10-Q 1 a20181231-10q.htm FORM 10-Q Document

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, 2018
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  ¨    No  x*
*
The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required during the preceding 12 months had it been subject to such filing requirements.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer  x
Smaller reporting company  o
Emerging growth company  o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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, 2018
 
September 30, 2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
101,584

 
$
103,944

Restricted cash and cash equivalents
414

 
1,036

Accounts receivable, net of allowance for doubtful accounts of $12,593 and $12,265, respectively
49,757

 
44,532

Inventories
14,881

 
15,357

Notes receivable
7,524

 
109,859

Other current assets
24,735

 
22,129

Total current assets
198,895

 
296,857

Restricted cash and cash equivalents
213,169

 
129,646

Property and equipment, net
1,382,099

 
1,395,369

Goodwill
39,459

 
39,459

Other intangible assets, net
416,333

 
403,495

Notes receivable
—

 
1,857

Other assets, net
49,364

 
45,436

Total assets
$
2,299,319

 
$
2,312,119

LIABILITIES AND CAPITAL
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
73,865

 
$
73,232

Trade payables
14,049

 
14,704

Accrued payroll
39,783

 
54,380

Construction payables
9,732

 
10,747

Accrued interest payable
9,393

 
19,418

Other current liabilities
176,033

 
123,303

Total current liabilities
322,855

 
295,784

Long-term debt, net of current portion
1,735,467

 
1,740,923

Other long-term liabilities
11,096

 
4,618

Total liabilities
2,069,418

 
2,041,325

Commitments and Contingencies


 


Capital:
 
 
 
Retained earnings
203,255

 
250,707

Accumulated other comprehensive income
12,866

 
11,062

Total capital attributable to Mohegan Tribal Gaming Authority
216,121

 
261,769

Non-controlling interests
13,780

 
9,025

Total capital
229,901

 
270,794

Total liabilities and capital
$
2,299,319

 
$
2,312,119

On October 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), on a modified retrospective basis. Please refer to Note 2 for further information.

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


3

MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 
For the
 
For the
 
Three Months Ended
 
Three Months Ended
 
December 31, 2018
 
December 31, 2017
Revenues:
 
 
 
Gaming
$
221,935

 
$
287,006

Food and beverage
34,806

 
21,820

Hotel
22,977

 
14,907

Retail, entertainment and other
39,782

 
32,888

Gross revenues
319,500

 
356,621

Less-Promotional allowances
—

 
(25,137
)
Net revenues
319,500

 
331,484

Operating costs and expenses:
 
 
 
Gaming, including related party transactions of $702 and $1,367, respectively
128,664

 
164,315

Food and beverage
26,447

 
10,189

Hotel, including related party transactions of $2,161 and $2,340, respectively
9,803

 
7,005

Retail, entertainment and other
20,762

 
11,617

Advertising, general and administrative, including related party transactions of $11,332 and $10,580, respectively
49,018

 
50,377

Corporate, including related party transactions of $1,397 and $1,705, respectively
12,425

 
12,153

Depreciation and amortization
27,090

 
20,207

Other, net
1,921

 
621

Total operating costs and expenses
276,130

 
276,484

Income from operations
43,370

 
55,000

Other income (expense):
 
 
 
Interest income
3,439

 
3,869

Interest expense
(36,010
)
 
(28,336
)
Other, net
(91
)
 
(1,843
)
Total other expense
(32,662
)
 
(26,310
)
Net income
10,708

 
28,690

(Income) loss attributable to non-controlling interests
(86
)
 
519

Net income attributable to Mohegan Tribal Gaming Authority
10,622

 
29,209

Comprehensive income:
 
 
 
Foreign currency translation adjustment
1,899

 
14,747

Other comprehensive income
1,899

 
14,747

Other comprehensive income attributable to non-controlling interests
(95
)
 
(8,318
)
Other comprehensive income attributable to Mohegan Tribal Gaming Authority
1,804

 
6,429

Comprehensive income attributable to Mohegan Tribal Gaming Authority
$
12,426

 
$
35,638

On October 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), on a modified retrospective basis. Please refer to Note 2 for further information.


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



4

MOHEGAN TRIBAL GAMING AUTHORITY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(in thousands)
(unaudited)

 
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Total Capital Attributable to Mohegan Tribal Gaming Authority
 
Non-controlling      
Interests
 
Total Capital
Balance, September 30, 2018
$
250,707

 
$
11,062

 
$
261,769

 
$
9,025

 
$
270,794

Cumulative-effect adjustment for the adoption of ASC 606 "Revenue from Contracts with Customers"
(41,575
)
 
—

 
(41,575
)
 
—

 
(41,575
)
Net income
10,622

 
—

 
10,622

 
86

 
10,708

Foreign currency translation adjustment
—

 
1,804

 
1,804

 
95

 
1,899

Distributions to Mohegan Tribe
(12,000
)
 
—

 
(12,000
)
 
—

 
(12,000
)
Redemption of membership interest related to the New England Black Wolves franchise
(4,499
)
 
