Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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 No. 1-4748
Resorts International, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 59-0763055
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1133 Boardwalk, Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 344-6000
(Registrant's telephone number,
including area code)
Indicate by check mark 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 check mark 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
Number of shares outstanding of each class of registrant's common stock
as of June 30, 1994: Common Stock - 37,754,172 shares and Class B
Redeemable Common Stock - 35,000 shares.
Exhibit Index is presented on page 24
Total No. of Pages 25
1<PAGE>
RESORTS INTERNATIONAL, INC.
FORM 10-Q
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements
of Operations for the
Quarters and Halves Ended
June 30, 1994 and 1993 3
Consolidated Balance Sheets
at June 30, 1994 and
December 31, 1993 4
Consolidated Statements
of Cash Flows for the
Halves Ended June 30,
1994 and 1993 5
Notes to Consolidated
Financial Statements 6
Pro Forma Financial Data 12
Item 2. Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 16
Part II. Other Information
Item 1. Legal Proceedings 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on
Form 8-K 22
2<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
(Unaudited)
Quarter Ended Half Ended
June 30, June 30,
1994 1993 1994 1993
Revenues:
Casino $ 72,314 $ 73,593 $147,042 $151,425
Rooms 5,004 9,099 16,504 20,071
Food and beverage 7,359 12,086 20,703 24,530
Other casino/hotel revenues 2,903 5,679 9,732 12,228
Other operating revenues 1,136 4,211 4,577 8,599
Real estate related 2,100 2,029 4,130 3,998
90,816 106,697 202,688 220,851
Expenses:
Casino 37,266 44,914 85,659 91,875
Rooms 1,556 2,746 4,345 5,563
Food and beverage 6,726 10,715 17,172 20,890
Other casino/hotel
operating expenses 11,872 16,895 29,018 33,434
Other operating expenses 860 3,325 3,483 6,876
Selling, general and
administrative 14,910 18,575 31,558 36,649
Provision for doubtful
receivables 281 785 1,097 1,816
Depreciation 4,485 7,397 10,790 13,946
Real estate related 473 420 789 790
Unallocated corporate
expense (1,482) (866) (3,204) (1,885)
Write-down of non-operating
real estate 20,525 20,525
Loss on SIHL Sale 73,108 73,108
170,580 104,906 274,340 209,954
Earnings (loss) from operations (79,764) 1,791 (71,652) 10,897
Other income (deductions):
Interest income 537 666 1,226 1,509
Interest expense (4,960) (14,075) (23,085) (24,972)
Amortization of debt discount (761) (12,594) (13,331) (23,951)
Recapitalization costs (5,406) (1,156) (9,788) (1,749)
Proceeds from Litigation Trust 2,542
Loss before extraordinary item (90,354) (25,368) (114,088) (38,266)
Extraordinary item - gain on
exchange of debt 187,300 187,300
Net earnings (loss) $ 96,946 $(25,368) $ 73,212 $(38,266)
Per share data:
Loss before extraordinary item $(2.86) $(1.26) $(4.40) $(1.90)
Extraordinary item 5.93 7.23
Net earnings (loss) $ 3.07 $(1.26) $ 2.83 $(1.90)
Weighted average number
of shares outstanding 31,573 20,157 25,897 20,157
3<PAGE>
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, except par value)
June 30, December 31,
1994 1993
(Unaudited)
ASSETS
Current assets:
Cash (including cash equivalents
of $15,463 and $41,273) $ 28,546 $ 62,546
Restricted cash equivalents 10,391 14,248
Receivables, less allowance for
doubtful accounts of $4,194 and $7,874 6,988 19,297
Inventories 1,444 8,664
Prepaid expenses 9,006 10,664
Total current assets 56,375 115,419
Property and equipment, net of
accumulated depreciation of $42,713
and $82,099 250,526 447,840
Deferred charges and other assets 11,976 12,526
$ 318,877 $ 575,785
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt,
net of unamortized discount $ 58 $ 466,336
Accounts payable and accrued liabilities 53,552 84,164
Total current liabilities 53,610 550,500
Long-term debt, net of unamortized
discount 221,501 85,029
Deferred income taxes 53,700 54,000
Shareholders' deficit:
Common stock - $.01 par value 378 202
Class B Stock
Capital in excess of par 127,196 102,092
Accumulated deficit (137,508) (210,720)
(9,934) (108,426)
Note receivable from related party (5,318)
Total shareholders' deficit (9,934) (113,744)
$ 318,877 $ 575,785
4<PAGE>
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Half Ended
June 30,
1994 1993
Cash flows from operating activities:
Cash received from customers $ 198,959 $ 224,981
