================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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: June 30, 1998
OR
[ ] 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: 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
incorporation or organization) Identification No.)
Huron Avenue and Brigantine Boulevard
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Commission file number: 1-9029
TRUMP'S CASTLE ASSOCIATES, L.P.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2608426
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huron Avenue and Brigantine Boulevard
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
-------------------------------
Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days. Yes _X_ No___
As of August 14, 1998, there were 200 shares of Trump's Castle Funding,
Inc.'s Common Stock, par value $.01 per share, outstanding.
Trump's Castle Funding, Inc. meets the conditions set forth in General
Instructions H(1)(a) and (b) of From 10-Q and is therefore filing this form with
the reduced disclosure format.
================================================================================
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Condensed Consolidated Balance Sheets of Trump's Castle Associates, L.P. and Subsidiary as of
June 30, 1998 (unaudited) and December 31, 1997.............................................. 1
Condensed Consolidated Statements of Operations of Trump's Castle Associates, L.P. and Subsidiary
for the Three and Six Months Ended June 30, 1998 and 1997 (unaudited)....................... 2
Condensed Consolidated Statement of Partners' Capital of Trump's Castle Associates, L.P. and
Subsidiary for the Six Months Ended June 30, 1998 (unaudited)............................... 3
Condensed Consolidated Statements of Cash Flows of Trump's Castle Associates, L.P. and Subsidiary
for the Six Months Ended June 30, 1998 and 1997 (unaudited)................................. 4
Notes to Condensed Consolidated Financial Statements of Trump's Castle
Associates, L.P. and Subsidiary (unaudited) ................................................ 5
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations..... 7
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk................................ 11
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings......................................................................... 12
ITEM 2 - Changes in Securities and Use of Proceeds................................................. 12
ITEM 3 - Defaults Upon Senior Securities........................................................... 12
ITEM 4 - Submission of Matters to a Vote of Security Holders....................................... 12
ITEM 5 - Other Information......................................................................... 12
ITEM 6 - Exhibits and Reports on Form 8-K.......................................................... 12
SIGNATURES
Signature - Trump's Castle Funding, Inc........................................................... 13
Signature - Trump's Castle Associates, L.P........................................................ 14
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 19,148 $ 14,472
Receivables, net ..................................................... 8,704 8,028
Inventories .......................................................... 2,905 3,090
Other current assets ................................................. 2,367 1,713
-------- --------
Total current assets ........................................... 33,124 27,303
PROPERTY AND EQUIPMENT, NET ............................................. 492,462 499,513
OTHER ASSETS ............................................................ 16,489 14,590
-------- --------
Total assets ................................................... $542,075 $541,406
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities-other borrowings .................................. $ 1,963 $ 7,954
Accounts payable and accrued expenses ................................ 28,871 25,742
Due to affiliates .................................................... 21,100 23,949
Accrued interest payable ............................................. 5,044 4,020
-------- --------
Total current liabilities ...................................... 56,978 61,665
MORTGAGE NOTES
(Net of unamortized discount of $28,551 and $30,170, respectively) ... 213,590 211,971
PIK NOTES
(Net of unamortized discount of $7,012 and $7,197, respectively) ..... 79,496 73,699
OTHER BORROWINGS ........................................................ 67,801 55,673
OTHER LONG TERM LIABILITIES ............................................. 3,540 4,730
-------- --------
Total liabilities .............................................. 421,405 407,738
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL ....................................................... 120,670 133,668
-------- --------
Total liabilities and capital .................................. $542,075 $541,406
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
1
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Gaming ...................... $ 61,163 $ 68,545 $ 123,776 $ 132,519
Rooms ....................... 3,904 4,842 7,461 8,779
Food and beverage ........... 8,047 8,613 15,541 16,532
Other ....................... 2,713 3,162 4,598 5,368
--------- --------- --------- ---------
Gross revenues ........... 75,827 85,162 151,376 163,198
Less-promotional allowances .... 8,986 10,123 17,932 19,735
--------- --------- --------- ---------
Net revenues ................ 66,841 75,039 133,444 143,463
--------- --------- --------- ---------
COSTS AND EXPENSES:
Gaming ...................... 38,727 44,449 78,604 85,483
Rooms ....................... 931 691 1,599 1,299
Food and beverage ........... 2,522 2,497 4,354 4,620
General and administrative .. 13,682 16,049 28,691 32,222
Depreciation and amortization 4,148 3,684 8,198 8,725
--------- --------- --------- ---------
Total costs and expenses .... 60,010 67,370 121,446 132,349
--------- --------- --------- ---------
Income from operations ... 6,831 7,669 11,998 11,114
INTEREST INCOME ................ 153 91 381 160
INTEREST EXPENSE ............... (12,762) (12,330) (25,377) (24,528)
--------- --------- --------- ---------
Net loss .................... $ (5,778) $ (4,570) $ (12,998) $ (13,254)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
2
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(unaudited)
(in thousands)
Partners' Partners'
Capital Deficit Total
--------- --------- ---------
Balance at December 31, 1997 ....... $ 175,395 $ (41,727) $ 133,668
Net loss ........................... -- (12,998) (12,998)
--------- --------- ---------
Balance at June 30, 1998 ........... $ 175,395 $ (54,725) $ 120,670
========= ========= =========
The accompanying notes are an integral part of this
condensed consolidated statement.
