10-Q 1 a20111231-10q.htm 2011.12.31-10Q
THIS DOCUMENT IS A COPY OF THE FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2011 FILED ON FEBRUARY 15, 2012 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION

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 December 31, 2011
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)
 
 
December 31,
2011
 
September 30,
2011
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
91,742

 
$
112,174

Restricted cash
771

 
2,002

Receivables, net
23,744

 
20,471

Inventories
14,191

 
14,028

Other current assets
29,017

 
27,227

Total current assets
159,465

 
175,902

Non-current assets:
 
 
 
Property and equipment, net
1,523,736

 
1,529,595

Goodwill
39,459

 
39,459

Other intangible assets, net
406,235

 
406,338

Other assets, net
52,038

 
51,902

Total assets
$
2,180,933

 
$
2,203,196

LIABILITIES AND CAPITAL
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
777,351

 
$
800,250

Current portion of relinquishment liability
74,027

 
67,911

Due to Mohegan Tribe
11,250

 
10,850

Current portion of capital leases
713

 
707

Trade payables
15,217

 
17,452

Construction payables
5,410

 
8,892

Accrued interest payable
28,557

 
28,580

Other current liabilities
136,300

 
132,949

Total current liabilities
1,048,825

 
1,067,591

Non-current liabilities:
 
 
 
Long-term debt, net of current portion
819,377

 
819,316

Relinquishment liability, net of current portion
98,964

 
110,348

Capital leases, net of current portion
4,455

 
4,635

Other long-term liabilities
2,762

 
2,582

Total liabilities
1,974,383

 
2,004,472

Commitments and Contingencies


 


Capital:
 
 
 
Retained earnings
204,404

 
196,403

Mohegan Tribal Gaming Authority capital
204,404

 
196,403

Non-controlling interests
2,146

 
2,321

Total capital
206,550

 
198,724

Total liabilities and capital
$
2,180,933

 
$
2,203,196

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


3

MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
(unaudited)
 
 
For the
 
For the
 
Three Months Ended
 
Three Months Ended
 
December 31, 2011
 
December 31, 2010
Revenues:
 
 
 
Gaming
$
317,532

 
$
307,657

Food and beverage
23,376

 
21,994

Hotel
9,118

 
8,997

Retail, entertainment and other
27,593

 
22,446

Gross revenues
377,619

 
361,094

Less-Promotional allowances
(25,743
)
 
(25,489
)
Net revenues
351,876

 
335,605

Operating costs and expenses:
 
 
 
Gaming
198,846

 
193,331

Food and beverage
10,836

 
10,045

Hotel
3,277

 
3,166

Retail, entertainment and other
10,755

 
6,213

Advertising, general and administrative
50,012

 
50,294

Corporate
3,479

 
4,536

Depreciation and amortization
20,903

 
23,215

Loss on disposition of assets
258

 
—

Severance
—

 
521

Total operating costs and expenses
298,366

 
291,321

Income from operations
53,510

 
44,284

Other income (expense):
 
 
 
Accretion of discount to the relinquishment liability
(2,062
)
 
(2,842
)
Interest income
1,030

 
780

Interest expense
(28,809
)
 
(29,746
)
Other income, net
4

 
5

Total other expense
(29,837
)
 
(31,803
)
Net income
23,673

 
12,481

Loss attributable to non-controlling interests
329

 
449

Net income attributable to Mohegan Tribal Gaming Authority
$
24,002

 
$
12,930


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, September 30, 2011
$
198,724

 
$
196,403

 
$
2,321

Cumulative-effect of adoption of amendments to ASC 924 regarding jackpot liabilities
1,968

 
1,968

 
—

Contributions from members
154

 
—

 
154

Net income (loss)
23,673

 
24,002

 
(329
)
Distributions to Mohegan Tribe
(17,969
)
 
(17,969
)
 
—

Balance, December 31, 2011
$
206,550

 
$
204,404

 
$
2,146

 
 
 
 
 
 
Balance, September 30, 2010
$
132,044

 
$
129,476

 
$
2,568

Contributions from members
1,301

 
—

 
1,301

Net income (loss)
12,481

 
12,930

 
(449
)
Distributions to Mohegan Tribe
(4,507
)
 
(4,507
)
 
—

Balance, December 31, 2010
$
141,319

 
$
137,899

 
$
3,420


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
 
Three Months Ended
 
Three Months Ended
 
December 31, 2011
 
December 31, 2010
Cash flows provided by (used in) operating activities:
 
 
 
Net income
$
23,673

 
$
12,481

Adjustments to reconcile net income to net cash flows provided by operating activities:
 
 
 
Depreciation and amortization
20,903

 
23,215

Accretion of discount to the relinquishment liability
2,062

 
2,842

Cash paid for accretion of discount to the relinquishment liability
(1,421
)
 
(1,929
)
Amortization of debt issuance costs
1,803

 
1,792

Accretion of bond discount
178

 
158

Amortization of net deferred gain on settlement of derivative instruments
(117
)
 
(117
)
Provision for losses on receivables
364

 
485

Loss on disposition of assets
258

 
14

Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in receivables
(3,353
)
 
957

Increase in inventories
(163
)
 
(279
)
Increase in other assets
(1,774
)
 
(5,383
)
Decrease in trade payables
(2,235
)
 
(5,609
)
Increase in other liabilities
7,303

 
6,298

Net cash flows provided by operating activities
47,481

 
34,925

Cash flows provided by (used in) investing activities:
 
 
 
Purchases of property and equipment, net of decrease in construction payables of $3,482 and $8,958, respectively
(18,714
)
 
(15,857
)
Issuance of third-party loans and advances
(182
)
 
(221
)
Payments received on third-party loans
38

 
61

Increase in restricted cash, net
(594
)
 
(1,333
)
Proceeds from asset sales
55

 
33

Net cash flows used in investing activities
(19,397
)
 
(17,317
)
Cash flows provided by (used in) financing activities:
 
 
 
Bank Credit Facility borrowings - revolving loan
67,000

 
96,000

Bank Credit Facility repayments - revolving loan
(97,000
)
 
(80,000
)
Salishan-Mohegan Bank Credit Facility borrowings - revolving loan
—

 
250

Line of Credit borrowings
139,827

 
137,784

Line of Credit repayments
(132,726
)
 
(134,455
)
Borrowings from Mohegan Tribe
400

 
—

Principal portion of relinquishment liability payments
(5,909
)
 
(5,544
)
Distributions to Mohegan Tribe
(17,969
)
 
(4,507
)
Capitalized debt issuance costs
(2,119
)
 
(8
)
Payments on capital lease obligations
(174
)
 
(175
)
Non-controlling interest contributions
154

 
1,301

Net cash flows (used in) provided by financing activities
(48,516
)
 
10,646

Net (decrease) increase in cash and cash equivalents
(20,432
)
 
28,254

Cash and cash equivalents at beginning of period
112,174

 
63,897

Cash and cash equivalents at end of period
$
91,742

 
$
92,151

Supplemental disclosure:
 
 
 
Cash paid during the period for interest
$
26,967

 
$
27,695

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 507-acre reservation situated in Southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988 (“IGRA”), federally-recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal land, 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 December 31, 2011, 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”) and MTGA Gaming, LLC (“MTGA Gaming”). 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 Country Club at Pautipaug golf course in Southeastern Connecticut (“Mohegan Sun Country Club”).
MCV-PA holds a 0.01% general partnership interest in Downs Racing, L.P., Backside, L.P., Mill Creek Land, L.P. and Northeast Concessions, L.P., 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 Entities”). The Authority views Mohegan Sun and the Pennsylvania Entities as two separate operating segments.
Mohegan Ventures-NW and the Tribe hold 49.15% and 7.85% membership interests in Salishan-Mohegan, LLC (“Salishan-Mohegan”), respectively, which 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”).
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 and the Tribe hold 49% and 51% membership interests in Mohegan Gaming & Hospitality, LLC (“MG&H”), respectively. MG&H holds a 100% membership interest in Mohegan Resorts, LLC (“Mohegan Resorts”). Certain of the Authority's and the Tribe's diversification efforts are conducted, either directly or indirectly, through MG&H and 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. The Mohegan New York Entities have agreed in principle to enter into a joint venture arrangement with unrelated third-party investors and developers to manage a proposed gaming facility to be located in Thompson, New York.

 
NOTE 2—LIQUIDITY AND FINANCIAL POSITION:

The Authority has significant outstanding indebtedness and financial commitments. As of December 31, 2011, the Authority's debt totaled $1.6 billion, of which $788.6 million matures within the next twelve months, including $505.0 million outstanding under the Authority's Bank Credit Facility which matures on March 9, 2012 and the Authority's $250.0 million 2002 8% Senior Subordinated Notes which mature on April 1, 2012. In addition, a substantial amount of the Authority's other outstanding

7
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

indebtedness matures over the following three fiscal years. Please refer to Note 4 “Long-Term Debt” for further details regarding the Authority's debt maturities. The Authority does not anticipate that cash flows from operations and cash on hand will be sufficient to repay amounts outstanding under the Bank Credit Facility or the $250.0 million 2002 8% Senior Subordinated Notes at maturity. Accordingly, the Authority has determined that it will need to refinance such outstanding indebtedness or otherwise access the debt capital markets to replace such outstanding indebtedness prior to their maturity in order to maintain sufficient resources for its operations. In this regard, on January 24, 2012, the Authority commenced a series of refinancing transactions, including the refinancing of the Bank Credit Facility and the $250.0 million 2002 8% Senior Subordinated Notes. Please refer to Note 10 “Subsequent Events” for further details regarding the proposed refinancing transactions. However, as of the date of this filing the Authority has not yet completed these refinancing transactions. The conditions and events described above and the current uncertainty relating to the refinancing of the Authority's fiscal 2012 maturities raise substantial doubt about its ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared under the assumption that the Authority will continue as a going concern. In addition, the accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Authority be unable to continue as a going concern.

The Authority's ability to timely refinance or replace its outstanding indebtedness depends upon the willingness of banks and investors to lend to it, its credit rating and capital market conditions. The Authority may need to obtain waivers or consents from its lenders in order to execute its refinancing plans on satisfactory terms; 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 waivers or consents or unable to refinance or replace the Bank Credit Facility or the $250.0 million 2002 8% Senior Subordinated Notes or any of its other outstanding indebtedness at or prior to their respective maturities, it would be in default thereof, which may result in cross-defaults under its other outstanding indebtedness. If such defaults or cross-defaults were to occur, it would allow the Authority's 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. In such event, the Authority would not have sufficient available funds to repay such accelerated indebtedness and its ability to otherwise refinance or replace its outstanding indebtedness is limited. If such acceleration were to occur, the Authority can provide no assurance that it would be able to obtain the financing necessary for such repayment and may have to adopt one or more alternative strategies, such as reducing or delaying planned capital expenditures, disposing of some of its assets and/or seeking to restructure some or all of its outstanding indebtedness. Such financing strategies may not be sufficient or effected on satisfactory terms, if at all.

In addition, if the Authority's pro forma fixed charge coverage ratio, as defined under its senior and senior subordinated note indentures, was to fall below 2.0 to 1.0, it would be unable to refinance its outstanding subordinated indebtedness with senior indebtedness without waivers or consents from certain of its creditors, thus limiting the options available to the Authority to refinance or replace its outstanding indebtedness. In such event, the Authority can provide no assurance that it would be able to obtain such waivers or consents or that it would be able to refinance or replace its outstanding indebtedness or that financing options available, if any, would be on favorable or acceptable terms. As of December 31, 2011, the Authority's fixed charge coverage ratio was above 2.0 to 1.0.

On December 28, 2011, the Authority and the Tribe entered into a waiver under the Bank Credit Facility pursuant to which the lenders agreed to waive any potential default by the Authority under the Bank Credit Facility as a result of a going concern opinion issued by the Authority's independent registered public accounting firm in its report for the fiscal year ended September 30, 2011.


NOTE 3—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 Authority's operating results for the three months ended December 31, 2011 are not necessarily indicative of results for the fiscal year ending September 30, 2012.

8
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

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, 2011.
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, and the accounts of MG&H, Mohegan Resorts and its subsidiaries are consolidated into the accounts of MTGA Gaming, as Mohegan Ventures-NW and MTGA Gaming are deemed to be the primary beneficiaries. In consolidation, all intercompany balances and transactions were eliminated.
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.
The carrying amount of cash and cash equivalents, receivables, trade payables and promissory notes approximates fair value. The estimated fair value of the Authority's financing facilities and notes were as follows (in thousands):
 
December 31, 2011
 
Carrying Value         
 
Fair Value         
Bank Credit Facility
$
505,000

 
$
479,119

2009 11 1/2% Second Lien Senior Secured Notes
$
193,853

 
$
183,750

2005 6  1/8% Senior Unsecured Notes
$
250,000

 
$
169,375

2002 8% Senior Subordinated Notes
$
250,000

 
$
161,833

2004 7 1/8% Senior Subordinated Notes
$
225,000

 
$
112,037

2005 6  7/8% Senior Subordinated Notes
$
150,000

 
$
66,188


The estimated fair values of the Authority's financing facilities and notes were based on quoted market prices or prices of similar instruments on or about December 31, 2011.






9
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. The following table presents a reconciliation of long-term receivables and the related reserves for doubtful collection of these long-term receivables (in thousands):
 
Long-Term Receivables
 
Affiliates (1)
 
Tenants
 
Total
Balance, September 30, 2011
$
46,561

 
$
1,285

 
$
47,846

Additions:
 
 
 
 
 
   Issuance of affiliate advances and tenant loans
1,196

 
—

 
1,196

Deductions:
 
 
 
 
 
   Payments received
—

 
(38
)
 
(38
)
Balance, December 31, 2011
$
47,757

 
$
1,247

 
$
49,004

__________
(1)
Includes interest receivable of $19.5 million and $18.4 million as of December 31, 2011 and September 30, 2011, 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        
 
Total             
Balance, September 30, 2011
$
20,201

 
$
78

 
$
20,279

Additions:
 
 
 
 
 
   Charges to bad debt expense
286

 
—

 
286

Deductions:
 
 
 
 
 
   Adjustments
—

 
(3
)
 
(3
)
Balance, December 31, 2011
$
20,487

 
$
75

 
$
20,562


New Accounting Standards

In September 2011, the FASB issued revised guidance pertaining to the accounting standard for goodwill impairment tests. The revised guidance allows an entity the option to assess qualitative factors to determine whether the fair value of a reporting unit is less than its carrying value before performing the two-step goodwill impairment test. The revised guidance is effective for interim and annual periods beginning after December 15, 2011; however, early adoption is permitted. The Authority does not expect its adoption to impact its financial position, results of operations or cash flows.
 
In June 2011, the FASB issued revised guidance pertaining to reporting of comprehensive income. The revised guidance allows an entity the option of presenting the total of comprehensive income, components of net income and components of other comprehensive income, either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The revised guidance is effective retrospectively for annual periods, and interim periods within those annual periods, beginning after December 15, 2011. The Authority does not expect its adoption to impact its financial position, results of operations or cash flows.