Cash paid to suppliers and employees (164,474) (198,812)
Cash flow from operations before
interest and income taxes 34,485 26,169
Interest received 1,458 2,255
Interest paid (4,113) (4,266)
Income taxes refunded (paid) (345) 350
Net cash provided by operating
activities 31,485 24,508
Cash flows from investing activities:
Cash proceeds from SIHL Sale, net of
cash balances transferred 38,742
Payments for property and equipment (4,995) (22,687)
Proceeds from sale of property 19
Casino Reinvestment Development
Authority deposits and bond purchases (1,360) (1,357)
Proceeds from sale of short-term money
market security with maturity
greater than three months 885
Purchase of short-term money market
security with maturity
greater than three months (492)
Net cash provided by (used in)
investing activities 32,406 (23,651)
Cash flows from financing activities:
Excess Cash and cash proceeds of SIHL Sale
distributed to noteholders (101,129)
Collection of note receivable from related
party 3,008 3,477
Payments of recapitalization costs (6,106) (2,526)
Proceeds from Litigation Trust 2,542
Repayments of non-public debt (63) (2,172)
Net cash used in financing
activities (101,748) (1,221)
Net decrease in cash and cash equivalents (37,857) (364)
Cash and cash equivalents at beginning
of period 76,794 66,887
Cash and cash equivalents at end of
period $ 38,937 $ 66,523
5<PAGE>
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. General:
The accompanying consolidated interim financial statements, which
are unaudited, include the operations of Resorts International, Inc.
("RII") and its subsidiaries. The term "Company" as used herein includes
RII and/or one or more of its subsidiaries, as the context may require.
While the accompanying interim financial information is unaudited,
management of the Company believes that all adjustments necessary for a
fair presentation of these interim results have been made and all such
adjustments are of a normal recurring nature.
The notes presented herein are intended to provide supplemental
disclosure of items of significance occurring subsequent to December 31,
1993 and should be read in conjunction with the Notes to Consolidated
Financial Statements contained in pages 50 through 68 of RII's Annual
Report on Form 10-K for the year ended December 31, 1993 ("RII's 1993
Form 10-K").
B. Restructuring of Senior Secured Redeemable Notes
due April 15, 1994 (the "Series Notes"):
As described in RII's 1993 Form 10-K, the Company proposed a
restructuring of the Series Notes (the "Restructuring") which RII and
GGRI, Inc. ("GGRI"), RII's subsidiary which guaranteed the Series Notes,
accomplished through a prepackaged bankruptcy joint plan of
reorganization (the "Plan"). On March 21, 1994, after receiving the
requisite acceptances for confirmation of the Plan from holders of Series
Notes and equity interests in RII, RII and GGRI filed their prepackaged
bankruptcy cases with the United States Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court").
In accordance with Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code," the Company
stopped accruing interest and amortizing discounts on the Series Notes as
of March 21, 1994.
The Plan was confirmed by the Bankruptcy Court on April 22, 1994 and
o n May 3, 1994 (the "Effective Date"), all conditions to the
effectiveness of the Plan were either met or waived and the Plan became
effective. Pursuant to the Plan, among other things, the Series Notes
were exchanged for: (i) $160,000,000 principal amount of New Debt
Securities (see below); (ii) 40% of RII's common stock on a fully diluted
basis (excluding certain stock options); (iii) the proceeds from the sale
(the "SIHL Sale," see below) of RII's properties and operations in
Paradise Island, The Bahamas; and (iv) the Company's Excess Cash, as
defined in the Plan, which approximated $34,500,000. Excess Cash was
essentially all the Company's non-restricted cash and equivalents on the
Effective Date in excess of (i) $20,000,000, (ii) cash balances to be
transferred as part of the SIHL Sale, and (iii) estimated cash balances
required to pay certain recapitalization costs and other expenses
provided for in the Plan. Included in Excess Cash was a $2,542,000
distribution that RII received in March 1994 from a litigation trust (the
"Litigation Trust") established under a previous plan of reorganization
to pursue certain claims against a former affiliate. Such distribution
was described in the Plan as "Deferred Cash."