3
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................ $(12,998) $(13,254)
Adjustments to reconcile net loss to net cash flows provided
by operating activities-
Noncash charges-
Depreciation and amortization ................................ 8,198 8,725
Accretion of bond discount ................................... 1,804 1,543
Issuance of debt in exchange for accrued interest ............ 5,612 4,908
Provision for losses on receivables .......................... 536 744
Valuation allowance-CRDA investments ......................... 528 576
Increase in receivables ...................................... (1,212) (2,347)
Decrease (increase) in inventories ........................... 185 (1,270)
Increase in other current assets ............................. (614) (1,369)
Increase in other assets ..................................... (888) (3,412)
Increase in current liabilities .............................. 4,153 3,248
(Decrease) increase in amounts due to affiliates ............. (321) 10,125
Decrease in other liabilities ................................ (1,190) (75)
-------- --------
Net cash flows provided by operating activities ......... 3,793 8,142
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net ..................... (1,147) (1,397)
Purchase of CRDA investments ................................. (1,539) (1,672)
-------- --------
Net cash flows used in investing activities ............. (2,686) (3,069)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable to affiliate ....................... (2,550) (2,000)
Repayment of other borrowings ................................ (60,881) (2,120)
Proceeds of other borrowings ................................. 67,000 --
-------- --------
Net cash flows provided by (used in) financing activities 3,569 (4,120)
-------- --------
Net increase in cash and cash equivalents ............... 4,676 953
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....................... 14,472 15,380
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................. $ 19,148 $ 16,333
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest .............................................. $ 16,874 $ 18,025
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
4
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Organization and Operations
The accompanying condensed consolidated financial statements include those
of Trump's Castle Associates, L.P., a New Jersey limited partnership (the
"Partnership"), and its wholly owned subsidiary, Trump's Castle Funding, Inc., a
New Jersey corporation ("Funding"). The Partnership is wholly owned by Trump
Hotels & Casino Resorts Holdings, L.P., a Delaware limited partnership ("THCR
Holdings"). THCR Holdings is currently a 63.4% owned subsidiary of Trump Hotels
& Casino Resorts, Inc. ("THCR").
All significant intercompany balances and transactions have been eliminated
in the condensed consolidated financial statements.
The Partnership operates Trump Marina Hotel Casino ("Trump Marina"), a
luxury casino hotel located in the Marina District of Atlantic City, New Jersey.
The primary portion of Trump Marina's revenues are derived from its gaming
operations. Competition in the Atlantic City gaming market is intense and the
Partnership believes that the competition will continue due to expansion by
existing operators and new entrants to the gaming industry becoming operational.
Funding was incorporated solely to serve as a financing company to raise
funds through the issuance of bonds to the public. Since Funding has no business
operations, its ability to repay the principal and interest on the 10 1/4%
Senior Secured Notes due 2003 (the "New Senior Notes"), the 11 3/4% Mortgage
Notes due 2003 (the "Mortgage Notes") and its Increasing Rate Subordinated
Pay-in-Kind Notes due 2005 (the "PIK Notes") is completely dependent upon the
operations of the Partnership. (See Note 3 regarding refinancing of the Old
Senior Notes.)