In April 2010, the FASB issued guidance pertaining to accruals for casino jackpot liabilities. The new guidance clarifies that an entity should not accrue jackpot liabilities (or portions thereof) before a jackpot is won if the entity can avoid paying such jackpot. The new guidance specifies that jackpots should be accrued and charged to revenue when the entity has the obligation to pay such jackpot and applies to both base and progressive jackpots and requires a cumulative-effect adjustment to opening retained earnings in the period of adoption. The new guidance was effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2010. The Authority adopted this guidance in its first quarter of fiscal 2012, and as such, recorded a cumulative-effect adjustment, which decreased other current liabilities and increased retained earnings by $2.0 million.









10
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

NOTE 4—LONG-TERM DEBT:
Long-term debt consisted of the following (in thousands, including current maturities):
 
 
December 31,
2011
 
September 30,
2011
Bank Credit Facility, due March 2012
$
505,000

 
$
535,000

2009 11 1/2% Second Lien Senior Secured Notes, due November 2017, net of discount of $6,147 and $6,325, respectively
193,853

 
193,675

2005 6 1/8% Senior Unsecured Notes, due February 2013
250,000

 
250,000

2002 8% Senior Subordinated Notes, due April 2012
250,000

 
250,000

2004 7 1/8% Senior Subordinated Notes, due August 2014
225,000

 
225,000

2005 6 7/8% Senior Subordinated Notes, due February 2015
150,000

 
150,000

Line of Credit, due March 2012
7,101

 
—

Salishan-Mohegan Bank Credit Facility, due March 2012
15,250

 
15,250

Mohegan Tribe Promissory Note, due March 2012
10,000

 
10,000

Mohegan Tribe Credit Facility, due March 2012
1,250

 
850

Subtotal
1,607,454

 
1,629,775

Plus: net deferred gain on derivative instruments sold
524

 
641

Long-term debt, excluding capital leases
1,607,978

 
1,630,416

Less: current portion of long-term debt
(788,601
)
 
(811,100
)
Long-term debt, net of current portion
$
819,377

 
$
819,316


Bank Credit Facility

In December 2008, the Authority entered into a Third Amended and Restated Bank Credit Facility. The Bank Credit Facility was amended in October 2009. As amended, the Bank Credit Facility provides for a revolving loan and letter of credit borrowing capacity of up to $675.0 million from a syndicate of financial institutions and commercial banks, with Bank of America, N.A., serving as Administrative Agent. The Bank Credit Facility has no mandatory amortization provision and is payable in full on March 9, 2012. As of December 31, 2011, $505.0 million was drawn on the Bank Credit Facility. As of December 31, 2011, letters of credit issued under the Bank Credit Facility totaled $3.8 million, of which no amount was drawn. Inclusive of letters of credit, which reduce borrowing availability under the Bank Credit Facility, and after taking into account restrictive financial covenant requirements under the Bank Credit Facility and the Authority's Line of Credit and note indentures, the Authority had approximately $62.1 million of borrowing capacity under the Bank Credit Facility as of December 31, 2011. The Authority plans to refinance or replace the Bank Credit Facility at or prior to maturity (refer to Note 2).
Under the Bank Credit Facility, at the Authority's option, each advance of loan proceeds accrues interest on the basis of a Base Rate or on the basis of a one-month, two-month, three-month, six-month or twelve-month Eurodollar Rate, plus in either case, an Applicable Rate based on the Authority's total leverage ratio, as each term is defined under the Bank Credit Facility. The Authority also pays commitment fees for the unused portion of borrowing capacity under the Bank Credit Facility on a quarterly basis equal to the product obtained by multiplying the Applicable Rate for commitment fees by the average daily unused borrowing capacity for that calendar quarter. The Applicable Rate for Base Rate loans is between 1.25% and 2.75%. The Applicable Rate for Eurodollar Rate loans is between 2.50% and 4.00%. The Applicable Rate for commitment fees is between 0.20% and 0.50%. The Base Rate is the higher of Bank of America's announced Prime Rate, the Eurodollar Rate for one-month contracts plus 1.25% or the Federal Funds Rate plus 0.50%. Interest on Base Rate loans is payable quarterly in arrears. Interest on Eurodollar Rate loans is payable at the end of each applicable interest period or quarterly in arrears, if earlier. As of December 31, 2011, the Authority had $7.0 million in Base Rate loans and $498.0 million in Eurodollar Rate loans outstanding. The Base Rate loans outstanding at December 31, 2011 were based on Bank of America's Prime Rate of 3.25% plus an Applicable Rate of 2.25%. The Eurodollar Rate loans outstanding at December 31, 2011 were based on one-month Eurodollar Rates ranging from 0.27% to 0.30% plus an Applicable Rate of 3.50%. The Applicable Rate for commitment fees was 0.50% as of December 31, 2011. As of December 31, 2011 and September 30, 2011, accrued interest, including commitment fees, on the Bank Credit Facility was $932,000 and $1.0 million, respectively.
The Bank Credit Facility is collateralized by a first priority lien on substantially all of the Authority's assets, 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 also is required to pledge additional assets as collateral for the Bank Credit Facility as it or its existing and future guarantor subsidiaries acquire them. The Authority's obligations under the Bank Credit Facility are fully and unconditionally guaranteed, jointly and severally, by the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan

11
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Ventures-NW, MVW, WTG and MTGA Gaming. The Bank Credit Facility includes non-financial covenant requirements of the types customarily found in loan agreements for similar transactions. The Bank Credit Facility also subjects the Authority to a number of restrictive financial covenant requirements. These financial covenant requirements include, among other things, a minimum fixed charge coverage ratio, maximum total leverage and senior leverage ratios and maximum capital expenditures and investments.
As of December 31, 2011, the Authority and the Tribe were in compliance with all respective covenant requirements under the Bank Credit Facility.
Senior 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 11.50% per annum (the “2009 Second Lien Senior Secured Notes”). The 2009 Second Lien Senior Secured Notes were issued at a price of 96.234% of par, to yield an effective interest rate of 12.25% per annum. The 2009 Second Lien Senior Secured Notes mature on November 1, 2017. The first call date for the 2009 Second Lien Senior Secured Notes is November 1, 2013. Interest on the 2009 Second Lien Senior Secured Notes is payable semi-annually on May 1st and November 1st. The 2009 Second Lien Senior Secured Notes are collateralized by a second priority lien on substantially all of the Authority's and its existing and future guarantor subsidiaries' properties and assets, and are effectively subordinated to all of the Authority's and its existing and future guarantor subsidiaries' first priority lien secured indebtedness, including borrowings under the Bank Credit Facility, to the extent of the value of the collateral securing such indebtedness. The 2009 Second Lien Senior Secured Notes rank equally in right of payment with all of the Authority's and its existing and future guarantor subsidiaries' senior indebtedness and Senior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing, but, to the extent of the value of the collateral securing such indebtedness, rank effectively senior to all of the Authority's and its existing and future guarantor subsidiaries' unsecured senior indebtedness, including the 2005 6 1/8% Senior Unsecured Notes and Senior and Junior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2009 Second Lien Senior Secured Notes rank senior to all of the Authority's and its existing and future guarantor subsidiaries' subordinated indebtedness, including the 2002 8% Senior Subordinated Notes, 2004 7 1/8% Senior Subordinated Notes and 2005 6 7/8% Senior Subordinated Notes. As of December 31, 2011 and September 30, 2011, accrued interest on the 2009 Second Lien Senior Secured Notes was $3.8 million and $9.6 million, respectively.
The 2009 Second Lien Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, on a second priority lien senior secured basis, by the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming. Refer to Note 9 for condensed consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities.
The 2009 Second Lien Senior Secured 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.
 

2005 6 1/8% Senior Unsecured Notes
In February 2005, the Authority issued $250.0 million Senior Unsecured Notes with fixed interest payable at a rate of 6.125% per annum (the “2005 Senior Unsecured Notes”). The 2005 Senior Unsecured Notes mature on February 15, 2013. The 2005 Senior Unsecured Notes are callable at the Authority's option at par. Interest on the 2005 Senior Unsecured Notes is payable semi-annually on February 15th and August 15th. The 2005 Senior Unsecured Notes are uncollateralized general obligations of the Authority, and are effectively subordinated to all of the Authority's and its existing and future guarantor subsidiaries' senior secured indebtedness, including borrowings under the Bank Credit Facility and 2009 Second Lien Senior Secured Notes, to the extent of the value of the collateral securing such debt. The 2005 Senior Unsecured Notes rank equally in right of payment with the 2009 Second Lien Senior Secured Notes and Senior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2005 Senior Unsecured Notes rank senior to Junior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing and all of the Authority's and its existing and future guarantor subsidiaries' subordinated indebtedness, including the 2002 8% Senior Subordinated Notes, 2004 7 1/8% Senior Subordinated Notes and 2005 6 7/8% Senior Subordinated Notes. As of December 31, 2011 and September 30, 2011, accrued interest on the 2005 Senior Unsecured Notes was $5.7 million and $1.9 million, respectively.
The 2005 Senior Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, by the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming. Refer to Note 9 for condensed

12
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities.
Senior Subordinated Notes
 
2002 8% Senior Subordinated Notes
In February 2002, the Authority issued $250.0 million Senior Subordinated Notes with fixed interest payable at a rate of 8.000% per annum (the “2002 Senior Subordinated Notes”). The 2002 Senior Subordinated Notes mature on April 1, 2012. The 2002 Senior Subordinated Notes are callable at the Authority's option at par. Interest on the 2002 Senior Subordinated Notes is payable semi-annually on April 1st and October 1st. As of December 31, 2011 and September 30, 2011, accrued interest on the 2002 Senior Subordinated Notes was $5.0 million and $10.0 million, respectively. The Authority plans to refinance or replace the 2002 Senior Subordinated Notes at or prior to maturity (refer to Note 2).
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. As of December 31, 2011 and September 30, 2011, accrued interest on the 2004 Senior Subordinated Notes was $6.0 million and $2.0 million, 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. As of December 31, 2011 and September 30, 2011, accrued interest on the 2005 Senior Subordinated Notes was $3.9 million and $1.3 million, respectively.

The Authority's senior subordinated notes are uncollateralized general obligations of the Authority, and are subordinated to borrowings under the Bank Credit Facility, 2009 Second Lien Senior Secured Notes, 2005 Senior Unsecured Notes and Senior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The senior subordinated notes rank equally in right of payment with each other and Junior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The senior subordinated notes are fully and unconditionally guaranteed, jointly and severally, by the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming. Refer to Note 9 for condensed consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities.
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, limitations on the Authority's ability to make restricted payments, as defined under the note indentures, and incur additional indebtedness. Under these financial covenant requirements, the Authority is generally able to make restricted payments, including distributions to the Tribe, and incur additional indebtedness that otherwise may be restricted, provided the Authority's pro forma fixed charge coverage ratio is at least 2.0 to 1.0. If the Authority's pro forma fixed charge coverage ratio was to fall below 2.0 to 1.0, its ability to make restricted payments and incur additional indebtedness would be limited and subject to other applicable exceptions under the note indentures. Additionally, while the Authority may continue to borrow under the Bank Credit Facility pursuant to exceptions contained in the note indentures, its ability to incur other additional indebtedness to raise capital also would be limited. Further, if the Authority's pro forma fixed charge coverage ratio was to fall below 2.0 to 1.0, the Authority would be unable to refinance or replace its outstanding subordinated indebtedness with senior indebtedness without waivers or consents from certain of its creditors, thus limiting the options available to the Authority to refinance or replace its outstanding indebtedness. In such event, the Authority can provide no assurance that it would be able to obtain such waivers or consents or that it would be able to refinance or replace its outstanding indebtedness or that financing options available, if any, would be on favorable or acceptable terms. As of December 31, 2011, the Authority's fixed charge coverage ratio was above 2.0 to 1.0.
As of December 31, 2011, the Authority and the Tribe were in compliance with all respective covenant requirements under the senior and senior subordinated note indentures.

13
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

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
As of December 31, 2011, the Authority had a $16.5 million revolving loan agreement with Bank of America, N.A. (the “Line of Credit”). The Line of Credit matures on March 9, 2012. Under the Line of Credit, at the Authority's option, each advance accrues interest on the basis of a one-month Eurodollar Rate or Prime Rate, plus in either case, an Applicable Rate based on the Authority's total leverage ratio, as each term is defined under the Line of Credit. Borrowings under the Line of Credit are uncollateralized obligations. As of December 31, 2011, the Authority had $7.1 million in Eurodollar Rate loans outstanding, which were based on a one-month Eurodollar Rate of 0.28% plus an Applicable Rate of 3.0%. The Line of Credit subjects the Authority to certain covenants, including a covenant to maintain at least the Line of Credit commitment amount available for borrowing under the Bank Credit Facility. As of December 31, 2011, the Authority was in compliance with all covenant requirements under the Line of Credit and had $9.4 million of borrowing capacity thereunder. The Authority has commenced discussions with Bank of America, N.A. to extend the maturity date of the Line of Credit; however, it can provide no assurance of the terms of such extension or whether such extension will be granted. As of December 31, 2011 and September 30, 2011, accrued interest on the Line of Credit was $8,000 and $7,000, respectively.
Salishan-Mohegan Bank Credit Facility
As of December 31, 2011, Salishan-Mohegan had a fully drawn $15.25 million revolving loan agreement with Bank of America, N.A. (the “Salishan-Mohegan Bank Credit Facility”). The Salishan-Mohegan Bank Credit Facility matures on March 9, 2012. Under the Salishan-Mohegan Bank Credit Facility, at the option of Salishan-Mohegan, each advance of loan proceeds accrues interest on the basis of a Base Rate or on the basis of a one-month, two-month, three-month or six-month Eurodollar Rate, plus in either case, an Applicable Rate, as defined under the Salishan-Mohegan Bank Credit Facility. The Applicable Rate is 2.50% for Base Rate loans and 3.50% for Eurodollar Rate loans. The Base Rate is the higher of Bank of America's announced Prime Rate or the Federal Funds Rate plus 0.50%. The Salishan-Mohegan Bank Credit Facility has no mandatory amortization provision and is payable in full at maturity. The Salishan-Mohegan Bank Credit Facility is collateralized by a lien on substantially all of the existing and future assets of Salishan-Mohegan. The obligations of Salishan-Mohegan under the Salishan-Mohegan Bank Credit Facility also are guaranteed by the Tribe. The Salishan-Mohegan Bank Credit Facility subjects Salishan-Mohegan to certain covenant requirements customarily found in loan agreements for similar transactions. As of December 31, 2011, Salishan-Mohegan was in compliance with all respective covenant requirements under the Salishan-Mohegan Bank Credit Facility. The Authority has commenced discussions with Bank of America, N.A. to extend the maturity date of the Salishan-Mohegan Bank Credit Facility; however, it can provide no assurance of the terms of such extension or whether such extension will be granted.
As of December 31, 2011, Salishan-Mohegan had $15.25 million in Eurodollar Rate loans and no Base Rate loan outstanding. The Eurodollar Rate loans outstanding at December 31, 2011 were based on a one-month Eurodollar Rate of 0.28% plus an Applicable Rate of 3.50%. As of December 31, 2011 and September 30, 2011, accrued interest on the Salishan-Mohegan Bank Credit Facility was $21,000 and $19,000, respectively.
Mohegan Tribe Promissory Note
In September 2009, the Tribe made a $10.0 million loan to Salishan-Mohegan (the “Mohegan Tribe Promissory Note”). The Mohegan Tribe Promissory Note matures on March 31, 2012. The Mohegan Tribe Promissory Note accrues interest at an annual rate of 15.0%. Under the terms of the Mohegan Tribe Promissory Note, as amended, accrued interest from November 2009 through October 2010 was paid at a monthly rate of 3.0%, with the remaining 12.0% due at maturity; and from November 2010 through maturity, all accrued interest under the Mohegan Tribe Promissory Note is payable at maturity. The Authority has commenced discussions with the Tribe to extend the maturity date of the Mohegan Tribe Promissory Note; however, it can provide no assurance of the terms of such extension or whether such extension will be granted. As of December 31, 2011 and September 30, 2011, accrued interest on the Mohegan Tribe Promissory Note was $3.1 million and $2.7 million, respectively.
Mohegan Tribe Credit Facility
As of December 31, 2011, Salishan-Mohegan had a $1.75 million revolving loan agreement with the Tribe (the “Mohegan Tribe Credit Facility”). The Mohegan Tribe Credit Facility matures on March 31, 2012. The Mohegan Tribe Credit Facility accrues interest at an annual rate of 15.0% payable at maturity. The Authority has commenced discussions with the Tribe to extend the maturity date of the Mohegan Tribe Credit Facility; however, it can provide no assurance of the terms of such extension or whether such extension will be granted. As of December 31, 2011, Salishan-Mohegan had $1.25 million drawn on the Mohegan Tribe