6<PAGE>
The difference between the carrying value of the Series Notes and
the sum of the fair values of the items exchanged therefor resulted in a
gain of $187,300,000 which has been reported as an extraordinary item.
Pursuant to the Plan, the Company entered into the senior note
purchase agreement (the "Senior Facility") described below.
Also in connection with the Restructuring: (i) the Company prepaid
fees of $2,310,000 due The Griffin Group, Inc. (the "Griffin Group"), a
corporation controlled by Merv Griffin, Chairman of the Board of
Directors of RII, under a license and services agreement (the "Griffin
Services Agreement") by applying such amount as a reduction of the
balance of a note receivable from Griffin Group (the "Group Note"); (ii)
Griffin Group repaid the then remaining balance, $3,008,000, of the Group
Note (which was distributed to holders of the Series Notes as part of
Excess Cash); (iii) RII issued a warrant, which is exercisable through
May 3, 1998, to purchase 4,666,850 shares of RII's common stock at $1.20
per share to an affiliate of Griffin Group (the "Griffin Warrant"); (iv)
the RII Senior Management Stock Option Plan was terminated, although
holders of options granted under that plan established in 1990 retain
their options; (v) the RII 1994 Stock Option Plan, which allows for the
granting of options to purchase up to 5% of the outstanding common stock
of RII, was adopted and (vi) RII increased its authorized shares of
common stock to 100,000,000 and authorized 120,000 shares of Class B
redeemable common stock (the "Class B Stock").
For pro forma effects of the Restructuring on continuing operations
assuming the Restructuring occurred on January 1, 1993 see "Pro Forma
Financial Data" following Note I.
New Debt Securities
The "New Debt Securities" consist of $125,000,000 principal amount
of 11% Mortgage Notes (the "Mortgage Notes") due September 15, 2003 and
$35,000,000 principal amount of 11.375% Junior Mortgage Notes (the
"Junior Mortgage Notes") due December 15, 2004. The New Debt Securities
were issued by Resorts International Hotel Financing, Inc. ("RIHF"), a
subsidiary of RII, and are guaranteed by Resorts International Hotel,
Inc. ("RIH"), RII's subsidiary that owns and operates Merv Griffin's
Resorts Casino Hotel (the "Resorts Casino Hotel") in Atlantic City, New
Jersey. The accrual of interest and amortization of discount on the New
Debt Securities commenced on May 3, 1994.
The Mortgage Notes are secured by a $125,000,000 promissory note
made by RIH (the "RIH Promissory Note"), the terms of which mirror the
terms of the Mortgage Notes. The RIH Promissory Note and RIH's guaranty
of the Mortgage Notes are secured by liens on the Resorts Casino Hotel,
consisting of RIH's fee and leasehold interests comprising the Resorts
Casino Hotel, the contiguous parking garage and property, all additions
and improvements thereto, and related personal property. The liens
securing the Mortgage Notes will be subordinated to the lien securing the
Senior Facility Notes (described below), if the Senior Facility Notes are
issued.
The Junior Mortgage Notes were issued as part of Units with Class B
Stock (see below). In certain circumstances, interest payable on the
Junior Mortgage Notes may be satisfied by the issuance of additional
Units. The Junior Mortgage Notes are secured by a $35,000,000 promissory
note made by RIH (the "RIH Junior Promissory Note"), the terms of which
mirror the terms of the Junior Mortgage Notes. The RIH Junior Promissory
Note and
7<PAGE>
RIH's guaranty of the Junior Mortgage Notes are also secured by liens on
the Resorts Casino Hotel property as described above. The liens securing
the Junior Mortgage Notes will be subordinated to the lien securing the
Senior Facility Notes, if the Senior Facility Notes are issued, and are
subordinated to the liens securing the Mortgage Notes.
The indentures pursuant to which the Mortgage Notes and the Junior
Mortgage Notes were issued (collectively, the "Indentures") prohibit RIH
a n d its subsidiaries from paying dividends, from making other
distributions in respect of their capital stock, and from purchasing or
redeeming their capital stock, with certain exceptions, unless certain
interest coverage ratios are attained. Also, the Indentures restrict RIH
and its subsidiaries from incurring additional indebtedness, with certain
exceptions, and limit intercompany loans by RIH to RII to loans from the
proceeds of the Senior Facility (or similar working capital facility) and
other advances not in excess of $1,000,000 in the aggregate at any time
outstanding. Similar restrictions curtail the activities of RIHF. The
shareholder's equity of RIH amounted to $23,306,000 at June 30, 1994, all
of which is restricted under these Indenture provisions.
