LEASES

12 Months Ended

Sep. 30, 2020

Leases [Abstract]

LEASES

LEASES:

Lessee

    The Company leases real estate and equipment under various operating and finance lease agreements. Lease terms range from approximately one month to 50 years and do not contain any material residual value guarantees or restrictive covenants. Rental payments under these lease agreements are fixed and/or variable based on periodic adjustments for inflation, performance, usage or appraised land values. Variable components of lease payments are not included in the calculation of ROU assets and liabilities.

    The Company’s lease arrangements contain both lease and non-lease components. For instances in which the Company is a lessee, the Company accounts for both lease and non-lease components as a single lease component for substantially all classes of underlying assets (primarily real estate and equipment). Leases with an expected or initial term of 12 months or less are not recorded on the Company’s consolidated balance sheet and the related lease expenses are recognized on a straight-line basis over the expected lease term.

    Information related to weighted average lease terms and discount rates is as follows:

	September 30, 2020
Weighted average remaining lease terms (years):
Operating leases	22
Finance leases	18
Weighted average discount rates:
Operating leases (1)	8.48	%
Finance leases	4.99	%

_________

(1)The weighted average discount rates for existing operating leases were established upon the adoption of ASU 2016-02 on October 1, 2019.

The components of lease expense are as follows (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
Operating lease expense	$	38,414
Short-term lease expense	27,121
Variable lease expense	12,922
Finance lease expense:
Amortization of ROU assets	2,401
Interest on lease liabilities	1,547
Less: sublease income (1)	(20,791)
Total	$	61,614

_________

(1)Represents income earned by the Company from the rental of hotel, convention or retail space at the MGE Niagara Resorts and the Earth Hotel Tower at Mohegan Sun, both of which are leased properties.

    Supplemental cash flow information related to lease liabilities is as follows (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Payments on operating lease obligations	$	22,844
Payments for interest on finance lease obligations	889
Payments on finance lease obligations	1,298
Total	$	25,031

    Maturities of ROU lease obligations are as follows (in thousands):

	Operating Leases		Finance Leases
Fiscal years:
2021	$	48,623	$	4,261
2022	38,295		3,107
2023	37,824		2,913
2024	37,942		2,547
2025	38,201		2,146
Thereafter	812,066		30,445
Total future lease payments	1,012,951		45,419
Less: amounts representing interest	(581,314)		(14,735)
Plus: residual values	—		327
Present value of future lease payments	431,637		31,011
Less: current portion of lease obligations	(19,939)		(2,802)
Lease obligations, net of current portion	$	411,698	$	28,209

In connection with the acquisition of the MGE Niagara Resorts, the Company committed to enter into a lease agreement with a third-party to lease the Niagara Falls Entertainment Centre. Prior to the adoption of ASU 2016-02, the Company was deemed, for accounting purposes only, to be the owner of this construction project, despite not being the legal owner prior to the completion of construction. Accordingly, the Company capitalized $90.3 million as of September 30, 2019 as a build-to-suit asset within property and equipment, net and recorded a corresponding build-to-suit liability. In connection with the adoption of ASU 2016-02, the Company derecognized the build-to-suit asset and liability in their entirety.

Lessor

The Company leases space at its facilities to third parties. Lease terms for these non-cancelable operating leases range from approximately one month to 21 years. Rental income under these lease agreements is fixed and/or variable based on percentage of tenant sales or periodic adjustments for inflation. Rental income is recorded within hotel and retail, entertainment and other revenues. For instances in which the Company is the lessor, and the class of underlying asset represents retail space, the Company accounts for both the lease and non-lease components, such as common area maintenance and tenant services, as

a single lease component. In all other instances, non-lease components are accounted for separately in accordance with applicable guidance, most commonly ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. 

Lease income consists of the following (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
	Hotel		Retail, Entertainment and Other
Fixed rent	$	42,473	$	7,160
Variable rent	—		4,176
Total	$	42,473	$	11,336

    Future fixed rental income that the Company expects to earn under non-cancelable operating leases, exclusive of amounts under contingent escalated rent clauses, is as follows (in thousands):

Fiscal years:	Operating Leases Fixed Rental Income
2021	$	6,669
2022	4,954
2023	4,397
2024	3,891
2025	2,804
Thereafter	6,715
Total	$	29,430

    Due to the evolving nature of COVID-19 and the related economic uncertainties, the Company cannot be certain that the contractual future fixed rental income presented above will be realized in their entirety.