14
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Credit Facility and $500,000 of borrowing capacity thereunder. As of December 31, 2011 and September 30, 2011, accrued interest on the Mohegan Tribe Credit Facility was $89,000 and $47,000, respectively.

NOTE 5—RELATED PARTY TRANSACTIONS:
Distributions to the Tribe totaled $18.0 million and $4.5 million for the three months ended December 31, 2011 and 2010, respectively.
The Tribe provides certain governmental and administrative services in connection with the operation of Mohegan Sun. The Authority incurred expenses for such services totaling $6.8 million and $6.9 million for the three months ended December 31, 2011 and 2010, 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 $5.4 million and $5.2 million for the three months ended December 31, 2011 and 2010, respectively.
The Authority incurred interest expense associated with the Mohegan Tribe Promissory Note totaling $378,000 for each of the three months ended December 31, 2011 and 2010.
The Authority incurred interest expense associated with the Mohegan Tribe Credit Facility totaling $42,000 for the three months ended December 31, 2011.

NOTE 6—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 5.5% of gross revenues from slot machines for such month. In the event free promotional slot plays exceed 5.5% of monthly gross revenues from slot machines, 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 Authority reflected expenses associated with the combined Slot Win Contribution and free promotional slot play contribution totaling $43.4 million and $43.1 million for the three months ended December 31, 2011 and 2010, respectively. As of December 31, 2011 and September 30, 2011, the combined outstanding Slot Win Contribution and free promotional slot play contribution totaled $14.6 million and $15.3 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.

15
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)


The Authority reflected expenses associated with the Pennsylvania Slot Machine Tax totaling $33.5 million and $30.8 million for the three months ended December 31, 2011 and 2010, respectively. As of December 31, 2011 and September 30, 2011, outstanding Pennsylvania Slot Machine Tax payments totaled $6.9 million and $4.8 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. On July 13, 2010, Downs Racing opened its table game and poker operations at Mohegan Sun at Pocono Downs. 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”). During the initial two years of operation, the Pennsylvania Table Game Tax is 14%, plus 2% in local share assessments. Following the initial two years of operation, the Pennsylvania Table Game Tax will be reduced to 12%, plus the 2% local share assessments.
The Authority reflected expenses associated with the Pennsylvania Table Game Tax totaling $1.8 million and $ 1.6 million for the three months ended December 31, 2011 and 2010, respectively. As of December 31, 2011 and September 30, 2011, outstanding Pennsylvania Table Game Tax payments totaled $135,000 and $87,000, 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 Authority reflected expenses associated with the Pennsylvania Regulatory Fee totaling $1.3 million and $1.2 million for the three months ended December 31, 2011 and 2010, respectively. As of December 31, 2011 and September 30, 2011, outstanding Pennsylvania Regulatory Fee payments to the PGCB totaled $159,000 and $106,000, 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 approved gaming facilities are opened in the Commonwealth of Pennsylvania. Currently, 10 of the 14 approved gaming facilities have commenced operations. As of December 31, 2011, 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 $169,000 for the three months ended December 31, 2011.
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 Entities through December 31, 2014. As of December 31, 2011 and September 30, 2011, outstanding payments to the PHHA for purses earned by horsemen, but not yet paid, and other fees totaled $7.6 million and $9.2 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 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

16
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

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 $4.6 million and $4.5 million for the three months ended December 31, 2011 and 2010, 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 7—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 obligations, which include the Bank Credit Facility, the 2009 Second Lien Senior Secured Notes 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 obligations, including the 2005 Senior Unsecured Notes. 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 December 31, 2011 and September 30, 2011, the carrying amount of the relinquishment liability was $173.0 million and $178.3 million, respectively. The decrease in the relinquishment liability during the three months ended December 31, 2011 was due to $7.3 million in relinquishment payments. This reduction in the liability was offset by $2.0 million representing the accretion of discount to the relinquishment liability.





17
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

Relinquishment payments consisted of the following (in millions):
 
For the Three Months Ended
 
December 31, 2011
 
December 31, 2010
Principal
$
5.9

 
$
5.5

Accretion of discount
1.4

 
1.9

Total
$
7.3

 
$
7.4

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 December 31, 2011 and September 30, 2011, relinquishment payments earned but unpaid were $20.4 million and $14.7 million, respectively.

NOTE 8—SEGMENT REPORTING:
As of December 31, 2011, the Authority owns and operates either directly or through wholly-owned subsidiaries Mohegan Sun, the Connecticut Sun WNBA franchise and the Mohegan Sun Country Club (collectively, the “Connecticut Entities”), and the Pennsylvania Entities. All of the Authority's revenues are derived from these operations. The Connecticut Sun WNBA franchise and the Mohegan Sun Country 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 Entities and the Pennsylvania Entities on a separate basis. The Authority, therefore, believes that it has two separate reportable segments: (1) Mohegan Sun, which includes the operations of the Connecticut Entities, and (2) Mohegan Sun at Pocono Downs, which includes the operations of the Pennsylvania Entities. The following tables provide financial information related to each segment (in thousands):
 
For the Three Months Ended
 
December 31, 2011
 
December 31, 2010
Net revenues:
 
 
 
Mohegan Sun
$
273,898

 
$
263,830

Mohegan Sun at Pocono Downs
77,978

 
71,775

Total
351,876

 
335,605

Income (loss) from operations:
 
 
 
Mohegan Sun
46,993

 
42,544

Mohegan Sun at Pocono Downs
10,032

 
6,319

Corporate
(3,515
)
 
(4,579
)
Total
53,510

 
44,284

Accretion of discount to the relinquishment liability
(2,062
)
 
(2,842
)
Interest income
1,030

 
780

Interest expense
(28,809
)
 
(29,746
)
Other income, net
4

 
5

Net income
23,673

 
12,481

Loss attributable to non-controlling interests
329

 
449

Net income attributable to Mohegan Tribal Gaming Authority
$
24,002

 
$
12,930

 
For the Three Months Ended
 
December 31, 2011
 
December 31, 2010
Capital expenditures incurred:
 
 
 
Mohegan Sun
$
13,984

 
$
5,411

Mohegan Sun at Pocono Downs
1,248

 
1,488

Total
$
15,232

 
$
6,899

 
 
 
 
 
December 31, 2011
 
September 30, 2011
Total assets:
 
 
 
Mohegan Sun
$
1,521,913

 
$
1,505,210

Mohegan Sun at Pocono Downs
583,323

 
584,267

Corporate
75,697

 
113,719

Total
$
2,180,933

 
$
2,203,196


18
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)


NOTE 9—SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION:

As of December 31, 2011, substantially all of the Authority's outstanding debt, including its Bank Credit Facility, 2009 Second Lien Senior Secured Notes, 2005 Senior Unsecured Notes, 2002 Senior Subordinated Notes, 2004 Senior Subordinated Notes and 2005 Senior Subordinated Notes, is fully and unconditionally guaranteed, on a joint and several basis, by the following 100% owned subsidiaries of the Authority: the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming. The Authority's 2001 83/8% Senior Subordinated Notes, which were repaid at maturity on July 1, 2011, were fully and unconditionally guaranteed by MBC. In September 2010, Mohegan Ventures, LLC, a subsidiary of the Tribe, surrendered its membership interest in WTG to MVW. Accordingly, MVW now holds 100% membership interest in WTG. Separate financial statements and other disclosures concerning the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, 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 8 are adequate for investor analysis of these subsidiaries. Condensed consolidating financial statement information for the Authority, its guarantor subsidiaries and non-guarantor entities as of December 31, 2011 and September 30, 2011 and for the three months ended December 31, 2011 and 2010 is as follows (in thousands):

CONDENSED CONSOLIDATING BALANCE SHEETS 
 
December 31, 2011
 
Authority
 
Total
Guarantor
Subsidiaries (1)
 
Total  Non Guarantor
Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Property and equipment, net
$
1,259,623

 
$
244,162

 
$
19,951

 
$
—

 
$
1,523,736

Intercompany receivables
513,368

 
13,104

 
—

 
(526,472
)
 
—

Investment in subsidiaries
72,946

 
2,064

 
—

 
(75,010
)
 
—

Other intangible assets, net
120,708

 
285,527

 
—

 
—

 
406,235

Other assets, net
149,638

 
73,774

 
27,550

 
—

 
250,962

Total assets
$
2,116,283

 
$
618,631

 
$
47,501

 
$
(601,482
)
 
$
2,180,933

LIABILITIES AND CAPITAL
 
 
 
 
 
 
 
 
 
Current liabilities
$
986,005

 
$
32,630

 
$
18,940

 
$
—

 
$
1,037,575

Due to Mohegan Tribe
—

 
—

 
11,250

 
—

 
11,250

Long-term debt and capital leases, net of current portions
823,832

 
—

 
—

 
—

 
823,832

Relinquishment liability, net of current portion
98,964

 
—

 
—

 
—

 
98,964

Intercompany payables
—

 
513,369

 
13,103

 
(526,472
)
 
—

Other long-term liabilities
2,762

 
—

 
—

 
—

 
2,762

Total liabilities
1,911,563

 
545,999

 
43,293

 
(526,472
)
 
1,974,383

Mohegan Tribal Gaming Authority capital
204,720

 
72,632

 
4,208

 
(77,156
)
 
204,404

Non-controlling interests
—

 
—

 
—

 
2,146

 
2,146

Total liabilities and capital
$
2,116,283

 
$
618,631

 
$
47,501

 
$
(601,482
)
 
$
2,180,933

___________
(1)   Includes the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)   Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.


19
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
September 30, 2011
 
Authority    
 
Total
Guarantor
Subsidiaries (1) 
 
Total Non Guarantor  
Entities (2)
 
Consolidating/
   Eliminating
Adjustments
 
Consolidated  
ASSETS
 
 
 
 
 
 
 
 
 
Property and equipment, net
$
1,263,876

 
$
245,768

 
$
19,951

 
$
—

 
$
1,529,595

Intercompany receivables
509,799

 
12,909

 
—

 
(522,708
)
 
—

Investment in subsidiaries
77,028

 
2,233

 
—

 
(79,261
)
 
—

Other intangible assets, net
120,737

 
285,601

 
—

 
—

 
406,338

Other assets, net
168,178

 
71,951

 
27,134

 
—

 
267,263

Total assets
$
2,139,618

 
$
618,462

 
$
47,085

 
$
(601,969
)
 
$
2,203,196

LIABILITIES AND CAPITAL
 
 
 
 
 
 
 
 
 
Current liabilities
$
1,006,018

 
$
31,950

 
$
18,773

 
$
—

 
$
1,056,741

Due to Mohegan Tribe
—

 
—

 
10,850

 
—

 
10,850

Long-term debt and capital leases, net of current portions
823,951

 
—

 
—

 
—

 
823,951

Relinquishment liability, net of current portion
110,348

 
—

 
—

 
—

 
110,348

Intercompany payables
—

 
509,799

 
12,909

 
(522,708
)
 
—

Other long-term liabilities
2,582

 
—

 
—

 
—

 
2,582

Total liabilities
1,942,899

 
541,749

 
42,532

 
(522,708
)
 
2,004,472

Mohegan Tribal Gaming Authority capital
196,719

 
76,713

 
4,553

 
(81,582
)
 
196,403

Non-controlling interests
—

 
—

 
—

 
2,321

 
2,321

Total liabilities and capital
$
2,139,618

 
$
618,462

 
$
47,085

 
$
(601,969
)
 
$
2,203,196

___________
(1)
Includes the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
 
For the Three Months Ended December 31, 2011
 
Authority  
 
Total
Guarantor
Subsidiaries (1)
 
Total Non Guarantor
Entities (2)
 
Consolidating/
Eliminating
Adjustments
 
Consolidated
Net revenues
$
273,781

 
$
78,096

 
$
—

 
$
(1
)
 
$
351,876

Operating costs and expenses:
 
 
 
 

 

 

Gaming and other operations
167,132

 
56,583

 
—

 
(1
)
 
223,714

Advertising, general and administrative
44,803

 
8,012

 
676

 
—

 
53,491

Depreciation and amortization
16,886

 
4,017

 
—

 
—

 
20,903

(Gain) loss on disposition of assets
(21
)
 
279

 
—

 
—

 
258

Total operating costs and expenses
228,800

 
68,891

 
676

 
(1
)
 
298,366

Income (loss) from operations
44,981

 
9,205

 
(676
)
 
—

 
53,510

Accretion of discount to the relinquishment liability
(2,062
)
 
—

 
—

 
—

 
(2,062
)
Interest expense
(14,507
)
 
(13,737
)
 
(736
)
 
171

 
(28,809
)
Loss on interests in subsidiaries
(4,671
)
 
(316
)
 
—

 
4,987

 
—

Other income, net
261

 
177

 
767

 
(171
)
 
1,034

Net income (loss)
24,002

 
(4,671
)
 
(645
)
 
