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EX-32.1 - EX-32.1 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex321_78.htm
EX-31.1 - EX-31.1 - MOHEGAN TRIBAL GAMING AUTHORITYck1005276-ex311_79.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 June 30, 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 and has 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  

 

 

 

 


 

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 June 30, 2020 and September 30, 2019 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three Months and Nine Months Ended June 30, 2020 and 2019 (unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Changes in Capital for the Three Months and Nine Months Ended June 30, 2020 and 2019 (unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 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

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

31

 

 

 

Item 4.

Controls and Procedures

31

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

Item 1A.

Risk Factors

32

 

 

 

Item 5.

Other Information

32

 

 

 

Item 6.

Exhibits

33

 

 

 

Signatures.

Mohegan Tribal Gaming Authority

34

 

 

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) (unaudited)

 

 

 

June 30, 2020

 

 

September 30, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

149,435

 

 

$

130,138

 

Restricted cash and cash equivalents

 

 

1,698

 

 

 

4,960

 

Accounts receivable, net of allowance for doubtful accounts of $15,041 and $11,715, respectively

 

 

48,499

 

 

 

52,764

 

Inventories

 

 

17,431

 

 

 

18,248

 

Due from Ontario Lottery and Gaming Corporation

 

 

4,806

 

 

 

10,946

 

Casino Operating and Services Agreement customer contract asset

 

 

8,902

 

 

 

3,004

 

Other current assets

 

 

45,989

 

 

 

47,276

 

Total current assets

 

 

276,760

 

 

 

267,336

 

Restricted cash and cash equivalents

 

 

61,148

 

 

 

145,631

 

Property and equipment, net

 

 

1,480,397

 

 

 

1,520,687

 

Right-of-use operating lease assets

 

 

341,533

 

 

 

 

Other intangible assets, net

 

 

327,078

 

 

 

455,265

 

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

 

 

118,841

 

 

 

50,192

 

Notes receivable

 

 

2,514

 

 

 

2,514

 

Other assets, net

 

 

80,899

 

 

 

69,971

 

Total assets

 

$

2,689,170

 

 

$

2,511,596

 

LIABILITIES AND CAPITAL

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

77,829

 

 

$

76,909

 

Current portion of finance lease obligations

 

 

2,291

 

 

 

1,133

 

Current portion of right-of-use operating lease obligations

 

 

14,019

 

 

 

 

Trade payables

 

 

23,634

 

 

 

16,672

 

Accrued payroll

 

 

32,387

 

 

 

53,225

 

Construction payables

 

 

46,236

 

 

 

11,888

 

Accrued interest payable

 

 

14,395

 

 

 

19,804

 

Due to Ontario Lottery and Gaming Corporation

 

 

30,353

 

 

 

30,662

 

Other current liabilities

 

 

155,505

 

 

 

174,231

 

Total current liabilities

 

 

396,649

 

 

 

384,524

 

Long-term debt, net of current portion

 

 

1,963,011

 

 

 

1,832,248

 

Finance lease obligations, net of current portion

 

 

28,067

 

 

 

28,561

 

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

 

 

344,100

 

 

 

 

Accrued payroll

 

 

868

 

 

 

 

Build-to-suit liability

 

 

 

 

 

90,292

 

Other long-term liabilities

 

 

33,648

 

 

 

38,538

 

Total liabilities

 

 

2,766,343

 

 

 

2,374,163

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Capital:

 

 

 

 

 

 

 

 

Retained earnings (deficit)

 

 

(76,615

)

 

 

137,124

 

Accumulated other comprehensive loss

 

 

(7,730

)

 

 

(6,633

)

Total capital attributable to Mohegan Tribal Gaming Authority

 

 

(84,345

)

 

 

130,491

 

Non-controlling interests

 

 

7,172

 

 

 

6,942

 

Total capital

 

 

(77,173

)

 

 

137,433

 

Total liabilities and capital

 

$

2,689,170

 

 

$

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 INCOME (LOSS) AND COMPREHENSIVE 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, 2020

 

 

June 30, 2019

 

 

June 30, 2020

 

 

