will be able to reopen or the conditions upon which additional reopenings may occur. In addition, while the Company has experienced some level of continued business disruption since the reopening of its properties, it expects this disruption to gradually dissipate, and remains confident in its ability to mitigate the impact of any such disruption through expense management. The impact of COVID-19 on the Company's operations through the date of the filing of this Quarterly Report on Form 10-Q has been significant, though the full extent of the impact will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of COVID-19 or a resurgence, the manner in which the Company’s guests, suppliers and other third parties respond to COVID-19, including perception of safety and health measures taken by the Company, new information which may emerge concerning its severity and the actions to contain it or treat its impact, as well as general economic conditions and consumer confidence. Accordingly, the Company cannot reasonably estimate the extent to which COVID-19 will further impact its future financial condition, results of operations and cash flows.

In response to COVID-19, the Company completed a series of transactions to ensure maximum financial flexibility, including (i) on March 13, 2020, it drew the remaining balance of its senior secured revolving credit facility, in the amount of approximately $125 million and (ii) on August 28, 2020, it entered into an amendment to its Senior Secured Credit Facilities which, among other things, waived non-compliance with certain of its financial covenants through June 30, 2020 and modified the financial covenants applicable to periods subsequent to June 30, 2020 (refer to Note 8).

The Company also took various actions to reduce costs in an effort to mitigate the operating and financial impact of COVID-19, including (i) furloughing approximately 98% of its workforce immediately following the closure of its properties, of which approximately 50% remain furloughed as of the date of the filing of this Quarterly Report on Form 10-Q; (ii) enacting meaningful compensation reductions to its remaining property and corporate personnel, including executive leadership, during the closure period; (iii) obtaining relief from certain threshold payments otherwise due to the OLG for the duration of the closure of the MGE Niagara Resorts, to be followed by a phased-in approach to such payments thereafter; (iv) obtaining a three month forbearance of gaming tax payments due to Connecticut and Pennsylvania; (v) deferring rental payments due under certain of MGE Niagara's lease agreements; and (vi) executing other substantial reductions in operating expenses, capital expenditures and overall costs.

The Company could experience other potential adverse impacts as a result of COVID-19, including, but not limited to, charges from further adjustments to the carrying value of its intangible assets, as well as other long-lived asset impairment charges. Actual results may differ materially from the Company’s current estimates as the scope of COVID-19 evolves, depending largely, but not exclusively, on the duration and extent of the Company’s business disruptions.

If the Company is unable to (i) execute its business plan (ii) sufficiently offset declines in revenues with appropriate cost reductions or (iii) execute certain cost containment initiatives, it may not have sufficient liquidity to meet its existing debt obligations, distributions to the Mohegan Tribe, capital expenditures and working capital requirements. In addition, the Company may not be able to satisfy its financial covenants under the senior secured credit facilities. In such event, the Company would need to seek additional sources of liquidity and obtain waivers or amendments under the senior secured credit facilities; however, it can provide no assurance that it would be able to obtain such liquidity and waivers or amendments. If the Company is unable to obtain such liquidity and waivers or amendments, it would be in default under the senior secured credit facilities, which may result in cross-defaults under its other outstanding indebtedness. If such defaults or cross-defaults were to occur, it would allow the Company's lenders to exercise their rights and remedies as defined under their respective agreements, including their right to accelerate the repayment of outstanding indebtedness. If such acceleration were to occur, the Company can provide no assurance that it would be able to obtain the financing necessary to repay such accelerated indebtedness.

8


MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

 

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 (“US GAAP”) 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 US GAAP 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 US GAAP. All adjustments, including normal recurring accruals and adjustments, necessary for a fair statement of the Company's operating results for the interim period, have been included.

The Company’s results for the three months and six months ended March 31, 2020 are not indicative of operating results expected for the entire fiscal year, particularly given the impact of COVID-19 as discussed above.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2019. The preparation of financial statements in conformity with US GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities.

Revenue Disaggregation

The Company is primarily engaged in the ownership, operation and development of integrated entertainment facilities both domestically and internationally. The Company’s current wholly-owned operations are focused within Connecticut and Pennsylvania. The Company also currently manages other gaming facilities elsewhere within the United States and Canada. The Company generates revenues by providing the following types of goods and services: gaming, food and beverage, hotel, retail, entertainment and other and management and development.

Revenue disaggregation by geographic location and revenue type for the three months ended March 31, 2020 was as follows (in thousands):

 

 

 

Connecticut

 

 

Pennsylvania

 

 

Canada

 

 

 

 

 

 

 

(Mohegan

Sun)

 

 

(Mohegan Sun

Pocono)

 

 

(MGE Niagara

Resorts)

 

 

Other

 

Gaming

 

$

124,721

 

 

$

45,409