—

 
(4,499
)
 
4,574

 
75

Balance, December 31, 2018
$
203,255

 
$
12,866

 
$
216,121

 
$
13,780

 
$
229,901

 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2017
$
196,645

 
$
1,125

 
$
197,770

 
$
111,399

 
$
309,169

Net income (loss)
29,209

 
—

 
29,209

 
(519
)
 
28,690

Foreign currency translation adjustment
—

 
6,429

 
6,429

 
8,318

 
14,747

Distributions to Mohegan Tribe
(12,000
)
 
—

 
(12,000
)
 
—

 
(12,000
)
Distributions to Mohegan Tribe related to Salishan-Mohegan, LLC

(390
)
 
—

 
(390
)
 
—

 
(390
)
Balance, December 31, 2017
$
213,464

 
$
7,554

 
$
221,018

 
$
119,198

 
$
340,216

On October 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), on a modified retrospective basis. Please refer to Note 2 for further information.


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 Three Months Ended
 
For the Three Months Ended
 
December 31, 2018
 
December 31, 2017
Cash flows provided by operating activities:
 
 
 
Net income
$
10,708

 
$
28,690

Adjustments to reconcile net income to net cash flows provided by operating activities:
 
 
 
Depreciation and amortization
27,090

 
20,207

Accretion of discounts
194

 
1,733

Amortization of discounts and debt issuance costs
4,845

 
2,270

Provision for losses on receivables
369

 
832

Other, net
(247
)
 
(254
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(5,594
)
 
(898
)
Accrued interest on notes receivable related to the Cowlitz Project
72,166

 
(2,994
)
Inventories
476

 
(507
)
Other assets
(2,189
)
 
(2,949
)
Trade payables
(655
)
 
(2,078
)
Accrued interest payable
(10,025
)
 
(9,601
)
Other liabilities
(16,087
)
 
(2,922
)
Net cash flows provided by operating activities
81,051

 
31,529

Cash flows provided by (used in) investing activities:
 
 
 
Purchases of property and equipment
(14,064
)
 
(44,387
)
Proceeds from notes receivable related to the Cowlitz Project
32,026

 
—

Other, net
(1,364
)
 
(2,357
)
Net cash flows provided by (used in) investing activities
16,598

 
(46,744
)
Cash flows provided by (used in) financing activities:
 
 
 
Senior secured credit facility borrowings - revolving and line of credit
360,712

 
226,879

Senior secured credit facility repayments - revolving and line of credit
(350,712
)
 
(191,879
)
Senior secured credit facility repayments - term loans A and B

(18,858
)
 
—

Other borrowings
11,335

 
3,200

Other repayments
(1,450
)
 
(69
)
Distributions to Mohegan Tribe
(12,000
)
 
(12,000
)
Distributions to Mohegan Tribe related to Salishan-Mohegan, LLC


—

 
(390
)
Other, net
(6,776
)
 
(19
)
Net cash flows provided by (used in) financing activities
(17,749
)
 
25,722

Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents
79,900

 
10,507

Effect of exchange rate on cash, cash equivalents, restricted cash and restricted cash equivalents
641

 
10,803

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
234,626

 
239,056

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$
315,167

 
$
260,366

Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents to the condensed consolidated balance sheets:
 
 
 
Cash and cash equivalents
$
101,584

 
$
113,020

Restricted cash and cash equivalents, current

414

 
332

Restricted cash and cash equivalents, non-current

213,169

 
147,014

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$
315,167

 
$
260,366

Supplemental disclosures:
 
 
 
Cash paid for interest
$
41,190

 
$
36,026

Non-cash transactions:
 
 
 
Construction payables
$
9,732

 
$
27,866

Senior secured credit facility reductions
$
28,858

 
$
18,650

Conversion of Redemption Liability to Redemption Note Payable
$
—

 
$
74,084


On October 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), on a modified retrospective basis. Please refer to Note 2 for further information.


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

6

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

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION:
Organization
The Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe”) established the Mohegan Tribal Gaming Authority in July 1995 with the exclusive authority to conduct and regulate gaming activities for the Mohegan Tribe on tribal lands and the non-exclusive authority to conduct such activities elsewhere. In June 2017, the Mohegan Tribal Gaming Authority announced a corporate effort to align its brand image with its expanding business, and accordingly rebranded, and is now doing business as Mohegan Gaming & Entertainment (the “Company”).
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by US GAAP. In management's opinion, all adjustments, including normal recurring accruals and adjustments, necessary for a fair statement of the Company's operating results for the interim period, have been included.
The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018. The preparation of financial statements in conformity with US GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. Certain immaterial line items in the accompanying condensed consolidated financial statements for the three months ended December 31, 2017 have been combined or reclassified to conform to fiscal 2019 presentation.