June 30, 2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming

 

$

89,379

 

 

$

235,418

 

 

$

569,642

 

 

$

669,172

 

Food and beverage

 

 

3,009

 

 

 

37,171

 

 

 

91,098

 

 

 

105,485

 

Hotel

 

 

2,589

 

 

 

23,794

 

 

 

50,293

 

 

 

68,776

 

Retail, entertainment and other

 

 

12,222

 

 

 

51,224

 

 

 

109,919

 

 

 

131,371

 

Net revenues

 

 

107,199

 

 

 

347,607

 

 

 

820,952

 

 

 

974,804

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming, including related party transactions of $755, $703, $2,265

   and $2,107, respectively

 

 

41,834

 

 

 

135,238

 

 

 

330,200

 

 

 

389,872

 

Food and beverage

 

 

5,075

 

 

 

29,080

 

 

 

79,160

 

 

 

81,611

 

Hotel, including related party transactions of $2,161, $2,161, $6,483

   and $6,483, respectively

 

 

4,296

 

 

 

12,052

 

 

 

26,611

 

 

 

31,881

 

Retail, entertainment and other

 

 

4,026

 

 

 

22,934

 

 

 

45,178

 

 

 

63,203

 

Advertising, general and administrative, including related party

   transactions of $4,517, $10,601, $23,129 and $33,417, respectively

 

 

35,672

 

 

 

53,534

 

 

 

172,768

 

 

 

149,664

 

Corporate, including related party transactions of $1,679, $1,821, $6,060

   and $4,655, respectively

 

 

7,700

 

 

 

13,839

 

 

 

31,959

 

 

 

38,728

 

Depreciation and amortization

 

 

26,477

 

 

 

22,810

 

 

 

82,847

 

 

 

92,682

 

Impairment of Mohegan Sun Pocono's intangible assets

 

 

 

 

 

 

 

 

126,596

 

 

 

 

Other, net

 

 

2,656

 

 

 

2,910

 

 

 

9,000

 

 

 

6,357

 

Total operating costs and expenses

 

 

127,736

 

 

 

292,397

 

 

 

904,319

 

 

 

853,998

 

Income (loss) from operations

 

 

(20,537

)

 

 

55,210

 

 

 

(83,367

)

 

 

120,806

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

270

 

 

 

1,149

 

 

 

1,549

 

 

 

5,639

 

Interest expense, net of capitalized interest

 

 

(32,478

)

 

 

(35,690

)

 

 

(98,830

)

 

 

(106,832

)

Other, net

 

 

120

 

 

 

(254

)

 

 

(2,904

)

 

 

(582

)

Total other expense

 

 

(32,088

)

 

 

(34,795

)

 

 

(100,185

)

 

 

(101,775

)

Income (loss) before income tax

 

 

(52,625

)

 

 

20,415

 

 

 

(183,552

)

 

 

19,031

 

Income tax benefit (provision)

 

 

2,696

 

 

 

(538

)

 

 

3,016

 

 

 

(730

)

Net income (loss)

 

 

(49,929

)

 

 

19,877

 

 

 

(180,536

)

 

 

18,301

 

Income attributable to non-controlling interests

 

 

(116

)

 

 

(38

)

 

 

(209

)

 

 

(198

)

Net income (loss) attributable to Mohegan Tribal Gaming Authority

 

 

(50,045

)

 

 

19,839

 

 

 

(180,745

)

 

 

18,103

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

6,088

 

 

 

(4,041

)

 

 

(1,076

)

 

 

(8,346

)

Other

 

 

 

 

 

 

 

 

 

 

 

44

 

Other comprehensive income (loss)

 

 

6,088

 

 

 

(4,041

)

 

 

(1,076

)

 

 

(8,302

)

Other comprehensive (income) loss attributable to non-controlling interests

 

 

(229

)

 

 

231

 

 

 

(21

)

 

 

446

 

Other comprehensive income (loss) attributable to Mohegan Tribal

   Gaming Authority

 

 

5,859

 

 

 

(3,810

)

 

 

(1,097

)

 

 

(7,856

)