4,987

 
23,673

Loss attributable to non-controlling interests
—

 
—

 
—

 
329

 
329

Net income (loss) attributable to Mohegan Tribal Gaming Authority
$
24,002

 
$
(4,671
)
 
$
(645
)
 
$
5,316

 
$
24,002

___________
(1)
Includes the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.

 

20
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
For the Three Months Ended December 31, 2010
 
Authority
 
MBC 100% Owned
Guarantor Subsidiary  
 
Other
100% 
Owned
Guarantor Subsidiaries (1)  
 
Total
Guarantor
  Subsidiaries  
 
Total Non
Guarantor Entities (2)  
 
Consolidating/
Eliminating
Adjustments  
 
Consolidated  
Net revenues
$
263,821

 
$
10

 
$
71,775

 
$
71,785

 
$
—

 
$
(1
)
 
$
335,605

Operating costs and expenses:
 
 

 

 
 
 

 

 

Gaming and other operations
160,061

 
324

 
52,371

 
52,695

 
—

 
(1
)
 
212,755

Advertising, general and administrative
45,843

 
186

 
7,888

 
8,074

 
913

 
—

 
54,830

Depreciation and amortization
17,758

 
47

 
5,410

 
5,457

 
—

 
—

 
23,215

Severance
521

 
—

 
—

 
—

 
—

 
—

 
521

Total operating costs and expenses
224,183

 
557

 
65,669

 
66,226

 
913

 
(1
)
 
291,321

Income (loss) from operations
39,638

 
(547
)
 
6,106

 
5,559

 
(913
)
 
—

 
44,284

Accretion of discount to the relinquishment liability
(2,842
)
 
—

 
—

 
—

 
—

 
—

 
(2,842
)
Interest expense
(15,684
)
 
(5
)
 
(13,526
)
 
(13,531
)
 
(693
)
 
162

 
(29,746
)
Loss on interests in subsidiaries
(8,234
)
 
—

 
(432
)
 
(432
)
 
—

 
8,666

 
—

Other income, net
52

 
—

 
170

 
170

 
725

 
(162
)
 
785

Net income (loss)
12,930

 
(552
)
 
(7,682
)
 
(8,234
)
 
(881
)
 
8,666

 
12,481

Loss attributable to non-controlling interests
—

 
—

 
—

 
—

 
—

 
449

 
449

Net income (loss) attributable to Mohegan Tribal Gaming Authority
$
12,930

 
$
(552
)
 
$
(7,682
)
 
$
(8,234
)
 
$
(881
)
 
$
9,115

 
$
12,930

___________
(1)
Includes the Pennsylvania Entities, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
 
For the Three Months Ended December 31, 2011
 
Authority
 
Total
Guarantor
Subsidiaries (1)
 
Total Non
Guarantor
 Entities (2)  
 
Consolidating/
Eliminating
  Adjustments  
 
Consolidated  
Net cash flows provided by (used in) operating activities
$
31,434

 
$
16,631

 
$
(584
)
 
$
—

 
$
47,481

Cash flows provided by (used in) investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
(16,060
)
 
(2,654
)
 
—

 
—

 
(18,714
)
Other cash flows provided by (used in) investing activities
10,060

 
(627
)
 
(173
)
 
(9,943
)
 
(683
)
Net cash flows used in investing activities
(6,000
)
 
(3,281
)
 
(173
)
 
(9,943
)
 
(19,397
)
Cash flows provided by (used in) financing activities:
 
 
 
 
 
 
 
 
 
Bank Credit Facility borrowings—revolving loan
67,000

 
—

 
—

 
—

 
67,000

Bank Credit Facility repayments—revolving loan
(97,000
)
 
—

 
—

 
—

 
(97,000
)
Line of Credit borrowings
139,827

 
—

 
—

 
—

 
139,827

Line of Credit repayments
(132,726
)
 
—

 
—

 
—

 
(132,726
)
Principal portion of relinquishment liability payments
(5,909
)
 
—

 
—

 
—

 
(5,909
)
Distributions to Mohegan Tribe
(17,969
)
 
—

 
—

 
—

 
(17,969
)
Other cash flows provided by (used in) financing activities
(2,489
)
 
(9,918
)
 
725

 
9,943

 
(1,739
)
Net cash flows provided by (used in) financing activities
(49,266
)
 
(9,918
)
 
725

 
9,943

 
(48,516
)
Net increase (decrease) in cash and cash equivalents
(23,832
)
 
3,432

 
(32
)
 
—

 
(20,432
)
Cash and cash equivalents at beginning of period
89,018

 
22,931

 
225

 
—

 
112,174

Cash and cash equivalents at end of period
$
65,186

 
$
26,363

 
$
193

 
$
—

 
$
91,742

___________
(1)
Includes the Pennsylvania Entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.

21
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

 
For the Three Months Ended December 31, 2010
 
Authority
 
MBC 100% Owned Guarantor Subsidiary
 
Other 100% Owned Guarantor Subsidiaries (1)
 
Total Guarantor Subsidiaries
 
Total
Non Guarantor Entities (2)
 
Consolidating/Eliminating Adjustments
 
Consolidated
Net cash flows provided by (used in) operating activities
$
25,381

 
$
(225
)
 
$
12,572

 
$
12,347

 
$
(2,803
)
 
$
—

 
$
34,925

Cash flows provided by (used in) investing activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
(9,729
)
 
—

 
(6,128
)
 
(6,128
)
 
—

 
—

 
(15,857
)
Other cash flows provided by (used in) investing activities
2,667

 
—

 
(1,370
)
 
(1,370
)
 
(196
)
 
(2,561
)
 
(1,460
)
Net cash flows used in investing activities
(7,062
)
 
—

 
(7,498
)
 
(7,498
)
 
(196
)
 
(2,561
)
 
(17,317
)
Cash flows provided by (used in) financing activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Bank Credit Facility borrowings - revolving loan
96,000

 
—

 
—

 
—

 
—

 
—

 
96,000

Bank Credit Facility repayments - revolving loan
(80,000
)
 
—

 
—

 
—

 
—

 
—

 
(80,000
)
Line of Credit borrowings
137,784

 
—

 
—

 
—

 
—

 
—

 
137,784

Line of Credit repayments
(134,455
)
 
—

 
—

 
—

 
—

 
—

 
(134,455
)
Principal portion of relinquishment liability payments
(5,544
)
 
—

 
—

 
—

 
—

 
—

 
(5,544
)
Distributions to Mohegan Tribe
(4,507
)
 
—

 
—

 
—

 
—

 
—

 
(4,507
)
Other cash flows provided by (used in) financing activities
(1,448
)
 
261

 
(2,810
)
 
(2,549
)
 
2,804

 
2,561

 
1,368

Net cash flows provided by (used in) financing activities
7,830

 
261

 
(2,810
)
 
(2,549
)
 
2,804

 
2,561

 
10,646

Net increase (decrease) in cash and cash equivalents
26,149

 
36

 
2,264

 
2,300

 
(195
)
 
—

 
28,254

Cash and cash equivalents at beginning of period
39,146

 
(49
)
 
24,366

 
24,317

 
434

 
—

 
63,897

Cash and cash equivalents at end of period
$
65,295

 
$
(13
)
 
$
26,630

 
$
26,617

 
$
239

 
$
—

 
$
92,151

___________
(1)
Includes the Pennsylvania Entities, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
(2)
Includes Salishan-Mohegan, MG&H and Mohegan Resorts and subsidiaries.




22
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

NOTE 10—SUBSEQUENT EVENTS:
On January 24, 2012, the Authority announced the commencement of several refinancing transactions designed to extend the maturity dates of the Authority's outstanding debt, including (1) a private offer to exchange all of the Authority's outstanding notes for new notes and a related solicitation of consents to certain amendments to the outstanding notes and indentures governing them, (2) an amendment and restatement of the Bank Credit Facility to, among other things, reduce the size thereof from $675.0 million to $475.0 million and extend the maturity date thereof from March 9, 2012 to March 31, 2015 and (3) the issuance and sale of approximately $225.0 million in principal amount of new first lien secured debt in a private placement transaction, the proceeds of which would be utilized to reduce the size of the Bank Credit Facility. Each of these transactions is subject to numerous conditions and contingencies, which may be waived by the Authority at any time. As of the date hereof, these conditions have not yet been satisfied or waived, and the Authority cannot predict whether any or all of these transactions will be consummated on their announced terms or at all. The private exchange offers are currently scheduled to expire on February 22, 2012, subject to extensions by the Authority.



23

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Some information included in this Quarterly Report on Form 10-Q and other materials filed by us with the Securities and Exchange Commission, or the SEC, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. Such statements include information relating to business development activities, as well as capital spending, financing sources and the effects of regulation, including gaming and tax regulation, and increased competition. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect” or “intend” and similar expressions. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated future results, and accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on our behalf. These risks and uncertainties include, but are not limited to, those relating to the following:

•
the financial performance of Mohegan Sun and Mohegan Sun at Pocono Downs and the Pennsylvania off-track wagering facilities;
•
our leverage and ability to meet our debt obligations and maintain compliance with financial covenant requirements;
•
the availability of financing, including the success, or lack thereof, of the refinancing transactions referenced herein and our ability to complete any or all of such transactions on the anticipated terms or at all;
•
the local, regional, national or global economic climate, including the lingering effects of the economic recession;
•
increased competition, including the expansion of gaming in New England, New York, New Jersey or Pennsylvania;
•
our dependence on existing management;
•
our ability to integrate new amenities from expansions to our facilities into our current operations and manage the expanded facilities;
•
changes in federal or state tax laws or the administration of such laws;
•
changes in gaming laws or regulations, including the limitation, denial or suspension of licenses required under gaming laws and regulations;
•
changes in applicable laws pertaining to the service of alcohol, smoking or other amenities offered at Mohegan Sun and Mohegan Sun at Pocono Downs;
•
our ability to successfully implement our diversification strategy;
•
an act of terrorism on the United States;
•
our customers' access to inexpensive transportation to our facilities and increases in oil, fuel or other transportation-related expenses; and
•
unfavorable weather conditions.
Additional information concerning potential factors that could affect our financial results is included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, as well as our other reports and filings with the SEC. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent events or circumstances, except as required by law. We cannot assure you that projected results or events will be achieved or will occur.
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes beginning on page 3 of this Quarterly Report on Form 10-Q.

Sufficiency of Resources

We have significant outstanding indebtedness and financial commitments. As of December 31, 2011, our debt totaled $1.6 billion, of which $788.6 million matures within the next twelve months, including $505.0 million outstanding under our bank credit facility which matures on March 9, 2012 and our $250.0 million 8% senior subordinated notes which mature on April 1, 2012. In addition, a substantial amount of our other outstanding indebtedness matures over the following three fiscal years. We do not anticipate that cash flows from operations and cash on hand will be sufficient to repay amounts outstanding under the bank credit facility or the $250.0 million 8% senior subordinated notes at maturity. Accordingly, we have determined that we will need to refinance such outstanding indebtedness or otherwise access the debt capital markets to replace such outstanding indebtedness prior to their maturity in order to maintain sufficient resources for our operations. In this regard, on January 24, 2012, we commenced a series of refinancing transactions, including the refinancing of the bank credit facility and the $250.0 million 8% senior subordinated notes. However, as of the date of this filing we have not yet completed these refinancing transactions. The conditions and events described above and the current uncertainty relating to the refinancing of our fiscal 2012 maturities raise substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements have been prepared under the assumption that we will continue as a going concern. In addition, our condensed consolidated financial statements do not

24

include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

Our ability to timely refinance or replace our outstanding indebtedness depends upon the willingness of banks and investors to lend to us, our credit rating and capital market conditions. We may need to obtain waivers or consents from our lenders in order to execute our refinancing plans on satisfactory terms; however, we can provide no assurance that we would be able to obtain such waivers or consents. If we are unable to obtain waivers or consents or unable to refinance or replace the bank credit facility or the $250.0 million 8% senior subordinated notes or any of our other outstanding indebtedness at or prior to their respective maturities, we would be in default thereof, which may result in cross-defaults under our other outstanding indebtedness. If such defaults or cross-defaults were to occur, it would allow our lenders and creditors to exercise their rights and remedies as defined under their respective agreements, including their right to accelerate the repayment of our outstanding indebtedness. In such event, we would not have sufficient available funds to repay such accelerated indebtedness and our ability to otherwise refinance or replace our outstanding indebtedness is limited. If such acceleration were to occur, we can provide no assurance that we would be able to obtain the financing necessary for such repayment and may have to adopt one or more alternative strategies, such as reducing or delaying planned capital expenditures, disposing of some of our assets and/or seeking to restructure some or all of our outstanding indebtedness. Such financing strategies may not be sufficient or effected on satisfactory terms, if at all.
 
In addition, if our pro forma fixed charge coverage ratio, as defined under our senior and senior subordinated note indentures, was to fall below 2.0 to 1.0, we would be unable to refinance our outstanding subordinated indebtedness with senior indebtedness without waivers or consents from certain of our creditors, thus limiting the options available to us to refinance or replace our outstanding indebtedness. In such event, we can provide no assurance that we would be able to obtain such waivers or consents or that we would be able to refinance or replace our outstanding indebtedness or that financing options available, if any, would be on favorable or acceptable terms. As of December 31, 2011, our fixed charge coverage ratio was above 2.0 to 1.0.

Inclusive of letters of credit, which reduce borrowing availability under the bank credit facility, and after taking into account restrictive financial covenant requirements under the bank credit facility, line of credit and note indentures, we had approximately $62.1 million of borrowing capacity under the bank credit facility as of December 31, 2011.

Overview
The Tribe and the Authority
The Mohegan Tribe of Indians of Connecticut, or the Mohegan Tribe or the Tribe, is a federally-recognized Indian tribe with an approximately 507-acre reservation situated in Southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988, or IGRA, federally-recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal land, 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. We were established as an instrumentality of the Tribe, 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. Our gaming operation at Mohegan Sun is one of only two legally authorized gaming operations in New England offering traditional slot machines and table games. Through our subsidiary, Downs Racing, L.P., or Downs Racing, we also own and operate Mohegan Sun at Pocono Downs, a gaming and entertainment facility located in Plains Township, Pennsylvania, and several off-track wagering facilities, or OTW facilities, located elsewhere in Pennsylvania, collectively the Pennsylvania entities. We are 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 our Management Board.
Mohegan Sun
In October 1996, we opened a gaming and entertainment complex known as Mohegan Sun. Mohegan Sun is located on a 185-acre site on the Tribe's reservation overlooking the Thames River with direct access from Interstate 395 and Connecticut Route 2A. Mohegan Sun is approximately 125 miles from New York City, New York, and approximately 100 miles from Boston, Massachusetts. In 2002, we completed a major expansion of Mohegan Sun known as Project Sunburst, which included increased gaming, restaurant and retail space, an entertainment arena, an approximately 1,200-room luxury Sky Hotel Tower and approximately 100,000 square feet of convention space. In 2007, we opened Sunrise Square, and, in 2008, we opened Casino of the Wind.



