UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1994
Commission File No. 1-9029
TRUMP'S CASTLE FUNDING, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
NEW JERSEY 11-2739203
_______________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
HURON AVENUE & BRIGANTINE BOULEVARD
ATLANTIC CITY, NEW JERSEY 08401
______________________________________________________ __________
(Address of principal executive offices) (Zip Code)
609-441-8679
__________________________________________________
Registrant's telephone number, including area code
Indicate by checkmark 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 checkmark whether the Registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes X No
As of August 12, 1994, there were 200 shares of Trump's Castle
Funding, Inc.'s common stock outstanding.
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TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
INDEX TO FORM 10-Q
Page
Number
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements
Consolidated Balance Sheets of Trump's Castle
Associates and Subsidiary as of June 30,
1994 (unaudited) and December 31, 1993 3
Consolidated Statements of Operations of Trump's
Castle Associates and Subsidiary for the six
months ended June 30, 1994 and 1993 (unaudited) 4
Consolidated Statement of Changes in Capital
of Trump's Castle Associates and Subsidiary for
the six months ended June 30, 1994 (unaudited) 5
Consolidated Statements of Cash Flows for Trump's
Castle Associates and Subsidiary for the six
months ended June 30, 1994 and 1993 (unaudited) 6
Notes to Consolidated Financial Statements 7-8
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings 13
Item 2 -- Changes in Securities 13
Item 3 -- Defaults Upon Senior Securities 13
Item 4 -- Submission of Matters to Vote of Security Holders 13
Item 5 -- Other Information 13-15
Item 6 -- Exhibits and Reports on Form 8-K 15
Signatures 16
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 1994 December 31
ASSETS (unaudited) 1993
CURRENT ASSETS:
Cash and temporary investments $10,857 $20,439
Receivables, net 10,740 9,654
Due from affiliates, net 963 615
Inventories 2,135 2,315
Other current assets 5,996 3,515
Total current assets 30,691 36,538
PROPERTY AND EQUIPMENT, NET 331,360 334,354
OTHER ASSETS 3,994 5,043
Total assets $366,045 $375,935
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Accounts payable and accrued expenses $27,433 $34,229
Accrued interest payable 5,536 234
Total current liabilities 32,969 34,463
MORTGAGE NOTES, due 2003 net
of unamortized discount of
$38,694 and $39,589 203,447 202,552
PIK NOTES, due 2005, net of unamortized
discount of $8,054 and $8,256 and
includes $454 of PIK interest payable
through June 30, 1994 44,244 42,242
OTHER BORROWINGS 65,000 65,000
Total liabilities 345,660 344,257
CAPITAL 20,385 31,678
Total liabilities and capital $366,045 $375,935
The accompanying notes to consolidated financial statements are
an integral part of these consolidated balance sheets.
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
For the Three Months For the Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
REVENUES:
Gaming $65,868 $60,387 $127,650 $116,712
Rooms 5,143 4,762 9,066 8,574
Food and beverage 7,721 8,067 13,989 14,855
Other 2,496 2,436 4,061 3,943
Gross Revenues 81,228 75,652 154,766 144,084
Less - Promotional
allowance 8,483 7,786 15,692 14,696
Net Revenues 72,745 67,866 139,074 129,388
COSTS AND EXPENSES:
Gaming 40,463 36,853 78,229 72,894
Rooms 790 941 1,420 1,702
Food and beverage 3,674 4,604 6,424 8,363
General and
administrative 17,030 15,508 35,307 29,459
Depreciation and
amortization 3,743 4,756 7,334 9,416
65,700 62,662 128,714 121,834
Income from operations 7,045 5,204 10,360 7,554
INTEREST INCOME 148 200 295 334
INTEREST EXPENSE (11,002) (11,304) (21,948) (22,534)
Net Loss ($3,809) ($5,900) ($11,293) ($14,646)
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
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TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(unaudited)
(in thousands)
Partners' Partners'
Capital Deficit Total
Balance at December 31, 1993 73,395 (41,717) 31,678
Net loss - (11,293) (11,293)
