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 March 31, 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 May 13, 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 March 31,
1994 (unaudited) and December 31, 1993 3
Consolidated Statements of Operations of Trump's
Castle Associates and Subsidiary for the three
months ended March 31, 1994 and 1993 (unaudited) 4
Consolidated Statement of Changes in Capital
of Trump's Castle Associates and Subsidiary for
the three months ended March 31, 1994 (unaudited) 5
Consolidated Statements of Cash Flows for Trump's
Castle Associates and Subsidiary for the three
months ended March 31, 1994 and 1993 (unaudited) 6
Note to Consolidated Financial Statements 7
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings 11
Item 2 -- Changes in Securities 11
Item 3 -- Defaults Upon Senior Securities 11
Item 4 -- Submission of Matters to Vote of Security Holders 11
Item 5 -- Other Information 11-13
Item 6 -- Exhibits and Reports on Form 8-K 13
Signatures 14
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TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, 1994 December 31
ASSETS (unaudited) 1993
CURRENT ASSETS:
Cash and temporary investments $18,359 $20,439
Receivables, net 10,634 9,654
Due from affiliates, net 1,054 615
Inventories 2,470 2,315
Other current assets 3,267 3,515
Total current assets 35,784 36,538
PROPERTY AND EQUIPMENT, NET 331,694 334,354
OTHER ASSETS 3,431 5,043
Total assets $370,909 $375,935
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Accounts payable and accrued expenses $26,605 $34,229
Accrued interest payable 8,852 234
Total current liabilities 35,457 34,463
MORTGAGE NOTES, due 2003 net of
unamortized discount of $39,149
and $39,589 202,992 202,552
PIK NOTES, due 2005, net of
unamortized discount of $8,145 and
$8,256 and includes $913 of PIK
interest payable through March 31, 1994 43,266 42,242
OTHER BORROWINGS 65,000 65,000
Total liabilities 346,715 344,257
CAPITAL 24,194 31,678
Total liabilities and
capital $370,909 $375,935
The accompanying note to consolidated financial statements
is an integral part of these consolidated balance sheets.
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TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
For the Three Months
Ended March 31
1994 1993
REVENUES:
Gaming $61,782 $56,325
Rooms 3,923 3,812
Food and beverage 6,268 6,788
Other 1,565 1,507
Gross Revenues 73,538 68,432
Less- Promotional allowances 7,209 6,910
Net Revenues 66,329 61,522
COSTS AND EXPENSES:
Gaming 37,766 36,041
Rooms 630 761
Food and beverage 2,750 3,759
General and administrative 18,277 13,951
Depreciation and amortization 3,591 4,660
63,014 59,172
Income from operations 3,315 2,350
INTEREST INCOME 147 134
INTEREST EXPENSE (10,946) (11,230)
Net Loss ($7,484) ($8,746)
The accompanying note to consolidated financial statements
is an integral part of these consolidated statements.
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TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(unaudited)
(in thousands)
Partners' Partners'
Capital Deficit Total
Balance at December 31, 1993 73,395 (41,717) 31,678
Net loss - (7,484) (7,484)
Balance at March 31, 1994 $73,395 ($49,201) $24,194
The accompanying note to consolidated financial statements
is 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 Three Months
Ended March 31
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($7,484) ($8,746)
Adjustments to reconcile net profit (loss) to net
cash flows provided by (used in) operating activities
Noncash charges-
Depreciation and amortization 3,591 4,660
Accretion of bond discount 551 2,433
Provision for losses on receivables 2,388 306
Valuation adjustment of CRDA investments 291 264
(663) (1,083)
(Increase) decrease in receivables, net (3,807) 963
(Increase) decrease in inventories (155) 127
Decrease in other current assets 183 1,132
Decrease in other assets 2,089 315
Increase (decrease) in current liabilities 1,907 (2,116)
Net cash flows used in operating activities ($446) ($662)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment, net ($931) ($3,683)
Purchase of CRDA investments (703) (654)
Net cash flows used in investing
activities (1,634) (4,337)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Distributions to TC\GP, INC. (179)
Net decrease in cash and cash
equivalents (2,080) (5,178)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 20,439 23,610
CASH AND CASH EQUIVALENTS
AT MARCH 31 $18,359 $18,432
SUPPLEMENTAL INFORMATION:
Cash paid for interest $857 $10,786
The accompanying note to consolidated financial statements is
an integral part of these consolidated statements.