25

Mohegan Sun currently operates in an approximately 3.1 million square-foot facility, which includes the following:
Casino of the Earth
As of December 31, 2011, Casino of the Earth offered:
•
approximately 188,000 square feet of gaming space;
•
approximately 3,230 slot machines and 180 table games, including blackjack, roulette and craps;
•
Sunrise Square, a 9,800-square-foot Asian-themed gaming area;
•
an approximately 9,000-square-foot simulcasting Racebook facility;
•
food and beverage amenities, including: Seasons Buffet, a 784-seat multi-station buffet with live cooking stations, Birches Bar & Grill, a Hong Kong-style food outlet offering authentic Southeast Asian cuisine, Bobby Flay's Bobby's Burger Palace and multiple service bars, all operated by us, as well as Ballo Italian Restaurant & Social Club, Frank Pepe Pizzeria Napoletana and Fidelia's Market, an approximately 290-seat multi-station food court, operated by third-parties, for a total seating of approximately 1,700;
•
four Mohegan Sun-owned retail shops, offering products ranging from Mohegan Sun logo souvenirs to cigars; and
•
the Wolf Den, an approximately 10,000-square-foot, 400-seat lounge featuring live entertainment seven days a week.
Casino of the Sky
As of December 31, 2011, Casino of the Sky offered:
•
approximately 119,000 square feet of gaming space;
•
approximately 2,160 slot machines and 105 table games, including blackjack, roulette and craps;
•
food and beverage amenities, including: Todd English's Tuscany, Bobby Flay's Bar Americain, a 24-hour coffee shop and four lounges and bars, all operated by us, as well as five full-service restaurants, three quick-service restaurants and a multi-station food court operated by third-parties, for a total seating of approximately 2,350;
•
The Shops at Mohegan Sun containing 32 retail shops, seven of which we own;
•
the Mohegan Sun Arena with seating for up to 10,000;
•
an approximately 1,200-room luxury Sky Hotel Tower, including a private high-limit table games suite;
•
Mohegan After Dark, consisting of Ultra 88, a nightclub, Lucky's Lounge and Dubliner, an Irish pub, all operated by a third-party;
•
an approximately 20,000-square-foot spa operated by a third-party;
•
approximately 100,000 square feet of convention space; and
•
a child care facility and an arcade-style entertainment area operated by a third-party.
Casino of the Wind
As of December 31, 2011, Casino of the Wind offered:
•
approximately 45,000 square feet of gaming space;
•
approximately 725 slot machines, 30 table games, including blackjack, roulette and craps, and a 42-table themed poker room;
•
food and beverage amenities, including: a two-level, 16,000-square-foot Jimmy Buffett's Margaritaville Restaurant, operated by a third-party, and Chief's Deli, a casual dining restaurant, and a bar, both operated by us, for a total seating of approximately 450; and
•
a retail shop operated by a third-party.
Mohegan Sun offers parking for approximately 13,000 patrons and 3,900 employees. In addition, we operate a gasoline and convenience center, an approximately 3,600-square-foot, 20-pump facility located adjacent to Mohegan Sun.
Mohegan Basketball Club
We formed Mohegan Basketball Club, LLC, or MBC, to own and operate a professional basketball team in the Women's National Basketball Association, or the WNBA. In January 2003, MBC entered into a membership agreement with the WNBA permitting it to operate the Connecticut Sun basketball team. The team plays its home games in the Mohegan Sun Arena.

26

Mohegan Golf
We formed Mohegan Golf, LLC, or Mohegan Golf, to purchase and operate a golf course in Southeastern Connecticut. In May 2007, Mohegan Golf acquired substantially all of the assets of Pautipaug Country Club, Inc., which included a golf course in Sprague and Franklin, Connecticut. The golf course was renamed Mohegan Sun Country Club at Pautipaug and reopened under the ownership of Mohegan Golf in June 2007. In August 2010, the golf course and related facilities were temporarily closed for renovations and are scheduled to re-open in the spring of 2012.
Mohegan Sun at Pocono Downs
Through Downs Racing, we own and operate a gaming and entertainment facility known as Mohegan Sun at Pocono Downs located on a 400-acre site in Plains Township, Pennsylvania, and OTW facilities located in Carbondale, East Stroudsburg and Lehigh Valley, Pennsylvania. In November 2006, Mohegan Sun at Pocono Downs became the first location to offer slot machine gaming in the Commonwealth of Pennsylvania when Phase I of its gaming and entertainment facility opened. In July 2008, we completed a major expansion of Mohegan Sun at Pocono Downs known as Project Sunrise, which included increased gaming, restaurant and retail space. In July 2010, Mohegan Sun at Pocono Downs opened its table game and poker operations, including additional non-smoking sections and a high-limit gaming area.
As of December 31, 2011, Mohegan Sun at Pocono Downs operates in an approximately 400,000-square-foot facility, which included the following:
•
approximately 82,000 square feet of gaming space;
•
approximately 2,330 slot machines, 66 table games, including blackjack, roulette and craps, and an 18-table poker room;
•
live harness racing and simulcast and off-track wagering;
•
food and beverage amenities, including: Ruth's Chris Steakhouse, Rustic Kitchen Bistro and Bar, which features dining and a live cooking show, Bar Louie, a casual bar and restaurant, Timbers Buffet, a 300-seat Mohegan Indian cultural heritage themed multi-station buffet, and a food court, including: Johnny Rockets, Hot Dog Hall of Fame, Puck Express by Wolfgang Puck and Ben & Jerry's Ice Cream, for a total seating of approximately 1,800;
•
five retail shops, one of which we own, offering products ranging from Mohegan Sun at Pocono Downs logo souvenirs to fine apparel; and
•
three bars/lounges: Sunburst Bar, featured in the center of the gaming floor, Breakers Night Club and Pearl Sushi Bar.
Market and Competition from Other Gaming Operations

Our gaming operation at Mohegan Sun is one of only two current gaming operations in New England offering traditional slot machines and table games, with the other operation being our sole gaming competitor in Connecticut, Foxwoods Resort Casino, or Foxwoods, owned by the Mashantucket Pequot Tribe and located approximately 10 miles from Mohegan Sun. We also face competition from racino and video lottery terminal facilities in the states of Rhode Island and New York and gaming facilities in the states of New York and New Jersey. In addition, we face competition in and from the Northeastern Pennsylvania gaming market, both in the immediate market for Mohegan Sun at Pocono Downs, and for Mohegan Sun, in marketing and attracting patrons from the New York City metropolitan region. Please refer to “Part I. Item 1. Business-Market and Competition from Other Gaming Operations” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011 and our other reports and filings with the SEC for further details regarding current and potential competition from other gaming operations.
Explanation of Key Financial Statement Captions
There has been no material change from the explanation of key financial statement captions previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011.


Results of Operations
Summary Operating Results
As of December 31, 2011, we own and operate either directly or through wholly-owned subsidiaries Mohegan Sun, the Connecticut Sun WNBA franchise and the Mohegan Sun Country Club, or collectively, the Connecticut entities, and the Pennsylvania entities. All of our revenues are derived from these operations. The Connecticut Sun WNBA franchise and the Mohegan Sun Country Club are aggregated with the Mohegan Sun operating segment because these operations all share similar

27

economic characteristics, which is to generate gaming and entertainment revenues by attracting patrons to Mohegan Sun. Our executive officers review and assess the performance and operating results and determine the proper allocation of resources to the Connecticut entities and the Pennsylvania entities on a separate basis. We, therefore, believe that we have two separate reportable segments: (1) Mohegan Sun, which includes the operations of the Connecticut entities, and (2) Mohegan Sun at Pocono Downs, which includes the operations of the Pennsylvania entities.
The following table summarizes our results on a property basis (in thousands, except where noted):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance    
 
Percentage
Variance    
Net revenues:
 
 
 
 
 
 
 
Mohegan Sun
$
273,898

 
$
263,830

 
$
10,068

 
3.8
 %
Mohegan Sun at Pocono Downs
77,978

 
71,775

 
6,203

 
8.6
 %
Total
$
351,876

 
$
335,605

 
$
16,271

 
4.8
 %
Income (loss) from operations:
 
 
 
 
 
 
 
Mohegan Sun
$
46,993

 
$
42,544

 
$
4,449

 
10.5
 %
Mohegan Sun at Pocono Downs
10,032

 
6,319

 
3,713

 
58.8
 %
Corporate
(3,515
)
 
(4,579
)
 
1,064

 
(23.2
)%
Total
$
53,510

 
$
44,284

 
$
9,226

 
20.8
 %
Net income attributable to Mohegan Tribal Gaming Authority
$
24,002

 
$
12,930

 
$
11,072

 
85.6
 %
Operating margin:
 
 
 
 
 
 
 
Mohegan Sun
17.2
%
 
16.1
%
 
1.1
%
 
6.8
 %
Mohegan Sun at Pocono Downs
12.9
%
 
8.8
%
 
4.1
%
 
46.6
 %
Total
15.2
%
 
13.2
%
 
2.0
%
 
15.2
 %

The most significant factors and trends that we believe impacted our financial performance were as follows:
•
higher table games hold percentage at Mohegan Sun;
•
changes in promotional offers designed to improve profitability;
•
strong patron response to promotional offers at Mohegan Sun at Pocono Downs;
•
additional costs related to Mohegan Sun's 15th anniversary festivities for casino patrons; and
•
continued focus on managing expenses and enhancing operating efficiencies.

Net revenues for the three months ended December 31, 2011 compared to the same period in the prior year increased as a result of increases in gaming and non-gaming revenues at both Mohegan Sun and Mohegan Sun at Pocono Downs.
Income from operations for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily due to the growth in net revenues, combined with lower depreciation and Corporate expenses. The increase in income from operations also reflects changes in our promotional offers designed to improve profitability, as well as our continued focus on managing expenses and enhancing operating efficiencies.
Net income attributable to the Authority for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily as a result of the growth in income from operations, combined with lower interest expense.
Mohegan Sun
Gross Revenues
Gross revenues consisted of the following (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance    
 
Percentage
Variance
Gaming
$
243,548

 
$
239,724

 
$
3,824

 
1.6
%
Food and beverage
17,264

 
16,147

 
1,117

 
6.9
%
Hotel
9,118

 
8,997

 
121

 
1.3
%
Retail, entertainment and other
25,673

 
20,844

 
4,829

 
23.2
%
Total
$
295,603

 
$
285,712

 
$
9,891

 
3.5
%


28

The following table summarizes the percentage of gross revenues from each of the four revenue sources:
 
For the Three Months Ended December 31,
 
2011
 
2010
Gaming
82.4
%
 
83.9
%
Food and beverage
5.8
%
 
5.7
%
Hotel
3.1
%
 
3.1
%
Retail, entertainment and other
8.7
%
 
7.3
%
Total
100.0
%
 
100.0
%

The following table presents data related to gaming operations (in thousands, except where noted):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage Variance
Slots:
 
 
 
 
 
 
 
Handle
$
2,064,371

 
$
2,120,579

 
$
(56,208
)
 
(2.7
)%
Gross revenues
$
170,814

 
$
169,356

 
$
1,458

 
0.9
 %
Net revenues
$
163,776

 
$
163,217

 
$
559

 
0.3
 %
Free promotional slot plays (1)
$
13,807

 
$
12,370

 
$
1,437

 
11.6
 %
Weighted average number of machines (in units)
6,238

 
6,404

 
(166
)
 
(2.6
)%
Hold percentage (gross)
8.3
%
 
8.0
%
 
0.3
%
 
3.8
 %
Win per unit per day (gross) (in dollars)
$
298

 
$
287

 
$
11

 
3.8
 %
Table games:
 
 
 
 
 
 
 
Drop
$
505,391

 
$
504,359

 
$
1,032

 
0.2
 %
Revenues
$
74,947

 
$
71,542

 
$
3,405

 
4.8
 %
Weighted average number of games (in units)
314

 
331

 
(17
)
 
(5.1
)%
Hold percentage (2)
14.8
%
 
14.2
%
 
0.6
%
 
4.2
 %
Win per unit per day (in dollars)
$
2,592

 
$
2,351

 
$
241

 
10.3
 %
Poker:
 
 
 
 
 
 
 
Revenues
$
3,016

 
$
2,967

 
$
49

 
1.7
 %
Weighted average number of tables (in units)
42

 
42

 
—

 
—

Revenue per unit per day (in dollars)
$
781

 
$
768

 
$
13

 
1.7
 %
__________
(1)
Free promotional slot plays are included in slot handle, but not reflected in slot revenues.
(2)
Table games hold percentage is relatively predictable over longer periods of time, but can significantly fluctuate over shorter periods.

Gaming revenues for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily as a result of higher table game revenues. The increase in table game revenues resulted from higher table games hold percentage, combined with the slight increase in table games drop. Slot revenues increased slightly due to the increase in slot hold percentage reflecting changes in our slot mix on the gaming floor during the period. These results also reflect the impact of changes in our promotional offers designed to improve profitability.
The following table presents data related to food and beverage operations (in thousands, except where noted):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Meals served
819

 
846

 
(27
)
 
(3.2
)%
Average price per meal served (in dollars)
$
16.79

 
$
15.17

 
$
1.62

 
10.7
 %

Food and beverage revenues for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily due to the increase in the average price per meal served resulting, in part, from the July 2011 re-opening of the renovated Season's Buffet featuring expanded offerings. The reduction in the number of meals served reflects the replacement of certain Mohegan Sun-owned outlets with third-party operators and the September 2011 opening of Ballo Italian Restaurant & Social Club, a third-party restaurant.

29

The following table presents data related to hotel operations (in thousands, except where noted): 
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Rooms occupied
102

 
103

 
(1
)
 
(1.0
)%
Occupancy rate
94.0
%
 
95.4
%
 
(1.4
)%
 
(1.5
)%
Average daily room rate (in dollars)
$
86

 
$
84

 
$
2

 
2.4
 %
Revenue per available room (in dollars)
$
81

 
$
80

 
$
1

 
1.3
 %

Hotel revenues for the three months ended December 31, 2011 compared to the same period in the prior year increased as a result of the increase in average daily room rate, reflecting a shift in hotel occupancy to transient guests from casino business.
The following table presents data related to entertainment operations (in thousands, except where noted):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Arena events (in events)
27

 
23

 
4

 
17.4
%
Arena tickets
155

 
119

 
36

 
30.3
%
Average price per Arena ticket (in dollars)
$
53.22

 
$
45.79

 
$
7.43

 
16.2
%

Retail, entertainment and other revenues for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily due to a $3.0 million increase in entertainment revenues. The growth in entertainment revenues resulted from the increases in arena tickets sold and the average price per arena ticket. These results reflect the increase in events at the Mohegan Sun Arena during the period, including an additional headliner show. The increase in retail, entertainment and other revenues also reflects additional gasoline revenues from the September 2011 opening of our employee gas station.