The accompanying condensed 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 condensed consolidated financial statements have been
prepared by the Partnership pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Accordingly, certain information
and note disclosures normally included in the financial statements prepared in
conformity with generally accepted accounting principles have been omitted.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the annual report on Form 10-K for the year ended December 31, 1997
filed with the SEC by the Partnership and Funding.
Certain reclassifications have been made to conform prior year financial
information to the current year presentation.
The casino industry in Atlantic City is seasonal in nature; accordingly,
the results of operations for the three and six month periods ending June 30,
1998 are not necessarily indicative of the operating results for a full year.
(2) Property and Equipment
During the second quarter of 1997, the Partnership revised its estimates of
the useful lives of buildings, building improvements and furniture and fixtures
which were acquired in 1996. Buildings and building improvements were
reevaluated to have a forty year life and furniture and fixtures were determined
to have a five to seven year life. The Partnership believes these changes more
appropriately reflect the timing of the economic benefits to be received from
these assets during their estimated useful lives. For the six months ended June
30, 1998, the net effect of applying these new lives was to decrease the net
loss by $1,409,000. There was no effect to net loss as a result of applying
these new estimates of useful lives for the three months ended June 30, 1998.
(3) Long Term Debt and Subsequent Event
On April 17, 1998, Funding refinanced its 11 1/2% Senior Secured Notes due
2000 (the "Old Senior Notes")
5
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
and its term loan with a bank (the "Term Loan") by issuing the New Senior Notes.
The New Senior Notes have a priority mortgage lien ahead of the Partnership's
Mortgage Notes and are further secured by virtually all of the Partnership's
assets. The proceeds from the issuance of the New Senior Notes were used to
redeem all of the issued and outstanding Old Senior Notes at 100% of their
principal amount and to repay the Term Loan in full. In conjunction with this
refinancing, Trump's Castle Hotel & Casino Inc., a New Jersey corporation and
the general partner of the Partnership ("TCHI"), obtained a working capital
credit facility (the "Working Capital Loan"). Both the New Senior Notes and the
Working Capital Loan are guaranteed by the Partnership.
The New Senior Notes have an outstanding principal amount of $62,000,000
and bear interest at the rate of 10 1/4% per annum, payable semi-annually each
April and October. The New Senior Notes mature on April 17, 2003 and are
included in Other Borrowings in the Partnership's condensed consolidated balance
sheet.
The Working Capital Loan has an outstanding principal amount of $5,000,000
and bears interest at the rate of 10 1/4% per annum, payable semi-annually each
April and October. The entire principal balance of the Working Capital Loan,
which matures on April 17, 2003, is payable to TCHI and is included in Other
Borrowings on the Partnership's condensed consolidated balance sheet.
On July 8, 1998, the Partnership received a bank commitment to refinance
its Mortgage Notes, New Senior Notes and the Working Capital Loan. A tender
offer was made to existing mortgage note holders on July 9, 1998 offering $940
per $1,000 of principal amount, plus accrued interest. Consummation of the
tender offer is conditioned upon, among other things, a minimum tender of 98% of
the principal amount of the mortgage notes. The expiration of the tender offer
was extended to August 14, 1998. Although it is the Partnership's intention to
complete this transaction, no assurances can be made as to the ultimate
consummation of the refinancing, or on the terms as are currently outlined in
the existing tender offer and bank commitment.