    The portions of Mohegan Sun, including the Sky Hotel Tower and the Earth Expo & Convention Center, and Mohegan Sun Pocono that are leased to third parties under operating leases are recorded within property and equipment, net as follows (in thousands):

	September 30, 2020
Property and equipment, at cost	$	484,143
Less: accumulated depreciation	(198,080)
Property and equipment, net	$	286,063

    As of September 30, 2019, information pertaining to the Company’s leases, as accounted for under prior accounting standards, was as follows:

Capital Leases

Minimum future capital lease payments were as follows (in thousands):

Fiscal years:	Capital Leases
2020	$	2,571
2021	2,598
2022	2,598
2023	2,548
2024	2,251
Thereafter	32,832
Total minimum future capital lease payments	45,398
Less: amounts representing interest	(16,031)
Plus: residual values	327
Present value of capital lease obligations	29,694
Less: current portion of capital lease obligations	(1,133)
Capital lease obligations, net of current portion	$	28,561

Operating Leases

Minimum future rental income that the Company expected to earn under non-cancelable leases was as follows (in thousands):

Fiscal years:	Operating Leases
2020	$	4,808
2021	4,038
2022	2,485
2023	2,092
2024	2,011
Thereafter	5,734
Total	$	21,168

Minimum future rental payments that the Company expected to incur under non-cancelable leases and subleases was as follows (in thousands):

	Operating Leases
Fiscal years:	Minimum Future Rental Payments		Minimum Future Sublease Income		Total
2020	$	32,504	$	(1,709)	$	30,795
2021	30,376		(1,428)		28,948
2022	30,651		(1,114)		29,537
2023	30,473		(987)		29,486
2024	30,602		(1,025)		29,577
Thereafter	715,910		(843)		715,067
Total	$	870,516	$	(7,106)	$	863,410

LEASES

LEASES:

Lessee

    The Company leases real estate and equipment under various operating and finance lease agreements. Lease terms range from approximately one month to 50 years and do not contain any material residual value guarantees or restrictive covenants. Rental payments under these lease agreements are fixed and/or variable based on periodic adjustments for inflation, performance, usage or appraised land values. Variable components of lease payments are not included in the calculation of ROU assets and liabilities.

    The Company’s lease arrangements contain both lease and non-lease components. For instances in which the Company is a lessee, the Company accounts for both lease and non-lease components as a single lease component for substantially all classes of underlying assets (primarily real estate and equipment). Leases with an expected or initial term of 12 months or less are not recorded on the Company’s consolidated balance sheet and the related lease expenses are recognized on a straight-line basis over the expected lease term.

    Information related to weighted average lease terms and discount rates is as follows:

	September 30, 2020
Weighted average remaining lease terms (years):
Operating leases	22
Finance leases	18
Weighted average discount rates:
Operating leases (1)	8.48	%
Finance leases	4.99	%

_________

(1)The weighted average discount rates for existing operating leases were established upon the adoption of ASU 2016-02 on October 1, 2019.

The components of lease expense are as follows (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
Operating lease expense	$	38,414
Short-term lease expense	27,121
Variable lease expense	12,922
Finance lease expense:
Amortization of ROU assets	2,401
Interest on lease liabilities	1,547
Less: sublease income (1)	(20,791)
Total	$	61,614

_________

(1)Represents income earned by the Company from the rental of hotel, convention or retail space at the MGE Niagara Resorts and the Earth Hotel Tower at Mohegan Sun, both of which are leased properties.

    Supplemental cash flow information related to lease liabilities is as follows (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Payments on operating lease obligations	$	22,844
Payments for interest on finance lease obligations	889
Payments on finance lease obligations	1,298
Total	$	25,031

    Maturities of ROU lease obligations are as follows (in thousands):

	Operating Leases		Finance Leases
Fiscal years:
2021	$	48,623	$	4,261
2022	38,295		3,107
2023	37,824		2,913
2024	37,942		2,547
2025	38,201		2,146
Thereafter	812,066		30,445
Total future lease payments	1,012,951		45,419
Less: amounts representing interest	(581,314)		(14,735)
Plus: residual values	—		327
Present value of future lease payments	431,637		31,011
Less: current portion of lease obligations	(19,939)		(2,802)
Lease obligations, net of current portion	$	411,698	$	28,209

In connection with the acquisition of the MGE Niagara Resorts, the Company committed to enter into a lease agreement with a third-party to lease the Niagara Falls Entertainment Centre. Prior to the adoption of ASU 2016-02, the Company was deemed, for accounting purposes only, to be the owner of this construction project, despite not being the legal owner prior to the completion of construction. Accordingly, the Company capitalized $90.3 million as of September 30, 2019 as a build-to-suit asset within property and equipment, net and recorded a corresponding build-to-suit liability. In connection with the adoption of ASU 2016-02, the Company derecognized the build-to-suit asset and liability in their entirety.