During the three months ended December 31, 2018, the Company made an out-of-period correction, which decreased property and equipment, net and increased depreciation and amortization expense by $6.3 million. This adjustment resulted from the assignment, in a prior year, of an incorrect useful life to depreciate a long lived asset related to tenant allowances.
Fair Value of Financial Instruments
The Company 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 Company's estimates or assumptions that market participants would utilize in pricing such assets or liabilities.
The Company'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, restricted cash and cash equivalents, receivables, trade payables and certain promissory notes, including a redemption note payable, approximates fair value. The estimated fair values of the Company's long-term debt were as follows (in thousands):
 
December 31, 2018
 
Carrying Value         
 
Fair Value         
Senior Secured Credit Facility - Revolving
$
66,000

 
$
60,803

Senior Secured Credit Facility - Term Loan A
$
295,424

 
$
281,846

Senior Secured Credit Facility - Term Loan B
$
809,160

 
$
735,587

2016 7 7/8% Senior Unsecured Notes
$
489,323

 
$
466,875


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

The estimated fair values of the Company's long-term debt were based on Level 2 inputs (quoted market prices or prices of similar instruments) on or about December 31, 2018.


NOTE 2—NEW ACCOUNTING STANDARDS:
ASU 2014-09
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASC 606”), which outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.
Effective October 1, 2018, the Company adopted ASC 606, on a modified retrospective basis, to all contracts at the date of initial adoption. The Company recognized the cumulative-effect of initially adopting ASC 606 as an adjustment to retained earnings as of October 1, 2018, with a corresponding increase to other current liabilities. Comparative information for the three months ended December 31, 2017 has not been restated and continues to be reported under accounting standards in effect for that period. The adoption of ASC 606 did not have a material effect on the Company’s net income for the three months ended December 31, 2018. The Company does not expect the adoption of ASC 606 to have a material effect on its net income on a continuing basis.
The cumulative-effect of adopting ASC 606 was as follows (in thousands):
 
September 30, 2018
 
ASC 606 Adjustment
 
October 1, 2018
Other current liabilities
$
123,303

 
$
41,575

 
$
164,878

Retained earnings
$
250,707

 
$
(41,575
)
 
$
209,132

The impact of adopting ASC 606 on the Company’s condensed consolidated balance sheet as of December 31, 2018 was as follows (in thousands):
 
Balance under ASC 606
 
Balance without ASC 606
 
Effect of Change
 
December 31, 2018
 
December 31, 2018
 
Higher/ (Lower)
Other current liabilities
$
176,033

 
$
135,774

 
$
40,259

Retained earnings
$
203,255

 
$
243,514

 
$
(40,259
)
    















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

The impact of adopting ASC 606 on the Company’s condensed consolidated statement of income for three months ended December 31, 2018 was as follows (in thousands):
 
 
 
 
 
 
 
Promotional
 
 
 
 
 
 
 
 
 
 
 
 
 
Promotional
 
Allowances
 
Gross vs.
 
 
 
 
 
 
 
For the
 
 
 
Allowances
 
(Non-
 
Net
 
 
 
 
 
Effect of
 
Three Months Ended
 
Loyalty
 
(Discretionary
 
Discretionary
 
Presentation
 
Cash
 
Balance
 
Change
 
December 31, 2018
 
Points
 
Complimentaries)
 
Complimentaries)
 
and Other
 
Giveaways
 
without
 
Higher/
 
2018
 
(1)
 
(2)
 
(2)
 
(3)
 
(4)
 
ASC 606
 
(Lower)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gaming
$
221,935

 
$
1,219

 
$
(30,736
)
 
$
(17,847
)
 
$
5,650

 
$
(2,679
)
 
$
266,328

 
$
(44,393
)
Food and beverage
34,806

 
—

 
10,101

 
—

 
1,149

 
—

 
23,556

 
11,250

Hotel
22,977

 
—

 
5,998

 
—

 
164

 
—

 
16,815

 
6,162

Retail, entertainment and other
39,782

 
—

 
152

 
1,605

 
(1,962
)
 
—

 
39,987

 
(205
)
Gross revenues
319,500

 
1,219

 
(14,485
)
 
(16,242
)
 
5,001

 
(2,679
)
 
346,686

 
(27,186
)
Less-Promotional allowances
—

 
—

 
15,650

 
6,381

 
706

 
—

 
(22,737
)
 
22,737

Net revenues
319,500

 
1,219

 
1,165

 
(9,861
)
 
5,707

 
(2,679
)
 
323,949

 
(4,449
)
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gaming
128,664

 
(95
)
 
(1,711
)
 
(29,629
)
 
5,752

 
(2,679
)
 
157,026

 
(28,362
)
Food and beverage
26,447

 
—

 
2,876

 
7,355

 
1,149

 
—

 
15,067

 
11,380

Hotel
9,803

 
—

 
—

 
2,591

 
164

 
—

 
7,048

 
2,755

Retail, entertainment and other
20,762

 
—

 
—

 
9,822

 
(1,467
)
 