(4) Financial Information of Funding
Financial information relating to Funding is as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
Total Assets (including Mortgage Notes Receivable of $242,141, net of
unamortized discount of $28,551 and $30,170 at June 30, 1998 and December 31,
1997, PIK Notes Receivable of $86,508, net of unamortized discount of $7,012
at June 30, 1998 and $80,896, net of unamortized discount of $7,197 at
December 31, 1997, New Senior Notes Receivable of $62,000 at June 30,
1998 and Old Senior Notes Receivable of $27,000 at December 31, 1997) ............. $355,086 $312,670
======== ========
Total Liabilities and Capital (including Mortgage Notes Payable of $242,141, net of
unamortized discount of $28,551 and $30,170 at June 30, 1998 and December
31, 1997, PIK Notes Payable of $86,508, net of unamortized discount of
$7,012 at June 30, 1998 and $80,896, net of unamortized discount of $7,197
at December 31, 1997, New Senior Notes Payable of $62,000 at June 30, 1998
and Old Senior Notes Payable of $27,000 at December 31, 1997) ..................... $355,086 $312,670
======== ========
</TABLE>
Six Months
Ended June 30,
--------------------------
1998 1997
------- -------
Interest Income .......................... $23,917 $22,243
Interest Expense ......................... 23,917 22,243
------- -------
Net Income ............................... $ -- $ --
======= =======
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Cash flow from operating activities is the Partnership's principal source
of liquidity. For the six months ended June 30 1998, the Partnership's net cash
flow provided by operating activities was $3,793,000.
In addition to funding operations, the Partnership's principal uses of cash
are capital expenditures and debt service.
Capital expenditures for 1998 are anticipated to be approximately
$5,000,000 and principally consist of hotel room renovations, as well as ongoing
casino floor improvements.
At June 30, 1998, the Partnership's debt consisted primarily of (i) the New
Senior Notes, (ii) the Mortgage Notes, (iii) the PIK Notes and (iv) the Working
Capital Loan.
The Mortgage Notes have an outstanding principal amount of approximately
$242,141,000, bear interest at the rate of 11 3/4% per annum and mature on
November 15, 2003.
The PIK Notes have an outstanding principal amount of approximately
$86,508,000 and mature on November 15, 2005. Interest is currently payable
semi-annually at the rate of 13 7/8%. On or prior to November 15, 2003, interest
on the PIK Notes may be paid in cash or through the issuance of additional PIK
Notes. During the second quarter of 1998 interest in the amount of approximately
$5,612,000 was paid through the issuance of additional PIK Notes and the
Partnership anticipates that additional interest due during the fourth quarter
of approximately $6,002,000 will be paid through the issuance of additional PIK
Notes.
On April 17, 1998, Funding refinanced its Old Senior Notes and its Term
Loan by issuing the New Senior Notes. The proceeds from the issuance of the New
Senior Notes were used to redeem all of the issued and outstanding Old Senior
Notes at 100% of their principal amount and to repay the Term Loan in full. In
conjunction with this refinancing, TCHI obtained a working capital credit
facility (the "Working Capital Loan") and loaned the proceeds to the
Partnership.
The New Senior Notes have an outstanding principal amount of $62,000,000
and bear interest at the rate of 10 1/4% per annum, payable semi-annually each
April and October. The New Senior Notes mature on April 17, 2003.
The Working Capital Loan has an outstanding principal amount of $5,000,000
and bears interest at the rate of 10 1/4% per annum, payable semi-annually each
April and October. The entire principal balance of the Working Capital Loan
matures on April 17, 2003.
On July 8, 1998, the Partnership received a bank commitment to refinance
its Mortgage Notes, New Senior Notes and the Working Capital Loan. A tender
offer was made to existing mortgage note holders on July 9, 1998 offering $940
per $1,000 of principal amount, plus accrued interest. Consummation of the
tender offer is conditioned upon, among other things, a minimum tender of 98% of
the principal amount of the mortgage notes. The expiration of the tender offer
was extended to August 14, 1998. Although it is the Partnership's intention to
complete this transaction, no assurances can be made as to the ultimate
consummation of the refinancing, or on the terms as are currently outlined in
the existing tender offer and bank commitment.
The Partnership's total cash debt service requirement was approximately
$20,880,000 during the six months ended June 30, 1998 and the Partnership
anticipates that approximately $18,859,000 in cash will be required during the
remainder of 1998 to meet its debt service obligations. The Partnership has the
authority to obtain a working capital facility of up to $10,000,000 (of which
approximately $5,437,000 is outstanding), although there can be no assurance
that such financing will be available or on terms acceptable to the Partnership.
