<PAGE>
================================================================================
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: September 30, 1999
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 HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 11-2735914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huron Avenue and Brigantine Boulevard
Atlantic City, New Jersey 08401
(609) 441-6060
(Address, including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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
(609) 441-6060
(Address, including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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
(609) 441-6060
(Address, including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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 November 4, 1999, there were 100 shares of Trump's Castle Hotel &
Casino, Inc.'s Common Stock, no par value, outstanding. Trump's Castle Hotel &
Casino, Inc. meets the conditions set forth in General Instructions H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.
As of November 4, 1999, 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 Form 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 as of December 31, 1998 and September 30, 1999
(unaudited)..................................................................................... 1
Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 1998 and 1999 (unaudited)......................................................... 2
Condensed Consolidated Statement of Partners' Capital for the nine months ended
September 30, 1999 (unaudited).................................................................. 3
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1999 (unaudited)........................................................ 4
Notes to Condensed Consolidated Financial Statements (unaudited) ................................. 5
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations....... 8
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk.................................. 14
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings........................................................................... 15
ITEM 2 - Changes in Securities and Use of Proceeds................................................... 15
ITEM 3 - Defaults Upon Senior Securities............................................................. 15
ITEM 4 - Submission of Matters to a Vote of Security Holders......................................... 15
ITEM 5 - Other Information........................................................................... 15
ITEM 6 - Exhibits and Reports on Form 8-K............................................................ 16
SIGNATURES
Signature - Trump's Castle Hotel & Casino, Inc.................................................... 17
Signature - Trump's Castle Funding, Inc........................................................... 18
Signature - Trump's Castle Associates, L.P........................................................ 19
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
-------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 19,723 $ 29,614
Receivables, net...................................................... 8,401 12,970
Inventories........................................................... 3,020 3,169
Other current assets.................................................. 1,884 2,634
----------- -----------
Total current assets............................................ 33,028 48,387
PROPERTY AND EQUIPMENT, NET.............................................. 488,745 484,286
OTHER ASSETS............................................................. 15,115 15,598
----------- -----------
Total assets.................................................... $ 536,888 $ 548,271
========= =========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES:
Current maturities-long term debt..................................... $ 1,277 $ 1,357
Accounts payable and accrued expenses................................. 27,048 25,506
Due to affiliates..................................................... 21,602 20,980
Accrued interest payable.............................................. 4,777 13,531
----------- ----------
Total current liabilities....................................... 54,704 61,374
LONG TERM DEBT, LESS CURRENT MATURITIES.................................. 368,529 381,424
OTHER LONG TERM LIABILITIES.............................................. 3,541 6,919
----------- -----------
Total liabilities............................................... 426,774 449,717
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL........................................................ 110,114 98,554
---------- -----------
Total liabilities and partners' capital......................... $ 536,888 $ 548,271
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
1
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1998 1999 1998 1999
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES:
Gaming .......................................... $ 74,331 $ 75,346 $ 198,351 $ 205,450
Rooms ........................................... 4,990 5,047 12,451 12,266
Food and beverage ............................... 10,459 10,229 26,000 26,395
Other ........................................... 3,716 3,435 8,314 8,055
--------- --------- --------- ---------
Gross revenues ............................... 93,496 94,057 245,116 252,166
Less-promotional allowances ........................ 11,740 10,570 29,672 28,475