—

 
12,407

 
8,355

Advertising, general and administrative
49,018

 
—

 
—

 
—

 
109

 
—

 
48,909

 
109

Corporate
12,425

 
—

 
—

 
—

 
—

 
—

 
12,425

 
—

Depreciation and amortization
27,090

 
—

 
—

 
—

 
—

 
—

 
27,090

 
—

Other, net
1,921

 
—

 
—

 
—

 
—

 
—

 
1,921

 
—

Total operating costs and expenses
276,130

 
(95
)
 
1,165

 
(9,861
)
 
5,707

 
(2,679
)
 
281,893

 
(5,763
)
Income from operations
$
43,370

 
$
1,314

 
$
—

 
$
—

 
$
—

 
$
—

 
$
42,056

 
$
1,314

The most significant impacts were as follows:
(1) ASC 606 modified the accounting related to loyalty points. The Company’s loyalty reward programs allow patrons to utilize their reward membership cards to earn loyalty points that are redeemable for complimentary items such as food and beverage, lodging and retail products. Under ASC 606, the Company is required to utilize a deferred revenue model to reduce gaming revenues by the estimated fair value of loyalty points earned by patrons and recognize the related revenues when such loyalty points are redeemed. The deferred revenue liability is based on the estimated stand-alone selling price (“SSP”) of the loyalty points earned after factoring in the likelihood of redemption ("Breakage"). Prior to the adoption of ASC 606, the liability for unredeemed loyalty points was estimated based on expected redemption rates and estimated costs of the goods and services to be provided.
(2) ASC 606 modified the accounting related to promotional allowances. The Company no longer recognizes revenues for complimentary items provided to patrons, as well as for goods and services provided to patrons in connection with loyalty point redemptions, as gross revenues with a corresponding offset to promotional allowances to arrive at net revenues. The majority of such amounts previously included within promotional allowances now offset gaming revenues based on an allocation of revenues

9
MOHEGAN TRIBAL GAMING AUTHORITY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(unaudited)

to performance obligations utilizing SSP. These changes resulted in the elimination of promotional allowances and the reclassification of revenues between the various revenue line items.

(3) ASC 606 modified gross versus net presentation. The Company now records mandatory service charges on food and beverage items and wide area progressive operator fees on a gross basis, with amounts received from patrons recorded as revenues and the corresponding amounts paid recorded as expenses. This change resulted in an increase in revenues with a corresponding increase in expenses.

(4) ASC 606 modified the accounting related to cash giveaways. The Company now records cash giveaways as a reduction to gaming revenues. Previously, the Company recorded cash giveaways as a reduction to expenses. This change resulted in a decrease in expenses with a corresponding decrease in gaming revenues.
The Company’s revenues from contracts with customers consist of gaming, food and beverage, hotel, retail, entertainment and convention related transactions, as well as management and development services related to management and development contracts with third-party facilities.
The transaction price in a gaming contract is the difference between gaming wins and losses, not the total amount wagered. The transaction prices in food and beverage, hotel, retail, entertainment and convention contracts are the net amounts collected for such goods and services. Sales and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or expenses. The transaction price in a racing contract, inclusive of live racing at the Company’s facilities and import and export arrangements, is the commission received from the pari-mutuel pool less contractual fees and obligations, which primarily consist of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to racing operations. The transaction prices in management and development service contracts are the amounts collected for services rendered in accordance with contractual terms, inclusive of reimbursable costs and expenses.
Gaming transactions involve two performance obligations for patrons participating in the Company’s loyalty reward programs and a single performance obligation for patrons that do not participate. The Company applies a practical expedient by accounting for gaming contracts on a portfolio basis, as such contracts share similar characteristics. The Company does not expect the effects on its condensed consolidated financial statements under this approach to differ materially versus under an individual contract basis. Revenues allocated to gaming performance obligations are recognized when gaming occurs as such activities are settled immediately. Revenues allocated to the loyalty points deferred revenue liability are recognized as revenues when loyalty points are redeemed. The deferred revenue liability is based on the estimated SSP of the loyalty points earned after factoring in Breakage.
Food and beverage, hotel, retail, entertainment and convention transactions have been determined to be separate, stand-alone performance obligations and the transaction prices for such contracts are recorded as revenues as the related goods and services are transferred to patrons. Revenues from contracts which include a combination of these transactions are allocated on a pro rata basis based on the goods' and services' SSP.
Management and development services have been determined to be separate, stand-alone performance obligations and the transaction prices for such contracts are recorded as revenues as the related services are performed.