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TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Note to Trump's Castle's 10-Q
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 period ended
March 31, 1994 are not necessarily indicative of the operating
results to be attained for any other period.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
Results of Operations for the Three Month Period
Ended March 31, 1994 and March 31, 1993.
The Partnership's net revenues (gross revenues less
promotional expenses) for the three months ended March 31, 1994
and 1993 totaled approximately $66.3 million and $61.5 million,
respectively, representing a $4.8 million (7.8%) increase. Gaming
revenues were approximately $61.8 million for the three months
ended March 31, 1994 and $56.3 million for the comparable period
in 1993.
Gaming revenue is comprised of table game win and slot
machine win. For the three months ended March 31, 1994 and 1993,
table game win at Trump's Castle approximated $22.9 million and
$17.0 million, respectively. During these periods, dollars
wagered on table games totalled approximately $111.2 million with
a win percentage of 20.1% in 1994 and $116.7 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 (See below).
For the three months ended March 31, 1994 and 1993, table
game credit extended to customers was approximately 31.0% and
26.3% of overall table play, respectively.
For the three months ended March 31, 1994 and 1993, slot
win at Trump's Castle approximated $38.9 million and $39.3
million, respectively. Dollars wagered on slot machines totaled
approximately $427.6 million and $420.2 million for the three
months ended March 31, 1994 and 1993, respectively, with a win
percentage of 9.1% in 1994 and 9.4% in 1993, respectively.
In the aggregate, nongaming revenues at Trump's Castle
did not vary significantly for the three months ended March 31,
1994 when compared to the same period in 1993.
Gaming costs and expenses increased for the three months
ended March 31, 1994 by $1.7 million. This increase is due to a
$2 million bad debt reserve recorded in the first quarter of 1994,
net of a variety of other cost reductions. The $2 million bad
debt reserve was recorded against a $4 million receivable relating
to the January 1, 1994 gaming loss by four international patrons.
The decrease in food and beverage operating expenses is
primarily attributable to a variety of cost reduction measures and
an improvement in the operational efficiency of all food and
beverage outlets. In addition, a reduction in food and beverage
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business volume enabled Trump's Castle to reduce certain variable
expenses.
General and administrative expenses increased approximately
$4.3 million for the quarter ended March 31, 1994 as compared to
the prior year. The increase was primarily attributable to a $2
million contribution to a marina beautification project and $1.8
million of real estate taxes incurred in the first quarter of
1994. (During the first quarter of 1993, Trump's Castle was the
beneficiary of real estate tax credits that virtually eliminated
the real estate tax expense for the quarter).
For the three months ended March 31, 1994, depreciation and
amortization decreased $1.1 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
March 31, 1994 by approximately $.3 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 three
months ended March 31, 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 9.43% to approximately
11.74%. 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
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.
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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 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
Increasing Rate Subordinated Pay-in-Kind Notes due 2005
(the "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
Notes"). The net proceeds from the sale of the Series
A Notes were used by the Partnership (i) to fund the
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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 have
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 Series B Notes have terms which
are virtually identical to those of the Series A Notes.
There can be no assurance that such offering will be
consummated.
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 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, 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 Litigation Warrants). Also as a
consequence of the Recapitalization, the principal
amount of the Partnership's debt has been reduced, and,
initially, the Partnership's cash charges have been
reduced.
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
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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
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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: May 13, 1994