--------- --------- --------- ---------
Net revenues ................................. 81,756 83,487 215,444 223,691
--------- --------- --------- ---------
COSTS AND EXPENSES:
Gaming .......................................... 46,729 43,549 125,577 124,866
Rooms ........................................... 784 1,042 2,383 2,889
Food and beverage ............................... 3,072 3,541 7,426 8,144
General and administrative ...................... 16,153 16,130 44,844 46,622
Depreciation and amortization ................... 4,160 4,454 12,358 12,980
--------- --------- --------- ---------
70,898 68,716 192,588 195,501
--------- --------- --------- ---------
Income from operations ....................... 10,858 14,771 22,856 28,190
INTEREST INCOME .................................... 173 193 554 585
INTEREST EXPENSE ................................... (12,886) (13,604) (38,263) (40,335)
--------- --------- --------- ---------
Net income (loss) ............................ $ (1,855) $ 1,360 $ (14,853) $ (11,560)
========= ========= ========= =========
</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 NINE MONTHS ENDED SEPTEMBER 30, 1999
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Partners' Partners'
Capital Deficit Total
-------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1998.................................. $175,395 $(65,281) $110,114
Net loss...................................................... - (11,560) (11,560)
-------- --------- ---------
Balance at September 30, 1999................................. $175,395 $(76,841) $ 98,554
======== ========= =========
</TABLE>
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 NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
-------------------------------
1998 1999
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................. $(14,853) $(11,560)
Adjustments to reconcile net loss to net cash flows provided
by operating activities-
Depreciation and amortization ..................................... 12,358 12,980
Issuance of PIK Notes in exchange for accrued interest ............ 5,612 6,418
Accretion of bond discount ........................................ 2,761 3,220
Provision for losses on receivables ............................... 943 201
Valuation allowance-CRDA investments .............................. 854 1,099
Increase in receivables ........................................... (3,271) (4,770)
Decrease (increase) in inventories ................................ 310 (149)
Increase in other current assets .................................. (773) (750)
Increase in other assets .......................................... (1,862) (178)
Increase in current liabilities ................................... 13,445 7,212
Decrease in amounts due to affiliates ............................. (295) (763)
Increase in other liabilities ..................................... 1,763 3,378
-------- --------
Net cash flows provided by operating activities .............. 16,992 16,338
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net .......................... (1,950) (2,365)
Purchase of CRDA investments ...................................... (2,464) (2,583)
-------- --------
Net cash flows used in investing activities .................. (4,414) (4,948)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of other borrowings ..................................... (63,930) (1,499)
Proceeds of other borrowings ...................................... 67,000 --
-------- --------
Net cash flows provided by (used in) financing activities .... 3,070 (1,499)
-------- --------
Net increase in cash and cash equivalents .................... 15,648 9,891
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................ 14,472 19,723
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................. $ 30,120 $ 29,614
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest ................................................... $ 16,963 $ 18,201
======== ========
Purchase of property and equipment under capitalized lease obligations ... $ 18 $ 4,059
======== ========
</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 99% owned by Trump Hotels
& Casino Resorts Holdings, L.P., a Delaware limited partnership ("THCR
Holdings"), and 1% owned by Trump's Castle Hotel & Casino, Inc., a New Jersey
corporation ("TCHI"). TCHI is wholly owned by THCR Holdings, and THCR Holdings
is currently a 63.4% owned subsidiary of Trump Hotels & Casino Resorts, Inc., a
Delaware corporation ("THCR").
All significant intercompany balances and transactions have been
eliminated in these condensed consolidated financial statements.
The Partnership operates the 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 to intensify due to
expansion by existing operators and new entrants to the gaming industry becoming
operational.
Since Funding has no business operations, its ability to repay the
principal and interest on the $62,000,000 10 1/4% Senior Secured Notes due 2003
(the "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.
Since TCHI has no business operations, its ability to repay the
principal and interest on the $5,000,000 10 1/4% Senior Secured Notes due 2003
(the "Working Capital Loan") is completely dependent upon the operations of the
Partnership.
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, 1998
filed with the SEC by the Partnership, Funding and TCHI.
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 nine month periods
ending September 30, 1999 are not necessarily indicative of the operating
results for a full year.