Promotional Allowances
The retail value of providing promotional allowances was included in revenues as follows (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Food and beverage
$
7,150

 
$
7,229

 
$
(79
)
 
(1.1
)%
Hotel
3,627

 
3,968

 
(341
)
 
(8.6
)%
Retail, entertainment and other
10,928

 
10,685

 
243

 
2.3
 %
Total
$
21,705

 
$
21,882

 
$
(177
)
 
(0.8
)%
The estimated cost of providing promotional allowances was included in gaming costs and expenses as follows (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Food and beverage
$
6,840

 
$
7,313

 
$
(473
)
 
(6.5
)%
Hotel
2,096

 
2,430

 
(334
)
 
(13.7
)%
Retail, entertainment and other
10,212

 
9,000

 
1,212

 
13.5
 %
Total
$
19,148

 
$
18,743

 
$
405

 
2.2
 %

Promotional allowances for the three months ended December 31, 2011 compared to the same period in the prior year declined primarily due to lower redemptions under the Player's Club program.





30

Operating Costs and Expenses
Operating costs and expenses consisted of the following (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Gaming
$
144,782

 
$
143,075

 
$
1,707

 
1.2
 %
Food and beverage
8,920

 
8,254

 
666

 
8.1
 %
Hotel
3,277

 
3,166

 
111

 
3.5
 %
Retail, entertainment and other
10,459

 
5,910

 
4,549

 
77.0
 %
Advertising, general and administrative
42,477

 
42,498

 
(21
)
 
—
 %
Depreciation and amortization
17,011

 
17,863

 
(852
)
 
(4.8
)%
Gain on disposition of assets
(21
)
 
—

 
(21
)
 
100.0
 %
Severance
—

 
520

 
(520
)
 
(100.0
)%
Total
$
226,905

 
$
221,286

 
$
5,619

 
2.5
 %

Gaming costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily as a result of higher costs related to Player's Club point redemptions at Mohegan Sun-owned facilities and increased promotional expenditures, resulting, in part, from our 15th anniversary festivities for casino patrons. These results were partially offset by lower payroll costs and reduced utilization of Player's Club points at third-party outlets. Expenses associated with the combined Slot Win Contribution and free promotional slot play contribution totaled $43.4 million and $43.1 million for the three months ended December 31, 2011 and 2010, respectively. Gaming costs and expenses as a percentage of gaming revenues were 59.5% and 59.7% for the three months ended December 31, 2011 and 2010, respectively.

Food and beverage costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily due to higher cost of goods sold commensurate with the increase in food and beverage revenues. The increase in food and beverage costs and expenses also reflects decreased use of food and beverage complimentaries, resulting in lower amounts of food and beverage costs being allocated to gaming costs and expenses, partially offset by reduced payroll costs.
Hotel costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily as a result of decreased use of hotel complimentaries, resulting in lower amounts of hotel costs being allocated to gaming costs and expenses, partially offset by reduced payroll costs.
Retail, entertainment and other costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily due to higher direct entertainment costs resulting from the increase in events at the Mohegan Sun Arena during the period, including an additional headliner show. The increase in retail, entertainment and other costs and expenses also reflects higher gasoline cost of goods sold commensurate with the increase in gasoline revenues. These results were partially offset by increased use of retail, entertainment and other complimentaries, resulting in higher amounts of retail, entertainment and other costs and expenses being allocated to gaming costs and expenses.
Advertising, general and administrative costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year were flat reflecting our continued focus on managing expenses.
Mohegan Sun at Pocono Downs
Gross Revenues
Gross revenues consisted of the following (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Gaming
$
73,984

 
$
67,933

 
$
6,051

 
8.9
%
Food and beverage
6,112

 
5,847

 
265

 
4.5
%
Retail, entertainment and other
1,920

 
1,602

 
318

 
19.9
%
Total
$
82,016

 
$
75,382

 
$
6,634

 
8.8
%




31

The following table summarizes the percentage of gross revenues from each of the three revenue sources:
 
For the Three Months Ended December 31,
 
2011
 
2010
Gaming
90.2
%
 
90.1
%
Food and beverage
7.5
%
 
7.8
%
Retail, entertainment and other
2.3
%
 
2.1
%
Total
100.0
%
 
100.0
%
The following table presents data related to gaming operations (in thousands, except where noted):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Slots:
 
 
 
 
 
 
 
Handle
$
736,959

 
$
689,358

 
$
47,601

 
6.9
 %
Gross revenues
$
59,159

 
$
53,658

 
$
5,501

 
10.3
 %
Net revenues
$
59,136

 
$
53,652

 
$
5,484

 
10.2
 %
Free promotional slot plays (1)
$
14,881

 
$
15,208

 
$
(327
)
 
(2.2
)%
Weighted average number of machines (in units)
2,332

 
2,466

 
(134
)
 
(5.4
)%
Hold percentage (gross)
8.0
%
 
7.8
%
 
0.2
%
 
2.6
 %
Win per unit per day (gross) (in dollars)
$
276

 
$
237

 
$
39

 
16.5
 %
Table games:
 
 
 
 
 
 
 
Drop
$
55,079

 
$
49,837

 
$
5,242

 
10.5
 %
Revenues
$
10,176

 
$
9,197

 
$
979

 
10.6
 %
Weighted average number of games (in units)
66

 
66

 
—

 
—

Hold percentage (2)
18.5
%
 
18.5
%
 
—

 
—

Win per unit per day (in dollars)
$
1,676

 
$
1,513

 
$
163

 
10.8
 %
Poker:
 
 
 
 
 
 
 
Revenues
$
989

 
$
1,070

 
$
(81
)
 
(7.6
)%
Weighted average number of tables (in units)
18

 
18

 
—

 
—

Revenue per unit per day (in dollars)
$
597

 
$
646

 
$
(49
)
 
(7.6
)%
 ___________
(1)
Free promotional slot plays are included in slot handle, but not reflected in slot revenues.
(2)
Table games hold percentage is relatively predictable over longer periods of time, but can significantly fluctuate over shorter periods.

Gaming revenues for the three months ended December 31, 2011 compared to the same period in the prior year increased as a result of higher slot and table game revenues. The increases in slot and table game revenues reflect strong patron response to our promotional offers and favorable weather conditions during the period.
The following table presents data related to food and beverage operations (in thousands, except where noted):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Meals served
184

 
193

 
(9
)
 
(4.7
)%
Average price per meal served (in dollars)
$
15.40

 
$
14.96

 
$
0.44

 
2.9
 %
Food and beverage and retail, entertainment and other revenues for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily due to increased patron visitation to the facility during the period.





32

Promotional Allowances
The retail value of providing promotional allowances was included in revenues as follows (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Food and beverage
$
3,615

 
$
3,288

 
$
327

 
9.9
%
Retail
423

 
319

 
104

 
32.6
%
Total
$
4,038

 
$
3,607

 
$
431

 
11.9
%

The estimated cost of providing promotional allowances was included in gaming costs and expenses as follows (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Food and beverage
$
2,790

 
$
2,457

 
$
333

 
13.6
%
Retail
483

 
420

 
63

 
15
%
Total
$
3,273

 
$
2,877

 
$
396

 
13.8
%

Promotional allowances for the three months ended December 31, 2011 compared to the same period in the prior year increased due to higher redemptions under the Player's Club program.
Operating Costs and Expenses
Operating costs and expenses consisted of the following (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
  Variance  
Gaming
$
54,064

 
$
50,256

 
$
3,808

 
7.6
 %
Food and beverage
1,916

 
1,791

 
125

 
7.0
 %
Retail, entertainment and other
296

 
303

 
(7
)
 
(2.3
)%
Advertising, general and administrative
7,535

 
7,796

 
(261
)
 
(3.3
)%
Depreciation and amortization
3,856

 
5,310

 
(1,454
)
 
(27.4
)%
Loss on disposition of assets
279

 
—

 
279

 
100.0
 %
Total
$
67,946

 
$
65,456

 
$
2,490

 
3.8
 %
Gaming costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily as a result of higher Pennsylvania Slot Machine Tax commensurate with the growth in slot revenues. The increase in gaming costs and expenses also was attributable to increased costs related to Player's Club point redemptions at Mohegan Sun at Pocono Downs-owned outlets, as well as higher payroll costs and promotional expenditures. Expenses associated with the Pennsylvania Slot Machine Tax totaled $33.5 million and $30.8 million for the three months ended December 31, 2011 and 2010, respectively. Expenses associated with the Pennsylvania Table Game Tax totaled $1.8 million and $1.6 million for the three months ended December 31, 2011 and 2010, respectively. Gaming costs and expenses as a percentage of gaming revenues were 73.1% and 74.0% for the three months ended December 31, 2011 and 2010, respectively.
Food and beverage costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year increased primarily due to higher cost of goods sold commensurate with the growth in food and beverage revenues.
Retail, entertainment and other costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year were flat.
Advertising, general and administrative costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year declined primarily as a result of our continued focus on managing expenses.



33

Corporate Expenses and Other Income (Expense)
Corporate expenses and other income (expense) consisted of the following (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance
 
Percentage
Variance
Corporate expenses:
 
 
 
 
 
 
 
Corporate
$
3,479

 
$
4,536

 
$
(1,057
)
 
(23.3
)%
Depreciation and amortization
36

 
42

 
(6
)
 
(14.3
)%
Severance
—

 
1

 
(1
)
 
(100.0
)%
Total Corporate expenses
$
3,515

 
$
4,579

 
$
(1,064
)
 
(23.2
)%
Other income (expense):
 
 
 
 
 
 
 
Accretion of discount to the relinquishment liability (1)
$
(2,062
)
 
$
(2,842
)
 
$
780

 
(27.4
)%
Interest income (2)
1,030

 
780

 
250

 
32.1
 %
Interest expense
(28,809
)
 
(29,746
)
 
937

 
(3.2
)%
Other income, net
4

 
5

 
(1
)
 
(20.0
)%
Total other expense
$
(29,837
)
 
$
(31,803
)
 
$
1,966

 
(6.2
)%
___________
(1)
Reflects accretion of the discount to the present value of the relinquishment liability for the impact of the time value of money.
(2)
Primarily represents interest earned on long-term receivables.
Total Corporate costs and expenses for the three months ended December 31, 2011 compared to the same period in the prior year decreased primarily as a result of lower professional expenses.

Interest expense for the three months ended December 31, 2011 compared to the same period in the prior year declined due to lower weighted average outstanding debt. Weighted average outstanding debt was $1.62 billion for the three months ended December 31, 2011 compared to $1.68 billion for the three months ended December 31, 2010. Weighted average interest rate was 7.1% for each of the three months ended December 31, 2011 and 2010.
Seasonality
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, our results of operations for the three months ended December 31, 2011 are not necessarily indicative of operating results for other interim periods or an entire fiscal year.

Liquidity and Capital Resources
Our cash flows consisted of the following (in thousands):
 
 
For the Three Months Ended December 31,
 
2011
 
2010
 
Variance    
 
Percentage
    Variance    
Net cash provided by operating activities
$
47,481

 
$
34,925

 
$
12,556

 
36.0
 %
Net cash used in investing activities
(19,397
)
 
(17,317
)
 
(2,080
)
 
12.0
 %
Net cash (used in) provided by financing activities
(48,516
)
 
10,646

 
(59,162
)
 
(555.7
)%
Net (decrease) increase in cash and cash equivalents
$
(20,432
)
 
$
28,254

 
$
(48,686
)
 
(172.3
)%
As of December 31, 2011 and September 30, 2011, we held cash and cash equivalents of $91.7 million and $112.2 million, respectively. As a result of the cash-based nature of our business, operating cash flow levels tend to follow trends in our operating income, excluding the effects of non-cash charges, such as depreciation and amortization, accretion of discounts and relinquishment liability reassessments. The increase in cash provided by operating activities for the three months ended December 31, 2011 compared to the same period in the prior year was attributable to increased operating income after adjustments for non-cash items, combined with lower working capital requirements.
Operating activities are a significant source of our cash flows. We utilize cash flows from operations for scheduled interest payments, relinquishment payments, planned capital expenditures, distributions to the Tribe, projected working capital needs and debt reduction, as well as make investments, from time to time. There are numerous potential factors which may cause a substantial reduction in the amount of such cash flows, including, but not limited to, the following:

34


•
reduced discretionary spending on activities such as gaming, leisure and hospitality;
•
increased competition, including the legalization or expansion of gaming in New England, New York, New Jersey, Pennsylvania or other states in the mid-Atlantic region, or the expansion of on-line gaming in the United States;
•
unfavorable weather conditions;
•
changes in applicable laws or policies regarding smoking or alcohol service at Mohegan Sun and Mohegan Sun at Pocono Downs;
•
an infrastructure or transportation disruption, such as the closure of a major highway near Mohegan Sun or Mohegan Sun at Pocono Downs, for an extended period of time; and
•
an act of terrorism on the United States.

In addition to cash flows from operations, we have relied on external sources of liquidity to meet our capital requirements. As discussed previously, an inability to refinance or replace our fiscal 2012 maturities could have a material adverse effect on our financial position, results of operations and cash flows. In addition, if our pro forma fixed charge coverage ratio, as defined under our senior and senior subordinated note indentures, was to fall below 2.0 to 1.0, our ability to incur additional indebtedness or refinance or replace existing outstanding indebtedness would be limited, which could adversely impact our ability to meet our capital requirements.
The increase in cash used in investing activities for the three months ended December 31, 2011 compared to the same period in the prior year was attributable to higher capital expenditures. The increase in cash used in financing activities for the three months ended December 31, 2011 compared to the same period in the prior year was primarily attributable to increased net debt repayments and higher distributions to the Tribe.
External Sources of Liquidity
Notes
We substantially financed the construction and expansion of Mohegan Sun and the acquisition and expansion of Mohegan Sun at Pocono Downs, with proceeds from the issuance of notes and borrowings under our bank credit facilities. As of December 31, 2011, we had outstanding:

•
$200.0 million of 11 1/2% second lien senior secured notes due November 1, 2017, or the 2009 second lien senior secured notes;
•
$250.0 million of 6 1/8% senior unsecured notes due February 15, 2013, or the 2005 senior unsecured notes;
•
$250.0 million of 8% senior subordinated notes due April 1, 2012, or the 2002 senior subordinated notes;
•
$225.0 million of 7 1/8% senior subordinated notes due August 15, 2014, or the 2004 senior subordinated notes; and
•
$150.0 million of 6 7/8% senior subordinated notes due February 15, 2015, or the 2005 senior subordinated notes.
These notes are fully and unconditionally guaranteed, jointly and severally, by the Pennsylvania entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming.
The senior and senior subordinated note indentures contain certain non-financial and financial covenant requirements with which we 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 our continued existence. The financial covenant requirements include, among other things, limitations on our ability to make restricted payments, as defined under the note indentures, and incur additional indebtedness. Under these financial covenant requirements, we are generally able to make restricted payments, including distributions to the Tribe, and incur additional indebtedness that otherwise may be restricted, provided our pro forma fixed charge coverage ratio is at least 2.0 to 1.0. As of December 31, 2011, our fixed charge coverage ratio was above 2.0 to 1.0. If our pro forma fixed charge coverage ratio falls below 2.0 to 1.0, our ability to make restricted payments and incur additional indebtedness would be limited and subject to other applicable exceptions under the note indentures. Additionally, while we may continue to borrow under the bank credit facility pursuant to exceptions contained in the note indentures, our ability to incur other additional indebtedness to raise capital also would be limited. Further, if our pro forma fixed charge coverage ratio falls below 2.0 to 1.0, we would be unable to refinance or replace our outstanding subordinated indebtedness with senior indebtedness without waivers or consents from certain of our creditors, thus limiting the options available to us to refinance or replace our outstanding indebtedness. In such event, we can provide no assurance that we would be able to obtain such waivers or consents or that we would be able to refinance or replace our outstanding indebtedness or that financing options available to us, if any, would be on favorable or acceptable terms.