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

Revenue Disaggregation
The Company is a geographically diversified, multi-jurisdictional owner, operator and manager of gaming facilities. The Company’s current operations are focused within Connecticut and Pennsylvania. The Company also currently manages other gaming facilities within the United States. The Company generates revenues by providing the following types of goods and services: (1) gaming, (2) food and beverage, (3) hotel, (4) retail, entertainment, and other and (5) management and development. Revenue disaggregation by the various types of revenues and geographic locations for the three months ended December 31, 2018 was as follows (in thousands):
 
 
 
 
 
 
 
 
 
Connecticut
 
Pennsylvania
 
Other
 
 
(Mohegan Sun)
 
(Mohegan Sun Pocono)
 
(Corporate and Other)
Gaming
 
$
170,482

 
$
51,453

 
$
—

Food and beverage
 
29,135

 
5,713

 
(42
)
Hotel
 
21,220

 
1,758

 
(1
)
Retail, entertainment and other
 
31,842

 
1,867

 
421

Management and development
 
—

 
—

 
5,712

Net revenues
 
$
252,679

 
$
60,791

 
$
6,090


Contract and Contract-Related Liabilities
There may exist a difference between the timing of cash receipts from patrons and the recognition of revenues, resulting in a contract or contract-related liability. In general, the Company has three types of liabilities: (1) outstanding gaming chips and slot tickets liability, which represents amounts owed in exchange for outstanding gaming chips and slot tickets held by patrons, (2) loyalty points deferred revenue liability, as discussed above, and (3) patron advances and other liability, which primarily represents funds deposited in advance by patrons for gaming and advance payments by patrons for goods and services, such as advance ticket sales, deposits on rooms and convention space and gift card purchases. These liabilities are generally expected to be recognized as revenues within one year and are recorded within other current liabilities on the Company’s condensed consolidated balance sheets.

The following table summarizes these liabilities (in thousands):
 
December 31, 2018
 
October 1, 2018
 
Increase/ (Decrease)
Outstanding gaming chips and slot tickets liability
$
6,690

 
$
3,298

 
$
3,392

Loyalty points deferred revenue liability
$
41,061

 
$
42,314

 
$
(1,253
)
Patron advances and other liability
$
20,029

 
$
17,530

 
$
2,499

ASU 2016-18
           In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the total change during the period in cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted ASU 2016-18 in its first quarter of fiscal 2019 on a retrospective basis. Transfers between cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents are no longer included within investing activities and, as such, the details of such transfers are not reported as cash flow activities in the statement of cash flows. This resulted in a $13.4 million change to net cash flows used in investing activities for the three months ended December 31, 2017.
ASU 2016-02
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016‑02”), which will require, among other things, lessees to recognize a right-of-use asset and a lease liability for leases with terms in excess of 12 months and the disclosure of key information about leasing arrangements. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” and ASU No. 2018-10, “Codification Improvements to Topic 842, Leases”, which clarified various aspects of this new standard. ASU 2016‑02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. ASU 2016-02 provides various optional practical expedients in transition, which the Company continues to evaluate. The Company expects to adopt ASU 2016-02 in its first quarter of fiscal 2020, on a modified retrospective basis, and will recognize the cumulative effect of its adoption as an adjustment to retained earnings as of October 1, 2019. While the Company continues to evaluate the impact ASU 2016-02 will have on its financial statements and related disclosures, the actual impact of this standard will be dependent upon the Company’s lease portfolio at the time of

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

adoption. The adoption of this standard is expected to have a material impact on the Company’s financial statements, as the Company has significant operating lease commitments that are off-balance sheet under current US GAAP.
ASU 2018-13
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which adds, amends and removes certain disclosure requirements related to fair value measurements. ASU 2018-13 requires enhanced disclosures on valuation techniques and inputs that a reporting entity uses to determine its measures of fair value, including judgments and assumptions that the entity makes and the uncertainties in the fair value measurements as of the reporting date. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019. Certain amended or eliminated disclosure requirements may be adopted earlier, while certain additional disclosure requirements can be adopted on its effective date. In addition, certain changes required by this standard require retrospective adoption, while other changes must be adopted prospectively. The Company is currently evaluating the impact this standard will have on its financial statements.

NOTE 3—COWLITZ PROJECT:
On December 4, 2018, the Company received $106.6 million from the Cowlitz Tribal Gaming Authority. This amount represented the full repayment of the then-outstanding notes and accrued interest, through the repayment date, due to Salishan-Mohegan, LLC in connection with the development of ilani Casino Resort pursuant to the Cowlitz Project, totaling $32.0 million and $74.6 million, respectively.

NOTE 4—LONG-TERM DEBT:
Long-term debt consisted of the following (in thousands):
 
December 31,
2018
 
September 30,
2018
Senior Secured Credit Facility - Revolving
$
66,000

 
$
66,000

Senior Secured Credit Facility - Term Loan A, net of discount and debt issuance costs of $6,016 and $6,661, respectively
295,424

 
311,466

Senior Secured Credit Facility - Term Loan B, net of discount and debt issuance costs of $19,670 and $20,571, respectively
809,160

 
810,430

2016 7 7/8% Senior Unsecured Notes, net of discount and debt issuance costs of $10,677 and $11,033, respectively
489,323

 
488,967

Mohegan Expo Credit Facility, net of debt issuance costs of $1,219 and $1,319, respectively
30,935

 
31,980

Guaranteed Credit Facility, net of debt issuance costs of $1,432 and $1,262, respectively
33,568