5
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
(2) Financial Information of Funding
Financial information relating to Funding is as follows (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------- --------------
<S> <C> <C>
Total Assets (including Mortgage Notes Receivable of $242,141, net of
unamortized discount of $26,807 at December 31, 1998 and $23,936 at September
30, 1999, PIK Notes Receivable of $92,510, net of unamortized discount of $6,806
at December 31, 1998 and $98,928, net of unamortized discount of $6,457 at
September 30, 1999, Senior Notes Receivable of $62,000 at December 31, 1998
and September 30, 1999).................................................. $363,038 $372,676
======== ========
Total Liabilities and Capital (including Mortgage Notes Payable of $242,141, net
of unamortized discount of $26,807 at December 31, 1998 and $23,936 at September
30, 1999, PIK Notes Payable of $92,510, net of unamortized discount of $6,806 at
December 31, 1998 and $98,928, net of unamortized discount of $6,457 at
September 30, 1999, Senior Notes Payable of $62,000 at December 31, 1998 and
September 30, 1999)...................................................... $363,038 $372,676
======== ========
</TABLE>
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
-------------------
1998 1999
---------- ----------
<S> <C> <C>
Interest Income............................................................... $36,611 $39,361
Interest Expense.............................................................. 36,611 39,361
-------- -------
Net Income.................................................................... $ - $ -
======= =======
</TABLE>
6
<PAGE>
TRUMP'S CASTLE ASSOCIATES, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(unaudited)
(3) Financial Information of TCHI
Financial information relating to TCHI is as follows (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------------ --------------
<S> <C> <C>
Total Assets (including Working Capital Loan Receivable of
$5,000 at December 31, 1998 and September 30, 1999)...................... $5,000 $5,000
====== ======
Total Liabilities and Capital (including Working Capital Loan
Payable of $5,000 at December 31, 1998 and September 30, 1999)........... $5,000 $5,000
====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
-------------------
1998 1999
---------- ----------
<S> <C> <C>
Interest Income.......................................................... $ 233 $ 384
Interest Expense......................................................... 233 384
--------- ---------
Net Income............................................................... $ - $ -
========= =========
</TABLE>
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital Resources and Liquidity
Cash flows from operating activities are the Partnership's principal
source of liquidity. The Partnership expects to have sufficient liquidity to
meet its obligations and intends to reduce debt by buying back bonds in the open
market, when permissible. Cash flow is managed based upon the seasonality of the
operations. Any excess cash flow achieved from operations during peak periods is
utilized to subsidize non-peak periods where necessary.
In addition to funding operations, the Partnership's principal uses
of cash are capital expenditures and debt service.
Capital expenditures for 1999 are anticipated to be approximately
$9,000,000 and principally consist of a casino floor and slot machine renovation
project, hotel room renovations, as well as ongoing property enhancements.
The Partnership's debt consists primarily of (i) the Mortgage Notes,
(ii) the PIK Notes, (iii) the Senior 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
$98,928,000 and mature on November 15, 2005. Interest is currently payable
semi-annually at the rate of 137/8%. 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 1999, interest in the amount of
approximately $6,418,000 was satisfied through the issuance of additional PIK
Notes. The Partnership anticipates that additional interest due during the
fourth quarter of 1999 in the amount of approximately $6,863,000 will also be
satisfied through the issuance of additional PIK Notes. Also, approximately 90%
of the PIK Notes are currently owned by THCR Holdings.
On April 17, 1998, Funding refinanced its 11 1/2% Senior Secured
Notes due 2000 (the "Old Senior Notes") and its term loan with a bank (the "Term
Loan") by issuing the Senior Notes. The proceeds from the issuance of the 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 the Working Capital Loan and
loaned the proceeds to the Partnership.
The 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 entire principal balance of the Senior Notes matures on
April 30, 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 30, 2003. The Partnership has the
authority to obtain a working capital facility of up to $10,000,000 (of which
approximately $5,452,000 is outstanding), although there can be no assurance
that such financing will be available, or on terms acceptable to the
Partnership.
The ability of Funding, TCHI and the Partnership to pay their
indebtedness when due will depend on the ability of the Partnership to either
generate cash from operations sufficient for such purposes or to refinance such
indebtedness on or before the date on which it becomes due. Cash flow from
operations may not be sufficient to repay a substantial portion of the principal
amount of the debt at maturity. The future operating performance of the
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (Continued)
Partnership and the ability to refinance this debt will be subject to the then
prevailing economic conditions, industry conditions and numerous other
financial, business and other factors, many of which are beyond the control of
Funding, TCHI or the Partnership. There can be no assurance that the future
operating performance of the Partnership will be sufficient to meet these
repayment obligations or that the general state of the economy, the status of
the capital markets or the receptiveness of the capital markets to the gaming
industry will be conducive to refinancing this debt or other attempts to raise
capital.
Year 2000
The Partnership has assessed the Year 2000 issue and has implemented a
plan to ensure that its systems are Year 2000 compliant. Analysis has been made
of the Partnership's various customer support and internal administration
systems and appropriate modifications have been made or are underway. Testing of
the modifications is expected to be completed during 1999. The Partnership is
approximately 98% complete in its modifications.