Balance at June 30, 1994 $73,395 ($53,010) $20,385
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
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TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
For The Six Months
Ended June 30
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($11,293) ($14,646)
Adjustments to reconcile net profit (loss)
to net cash flows provided by (used in)
operating activities
Noncash charges-
Depreciation and amortization 7,334 9,416
Accretion of bond discount 1,097 4,973
Provision for losses on receivables 3,723 595
Valuation adjustment of CRDA investments 615 529
1,476 867
(Increase) decrease in receivables, net (5,157) 158
Decrease in inventories 180 164
Increase in other current assets (2,610) (1,122)
Decrease (increase) in other assets 2,022 (1)
Increase in current liabilities 306 7,297
Net cash flows used in operating
activities ($3,783) $7,363
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment, net ($4,340) ($6,754)
Purchase of CRDA investments (1,459) (1,384)
Net cash flows used in investing
activities (5,799) (8,138)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Distributions to TC\GP, INC. 0 (317)
Net decrease in cash and cash
equivalents (9,582) (1,092)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 20,439 23,610
CASH AND CASH EQUIVALENTS
AT JUNE 30 $10,857 $22,518
SUPPLEMENTAL INFORMATION:
Cash paid for interest $13,750 $11,810
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Organization and Operations
The accompanying consolidated financial statements include
those of Trump's Castle Associates, a New Jersey general
partnership (the "Partnership") and its wholly owned subsidiary,
Trump's Castle Funding, Inc., a New Jersey Corporation (the
"Company"). All significant intercompany balances and
transactions have been eliminated in the consolidated financial
statements.
The accompanying consolidated financial statements have been
prepared by the Partnership without audit. In the opinion of the
Partnership, all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial position,
results of operations and cash flows for the periods presented
have been made.
The accompanying financial statements have been prepared by
the Partnership pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain
information and note disclosures normally included in the
financial statements prepared in conformity with generally
accepted accounting principles have been omitted.
These financial statements should be read in conjunction with
the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December
31, 1993 filed with the Securities and Exchange Commission.
The results of operations for the three month and six month
periods ended June 30, 1994 are not necessarily indicative of the
operating results to be attained for any other period.
(2) PIK Notes
On May 15, 1994, the first interest payment on the Increasing
Rate Subordinated Pay-In-Kind Notes due 2005 (the "PIK Notes")
came due. The amount of interest due totaled approximately
$1,345,000. In accordance with the indentures, the Partnership
issued additional notes in lieu of a cash payment as satisfaction
of the amount due.
(3) Fred Trump Gaming Chip Liability
In December 1990, Fred Trump, the father of Donald J. Trump,
placed $3,500,000 in cash on deposit with the Partnership's casino
cage, which was recorded by the Partnership as a gaming patron
<PAGE>
deposit. Counter checks totaling $3,500,000 were issued against
the deposit, for which Fred Trump received gaming chips valued at
$3,500,000. On October 8, 1992, in accordance with the terms of
the company's outstanding indebtedness, Fred Trump redeemed
$1,000,000 in gaming chips for cash. In December 1993, Fred Trump
redeemed $1,000,000 in gaming chips and placed the same amount on
deposit in the casino cage. This amount was included in Patrons
Deposits as of December 31, 1993 and was subsequently redeemed on
January 6, 1994. On May 19, 1994 in accordance with the
indentures, Fred Trump redeemed $1,475,000 in gaming chips for
cash. The remaining gaming chip liability to Fred Trump of
$25,000 is included in the unredeemed chip liability as of June 30,
1994.