Lessor

The Company leases space at its facilities to third parties. Lease terms for these non-cancelable operating leases range from approximately one month to 21 years. Rental income under these lease agreements is fixed and/or variable based on percentage of tenant sales or periodic adjustments for inflation. Rental income is recorded within hotel and retail, entertainment and other revenues. For instances in which the Company is the lessor, and the class of underlying asset represents retail space, the Company accounts for both the lease and non-lease components, such as common area maintenance and tenant services, as

a single lease component. In all other instances, non-lease components are accounted for separately in accordance with applicable guidance, most commonly ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. 

Lease income consists of the following (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
	Hotel		Retail, Entertainment and Other
Fixed rent	$	42,473	$	7,160
Variable rent	—		4,176
Total	$	42,473	$	11,336

    Future fixed rental income that the Company expects to earn under non-cancelable operating leases, exclusive of amounts under contingent escalated rent clauses, is as follows (in thousands):

Fiscal years:	Operating Leases Fixed Rental Income
2021	$	6,669
2022	4,954
2023	4,397
2024	3,891
2025	2,804
Thereafter	6,715
Total	$	29,430

    Due to the evolving nature of COVID-19 and the related economic uncertainties, the Company cannot be certain that the contractual future fixed rental income presented above will be realized in their entirety.

    The portions of Mohegan Sun, including the Sky Hotel Tower and the Earth Expo & Convention Center, and Mohegan Sun Pocono that are leased to third parties under operating leases are recorded within property and equipment, net as follows (in thousands):

	September 30, 2020
Property and equipment, at cost	$	484,143
Less: accumulated depreciation	(198,080)
Property and equipment, net	$	286,063

    As of September 30, 2019, information pertaining to the Company’s leases, as accounted for under prior accounting standards, was as follows:

Capital Leases

Minimum future capital lease payments were as follows (in thousands):

Fiscal years:	Capital Leases
2020	$	2,571
2021	2,598
2022	2,598
2023	2,548
2024	2,251
Thereafter	32,832
Total minimum future capital lease payments	45,398
Less: amounts representing interest	(16,031)
Plus: residual values	327
Present value of capital lease obligations	29,694
Less: current portion of capital lease obligations	(1,133)
Capital lease obligations, net of current portion	$	28,561

Operating Leases

Minimum future rental income that the Company expected to earn under non-cancelable leases was as follows (in thousands):

Fiscal years:	Operating Leases
2020	$	4,808
2021	4,038
2022	2,485
2023	2,092
2024	2,011
Thereafter	5,734
Total	$	21,168

Minimum future rental payments that the Company expected to incur under non-cancelable leases and subleases was as follows (in thousands):

	Operating Leases
Fiscal years:	Minimum Future Rental Payments		Minimum Future Sublease Income		Total
2020	$	32,504	$	(1,709)	$	30,795
2021	30,376		(1,428)		28,948
2022	30,651		(1,114)		29,537
2023	30,473		(987)		29,486
2024	30,602		(1,025)		29,577
Thereafter	715,910		(843)		715,067
Total	$	870,516	$	(7,106)	$	863,410

LEASES

LEASES:

Lessee

    The Company leases real estate and equipment under various operating and finance lease agreements. Lease terms range from approximately one month to 50 years and do not contain any material residual value guarantees or restrictive covenants. Rental payments under these lease agreements are fixed and/or variable based on periodic adjustments for inflation, performance, usage or appraised land values. Variable components of lease payments are not included in the calculation of ROU assets and liabilities.

    The Company’s lease arrangements contain both lease and non-lease components. For instances in which the Company is a lessee, the Company accounts for both lease and non-lease components as a single lease component for substantially all classes of underlying assets (primarily real estate and equipment). Leases with an expected or initial term of 12 months or less are not recorded on the Company’s consolidated balance sheet and the related lease expenses are recognized on a straight-line basis over the expected lease term.

    Information related to weighted average lease terms and discount rates is as follows:

	September 30, 2020
Weighted average remaining lease terms (years):
Operating leases	22
Finance leases	18
Weighted average discount rates:
Operating leases (1)	8.48	%
Finance leases	4.99	%

_________

(1)The weighted average discount rates for existing operating leases were established upon the adoption of ASU 2016-02 on October 1, 2019.

The components of lease expense are as follows (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
Operating lease expense	$	38,414
Short-term lease expense	27,121
Variable lease expense	12,922
Finance lease expense:
Amortization of ROU assets	2,401
Interest on lease liabilities	1,547
Less: sublease income (1)	(20,791)
Total	$	61,614

_________

(1)Represents income earned by the Company from the rental of hotel, convention or retail space at the MGE Niagara Resorts and the Earth Hotel Tower at Mohegan Sun, both of which are leased properties.