The Partnership believes that the issues of concern are predominantly
software related as opposed to hardware related. Further, the Partnership relies
upon third party suppliers for support of their individual systems provided to
the Partnership. These systems primarily support property, plant and equipment,
such as communications equipment, elevators and fire safety systems. Contact has
been made with all significant system suppliers and the Partnership is at
various stages of implementation. When necessary, contracts have been issued to
update these systems so as to ensure Year 2000 compliance. The cost of
addressing the Year 2000 issue is not expected to be material as modifications
are being made with existing systems personnel and no significant expenditures
for new hardware or software are expected.
If the Partnership did not assess the Year 2000 issue and provide for
its compliance, it would be forced to convert to manual systems to carry on its
business. Since the Partnership expects to be fully Year 2000 compliant, it does
not feel that a contingency plan is necessary at this time. However, the
Partnership will continually assess the situation and evaluate whether a
contingency plan is necessary as the millennium approaches.
This Year 2000 disclosure constitutes Year 2000 readiness disclosure
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (Continued)
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.
Comparison of Results of Operations for the Three Month Periods Ended September
30, 1998 and 1999.
Gaming revenues are the primary source of the Partnership's revenues
and primarily consist of table game and slot machine win. The following chart
details activity for the major components of gaming revenues:
<TABLE>
<CAPTION>
Three Months Ended
------------------
September 30,
-------------
1998 1999
---- ----
(dollars in thousands)
<S> <C> <C>
Table Game Revenue .................................................... $20,837 $20,401
Decrease from Prior Period ............................................ $(436)
Table Game Drop ....................................................... $132,698 $134,798
Increase from Prior Period ............................................ $2,100
Table Game Win Percentage ............................................. 15.7% 15.1%
Decrease from Prior Period ............................................ (0.6) pts.
Number of Table Games ................................................. 91 85
Decrease from Prior Period ............................................ (6)
Slot Revenue .......................................................... $52,503 $54,296
Increase from Prior Period ............................................ $1,793
Slot Handle ........................................................... $649,979 $700,336
Increase from Prior Period ............................................ $50,357
Slot Win Percentage ................................................... 8.1% 7.8%
Decrease from Prior Period ............................................ (0.3) pts.
Number of Slot Machines ............................................... 2,170 2,123
Decrease from Prior Period ............................................ (47)
Other Gaming Revenue .................................................. $991 $649
Decrease from Prior Period ............................................ $(342)
Total Gaming Revenues ................................................. $74,331 $75,346
Increase from Prior Period ............................................ $1,015
</TABLE>
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (Continued)
Table game revenues decreased by approximately $436,000 or 2.1% to
$20,401,000 for the three months ended September 30, 1999 from $20,837,000 for
the three months ended September 30, 1998. This decrease is the result of a
reduced table game win percentage, partially offset by increased table game
volumes. 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 15.5% for the three months ended September
30, 1999 and 1998, respectively.
Slot revenues increased approximately $1,793,000 or 3.4% to
$54,296,000 for the three months ended September 30, 1999 from $52,503,000 for
the three months ended September 30, 1998, due to an increased slot handle. The
increased slot handle is due primarily to sustained marketing programs and
events designed specifically for the slot customer. In addition, the Partnership
completed its slot machine renovation project during June 1999, and accordingly,
benefitted from an improved slot product during the third quarter of 1999.
Nongaming revenues, in the aggregate, decreased by approximately
$454,000 or 2.4% to $18,711,000 for the three months ended September 30, 1999
from $19,165,000 for the three months ended September 30, 1998. This decrease is
due primarily to the reduction in complimentary room, food and beverage, and
entertainment revenues resulting from a change in strategy designed to control
marketing costs and to increase cash sales from nongaming operations. The
decrease in complimentary revenues was partially offset by increased rooms and
food and beverage cash revenues. There was a corresponding decrease in
Promotional Allowances of $1,170,000 or 10.0% to $10,570,000 for the three
months ended September 30, 1999 from $11,740,000 for the three months ended
September 30, 1998.
Gaming costs decreased approximately $3,180,000 or 6.8% to $43,549,000
for the three months ended September 30, 1999 from $46,729,000 for the three
months ended September 30, 1998. This decrease is primarily the result of
decreased spending in promotional and complimentary marketing programs.