(4) Financial Information of the Company
Financial information relating to the Company is as
follows (in thousands):
June 30, December 31,
1994 1993
Total assets (including Mortgage
Notes Receivable of $242,141 at
June 30, 1994 and December 31,
1993, PIK Notes Receivable of
$51,844 and $50,499 at June 30,
1994 and December 31, 1993,
respectively and Senior Notes
Receivable of $27,000 at June
30, 1994 and December 31, 1993.) $326,523 $319,876
Total Liabilities and Capital
(including Mortgage Notes
Payable of $242,141 at June 30,
1994 and December 31, 1993, PIK
Notes Payable of $51,844 and
$50,499 at June 30, 1994 and
December 31, 1993 respectively
and Senior Notes Payable of
$27,000 at June 30, 1994 and
December 31, 1993.) $326,523 $319,876
Interest Income and Interest Expense for the six month periods
ending June 30, 1994 and June 30, 1993 was $20,217 and $20,664.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
Results of Operations for the Three Month Period
Ended June 30, 1994 and June 30, 1993.
The Partnership's net revenues (gross revenues less
promotional expenses) for the three months ended June 30, 1994 and
1993 totaled approximately $72.7 million and $67.9 million,
respectively, representing a $4.9 million (7.2%) increase. Gaming
revenues were approximately $65.9 million for the three months
ended June 30, 1994 and $60.4 million for the comparable period in
1993.
Gaming revenue is comprised of table game win and slot
machine win. For the three months ended June 30, 1994 and 1993,
table game win at Trump's Castle approximated $19.4 million and
$17.4 million, respectively. During these periods, dollars
wagered on table games totalled approximately $114.1 million with
a win percentage of 16.5% in 1994 and $119.8 million with a win
percentage of 14.5% in 1993.
For the three months ended June 30, 1994 and 1993, table game
credit extended to customers was approximately 29.8% and 28.0% of
overall table play, respectively.
For the three months ended June 30, 1994 and 1993, slot
win at Trump's Castle approximated $46.5 million and $43.0
million, respectively. Dollars wagered on slot machines totaled
approximately $508.5 million and $465.2 million for the three
months ended June 30, 1994 and 1993, respectively, with a win
percentage of 9.1% in 1994 and 9.2% in 1993, respectively.
In the aggregate, nongaming revenues at Trump's Castle
did not vary significantly for the three months ended June 30,
1994 when compared to the same period in 1993.
Gaming costs and expenses for the three months ended June 30,
1994 and June 30 1993 varied in direct proportion to the increase
in gaming revenue.
The decrease in rooms and food and beverage operating
expenses is primarily attributable to a variety of cost reduction
measures and an improvement in operational efficiency.
General and administrative expenses increased approximately
$1.5 million for the quarter ended June 30, 1994 as compared to
the prior year. The increase was primarily attributable to an
increase in spending for advertising and new business development.
<PAGE>
For the three months ended June 30, 1994, depreciation and
amortization decreased $1.0 million over the comparable period in
1993, primarily as a result of the impact of fully depreciated
assets.
Interest expense decreased for the three month period ended
June 30, 1994 over the comparable period in 1993 by approximately
$0.3 million as a result of the recapitalization on December 28,
1993.
Results of Operations for the Six Month Period
Ended June 30, 1994 and June 30, 1993.
The Partnership's net revenues (gross revenues less
promotional expenses) for the six months ended June 30, 1994 and
1993 totaled approximately $139.1 million and $129.4 million,
respectively, representing a $9.7 million (7.5%) increase. Gaming
revenues were approximately $127.7 million for the six months
ended June 30, 1994 and $116.7 million for the comparable period
in 1993.
Gaming revenue is comprised of table game win and slot
machine win. For the six months ended June 30, 1994 and 1993,
table game win at Trump's Castle approximated $42.3 million and
$34.4 million, respectively. During these periods, dollars
wagered on table games totalled approximately $225.3 million with
a win percentage of 18.8% in 1994 and $236.5 million with a win
percentage of 14.6% in 1993. In late 1993, Trump's Castle
commenced a shift in marketing strategy which included the
attraction of international table game patrons. On January 1,
1994 Trump's Castle won in excess of $6.0 million from four such
patrons.
For the six months ended June 30, 1994 and 1993, table game
credit extended to customers was approximately 30.4% and 27.2% of
overall table play, respectively.