35

As of December 31, 2011, we and the Tribe were in compliance with all respective covenant requirements under the senior and senior subordinated note indentures.
On January 30, 2012, Standard & Poor's Ratings Services lowered our issuer credit rating to CC from CCC following the announcement of our proposed refinancing transactions. This lowered credit rating may adversely impact our ability to access the debt capital markets in the future and, if we are able to access the debt capital markets, it likely would increase our cost of capital for the issuance of new debt as compared to costs incurred by us in prior financing transactions. We also could be subject to more restrictive covenants and other terms in connection with any such debt issuance.
Bank Credit Facility

In December 2008, we entered into a third amended and restated bank credit facility. The bank credit facility was amended in October 2009. As amended, the bank credit facility provides for a revolving loan and letter of credit borrowing capacity of up to $675.0 million from a syndicate of financial institutions and commercial banks, with Bank of America, N.A., serving as Administrative Agent. The bank credit facility has no mandatory amortization provision and is payable in full on March 9, 2012. As of December 31, 2011, $505.0 million was drawn on the bank credit facility. As of December 31, 2011, letters of credit issued under the bank credit facility totaled $3.8 million, of which no amount was drawn. Inclusive of letters of credit, which reduce borrowing availability under the bank credit facility, and after taking into account restrictive financial covenant requirements under the bank credit facility, line of credit and note indentures, we had approximately $62.1 million of borrowing capacity under the bank credit facility as of December 31, 2011.
Under the bank credit facility, at our option, each advance of loan proceeds accrues interest on the basis of a base rate or on the basis of a one-month, two-month, three-month, six-month or twelve-month Eurodollar rate, plus in either case, an applicable rate based on our total leverage ratio, as each term is defined under the bank credit facility. We also pay commitment fees for the unused portion of borrowing capacity under the bank credit facility on a quarterly basis equal to the product obtained by multiplying the applicable rate for commitment fees by the average daily unused borrowing capacity for that calendar quarter. The applicable rate for base rate loans is between 1.25% and 2.75%. The applicable rate for Eurodollar rate loans is between 2.50% and 4.00%. The applicable rate for commitment fees is between 0.20% and 0.50%. The base rate is the higher of Bank of America's announced prime rate, the Eurodollar rate for one-month contracts plus 1.25% or the federal funds rate plus 0.50%. Interest on base rate loans is payable quarterly in arrears. Interest on Eurodollar rate loans is payable at the end of each applicable interest period or quarterly in arrears, if earlier. As of December 31, 2011, we had $7.0 million in base rate loans and $498.0 million in Eurodollar rate loans outstanding. The base rate loans outstanding at December 31, 2011 were based on Bank of America's prime rate of 3.25% plus an applicable rate of 2.25%. The Eurodollar rate loans outstanding at December 31, 2011 were based on one-month Eurodollar rates ranging from 0.27% to 0.30% plus an applicable rate of 3.50%. The applicable rate for commitment fees was 0.50% as of December 31, 2011.
The bank credit facility is collateralized by a first priority lien on substantially all of our assets, including the assets that comprise Mohegan Sun at Pocono Downs and a leasehold mortgage on the land and improvements that comprise Mohegan Sun. We also are required to pledge additional assets as collateral for the bank credit facility as we or our existing and future guarantor subsidiaries acquire them. Our obligations under the bank credit facility are fully and unconditionally guaranteed, jointly and severally, by the Pennsylvania entities, MBC, Mohegan Golf, MCV-PA, Mohegan Ventures-NW, MVW, WTG and MTGA Gaming. The bank credit facility includes non-financial covenant requirements of the types customarily found in loan agreements for similar transactions. The bank credit facility also subjects us to a number of restrictive financial covenant requirements. These financial covenant requirements include, among other things, a minimum fixed charge coverage ratio, maximum total leverage and senior leverage ratios and maximum capital expenditures and investments.

On December 28, 2011, we and the Tribe entered into a waiver under the bank credit facility pursuant to which the lenders agreed to waive any potential default by us under the bank credit facility as a result of a going concern opinion issued by our independent registered public accounting firm in its report for the fiscal year ended September 30, 2011.
As of December 31, 2011, we and the Tribe were in compliance with all respective covenant requirements under the bank credit facility.
Line of Credit
As of December 31, 2011, we had a $16.5 million revolving loan agreement with Bank of America, N.A., or the line of credit. The line of credit matures on March 9, 2012. Under the line of credit, at our option, each advance accrues interest on the basis of a one-month Eurodollar rate or prime rate, plus in either case, an applicable rate based on our total leverage ratio, as each term is defined under the line of credit. Borrowings under the line of credit are uncollateralized obligations. As of December 31, 2011, we had $7.1 million in Eurodollar rate loans outstanding, which were based on a one-month Eurodollar rate of 0.28% plus an applicable rate of 3.0%. The line of credit subjects us to certain covenants, including a covenant to maintain at least the line of

36

credit commitment amount available for borrowing under the bank credit facility. As of December 31, 2011, we were in compliance with all covenant requirements under the line of credit and had $9.4 million of borrowing capacity thereunder. We have commenced discussions with Bank of America, N.A. to extend the maturity date of the line of credit; however, we can provide no assurance of the terms of such extension or whether such extension will be granted.
Letters of Credit
As of December 31, 2011, we maintained eight uncollateralized letters of credit to satisfy certain potential liabilities at Mohegan Sun and Mohegan Sun at Pocono Downs. As of December 31, 2011, letters of credit issued totaled $3.8 million, of which no amount was drawn. The letters of credit expire in March 2012, subject to renewals.
Salishan-Mohegan Bank Credit Facility
As of December 31, 2011, Salishan-Mohegan had a fully drawn $15.25 million revolving loan agreement with Bank of America, N.A., or the Salishan-Mohegan bank credit facility. The Salishan-Mohegan bank credit facility matures on March 9, 2012. Under the Salishan-Mohegan bank credit facility, at the option of Salishan-Mohegan, each advance of loan proceeds accrues interest on the basis of a base rate or on the basis of a one-month, two-month, three-month or six-month Eurodollar rate, plus in either case, an applicable rate, as defined under the Salishan-Mohegan bank credit facility. The applicable rate is 2.50% for base rate loans and 3.50% for Eurodollar rate loans. The base rate is the higher of Bank of America's announced prime rate or the federal funds rate plus 0.50%. The Salishan-Mohegan bank credit facility has no mandatory amortization provision and is payable in full at maturity. The Salishan-Mohegan bank credit facility is collateralized by a lien on substantially all of the existing and future assets of Salishan-Mohegan. The obligations of Salishan-Mohegan under the Salishan-Mohegan bank credit facility also are guaranteed by the Tribe. The Salishan-Mohegan bank credit facility subjects Salishan-Mohegan to certain covenant requirements customarily found in loan agreements for similar transactions. As of December 31, 2011, Salishan-Mohegan was in compliance with all respective covenant requirements under the Salishan-Mohegan bank credit facility. We have commenced discussions with Bank of America, N.A. to extend the maturity date of the Salishan-Mohegan bank credit facility; however, we can provide no assurance of the terms of such extension or whether such extension will be granted.
As of December 31, 2011, Salishan-Mohegan had $15.25 million in Eurodollar rate loans and no base rate loan outstanding. The Eurodollar rate loans outstanding at December 31, 2011 were based on a one-month Eurodollar rate of 0.28% plus an applicable rate of 3.50%.
Mohegan Tribe Promissory Note
In September 2009, the Tribe made a $10.0 million loan to Salishan-Mohegan, or the Mohegan Tribe promissory note. The Mohegan Tribe promissory note matures on March 31, 2012. The Mohegan Tribe promissory note accrues interest at an annual rate of 15.0%. Under the terms of the Mohegan Tribe promissory note, as amended, accrued interest from November 2009 through October 2010 was paid at a monthly rate of 3.0%, with the remaining 12.0% due at maturity; and from November 2010 through maturity, all accrued interest under the Mohegan Tribe promissory note is payable at maturity. We have commenced discussions with the Tribe to extend the maturity date of the Mohegan Tribe promissory note; however, we can provide no assurance of the terms of such extension or whether such extension will be granted.
Mohegan Tribe Credit Facility
As of December 31, 2011, Salishan-Mohegan had a $1.75 million revolving loan agreement with the Tribe, or the Mohegan Tribe credit facility. The Mohegan Tribe credit facility matures on March 31, 2012. The Mohegan Tribe credit facility accrues interest at an annual rate of 15.0% payable at maturity. We have commenced discussions with the Tribe to extend the maturity date of the Mohegan Tribe credit facility; however, we can provide no assurance of the terms of such extension or whether such extension will be granted. As of December 31, 2011, Salishan-Mohegan had $1.25 million drawn on the Mohegan Tribe Credit Facility and $500,000 of borrowing capacity thereunder.






37

Capital Expenditures
The following table presents data related to capital expenditures (in millions, including capitalized interest):
 
Capital Expenditures
 
Three Months Ended
 
Remaining Forecasted
 
Total Forecasted
 
December 31, 2011
 
Fiscal Year 2012
 
Fiscal Year 2012
Mohegan Sun:
 
 
 
 
 
Maintenance
$
11.9

 
$
21.1

 
$
33.0

Development
2.0

 
8.0

 
10.0

Expansion - Project Horizon
0.1

 
—

 
0.1

Subtotal
14.0

 
29.1

 
43.1

Mohegan Sun at Pocono Downs:
 
 
 
 
 
 Maintenance
1.2

 
2.8

 
4.0

Subtotal
1.2

 
2.8

 
4.0

Total
$
15.2

 
$
31.9

 
$
47.1

We primarily rely on cash flows provided by operating activities to fund maintenance capital expenditures at Mohegan Sun and Mohegan Sun at Pocono Downs. We plan to fund any development or expansion capital expenditures at Mohegan Sun and Mohegan Sun at Pocono Downs through a combination of cash flows provided by operating activities and draws under our bank credit facility.
Interest Expense
The following table presents our interest expense (in thousands):
 
For the Three Months Ended December 31,
 
2011
 
2010
Bank credit facility
$
5,105

 
$
6,050

2009 11 1/2% second lien senior secured notes, includes accretion of bond discount
5,928

 
5,908

2005 6 1/8% senior unsecured notes
3,828

 
3,828

2001 8 3/8% senior subordinated notes
—

 
42

2002 8% senior subordinated notes
5,000

 
5,000

2004 7 1/8% senior subordinated notes
4,008

 
4,008

2005 6 7/8% senior subordinated notes
2,578

 
2,578

Line of credit
59

 
71

WNBA promissory note
—

 
5

Salishan-Mohegan bank credit facility
146

 
146

Mohegan Tribe promissory note (Salishan-Mohegan)
378

 
378

Mohegan Tribe credit facility (Salishan-Mohegan)
42

 
—

Capital leases
51

 
57

Amortization of net deferred gain on settlement of derivative instruments
(117
)
 
(117
)
Amortization of debt issuance costs
1,803

 
1,792

Total interest expense
$
28,809

 
$
29,746

Critical Accounting Policies and Estimates
There has been no material change from the critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011.
Impact of Inflation
Absent changes in competitive and economic conditions or in specific prices affecting the hospitality and gaming industry, we do not expect that inflation will have a significant impact on our operations. Changes in specific prices, such as fuel and transportation prices, relative to the general rate of inflation may have a material adverse effect on the hospitality and gaming industry in general.



38

New Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board, or the FASB, issued revised guidance pertaining to the accounting standard for goodwill impairment tests. The revised guidance allows an entity the option to assess qualitative factors to determine whether the fair value of a reporting unit is less than its carrying value before performing the two-step goodwill impairment test. The revised guidance is effective for interim and annual periods beginning after December 15, 2011; however, early adoption is permitted. We do not expect this adoption to impact our financial position, results of operations or cash flows.
 
In June 2011, the FASB issued revised guidance pertaining to reporting of comprehensive income. The revised guidance allows an entity the option of presenting the total of comprehensive income, components of net income and components of other comprehensive income, either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The revised guidance is effective retrospectively for annual periods, and interim periods within those annual periods, beginning after December 15, 2011. We do not expect this adoption to impact our financial position, results of operations or cash flows.
In April 2010, the FASB issued guidance pertaining to accruals for casino jackpot liabilities. The new guidance clarifies that an entity should not accrue jackpot liabilities (or portions thereof) before a jackpot is won if the entity can avoid paying such jackpot. The new guidance specifies that jackpots should be accrued and charged to revenue when the entity has the obligation to pay such jackpot and applies to both base and progressive jackpots and requires a cumulative-effect adjustment to opening retained earnings in the period of adoption. The new guidance was effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2010. We adopted this guidance in our first quarter of fiscal 2012, and as such, recorded a cumulative-effect adjustment, which decreased other current liabilities and increased retained earnings by $2.0 million.

39

Item 3.
Quantitative and Qualitative Disclosures about Market Risk.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our bank credit facility in which interest accrues on the basis of a base rate formula or a Eurodollar rate formula, plus applicable rates, as defined under the bank credit facility. As of December 31, 2011, $505.0 million was drawn on the bank credit facility.
We attempt to manage our interest rate risk through a controlled combination of long-term fixed rate borrowings and variable rate borrowings in accordance with established policies and procedures. We do not hold or issue financial instruments for speculative or trading purposes.
The following table presents information as of December 31, 2011 about our current financial instruments or debt obligations that are sensitive to changes in interest rates. The table presents principal payments and related weighted average interest rates by expected maturity dates. Weighted average variable rates are based on implied forward rates in respective yield curves, which should not be considered to be precise indicators of actual future interest rates. Fair values for our debt instruments are based on quoted market prices or prices of similar instruments as of December 31, 2011. 
 