Rooms costs increased approximately $258,000 or 32.9% to $1,042,000
for the three months ended September 30, 1999 from $784,000 for the three months
ended September 30, 1998. This increase is due primarily to associated costs
incurred related to the increased cash rooms revenues generated in 1999.
Food and beverage costs increased approximately $469,000 or 15.3% to
$3,541,000 for the three months ended September 30, 1999 from $3,072,000 for the
three months ended September 30, 1998. This increase is due primarily to
associated costs incurred related to the increased food and beverage cash
revenues generated in 1999.
Interest expense increased approximately $718,000 or 5.6% to
$13,604,000 for the three months ended September 30, 1999 from $12,886,000 for
the three months ended September 30, 1998, due primarily to an increase in the
outstanding principal of the PIK Notes.
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (Continued)
Comparison of Results of Operations for the Nine Month Periods Ended September
30, 1998 and 1999.
Gaming revenues are the primary source of the Partnership's revenues
and primarily consist of table game and slot machine win. The following chart
details activity for the major components of gaming revenues:
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30,
-------------
1998 1999
---- ----
(dollars in thousands)
<S> <C> <C>
Table Game Revenue...................................................... $53,646 $55,400
Increase from Prior Period.............................................. $1,754
Table Game Drop......................................................... $345,318 $362,134
Increase from Prior Period.............................................. $16,816
Table Game Win Percentage............................................... 15.5% 15.3%
Decrease from Prior Period.............................................. (0.2) pts.
Number of Table Games................................................... 92 87
Decrease from Prior Period.............................................. (5)
Slot Revenue............................................................ $142,902 $148,387
Increase from Prior Period.............................................. $5,485
Slot Handle............................................................. $1,763,532 $1,878,950
Increase from Prior Period.............................................. $115,418
Slot Win Percentage..................................................... 8.1% 7.9%
Decrease from Prior Period.............................................. (0.2) pts.
Number of Slot Machines................................................. 2,163 2,145
Decrease from Prior Period.............................................. (18)
Other Gaming Revenue.................................................... $1,803 $1,663
Decrease from Prior Period.............................................. ($140)
Total Gaming Revenues................................................... $198,351 $205,450
Increase from Prior Period.............................................. $7,099
</TABLE>
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (Continued)
Table game revenues increased by approximately $1,754,000 or 3.3% to
$55,400,000 for the nine months ended September 30, 1999 from $53,646,000 for
the nine months ended September 30, 1998. This increase is the result of higher
table game volume than the previous year, partially offset by a reduced table
game win percentage. 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 15.4% and 15.3% for the nine months
ended September 30, 1999 and 1998, respectively.
Slot revenues increased approximately $5,485,000 or 3.8% to
$148,387,000 for the nine months ended September 30, 1999 from $142,902,000 for
the nine months ended September 30, 1998, due to an increased slot handle. The
increased slot handle is due primarily to sustained marketing programs and
events designed specifically for the slot customer. In addition, the Partnership
completed its slot machine renovation project during June 1999, and accordingly,
benefitted from an improved slot product during the third quarter of 1999.
Promotional Allowances decreased $1,197,000 or 4.0% to $28,475,000 for
the nine months ended September 30, 1999 from $29,672,000 for the nine months
ended September 30, 1998. This decrease is primarily the result of a change in
strategy designed to control marketing costs and to increase cash sales from
nongaming operations.
Room costs increased approximately $506,000 or 21.2% to $2,889,000 for
the nine months ended September 30, 1999 from $2,383,000 for the nine months
ended September 30, 1998. This increase is due primarily to associated costs
incurred related to the increased cash rooms revenues generated in 1999.
Food and beverage costs increased $718,000 or 9.7% to $8,144,000 for
the nine months ended September 30, 1999 from $7,426,000 for the nine months
ended September 30, 1998. This increased is due primarily to associated costs
incurred related to the increased food and beverage cash revenues generated in
1999.
General and administrative costs increased $1,778,000 or 4.0% to
$46,622,000 for the nine months ended September 30, 1999 from $44,844,000 for
the nine months ended September 30, 1998, resulting primarily from increased
compensation and insurance costs.
Interest expense increased approximately $2,072,000 or 5.4% to
$40,335,000 for the nine months ended September 30, 1999 from $38,263,000 for
the nine months ended September 30, 1998, due primarily to an increase in the
outstanding principal of the PIK Notes.