Senior Facility
The Senior Facility among RIHF, RII and RIH and certain funds and
accounts advised or managed by Fidelity Management & Research Company
("Fidelity") is available for a single borrowing of up to $20,000,000
during the one-year period ending May 2, 1995, through the issuance of
notes (the "Senior Facility Notes"). If issued, the Senior Facility
Notes will bear interest at 11% and will be due in 2002. The Senior
Facility Notes will be senior obligations of RIHF secured by a promissory
note from RIH in an aggregate principal amount of up to $20,000,000
payable in amounts and at times necessary to pay the principal of and
interest on the Senior Facility Notes. The Senior Facility Notes will be
guaranteed by RIH and secured by a lien on the Resorts Casino Hotel
property as described above. The Senior Facility Notes will also be
secured by a pledge by GGRI, RII's subsidiary which became the parent of
RIH as a result of the Restructuring, of all issued and outstanding
shares of RIH common stock. In addition, the Senior Facility Notes will
be guaranteed by RII, which guaranty will be secured by a pledge of all
the issued and outstanding stock of GGRI and RIHF.
Units
Each Unit comprises $1,000 principal amount of Junior Mortgage Notes
and one share of Class B Stock. Shares of Class B Stock may not be
transferred separately from the related Junior Mortgage Note. Holders of
Class B Stock are entitled to elect one-third of the Board of Directors
of RII and under certain circumstances they would be entitled to elect a
majority of the Board of Directors. Holders of Class B Stock are not to
participate in any dividends which may be declared by RII's Board of
Directors. Approximately 35,000 Units were issued pursuant to the Plan.
SIHL Sale
The Plan contemplated two alternatives for the disposition of the
Company's Paradise Island operations and properties. The disposition
that was effected was the SIHL Sale, which was negotiated among RII, two
representatives of major holders of Series Notes (Fidelity and TCW
Special Credits) and an unrelated party, Sun International Investments
Limited
8<PAGE>
("SIIL"). In essence, SIIL acquired a 60% interest in the Company's
Paradise Island assets through a subsidiary of SIIL, Sun International
Hotels Limited ("SIHL"), formed for that purpose.
SIIL purchased 60% of the capital stock of SIHL for $90,000,000 plus
interest at 7.5% from January 1, 1994 through the Effective Date (the
"SIHL Proceeds"). Pursuant to the purchase agreement, SIHL then
purchased 100% of the equity of Resorts International (Bahamas) 1984
L i mited, RII's former Bahamian subsidiary which, along with its
s u b s idiaries, owned and operated the Company's Paradise Island
properties. Also, certain subsidiaries of SIHL acquired certain assets
of RII and its U.S. subsidiaries which supported the Paradise Island
operations and assumed certain related liabilities. The purchase price
received from SIHL was $65,000,000 in cash, plus interest at 7.5% from
January 1, 1994 through the Effective Date, and 2,000,000 Series A
Ordinary Shares of SIHL (the "SIHL Shares"), which amounts to the
remaining 40% of the capital stock of SIHL. These cash proceeds as well
as the SIHL Shares were distributed to holders of Series Notes pursuant
to the Plan. SIHL used a portion of the SIHL Proceeds to fund its
$65,000,000 (plus interest) purchase price of the Company's Paradise
Island assets. RII understands that the other $25,000,000 of SIHL
Proceeds remaining in SIHL as of the Effective Date ($90,000,000 SIHL
Proceeds less the $65,000,000 used to purchase the Paradise Island
assets) will increase the equity value of SIHL and, in effect, represents
a d d i tional consideration in the amount of $10,000,000 (40% of
$25,000,000) for the sale of the Company's Paradise Island assets. Such
consideration was realized by the holders of Series Notes through the
increased value of their 40% equity interest in SIHL.
Although the SIHL Sale was effective May 3, 1994, the consolidated
statements of operations reflect the Paradise Island operations through
April 30, 1994. The loss on SIHL Sale represents the difference between
the carrying values and the fair values of the assets and equity
interests sold.
For information as to the revenues and contribution to consolidated
earnings from operations of the operations disposed of in the SIHL Sale,
see the Paradise Island portion of the casino/hotel segment, the Paradise
Island portion of the real estate related segment and the airline segment
included in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" herein and in RII's 1993 Form 10-K.