 
22,403

Redemption Note Payable, net of discount of $31,242 and $33,635, respectively
83,558

 
81,165

Other
1,364

 
1,744

Long-term debt
1,809,332

 
1,814,155

Less: current portion of long-term debt
(73,865
)
 
(73,232
)
Long-term debt, net of current portion
$
1,735,467

 
$
1,740,923

Senior Secured Credit Facilities - Non-cash Transactions
On December 31, 2018 and 2017, the bank that administers the Company's debt service payments for its Senior Secured Credit Facilities made certain required and optional principal payments on behalf of the Company totaling $28.9 million and $18.7 million, respectively, but did not accordingly debit the Company's bank account for these payments. As of December 31, 2018 and 2017, the Company reflected these non-cash transactions as reductions to current portion of long-term debt and corresponding increases to other current liabilities. In the respective following months, the bank withdrew the payments from the Company's bank account, resulting in reductions to the Company's cash and cash equivalents and other current liabilities.
Guaranteed Credit Facility - Second Advance
On October 30, 2018, the Company entered into a follow-on loan agreement with certain third-party lenders providing for an $11.3 million term loan under the Indian Loan Guaranty, Insurance and Interest Subsidy Program (the “BIA Loan Guaranty Program”). This term loan, combined with an initial term loan issued under the BIA Loan Guaranty Program in late September 2018, completes the allocation to the Company of $35.0 million in guaranteed term loans under the BIA Loan Guaranty Program. Like the initial facility, this term loan is also secured by a 90% loan guarantee by the Department of the Interior, Assistant Secretary

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

—Indian Affairs, Division of Capital Investment, and is otherwise identical to the initial facility, including use of proceeds, maturity, amortization, interest rate and covenant requirements.
Debt Covenant Compliance
As of December 31, 2018, the Company was in compliance with all financial covenants.
    
NOTE 5—SEGMENT REPORTING:
The following table summarizes the Company's results on a segment basis (in thousands):
 
For the Three Months Ended
 
December 31, 2018
 
December 31, 2017
Net revenues:
 
 
 
Mohegan Sun
$
252,679

 
$
262,937

Mohegan Sun Pocono
60,791

 
64,804

Corporate and other
6,090

 
3,803

Inter-segment revenues
(60
)
 
(60
)
Total
$
319,500

 
$
331,484

 
 
 
 
Income (loss) from operations:
 
 
 
Mohegan Sun
$
44,063

 
$
56,393

Mohegan Sun Pocono
7,192

 
7,675

Corporate and other
(7,885
)
 
(9,068
)
Total
$
43,370

 
$
55,000

 
 
 
 
Capital expenditures incurred:
 
 
 
Mohegan Sun
$
5,123

 
$
30,932

Mohegan Sun Pocono
377

 
2,610

Corporate and other
7,549

 
14,215

Total
$
13,049

 
47,757

 
 
 
 
 
December 31, 2018
 
September 30, 2018
Total assets:
 
 
 
Mohegan Sun
$
1,354,193

 
$
1,364,169

Mohegan Sun Pocono
573,976

 
581,079

Corporate and other
371,150

 
366,871

Total
$
2,299,319

 
$
2,312,119



NOTE 6—COMMITMENTS AND CONTINGENCIES:
The Company is a defendant in various claims and legal actions resulting from its normal course of business, primarily relating to personal injuries to patrons and damages to patrons' personal assets. The Company estimates litigation claims expense and accrues for such liabilities based upon historical experience. In management's opinion, the aggregate liability, if any, arising from such legal actions will not have a material impact on the Company's financial position, results of operations or cash flows.


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

NOTE 7—SUBSEQUENT EVENT:
On January 1, 2019, the Mohegan Tribe surrendered its interest in Salishan Mohegan, LLC and a related entity for total consideration of $10 million. Accordingly, the Company will now receive 100% of the management fees in connection with its management of the Cowlitz Project, as well as the Mohegan Tribe's share of development fees moving forward.


14

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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include information relating to business development activities, as well as capital spending, financing sources, 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 us 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 Pocono;
•
the local, regional, national or global economic climate;
•
increased competition, including the expansion of gaming in jurisdictions in which we own or operate gaming facilities;
•
our leverage and ability to meet our debt service obligations and maintain compliance with financial debt covenants;
•
the continued availability of financing;
•
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 our facilities;
•
cyber security risks relating to our information technology and other systems, including misappropriation of patron information or other breaches of information security;
•
our ability to successfully implement our diversification strategy;
•
an act of terrorism;
•
our customers' access to inexpensive transportation to our facilities and changes in oil, fuel or other transportation-related expenses;
•
unfavorable weather conditions;
•
risks associated with operations in foreign jurisdictions;
•
failure by our employees, agents, affiliates, vendors or businesses to comply with applicable laws, rules and regulations, including state gaming laws and regulations and anti-bribery laws such as the United States Foreign Corrupt Practices Act, and similar anti-bribery laws in other jurisdictions; and
•
fluctuations in foreign currency exchange rates.
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, 2018, 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.