Expected Maturity Date
 
Total
 
Fair Value
 
2012
 
2013
 
2014
 
2015
 
2016
 
Thereafter
 
Liabilities (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt and capital lease obligations (including current portions):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate
$
261,783

 
$
250,734

 
$
225,763

 
$
150,793

 
$
824

 
$
201,521

 
$
1,091,418

 
$
709,600

Average interest rate
8.3
%
 
6.1
%
 
7.1
%
 
6.9
%
 
3.9
%
 
11.4
%
 
7.9
%
 
 
Variable rate
$
527,351

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
527,351

 
$
501,470

Average interest rate (1)
3.8
%
 
—

 
—

 
—

 
—

 
—

 
3.8
%
 
 
___________
(1)
A 100 basis point change in average interest rate would impact annual interest expense by approximately $5.3 million.

Item 4.
Controls and Procedures
Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2011. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on an evaluation of our disclosure controls and procedures as of December 31, 2011, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


40

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings
We are subject to various claims and legal actions resulting from our normal course of business. Some of these matters relate to personal injuries to patrons and damages to patrons' personal assets. We estimate guest claims expense and accrue for such liabilities based upon historical experience.


Item 1A.
Risk Factors

There has been no material change from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011.


Item 6.
Exhibits
The exhibits to this Quarterly Report on Form 10-Q are listed on the Exhibit Index, which appears elsewhere herein and is incorporated herein by reference.



41

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Mohegan Tribal Gaming Authority has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
MOHEGAN TRIBAL GAMING AUTHORITY
 
 
 
 
Date:
February 14, 2012
By:
/S/    BRUCE S. BOZSUM        
 
 
 
Bruce S. Bozsum
Chairman and Member, Management Board
 
 
 
 
Date:
February 14, 2012
By:
/S/    MITCHELL GROSSINGER ETESS        
 
 
 
Mitchell Grossinger Etess
Chief Executive Officer,
Mohegan Tribal Gaming Authority
(Principal Executive Officer)
 
 
 
 
Date:
February 14, 2012
By:
/S/    MARIO C. KONTOMERKOS      
 
 
 
Mario C. Kontomerkos
Chief Financial Officer,
Mohegan Tribal Gaming Authority
(Principal Financial and Accounting Officer)


42

EXHIBIT INDEX

Exhibit No.
  
Description
3.1
  
Constitution of the Mohegan Tribe of Indians of Connecticut, as amended (filed as Exhibit 3.1 to the Authority’s Registration Statement on Form S-4, filed with the SEC on November 1, 2004 and incorporated by reference herein).
 
 
 
3.2
  
Ordinance No. 95-2 of the Tribe for Gaming on Tribal Lands, enacted on July 15, 1995 (filed as Exhibit 3.2 to the Authority’s Amendment No. 1 to its Registration Statement on Form S-1, filed with the SEC on February 29, 1996 (the 1996 Form S-1) and incorporated by reference herein).
 
 
 
3.3
  
Articles of Organization of Mohegan Basketball Club, LLC, dated as of January 27, 2003 (filed as Exhibit 3.3 to the Authority’s Registration Statement on Form S-4, filed with the SEC on September 23, 2003 (the “2003 Form S-4”) and incorporated by reference herein).
 
 
 
3.4
  
Operating Agreement of Mohegan Basketball Club, LLC, a Mohegan Tribe of Indians of Connecticut limited liability company, dated as of January 24, 2003 (filed as Exhibit 3.4 to the 2003 Form S-4 and incorporated by reference herein).
 
 
 
3.5
  
Certificate of Organization of Mohegan Commercial Ventures PA, LLC, dated as of January 6, 2005, as amended (filed as Exhibit 3.5 to the Authority’s Registration Statement on Form S-4, filed with the SEC on June 7, 2005 (the “2005 Form S-4”) and incorporated by reference herein).
 
 
 
3.6
  
Operating Agreement of Mohegan Commercial Ventures PA, LLC, a Commonwealth of Pennsylvania limited liability company, dated as of December 15, 2004 (filed as Exhibit 3.6 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.7
  
Certificate of Limited Partnership of Downs Racing, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.7 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.8
  
Amended and Restated Limited Partnership Agreement of Downs Racing, L.P., dated as of January 25, 2005 (filed as Exhibit 3.8 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.9
  
Certificate of Limited Partnership of Backside, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.9 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.10
  
Amended and Restated Limited Partnership Agreement of Backside, L.P., dated as of January 25, 2005 (filed as Exhibit 3.10 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.11
  
Certificate of Limited Partnership of Mill Creek Land, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.11 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.12
  
Amended and Restated Limited Partnership Agreement of Mill Creek Land, L.P., dated as of January 25, 2005 (filed as Exhibit 3.12 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.13
  
Certificate of Limited Partnership of Northeast Concessions, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.13 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.14
  
Amended and Restated Limited Partnership Agreement of Northeast Concessions, L.P., dated as of January 25, 2005 (filed as Exhibit 3.14 to the 2005 Form S-4 and incorporated by reference herein).
 
 
 
3.15
  
Articles of Organization of Mohegan Ventures-Northwest, LLC, dated as of July 23, 2004 (filed as Exhibit 3.15 to the Authority’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, filed with the SEC on August 10, 2006 (the “June 2006 Form 10-Q”) and incorporated by reference herein).
 
 
 
3.16
  
Operating Agreement of Mohegan Ventures-Northwest, LLC, a Mohegan Tribe of Indians of Connecticut limited liability company, dated as of July 23, 2004 (filed as Exhibit 3.16 to the June 2006 Form 10-Q and incorporated by reference herein).

43

Exhibit No.
  
Description
3.17
  
Articles of Organization of Mohegan Golf, LLC, dated as of November 20, 2006 (filed as Exhibit 3.17 to the Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006, filed with the SEC on December 21, 2006 (the “2006 Form 10-K”) and incorporated by reference herein).
 
 
 
3.18
  
Certificate of Formation of Wisconsin Tribal Gaming, LLC, dated as of February 27, 2007 (filed as Exhibit 3.18 to the Authority’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007, filed with the SEC on May 15, 2007 (the “March 2007 Form 10-Q”) and incorporated by reference herein).
 
 
 
3.19
  
Articles of Organization of Mohegan Ventures Wisconsin, LLC, dated as of March 1, 2007 (filed as Exhibit 3.19 to the March 2007 Form 10-Q and incorporated by reference herein).
 
 
 
3.20
  
Certificate of Formation of MTGA Gaming, LLC, dated as of July 27, 2007 (filed as Exhibit 3.20 to the Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2007 (the “2007 Form 10-K”), filed with the SEC on December 21, 2007 and incorporated by reference herein).
 
 
 
3.21
  
Articles of Amendment of Mohegan Golf, LLC, dated as of April 8, 2008 (filed as Exhibit 3.18 to the Authority’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008, filed with the SEC on May 15, 2008 and incorporated by reference herein).
 
 
 
4.1
  
Relinquishment Agreement, dated as of February 7, 1998, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut and Trading Cove Associates (filed as Exhibit 10.14 to the Authority’s Form 10-K405 for the fiscal year ended September 30, 1998, filed with the SEC on December 29, 1998 and incorporated by reference herein).
 
 
 
4.2
  
Indenture, dated as of February 20, 2002, between the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and State Street Bank and Trust Company, as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.12 to the Authority’s Registration Statement on Form S-4, filed with the SEC on March 27, 2002 (the “2002 Form S-4”) and incorporated by reference herein).

44

Exhibit No.
  
Description
4.3
  
Supplemental Indenture, dated as of January 27, 2003, between the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club, LLC, the other Subsidiary Guarantors (as defined under the Indenture) and the State Street Bank and Trust Company, as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.16 to the Authority's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003, filed with the SEC on August 7, 2003 and incorporated by reference herein).
 
 
 
4.4
  
Amended and Restated Supplemental Indenture, dated as of January 25, 2005, between the Mohegan Tribal Gaming Authority, Mohegan Basketball Club, LLC and U.S. Bank National Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.14 to the Authority’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004, filed with the SEC on February 14, 2005 (the “December 2004 Form 10-Q”) and incorporated by reference herein).
 
 
 
4.5
  
Supplemental Indenture No. 2, dated as of January 25, 2005, between the Mohegan Tribal Gaming Authority, Mohegan Basketball Club, LLC and U.S. Bank National Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.15 to the December 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.6
  
Supplemental Indenture No. 3, dated as of January 25, 2005, between the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined under the Indenture), and U.S. Bank National Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.16 to the December 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.7
  
Supplemental Indenture No. 4, dated as of August 4, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Ventures-Northwest, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.11 to the June 2006 Form 10-Q and incorporated by reference herein).
 
 
 
4.8
  
Supplemental Indenture No. 5, dated as of December 18, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Golf, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.12 to the 2006 Form 10-K and incorporated by reference herein).
 
 
 
4.9
  
Supplemental Indenture No. 6, dated as of March 28, 2007, between the Mohegan Tribal Gaming Authority, Wisconsin Tribal Gaming, LLC and Mohegan Ventures Wisconsin, LLC (each a Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.13 to the March 2007 Form 10-Q and incorporated by reference herein).
 
 
 
4.10
  
Supplemental Indenture No. 7, dated as of August 27, 2007, between the Mohegan Tribal Gaming Authority, MTGA Gaming, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.14 to the 2007 Form 10-K and incorporated by reference herein).
 
 
 
4.11
  
Form of Global 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (contained in the Indenture filed as Exhibit 4.12 to the 2002 Form S-4 and incorporated by reference herein).

45

Exhibit No.
  
Description
4.12
  
Indenture, dated as of August 3, 2004, between the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, Mohegan Basketball Club, LLC and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.19 to the Authority's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 (the “June 2004 Form 10-Q”), filed with the SEC on August 16, 2004 and incorporated by reference herein).
 
 
 
4.13
  
Supplemental Indenture No. 1, dated as of January 25, 2005, between the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined under the Indenture), and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.25 to the December 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.14
  
Supplemental Indenture No. 2, dated as of August 4, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Ventures-Northwest, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the June 2006 Form 10-Q and incorporated by reference herein).
 
 
 
4.15
  
Supplemental Indenture No. 3, dated as of December 18, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Golf, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.23 to the 2006 Form 10-K and incorporated by reference herein).
 
 
 
4.16
  
Supplemental Indenture No. 4, dated as of March 28, 2007, between the Mohegan Tribal Gaming Authority, Wisconsin Tribal Gaming, LLC and Mohegan Ventures Wisconsin, LLC (each a Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.26 to the March 2007 Form 10-Q and incorporated by reference herein).
 
 
 
4.17
  
Supplemental Indenture No. 5, dated as of August 27, 2007, between the Mohegan Tribal Gaming Authority, MTGA Gaming, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.29 to the 2007 Form 10-K and incorporated by reference herein).
 
 
 
4.18
  
Form of Global 7 1/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the June 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.19
  
Indenture, dated as of February 8, 2005, between the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 (filed as Exhibit 4.28 to the December 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.20
  
Supplemental Indenture No. 1, dated as of August 4, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Ventures-Northwest, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.23 to the June 2006 Form 10-Q and incorporated by reference herein).

46

Exhibit No.
  
Description
4.21
  
Supplemental Indenture No. 2, dated as of December 18, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Golf, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.27 to the 2006 Form 10-K and incorporated by reference herein).
 
 
 
4.22
  
Supplemental Indenture No. 3, dated as of March 28, 2007, between the Mohegan Tribal Gaming Authority, Wisconsin Tribal Gaming, LLC and Mohegan Ventures Wisconsin, LLC (each a Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.31 to the March 2007 Form 10-Q and incorporated by reference herein).
 
 
 
4.23
  
Supplemental Indenture No. 4, dated as of August 27, 2007, between the Mohegan Tribal Gaming Authority, MTGA Gaming, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.35 to the Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2007, filed with the SEC on December 21, 2007 and incorporated by reference herein).
 
 
 
4.24
  
Form of Global 6 7/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.29 to the December 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.25
  
Indenture, dated as of February 8, 2005, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined under the Indenture) and Wachovia Bank, National Association, as Trustee, relating to the 6 1/8% Senior Notes Due 2013 (filed as Exhibit 4.31 to the December 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.26
  
Supplemental Indenture No. 1, dated as of August 4, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Ventures-Northwest, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association (as successor to Wachovia Bank, National Association), as Trustee, relating to the 6 1/8% Senior Notes Due 2013 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.26 to the June 2006 Form 10-Q and incorporated by reference herein).
 
 
 
4.27
  
Supplemental Indenture No. 2, dated as of December 18, 2006, between the Mohegan Tribal Gaming Authority, Mohegan Golf, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association (as successor to Wachovia Bank, National Association), as Trustee, relating to the 6 1/8% Senior Notes Due 2013 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.31 to the 2006 Form 10-K and incorporated by reference herein).
 
 
 
4.28
  
Supplemental Indenture No. 3, dated as of March 28, 2007, between the Mohegan Tribal Gaming Authority, Wisconsin Tribal Gaming, LLC and Mohegan Ventures Wisconsin, LLC (each a Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association (as successor to Wachovia Bank, National Association), as Trustee, relating to the 6 1/8% Senior Notes Due 2013 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.36 to the March 2007 Form 10-Q and incorporated by reference herein).
 
 
 
4.29
  
Supplemental Indenture No. 4, dated as of August 27, 2007, between the Mohegan Tribal Gaming Authority, MTGA Gaming, LLC (as the Subsidiary Guarantor), the other Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to 6 1/8% Senior Notes Due 2013 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.41 to the 2007 Form 10-K and incorporated by reference herein).
4.30
  
Form of Global 6 1/8% Senior Notes Due 2013 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.32 to the December 2004 Form 10-Q and incorporated by reference herein).
 
 
 
4.31
  
Indenture, dated as of October 26, 2009, between the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined under the Indenture) and U.S. Bank National Association, as Trustee, relating to the 11 1/2% Second Lien Senior Secured Notes Due 2017 (filed as Exhibit 4.43 to the Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009, filed with the SEC on December 28, 2009 (the “2009 Form 10-K”) and incorporated by reference herein).
 
 
 
4.32
  
Form of Global 11 1/2% Second Lien Senior Secured Notes Due 2017 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.44 to the 2009 Form 10-K and incorporated by reference herein).
 
 
 





47

Exhibit No.
  
Description
 
 
 
31.1
  
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).
 
 
 
31.2
  
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith).
 
 
 
32.1
  
Section 1350 Certification of Chief Executive Officer (filed herewith).
 
 
 
32.2
  
Section 1350 Certification of Chief Financial Officer (filed herewith).
 
 
 
101.INS*
 
XBRL Instance Document (filed herewith).
 
 
 
101.SCH*
 
XBRL Taxonomy Extension Schema (filed herewith).
 
 
 
101.CAL*
 
XBRL Taxonomy Calculation Linkbase (filed herewith).

 
 
 
101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase (filed herewith).
 
 
 
101.LAB*
 
XBRL Taxonomy Extension Label Linkbase (filed herewith).
 
 
 
101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase (filed herewith).
 ________________________
*
Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed to be "filed" for purposes of Section 18 of the Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.





































48