    Supplemental cash flow information related to lease liabilities is as follows (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Payments on operating lease obligations	$	22,844
Payments for interest on finance lease obligations	889
Payments on finance lease obligations	1,298
Total	$	25,031

    Maturities of ROU lease obligations are as follows (in thousands):

	Operating Leases		Finance Leases
Fiscal years:
2021	$	48,623	$	4,261
2022	38,295		3,107
2023	37,824		2,913
2024	37,942		2,547
2025	38,201		2,146
Thereafter	812,066		30,445
Total future lease payments	1,012,951		45,419
Less: amounts representing interest	(581,314)		(14,735)
Plus: residual values	—		327
Present value of future lease payments	431,637		31,011
Less: current portion of lease obligations	(19,939)		(2,802)
Lease obligations, net of current portion	$	411,698	$	28,209

In connection with the acquisition of the MGE Niagara Resorts, the Company committed to enter into a lease agreement with a third-party to lease the Niagara Falls Entertainment Centre. Prior to the adoption of ASU 2016-02, the Company was deemed, for accounting purposes only, to be the owner of this construction project, despite not being the legal owner prior to the completion of construction. Accordingly, the Company capitalized $90.3 million as of September 30, 2019 as a build-to-suit asset within property and equipment, net and recorded a corresponding build-to-suit liability. In connection with the adoption of ASU 2016-02, the Company derecognized the build-to-suit asset and liability in their entirety.

Lessor

The Company leases space at its facilities to third parties. Lease terms for these non-cancelable operating leases range from approximately one month to 21 years. Rental income under these lease agreements is fixed and/or variable based on percentage of tenant sales or periodic adjustments for inflation. Rental income is recorded within hotel and retail, entertainment and other revenues. For instances in which the Company is the lessor, and the class of underlying asset represents retail space, the Company accounts for both the lease and non-lease components, such as common area maintenance and tenant services, as

a single lease component. In all other instances, non-lease components are accounted for separately in accordance with applicable guidance, most commonly ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. 

Lease income consists of the following (in thousands):

	For the Fiscal Year Ended
	September 30, 2020
	Hotel		Retail, Entertainment and Other
Fixed rent	$	42,473	$	7,160
Variable rent	—		4,176
Total	$	42,473	$	11,336

    Future fixed rental income that the Company expects to earn under non-cancelable operating leases, exclusive of amounts under contingent escalated rent clauses, is as follows (in thousands):

Fiscal years:	Operating Leases Fixed Rental Income
2021	$	6,669
2022	4,954
2023	4,397
2024	3,891
2025	2,804
Thereafter	6,715
Total	$	29,430

    Due to the evolving nature of COVID-19 and the related economic uncertainties, the Company cannot be certain that the contractual future fixed rental income presented above will be realized in their entirety.

    The portions of Mohegan Sun, including the Sky Hotel Tower and the Earth Expo & Convention Center, and Mohegan Sun Pocono that are leased to third parties under operating leases are recorded within property and equipment, net as follows (in thousands):

	September 30, 2020
Property and equipment, at cost	$	484,143
Less: accumulated depreciation	(198,080)
Property and equipment, net	$	286,063

    As of September 30, 2019, information pertaining to the Company’s leases, as accounted for under prior accounting standards, was as follows:

Capital Leases

Minimum future capital lease payments were as follows (in thousands):

Fiscal years:	Capital Leases
2020	$	2,571
2021	2,598
2022	2,598
2023	2,548
2024	2,251
Thereafter	32,832
Total minimum future capital lease payments	45,398
Less: amounts representing interest	(16,031)
Plus: residual values	327
Present value of capital lease obligations	29,694
Less: current portion of capital lease obligations	(1,133)
Capital lease obligations, net of current portion	$	28,561

Operating Leases

Minimum future rental income that the Company expected to earn under non-cancelable leases was as follows (in thousands):

Fiscal years:	Operating Leases
2020	$	4,808
2021	4,038
2022	2,485
2023	2,092
2024	2,011
Thereafter	5,734
Total	$	21,168

Minimum future rental payments that the Company expected to incur under non-cancelable leases and subleases was as follows (in thousands):

	Operating Leases
Fiscal years:	Minimum Future Rental Payments		Minimum Future Sublease Income		Total
2020	$	32,504	$	(1,709)	$	30,795
2021	30,376		(1,428)		28,948
2022	30,651		(1,114)		29,537
2023	30,473		(987)		29,486
2024	30,602		(1,025)		29,577
Thereafter	715,910		(843)		715,067
Total	$	870,516	$	(7,106)	$	863,410