C. Reverse Repurchase Agreements:
Cash equivalents at June 30, 1994 included reverse repurchase
agreements (federal government securities purchased under agreements to
resell those securities) with the institutions listed in the following
table under which the Company had not taken delivery of the underlying
securities. These agreements matured on July 1, 1994.
(In Thousands of Dollars)
National Westminster Bank NJ $13,836
City National Bank of Florida $ 7,096
Summit Trust Company $ 2,216
9<PAGE>
D. Complimentary Services:
The Consolidated Statements of Operations reflect each category of
operating revenues excluding the retail value of complimentary services
provided to casino patrons without charge. The rooms, food and beverage,
and other casino/hotel operations departments allocate a percentage of
their total operating expenses to the casino department for complimentary
s e rvices provided to casino patrons. These allocations do not
n e c e s s arily represent the incremental cost of providing such
complimentary services to casino patrons. Amounts allocated to the
casino department from the other operating departments were as follows:
Quarter Ended Half Ended
June 30, June 30,
(In Thousands of Dollars) 1994 1993 1994 1993
Rooms $1,033 $1,079 $ 2,172 $ 2,197
Food and beverage 3,607 4,894 8,166 10,332
Other casino/hotel operations 1,747 1,413 3,403 3,200
Total allocated to casino $6,387 $7,386 $13,741 $15,729
E. Write-down of Non-operating Real Estate:
The Company owns various non-operating sites in Atlantic City, New
Jersey, which are available for sale. Certain of these properties could
be developed while others are designated as wetlands. Based on a study
of these properties directed by the initial post-Restructuring Board of
Directors of RII, which Board was named as part of the Plan, the Company
determined that write-downs totalling $20,525,000 were appropriate in
order to properly reflect the net realizable value of these properties.
These charges were recorded in the second quarter of 1994.
F. Related Party Transaction:
The Company was required to pay Griffin Group $2,425,000 in cash on
September 17, 1995, which was to be the final payment under the Griffin
Services Agreement. On August 1, 1994, RII agreed to issue 1,940,000
shares of common stock of RII to an affiliate of Griffin Group in
satisfaction of this final payment obligation. The fair value of RII's
common stock, based on the average of the high and low trading prices on
the American Stock Exchange on the date of the agreement was $1.03 per
share. RII is to issue the shares as soon as is practicable. The shares
will not be registered under the Securities Act of 1933 and will be
restricted securities.
G. Income Taxes:
Because the exchange of the Series Notes occurred pursuant to a plan
confirmed by the Bankruptcy Court, any cancellation of debt income
realized by reason of the consummation of the Plan is excludable from the
Company's federal taxable income.
10<PAGE>
H. Statements of Cash Flows:
S u p plemental disclosures required by Statement of Financial
Accounting Standards No. 95 "Statement of Cash Flows" are presented
below.
Half Ended
June 30,
(In Thousands of Dollars) 1994 1993
Reconciliation of net earnings (loss) to net
cash provided by operating activities:
Net earnings (loss) $ 73,212 $(38,266)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Extraordinary item - gain on exchange of debt (187,300)
Loss on SIHL Sale 73,108
Write-down of non-operating real estate 20,525
Depreciation 10,790 13,946
Amortization (principally debt discount) 13,331 23,963
Provision for doubtful receivables 1,097 1,816
Interest expense for which obligation
was satisfied by issuance of debt 16,787
Provision for discount on Casino
Reinvestment Development Authority
obligations, net of amortization 694 732
Deferred tax benefit (300)
Recapitalization costs 9,788 1,749
Proceeds from Litigation Trust (2,542)
Net loss on sale of property 138
Net decrease in accounts receivable 43 6,829
Net (increase) decrease in inventories and
prepaids 3,445 (5,433)
Net increase in deferred charges and
other assets (17) (439)
Net increase in accounts payable and
accrued liabilities 15,473 2,824
Net cash provided by operating activities $ 31,485 $ 24,508
11<PAGE>
Half Ended
June 30,
(In Thousands of Dollars) 1994 1993
Non-cash investing and financing transactions:
Exchange of Series Notes for:
New Debt Securities (at estimated market
value) $135,300
SIHL Shares (at estimated market value) 60,000
Common stock of RII (at estimated market
value) 24,415
Other liabilities 1,130
Reduction in Group Note applied to
prepaid services 2,310
Exchange of note receivable from shareholder
for Group Note $7,523
Issuance of common stock of RII in settlement
of certain recapitalization costs 865
Reclassification to other assets from
receivables and property and equipment 450
Increase in liabilities for additions to
property and equipment and other assets 122 685
I. Commitments and Contingencies:
Litigation
RII and certain of its subsidiaries are defendants in certain
litigation. In the opinion of management, based upon advice of counsel,
the aggregate liability, if any, arising from such litigation will not
have a material adverse effect on the accompanying consolidated financial
statements.