For the six months ended June 30, 1994 and 1993, slot
win at Trump's Castle approximated $85.3 million and $82.3
million, respectively. Dollars wagered on slot machines totaled
approximately $936.0 million and $885.4 million for the six months
ended June 30, 1994 and 1993, respectively, with a win percentage
of 9.1% in 1994 and 9.3% in 1993, respectively.
In the aggregate, nongaming revenues at Trump's Castle
did not vary significantly for the six months ended June 30, 1994
when compared to the same period in 1993.
Gaming costs and expenses for the six months ended June 30,
1994 and June 30, 1993 varied in direct proportion to the increase
in gaming revenue.
<PAGE>
The decrease in rooms and food and beverage operating
expenses is primarily attributable to a variety of cost reduction
measures and an improvement in operational efficiency.
General and administrative expenses increased approximately
$5.8 million for the six months ended June 30, 1994 as compared to
the prior year. The increase was primarily attributable to:
(1) Significantly lower real estate tax expense incurred in
the first quarter of 1993 as a result of $1.8 million
real estate tax credit.
(2) The contribution of $2.5 million to a joint project with
Harrah's for the beautification of the marina district
of Atlantic City in which both casinos operate.
(3) Increased spending in connection with new business
development and facilities maintenance.
(4) Certain additional administrative costs.
For the six months ended June 30, 1994, depreciation and
amortization decreased $2.1 million over the comparable period in
1993, primarily as a result of the impact of fully depreciated
assets.
Interest expense decreased for the six month period ended
June 30, 1994 over the comparable period in 1993 by approximately
$0.6 million as a result of the recapitalization on December 28,
1993.
Inflation. There was no significant impact on the
Partnership's operations as a result of inflation during the six
months ended June 30, 1994 and 1993.
Liquidity and Capital Resources. Upon consummation of the
Recapitalization in December 1993 (see Item 5. Other Information),
the Partnership had a working capital surplus of $2.1 million
including $20.4 million of cash and temporary investments.
The effect of the Recapitalization on the Partnership's
capital structure has been to increase the Partnership's weighted
average cost of debt from approximately 9.4% to approximately
11.7%. The increase in the weighted average cost of debt capital
will be offset, at least initially, by an approximately $23
million decrease in the principal amount of the Partnership's
outstanding indebtedness and by a reduction in the cash required
to meet the Partnership's debt service obligations in the near
future. As a result of the Recapitalization, the Partnership's
consolidated indebtedness has been reduced from $381 million to
$358 million. The pay-in-kind feature of the PIK Notes could,
however, result in an additional $130 million of indebtedness over
the next ten years, assuming all accrued interest on the PIK Notes
is paid in additional PIK Notes. It is projected that the
<PAGE>
Partnership will require approximately $31.4 million in 1994 and
$36.1 million in 1995 in operating cash flow to meet its debt
service obligations. If necessary, the Partnership may seek to
obtain a credit facility of up to $10 million in principal amount
to fund any shortfall in cash available to meet debt service
obligations.
Management believes, based upon its current level of
operations, that although the Partnership is highly leveraged, it
will continue to have the ability to pay interest on its
indebtedness and to pay other liabilities with funds from
operations for the foreseeable future. However, there can be no
assurance to that effect. In the event that circumstances change,
the Partnership may seek to obtain a working capital facility of
up to $10 million, although there can be no assurance that such
financing will be available on terms acceptable to the
Partnership.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The Partnership and certain affiliated entities are
involved in various legal proceedings. Reference is
made to the description contained in the Company's
Annual Report on Form 10-K for the year ended December
31, 1993, and in the Company's Quarterly Report on Form
10-Q for the fiscal quarters ended September 30, 1993
and June 30, 1993.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to Vote of Security
Holders.
None
Item 5. Other Information.
On December 28, 1993, the Partnership and Funding
consummated the first step in the Recapitalization, an
exchange offer (the "Exchange Offer") pursuant to which
each $1,000 principal amount of 9.5% Mortgage Bonds due
1998 (the "Bonds") accepted for exchange was exchanged
for $750 principal amount of Funding's 11-3/4% Mortgage
Notes due 2003 (the "Mortgage Notes"), $120 principal
amount of Funding's PIK Notes and a cash payment of
$6.19, plus accrued interest to the date of exchange.