Results of Operations: Operating Revenues and Expenses
The financial information presented below reflects the financial condition
and results of operations of the Partnership. Funding is a wholly owned
subsidiary of the Partnership and conducts no business other than collecting
amounts due under certain intercompany notes from the Partnership for the
purpose of paying principal of, premium, if any, and interest on its
indebtedness, which Funding issued as a nominee for the Partnership.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Comparison of Results of Operations for the Three Month Periods Ended June 30,
1998 and 1997.
Gaming revenues are the primary source of the Partnership's revenues and
primarily consist of slot machine and table games win. The following table
details activity for the major components of gaming revenues:
Three Months Ended June 30,
---------------------------
1998 1997
---- ----
(dollars in thousands)
Table Game Revenue ...................... $15,131 $18,799
Decrease from Prior Period .............. ($3,668)
Table Game Drop ......................... $100,776 $128,355
Decrease from Prior Period .............. ($27,579)
Table Game Win Percentage ............... 15.0% 14.6%
Increase from Prior Period .............. 0.4 pts.
Number of Table Games ................... 91 96
Decrease from Prior Period .............. (5)
Slot Revenue ............................ $45,503 $49,210
Decrease from Prior Period .............. ($3,707)
Slot Handle ............................. $561,710 $590,006
Decrease from Prior Period .............. ($28,296)
Slot Win Percentage ..................... 8.1% 8.3%
Decrease from Prior Period .............. (0.2 pts.)
Number of Slot Machines ................. 2,163 2,168
Decrease from Prior Period .............. (5)
Poker Revenue ........................... -- $131
Decrease from Prior Period .............. ($131)
Number of Poker Tables .................. -- 6
Decrease from Prior Period .............. (6)
Other Gaming Revenue .................... $529 $405
Increase from Prior Period .............. $124
Total Gaming Revenues ................... $61,163 $68,545
Decrease from Prior Period .............. ($7,382)
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Table game and slot revenues decreased by $3,668,000 and $3,707,000,
respectively, for the three months ended June 30, 1998 compared to the prior
year. These decreases are a result of the increased gaming capacity in the
Atlantic City market as well as management's decision to reduce promotional
gaming costs in an effort to eliminate less profitable programs. Table game
revenues represent the amount retained by the Partnership from amounts wagered
at table games. The table game win percentage tends to be fairly constant over
the long term, but may vary significantly in the short term, due to large wagers
by "high rollers." The Atlantic City industry table game win percentages were
14.9% and 14.7% for the three month periods ended June 30, 1998 and 1997,
respectively.
Non gaming revenues, in the aggregate, decreased by approximately
$1,953,000 or 11.8% to $14,664,000 for the three months ended June 30, 1998 from
$16,617,000 for the three months ended June 30, 1997, primarily as a result of a
decrease in complimentary room rates as well as a decrease in complimentary food
and beverage activity. The complimentary room rate was reduced by management to
more closely conform to current industry practice. Industry-wide room rates have
recently decreased as a result of increased room inventory in the Atlantic City
market.
The majority of the decrease in non-gaming revenues was offset by a
decrease in promotional allowances. Promotional allowances decreased by
approximately $1,137,000 or 11.2% to $8,986,000 for the three months ended June
30, 1998 from $10,123,000 for the three months ended June 30, 1997, primarily as
a result of a decrease in complimentary food and rooms related to marketing
activities. This decrease is primarily the result of a decrease in promotion
spending activity in an effort to control costs.
Gaming costs decreased approximately $5,722,000 or 12.9% to $38,727,000 for
the three months ended June 30, 1998 from $44,449,000 for the three months ended
June 30, 1997. This decrease is primarily the result of a decrease in
promotional and complimentary expenses achieved by eliminating less profitable
programs.
General and administrative expenses decreased approximately $2,367,000 or
14.7% for the three months ended June 30, 1998 from the same period in 1997
primarily due to reduced payroll and other benefits related to Trump Casino
Services, L.L.C. ("TCS"), a wholly owned subsidiary of THCR Holdings, which
provides administrative support services to all of the Trump Atlantic City
properties.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Comparison of Results of Operations for the Six Month Periods Ended June 30,
1998 and 1997.