15


Overview
The Mohegan Tribe and the Company
The Mohegan Tribe of Indians of Connecticut, or the Mohegan Tribe, is a federally-recognized Indian tribe with an approximately 595-acre reservation situated in southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988, federally-recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal lands, subject to, among other things, the negotiation of a compact with the affected state. The Mohegan Tribe and the State of Connecticut entered into such a compact, the Mohegan Compact, which was approved by the United States Secretary of the Interior. We were established as an instrumentality of the Mohegan Tribe, with the exclusive authority to conduct and regulate gaming activities for the Mohegan Tribe on Tribal lands and the non-exclusive authority to conduct such activities elsewhere.
Our gaming operation at Mohegan Sun is one of only two legally authorized gaming operations in Connecticut offering slot machines and table games. Through our subsidiary, Downs Racing, L.P., we also own and operate Mohegan Sun Pocono, a gaming and entertainment facility located in Plains Township, Pennsylvania. We are governed by a nine-member Management Board, whose members also comprise the Mohegan Tribal Council, the governing body of the Mohegan Tribe. Any change in the composition of the Mohegan Tribal Council results in a corresponding change in our Management Board.
Market and Competition from Other Gaming Operations
Our gaming operation at Mohegan Sun is one of only two current gaming operations in Connecticut offering slot machines
and table games. We face competition from gaming facilities in Massachusetts, Rhode Island, New York and New Jersey. We also face competition in and from the northeastern Pennsylvania gaming market. 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, 2018 and our other reports and filings with the SEC for further details regarding current and potential competition from other gaming operations.
 
Results of Operations
The following table summarizes our results on a segment basis (in thousands):
 
For the Three Months Ended December 31,
 
2018
 
2017
 
Variance    
 
Percentage
Variance    
Net revenues:
 
 
 
 
 
 
 
Mohegan Sun
$
252,679

 
$
262,937

 
$
(10,258
)
 
(3.9
)%
Mohegan Sun Pocono
60,791

 
64,804

 
(4,013
)
 
(6.2
)%
Corporate and other
6,090

 
3,803

 
2,287

 
60.1
 %
Inter-segment revenues
(60
)
 
(60
)
 
—

 
—

Total
$
319,500

 
$
331,484

 
$
(11,984
)
 
(3.6
)%
Income (loss) from operations:
 
 
 
 
 
 
 
Mohegan Sun
$
44,063

 
$
56,393

 
$
(12,330
)
 
(21.9
)%
Mohegan Sun Pocono
7,192

 
7,675

 
(483
)
 
(6.3
)%
Corporate and other
(7,885
)
 
(9,068
)
 
1,183

 
13.0
 %
Total
$
43,370

 
$
55,000

 
$
(11,630
)
 
(21.1
)%
Net income attributable to Mohegan Tribal Gaming Authority
$
10,622

 
$
29,209

 
$
(18,587
)
 
(63.6
)%

The most significant factors and trends that impacted our operating and financial performance were as follows:
•
lower overall gaming volumes;
•
a strong entertainment calendar at Mohegan Sun;
•
higher revenues and increased development costs and expenses associated with our various diversification initiatives;
•
increasingly competitive gaming markets;
•
higher depreciation expense; and
•
higher interest expense.



16

Mohegan Sun
Revenues
Net revenues declined by $10.2 million, or 3.9%, to $252.7 million for the three months ended December 31, 2018 compared to $262.9 million in the same period in the prior year. After factoring in the impact of adopting the new revenue recognition standard, these results were primarily driven by lower slot revenues, partially offset by higher overall non-gaming revenues. Slot revenues were negatively impacted by year-over-year declines in both volumes and hold percentage, while non-gaming revenues benefited from a strong entertainment calendar featuring additional headliner shows and the addition of our Earth Expo & Convention Center, which opened in June 2018.
Operating Costs and Expenses
Operating costs and expenses increased by $2.1 million, or 1.0%, to $208.6 million for the three months ended December 31, 2018 compared to $206.5 million in the same period in the prior year. The increase in operating costs and expenses was principally due to higher depreciation expense and increased medical benefit costs. The increase in depreciation expense was primarily due to an out-of-period correction, which increased depreciation and amortization expense by $6.3 million.
Mohegan Sun Pocono
Revenues
Net revenues declined by $4.0 million, or 6.2%, to $60.8 million for the three months ended December 31, 2018 compared to $64.8 million in the same period in the prior year. After factoring in the impact of adopting the new revenue recognition standard, these results were primarily driven by lower gaming revenues resulting from declines in slot and table game revenues. Both slot and table game revenues were negatively impacted by lower volumes.
Operating Costs and Expenses
Operating costs and expenses declined by $3.5 million, or 6.1%, to $53.6 million for the three months ended December 31, 2018 compared to $57.1 million in the same period in the prior year. The reduction in operating costs and expenses was primarily driven by lower payroll costs, as well as lower slot machine and table game tax expenses commensurate with the declines in slot and table game revenues.
Corporate and Other
Revenues
Net revenues increased by $2.3 million, or 60.5%, to $6.1 million for the three months ended December 31, 2018 compared to $3.8 million in the same period in the prior year, primarily due to higher management fees earned in connection with our management contract with ilani Casino Resort.
Operating Costs and Expenses
Operating costs and expenses increased by $1.1 million, or 8.5%, to $14.0 million for the three months ended December 31, 2018 compared to $12.9 million in the same period in the prior year, primarily as a result of higher pre-opening costs and expenses associated with Project Inspire, our planned integrated resort and casino to be located adjacent to the Incheon International Airport in South Korea.
Other Expenses
Other expenses increased by $6.4 million, or 24.3%, to $32.7 million for the three months ended December 31, 2018 compared to $26.3 million in the same period in the prior year, primarily due to higher interest expense. Interest expense increased by $7.7 million, or 27.2%, to $36.0 million for the three months ended December 31, 2018 compared to $28.3 million in the same period in the prior year as a result of higher weighted average interest rate and weighted average outstanding debt. Weighted average interest rate was 7.4% for the three months ended December 31, 2018 compared to 6.7% in the same period in the prior year. Weighted average outstanding debt was $1.96 billion for the three months ended December 31, 2018 compared to $1.72 billion in the same period in the prior year.
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 Pocono during the months of May through August. Accordingly, our operating results for the three months ended December 31, 2018 are not necessarily indicative of operating results for other interim periods or an entire fiscal year.