Seasonality
The casino industry in Atlantic City is seasonal in nature;
accordingly, the results of operations for the three and nine month periods
ending September 30, 1999 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
13
<PAGE>
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
Management has reviewed the disclosure requirements for Item 3 and,
based upon the Partnership, Funding and TCHI's current capital structure, scope
of operations and financial statement structure, management believes that such
disclosure is not warranted at this time. Since conditions may change, each of
the Partnership, Funding and TCHI will periodically review its own compliance
with this disclosure requirement to the extent applicable.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
General. The Partnership, its partners, certain members of the former
Executive Committee of the Partnership, Funding, TCHI 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, Funding and TCHI 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.
Steiner Action. On or about July 30, 1999, William K. Steiner, a
stockholder of THCR, filed a derivative action in the Court of Chancery in
Delaware (Civil Action No. 17336NC) against each member of the Board of
Directors of THCR. The plaintiff claims that the directors of THCR breached
their fiduciary duties by approving certain loans from THCR to Donald J. Trump.
The complaint seeks to rescind the loans, and also seeks an order requiring the
defendants to account to THCR for losses and damages allegedly resulting from
the loans. The defendants believe that the suit is without merit and on October
1, 1999, the defendants moved to dismiss the complaint. The parties have not yet
established a briefing schedule with respect to the motions.
Various other 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.
15
<PAGE>
PART II - OTHER INFORMATION - (Continued)
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 Hotel & Casino, Inc.
27.2 Financial Data Schedule of Trump's Castle Funding, Inc.
27.3 Financial Data Schedule of Trump's Castle Associates, L.P.
b. Current Reports on Form 8-K:
None.
16
<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 HOTEL & CASINO, INC.
(Registrant)
Date: November 4, 1999
By: /s/ Nicholas L. Ribis
--------------------------------------
Nicholas L. Ribis
President and Chief Executive Officer
(Duly Authorized Officer and
Principal Financial Officer)
17
<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: November 4, 1999
By: /s/ Nicholas L. Ribis
--------------------------------------
Nicholas L. Ribis
President and Chief Executive Officer
(Duly Authorized Officer and
Principal Financial Officer)
18
<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: November 4, 1999
By: /s/ Nicholas L. Ribis
--------------------------------------
Nicholas L. Ribis
President and Chief Executive Officer
(Duly Authorized Officer and
Principal Financial Officer)
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information from Trump's Castle Hotel &
Casino, Inc. This data has been extracted from the Consolidated Balance Sheets
and Consolidated Statement of Operations for the three and nine month periods
ended September 30, 1999 and is qualified in its entirety by reference to such
Financial Statements.
</LEGEND>
<CIK> 0001063882
<NAME> TRUMP'S CASTLE HOTEL & CASINO, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<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> 5,000 5,000
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 5,000 5,000
<SALES> 0 0
<TOTAL-REVENUES> 128 384
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 128 384
<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-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The 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 nine month periods ended
September 30, 1999 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 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<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> 372,676 372,676
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 372,676 372,676
<SALES> 0 0
<TOTAL-REVENUES> 13,267 39,361
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13,267 39,361
<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-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information from Trump's Castle
Associates, L.P. This data has been extracted from the Consolidated Balance
Sheets and Consolidated Statements of Operations for the three and nine month
periods ended September 30, 1999 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 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 29,614 29,614
<SECURITIES> 0 0
<RECEIVABLES> 12,970<F1> 12,970<F1>
<ALLOWANCES> 0 0
<INVENTORY> 3,169 3,169
<CURRENT-ASSETS> 48,387 48,387
<PP&E> 534,544 534,544
<DEPRECIATION> 50,258 50,258
<TOTAL-ASSETS> 548,271 548,271
<CURRENT-LIABILITIES> 61,374 61,374
<BONDS> 381,424 381,424
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 548,271 548,271
<SALES> 0 0
<TOTAL-REVENUES> 83,487 223,691
<CGS> 0 0
<TOTAL-COSTS> 64,262 182,521
<OTHER-EXPENSES> 4,454<F2> 12,980<F2>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13,604 40,335
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,360 (11,560)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>Asset values represent net amounts.
<F2>Represents depreciation and amortization expenses.
</FN>
</TABLE>