Comprehensive income (loss) attributable to Mohegan Tribal

   Gaming Authority

 

$

(44,186

)

 

$

16,029

 

 

$

(181,842

)

 

$

10,247

 

 

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, March 31, 2020

 

$

(17,989

)

 

$

(13,589

)

 

$

(31,578

)

 

$

6,827

 

 

$

(24,751

)

Net income (loss)

 

 

(50,045

)

 

 

 

 

 

(50,045

)

 

 

116

 

 

 

(49,929

)

Foreign currency translation adjustment

 

 

 

 

 

5,859

 

 

 

5,859

 

 

 

229

 

 

 

6,088

 

Distributions to Mohegan Tribe

 

 

(8,333

)

 

 

 

 

 

(8,333

)

 

 

 

 

 

(8,333

)

Distributions to Salishan Company, LLC related to the Cowlitz

   Project

 

 

(248

)

 

 

 

 

 

(248

)

 

 

 

 

 

(248

)

Balance, June 30, 2020

 

$

(76,615

)

 

$

(7,730

)

 

$

(84,345

)

 

$

7,172

 

 

$

(77,173

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2019

 

$

137,124

 

 

$

(6,633

)

 

$

130,491

 

 

$

6,942

 

 

$

137,433

 

Net income (loss)

 

 

(180,745

)

 

 

 

 

 

(180,745

)

 

 

209

 

 

 

(180,536

)

Foreign currency translation adjustment

 

 

 

 

 

(1,097

)

 

 

(1,097

)

 

 

21

 

 

 

(1,076

)

Distributions to Mohegan Tribe

 

 

(32,333

)

 

 

 

 

 

(32,333

)

 

 

 

 

 

(32,333

)

Distributions to Salishan Company, LLC related to the

   Cowlitz Project

 

 

(661

)

 

 

 

 

 

(661

)

 

 

 

 

 

(661

)

Balance, June 30, 2020

 

$

(76,615

)

 

$

(7,730

)

 

$

(84,345

)

 

$

7,172

 

 

$

(77,173

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

 

$

174,053

 

 

$

7,016

 

 

$

181,069

 

 

$

7,658

 

 

$

188,727

 

Net income

 

 

19,839

 

 

 

 

 

 

19,839

 

 

 

38

 

 

 

19,877

 

Foreign currency translation adjustment

 

 

 

 

 

(3,810

)

 

 

(3,810

)

 

 

(231

)

 

 

(4,041

)

Distributions to Mohegan Tribe

 

 

(15,000

)

 

 

 

 

 

(15,000

)

 

 

 

 

 

(15,000

)

Balance, June 30, 2019

 

$

178,892

 

 

$

3,206

 

 

$

182,098

 

 

$

7,465

 

 

$

189,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

18,103

 

 

 

 

 

 

18,103

 

 

 

198

 

 

 

18,301

 

Foreign currency translation adjustment

 

 

 

 

 

(7,900

)

 

 

(7,900

)

 

 

(446

)

 

 

(8,346

)

Distributions to Mohegan Tribe

 

 

(39,000

)

 

 

 

 

 

(39,000

)

 

 

 

 

 

(39,000

)

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, June 30, 2019

 

$

178,892

 

 

$

3,206

 

 

$

182,098

 

 

$

7,465

 

 

$

189,563

 

 

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

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

June 30, 2020

 

 

June 30, 2019

 

Cash flows provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(180,536

)

 

$

18,301

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

82,847

 

 

 

92,682

 

Non-cash operating lease expense

 

 

9,364

 

 

 

 

Accretion of discounts

 

 

857

 

 

 

864

 

Amortization of discounts and debt issuance costs

 

 

13,977

 

 

 

14,619

 

Provision for losses on receivables

 

 

2,676

 

 

 

962

 

Impairment of Mohegan Sun Pocono's intangible assets

 

 

126,596

 

 

 

 

Deferred income tax provision

 

 

(3,262

)

 

 

 

Other, net

 

 

2,255

 

 

 

(26

)

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,237

 

 

 

(9,023

)

Accrued interest on notes receivable related to the Cowlitz Project

 

 