17

Liquidity and Capital Resources
As of December 31, 2018 and September 30, 2018, we held cash and cash equivalents of $101.6 million and $103.9 million, respectively. Inclusive of letters of credit, which reduce borrowing availability under our revolving facility, we had approximately $181.7 million of borrowing capacity under the revolving facility and line of credit as of December 31, 2018. 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.
Cash provided by operating activities increased by $49.6 million, or 157.5%, to $81.1 million for the three months ended December 31, 2018 compared to $31.5 million in the same period in the prior year, primarily due to the receipt of $74.6 million from the Cowlitz Tribal Gaming Authority related to accrued interest on funds previously advanced for the Cowlitz Project. These results were partially offset by higher working capital requirements, combined with lower net income after factoring in non-cash items.
Cash provided by investing activities totaled $16.6 million for the three months ended December 31, 2018 compared to cash used in investing activities of $46.7 million in the same period in the prior year. The increase in cash provided by investing activities for the three months ended December 31, 2018 primarily resulted from the receipt of $32.0 million from the Cowlitz Tribal Gaming Authority related to funds previously advanced for the Cowlitz Project, combined with lower capital expenditures. Capital expenditures totaled $13.0 million for the three months ended December 31, 2018, comprising maintenance and development and Project Inspire-related capital expenditures totaling $5.5 million and $7.5 million, respectively.
Cash used in financing activities totaled $17.7 million for the three months ended December 31, 2018 compared to cash provided by financing activities of $25.7 million in the same period in the prior year. The increase in cash used in financing activities for the three months ended December 31, 2018 was primarily driven by a $37.1 million reduction in borrowings.
Sufficiency of Resources
We believe that existing cash balances, financing arrangements and operating cash flows will provide us with sufficient resources to meet our existing debt obligations, distributions to the Mohegan Tribe and capital expenditures for at least the next twelve months; however, we can provide no assurance in this regard.
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, 2018, except for those related to Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). Please refer to “Part I. Item 1—Notes to Condensed Consolidated Financial Statements, Note 2—New Accounting Standards” in this Quarterly Report on Form 10-Q.


18

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. As of December 31, 2018, our primary exposure to market risk was interest rate risk associated with our credit facilities which accrued interest on the basis of a base rate formula or a Eurodollar rate formula, plus applicable rates, as defined under the credit facilities. Based on our variable rate outstanding debt as of December 31, 2018, a 100 basis point change in average interest rate would impact annual interest expense by approximately $12.6 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, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, 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, 2018, 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 have been no changes 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, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

19

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
There has been no material change from the legal proceedings previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

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, 2018.


20

Item 6.    Exhibits
Exhibit No.
  
Description
31.1
  
 
 
 
31.2
  
 
 
 
32.1
  
 
 
 
32.2
  
 
 
 
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).





21

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 7, 2019
By:
/S/    KEVIN P. BROWN         
 
 
 
Kevin P. Brown
Chairman and Member, Management Board
 
 
 
 
Date:
February 7, 2019
By:
 /S/    MARIO C. KONTOMERKOS        
 
 
 
Mario C. Kontomerkos
Chief Executive Officer,
Mohegan Tribal Gaming Authority
(Principal Executive Officer)
 
 
 
 
Date:
February 7, 2019
By:
 /S/    DREW M. KELLEY        
 
 
 
Drew M. Kelley
Chief Financial Officer,
Mohegan Tribal Gaming Authority
(Principal Financial and Accounting Officer)


22