Gaming revenues are the primary source of the Partnership's revenues and
primarily consist of slot machine and table games win. The following table
details activity for the major components of gaming revenues:
Six Months Ended June 30,
-------------------------
1998 1997
---- ----
(dollars in thousands)
Table Game Revenue ...................... $32,809 $37,343
Decrease from Prior Period .............. ($4,534)
Table Game Drop ......................... $212,620 $244,905
Decrease from Prior Period .............. ($32,285)
Table Game Win Percentage ............... 15.4% 15.2%
Increase from Prior Period .............. 0.2 pts.
Number of Table Games ................... 93 95
Decrease from Prior Period .............. (2)
Slot Revenue ............................ $90,155 $94,353
Decrease from Prior Period .............. ($4,198)
Slot Handle ............................. $1,113,553 $1,137,893
Decrease from Prior Period .............. ($24,340)
Slot Win Percentage ..................... 8.1% 8.3%
Decrease from Prior Period .............. (0.2 pts.)
Number of Slot Machines ................. 2,159 2,250
Decrease from Prior Period .............. (91)
Poker Revenue ........................... $ -- $256
Decrease from Prior Period .............. ($256)
Number of Poker Tables .................. -- 6
Decrease from Prior Period .............. (6)
Other Gaming Revenue .................... $812 $567
Increase from Prior Period .............. $245
Total Gaming Revenues ................... $123,776 $132,519
Decrease from Prior Period .............. ($8,743)
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Table game revenues represent the amount retained by the Partnership from
amounts wagered at table games. The table game win percentage tends to be fairly
constant over the long term, but may vary significantly in the short term, due
to large wagers by "high rollers." The Atlantic City industry table game win
percentages were 15.2% and 15.1% for the six month periods ended June 30, 1998
and 1997, respectively.
Non gaming revenues, in the aggregate, decreased by approximately
$3,079,000 or 10.0% to $27,600,000 for the six months ended June 30, 1998 from
$30,679,000 for the six months ended June 30, 1997, primarily as a result of a
decrease in complimentary room rates.
Promotional allowances decreased by approximately $1,803,000 or 9.1% to
$17,932,000 for the six months ended June 30, 1998 from $19,735,000 for the six
months ended June 30, 1997, primarily as a result of a decrease in complimentary
food and rooms related to marketing activities. This decrease is primarily the
result of a decrease in promotional spending activity in an effort to control
costs.
Gaming costs decreased approximately $6,879,000 or 8.0% to $78,604,000 for
the six months ended June 30, 1998 from $85,483,000 for the six months ended
June 30, 1997. This decrease is primarily the result of a decrease in
promotional and complimentary expenses.
General and administrative expenses decreased approximately $3,531,000 or
11.0% for the six months ended June 30, 1998 from the same period in 1997
primarily due to reduced advertising expenses and payroll and other benefits
related to TCS which provides administrative support services to all of the
Trump Atlantic City properties.
Seasonality
The casino industry in Atlantic City is seasonal in nature; accordingly,
the results of operations for the three and six month periods ending June 30,
1998 are not necessarily indicative of the operating results for a full year.
Important Factors Relating to Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Quarterly Report on Form
10-Q and those that may be made in the future by or on behalf of the
Registrants, the Registrants note that there are various factors that could
cause actual results to differ materially from those set forth in any such
forward-looking statements. The forward-looking statements contained in the
Quarterly Report were prepared by management and are qualified by, and subject
to, significant business, economic, competitive, regulatory and other
uncertainties and contingencies, all of which are difficult or impossible to
predict and many of which are beyond the control of the Registrants.