 

 

 

71,696

 

Inventories

 

 

714

 

 

 

(269

)

Due from Ontario Lottery and Gaming Corporation

 

 

5,482

 

 

 

 

Casino Operating and Services Agreement customer contract asset

 

 

(78,210

)

 

 

 

Other assets

 

 

398

 

 

 

(6,901

)

Trade payables

 

 

6,672

 

 

 

965

 

Accrued interest

 

 

(5,402

)

 

 

(9,189

)

Due to Ontario Lottery and Gaming Corporation

 

 

3,598

 

 

 

 

Operating lease liabilities

 

 

(162

)

 

 

 

Other liabilities

 

 

(22,713

)

 

 

(1,712

)

Net cash flows provided by (used in) operating activities

 

 

(33,612

)

 

 

172,969

 

Cash flows used in investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(104,384

)

 

 

(52,289

)

Acquisition of the MGE Niagara Resorts, net of cash acquired

 

 

(1,666

)

 

 

(72,287

)

Proceeds from notes receivable related to the Cowlitz Project

 

 

 

 

 

32,026

 

Investment in Mohegan Hotel Holding, LLC

 

 

(10,750

)

 

 

 

Other, net

 

 

(1,171

)

 

 

(12,698

)

Net cash flows used in investing activities

 

 

(117,971

)

 

 

(105,248

)

Cash flows provided by financing activities:

 

 

 

 

 

 

 

 

Senior secured credit facility borrowings - revolving and line of credit

 

 

807,525

 

 

 

1,014,972

 

Senior secured credit facility repayments - revolving and line of credit

 

 

(662,525

)

 

 

(966,972

)

Senior secured credit facility repayments - term loans A and B

 

 

(37,104

)

 

 

(51,011

)

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 borrowings - term loan

 

 

 

 

 

75,220

 

MGE Niagara Resorts credit facility repayments - term loan

 

 

(2,770

)

 

 

 

Proceeds from MGE Niagara Resorts convertible debenture

 

 

 

 

 

30,088

 

Other borrowings

 

 

2,845

 

 

 

11,335

 

Other repayments

 

 

(14,230

)

 

 

(6,938

)

Payments on finance lease obligations

 

 

(1,034

)

 

 

 

Distributions to Mohegan Tribe

 

 

(32,333

)

 

 

(39,000

)

Distributions to Salishan Company, LLC related to the Cowlitz Project

 

 

(661

)

 

 

(730

)

Redemption of Mohegan Tribe membership interest in the Cowlitz Project

 

 

 

 

 

(10,000

)

Payments of financing fees

 

 

(34

)

 

 

(3,256

)

Other, net

 

 

(1,527

)

 

 

(1,527

)

Net cash flows provided by financing activities

 

 

84,579

 

 

 

52,181

 

Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

(67,004

)

 

 

119,902

 

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

 

 

(1,444

)

 

 

(6,155

)

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

 

$

212,281

 

 

$

348,373

 

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

   consolidated balance sheets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

149,435

 

 

$

162,066

 

Restricted cash and cash equivalents, current

 

 

1,698

 

 

 

9,321

 

Restricted cash and cash equivalents, non-current

 

 

61,148

 

 

 

176,986

 

Cash, cash equivalents, restricted cash and restricted cash equivalents

 

$

212,281

 

 

$

348,373

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

95,211

 

 

$

101,393

 

Non-cash transactions:

 

 

 

 

 

 

 

 

Right-of-use operating lease assets

 

$

360,933

 

 

$

 

Right-of-use operating lease obligations

 

$

361,078

 

 

$

 

Finance lease assets and obligations

 

$

2,511

 

 

$

29,140

 

Construction payables

 

$

46,236

 

 

$

15,739

 

Senior secured credit facility reductions

 

$

10,514

 

 

$

13,296

 

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

 

$

(90,675)

 

 

$

77,403

 

MGE Niagara Resorts – recognition of parking license asset and liability

 

 

 

 

 

5,222

 

Payment by third-party for interactive gaming license

 

$

 

 

$

8,000

 

 

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.

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.

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

7


MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

 

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).