The 3.8% of Bonds not validly tendered in the Exchange
Offer were defeased, and pursuant to their terms,
called for redemption at a price equal to 75% of the
principal amount thereof, plus accrued interest to the
date of redemption.
On December 28, 1993, Funding issued, through a private
placement, $27 million principal amount of its 11-1/2%
Series A Senior Secured Notes due 2000 (the "Series A
<PAGE>
Notes"). The net proceeds from the sale of the Series
A Notes were used by the Partnership (i) to fund the
redemption of the Bonds not exchanged in the Exchange
Offer and (ii) to repay a portion of the Partnership's
outstanding indebtedness. Pursuant to the terms of a
Registration Rights Agreement with the purchasers of
the Series A Notes, Funding and the Partnership filed a
registration statement with the Securities and Exchange
Commission (the "SEC") for the issuance of $27 million
principal amount of Funding's 11-1/2% Series B Senior
Secured Notes (the "Series B Notes") in exchange for
the $27 million outstanding principal amount of the
Series A Notes. The Registration Statement was
declared effective in May 1994, and the full
$27,000,000 in principal amount of Series A Notes were
exchanged for a like amount of Series B Notes in June
1994. The Series B Notes have terms which are
virtually identical to those of the Series A Notes.
On December 30, 1993, the second step in the
Recapitalization was consummated, a merger (the
"Merger") of Trump's Castle Holding, Inc. ("Holding"),
a Delaware corporation wholly owned by the Partnership,
with and into TC/GP. Pursuant to the terms of the
Merger, each holder of TC/GP Common Stock, other than
those who exercised their statutory appraisal rights,
received $35 principal amount of PIK Notes for each
share of TC/GP Common Stock. The Partnership, as the
holder of all of the outstanding common stock of
Holding immediately prior to consummation of the
Merger, acquired all of the outstanding common stock of
TC/GP as a result of the Merger. Upon consummation of
the Merger, the Partnership distributed all of the
TC/GP common stock to Donald J. Trump ("Trump"), and
the partnership agreement of the Partnership was
amended and restated to alter certain governance
procedures and to otherwise reflect the
Recapitalization.
As a result of the Recapitalization, TC/GP has a 37.5%
interest in the Partnership, Trump has a 61.5% interest
in the Partnership, Trump's Castle Hotel & Casino, Inc.
("TCHI") has a 1% interest in the Partnership and Trump
is the beneficial owner of 100% of the common equity
interests in the Partnership (subject to the right of
the plaintiffs in certain litigation to be issued
warrants for the common stock of TCHI representing the
right to acquire an indirect beneficial interest in
0.5% of the common equity interest in the Partnership).
<PAGE>
Upon consummation of the Recapitalization, Funding's
outstanding debt consisted of the $27 million principal
amount outstanding of its Senior Notes, the
approximately $242 million principal amount outstanding
of its Mortgage Notes (which are subordinated to the
Senior Notes) and the approximately $50 million
principal amount outstanding of its PIK Notes (which
are subordinated to both the Senior Notes and the
Mortgage Notes). Funding has also guaranteed the
Midlantic Term Loan (as defined below).
In addition, upon consummation of the Recapitalization,
the Partnership had outstanding approximately $358
million principal amount of indebtedness, including a
term loan due to Midlantic National Bank, which had an
aggregate principal amount outstanding of $38 million
as of December 31, 1993 (the "Midlantic Term Loan").
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None
(b) The Company filed the following Current Reports on
Form 8-K:
None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned thereunto duly
authorized.
TRUMP'S CASTLE FUNDING, INC.
(Registrant)
By: /s/ Robert E. Schaffhauser
Robert E. Schaffhauser
Assistant Treasurer
(Duly Authorized Officer and
Chief Accounting Officer)
Date: August 12, 1994