Accordingly, there can be no assurance that the forward-looking statements
contained in this Quarterly Report will be realized or that actual results will
not be significantly higher or lower. The statements have not been audited by,
examined by, compiled by or subjected to agreed-upon procedures by independent
accountants, and no third-party has independently verified or reviewed such
statements. Readers of this Quarterly Report should consider these facts in
evaluating the information contained herein. In addition, the business and
operations of the Registrants are subject to substantial risks which increase
the uncertainty inherent in the forward-looking statements contained in this
Quarterly Report. The inclusion of the forward-looking statements contained in
this Quarterly Report should not be regarded as a representation by the
Registrants or any other person that the forward-looking statements contained in
this Quarterly Report will be achieved. In light of the foregoing, readers of
this Quarterly Report are cautioned not to place undue reliance on the
forward-looking statements contained herein.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to the General Instructions to Rule 305 of Regulation S-K, the
quantitative and qualitative disclosures called for by this Item 3 and by Rule
305 of Regulation S-K are inapplicable to the Registrants at this time.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Partnership, its partners, certain members of the former Executive
Committee, Funding and certain of their employees are involved in various legal
proceedings. Such persons and entities are vigorously defending the allegations
against them and intend to contest vigorously any future proceedings. The
Partnership and Funding have agreed to indemnify such persons against any and
all losses, claims, damages, expenses (including reasonable costs, disbursements
and counsel fees) and liabilities (including amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties) incurred by them in
said legal proceedings.
Various legal proceedings are now pending against the Partnership. The
Partnership considers all such proceedings to be ordinary litigation incident to
the character of its business. Management believes that the resolution of these
claims will not, individually or in the aggregate, have a material adverse
effect on the financial condition or results of operations of the Partnership.
From time to time, the Partnership may be involved in routine
administrative proceedings involving alleged violations of certain provisions of
the New Jersey Casino Control Act. However, the Partnership believes that the
final outcome of these proceedings will not, either individually or in the
aggregate, have a material adverse effect on the Partnership or on its ability
to otherwise retain or renew any casino or other licenses required under the New
Jersey Casino Control Act for the operation of Trump Marina.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
27.1 Financial Data Schedule of Trump's Castle Funding, Inc.
27.2 Financial Data Schedule of Trump's Castle Associates, L.P.
b. Current Reports on Form 8-K:
None.
12
<PAGE>
SIGNATURES
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)
Date: August 14, 1998
By: /s/ NICHOLAS L. RIBIS
----------------------------------
Nicholas L. Ribis
President and Chief Executive Officer
(Duly Authorized Officer and
Principal Financial Officer)
13
<PAGE>
SIGNATURES
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 ASSOCIATES, L.P.
(Registrant)
By: Trump's Castle Hotel & Casino, Inc.
its general partner
Date: August 14, 1998
By: /s/ NICHOLAS L. RIBIS
-----------------------------------
Nicholas L. Ribis
President and Chief Executive Officer
(Duly Authorized Officer and
Principal Financial Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from Trump's Castle
Funding, Inc. This data has been extracted from the Consolidated Balance sheets
and Consolidated Statement of Operations for the three and six month periods
ended June 30, 1998 and is qualified in its entirety by reference to such
Financial Statements.
</LEGEND>
<CIK> 0000770618
<NAME> TRUMP'S CASTLE FUNDING, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 355,086 355,086
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 200 200
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 355,086 355,086
<SALES> 0 0
<TOTAL-REVENUES> 10,699 22,243
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10,699 22,243
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from Trump's Castle
Associates, L.P. This data has been extracted from the Consolidated Balance
sheets and Consolidated Statement of Operations for the three and six month
periods ended June 30, 1998 and is qualified in its entirety by reference to
such Financial Statements.
</LEGEND>
<CIK> 0000911534
<NAME> TRUMP'S CASTLE ASSOCIATES, L.P.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 APR-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 19,148 19,148
<SECURITIES> 0 0
<RECEIVABLES> 8,704 <F1> 8,704 <F1>
<ALLOWANCES> 0 0
<INVENTORY> 2,905 2,905
<CURRENT-ASSETS> 2,367 2,367
<PP&E> 522,508 522,508
<DEPRECIATION> 30,046 30,046
<TOTAL-ASSETS> 542,075 542,075
<CURRENT-LIABILITIES> 56,978 56,978
<BONDS> 293,086 293,086
0 0
0 0
<COMMON> 200 200
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 542,075 542,075
<SALES> 0 0
<TOTAL-REVENUES> 66,841 133,444
<CGS> 0 0
<TOTAL-COSTS> 55,862 113,248
<OTHER-EXPENSES> 4,148 8,198
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,762 25,377
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,778) (12,998)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>
Asset values represent net amounts.
</FN>
</TABLE>