PRO FORMA FINANCIAL DATA
S e t forth below is certain unaudited pro forma financial
information. The pro forma statements of operations information for the
year ended December 31, 1993 and the half ended June 30, 1994 gives
effect to the Restructuring as if it occurred on January 1, 1993.
However, the pro forma statements of operations information excludes the
gains (losses) resulting from the Restructuring and the costs associated
therewith. The unaudited pro forma information is not necessarily
indicative of future results or what the Company's results of operations
would actually have been had the transactions occurred on January 1,
1993. Such information should not be used as a basis to project results
for any future period.
12<PAGE>
RESORTS INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
Half Ended June 30, 1994
Pro Forma
Historical Adjustments Pro Forma
Revenues:
Casino $ 147,042 $ (28,115) (a) $118,927
Rooms 16,504 (13,419) (a) 3,085
Food and beverage 20,703 (13,646) (a) 7,057
Other casino/hotel revenues 9,732 (7,708) (a) 2,024
Other operating revenues 4,577 (4,577) (a) 0
Real estate related 4,130 4,130
202,688 (67,465) 135,223
Expenses:
Casino 85,659 (16,623) (a) 69,036
Rooms 4,345 (2,787) (a) 1,558
Food and beverage 17,172 (9,308) (a) 7,864
Other casino/hotel operating
expenses 29,018 (11,687) (a) 17,331
Other operating expenses 3,483 (3,483) (a) 0
Selling, general and
administrative 31,558 (8,474) (a) 23,084
Provision for doubtful
receivables 1,097 (916) (a) 181
Depreciation 10,790 (4,013) (a) 6,777
Real estate related 789 789
Unallocated corporate expense (3,204) (4) (a) (2,137)
1,971 (b)
(900) (c)
Write-down of non-operating
real estate 20,525 20,525
Loss on SIHL Sale 73,108 (73,108) (d) 0
274,340 (129,332) 145,008
Loss from operations (71,652) 61,867 (9,785)
Other income (deductions):
Interest income 1,226 1,967 (a) 943
(2,250) (e)
Interest expense (23,085) 10 (a) (13,020)
16,064 (f)
(6,009) (g)
Amortization of debt discount (13,331) 12,021 (f) (1,838)
(528) (g)
Recapitalization costs (9,788) 1,326 (a) 0
8,462 (h)
Proceeds from Litigation
Trust 2,542 2,542
Loss before extraordinary item $(114,088) $ 92,930 $(21,158)
Loss before extraordinary item
per share $ (4.40) $ (.56)
Weighted average number of
shares outstanding 25,897 37,754(i)
See Notes to Pro Forma Consolidated Statements of Operations
13<PAGE>
RESORTS INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
Year Ended December 31, 1993
Pro Forma
Historical Adjustments Pro Forma
Revenues:
Casino $ 307,059 $ (62,943) (a) $244,116
Rooms 35,708 (28,734) (a) 6,974
Food and beverage 46,843 (30,917) (a) 15,926
Other casino/hotel revenues 23,330 (18,867) (a) 4,463
Other operating revenues 18,122 (18,121) (a) 1
Real estate related 8,502 (445) (a) 8,057
439,564 (160,027) 279,537
Expenses:
Casino 189,304 (47,696) (a) 141,608
Rooms 10,906 (7,504) (a) 3,402
Food and beverage 41,859 (24,149) (a) 17,710
Other casino/hotel operating
expenses 69,918 (35,154) (a) 34,764
Other operating expenses 14,697 (14,697) (a) 0
Selling, general and
administrative 71,700 (24,340) (a) 47,360
Provision for doubtful
receivables 2,889 (1,988) (a) 901
Depreciation 27,924 (14,169) (a) 13,755
Real estate related 1,605 (221) (a) 1,384
Unallocated corporate expense (4,136) (8) (a) (2,584)
4,635 (b)
(3,075) (c)
426,666 (168,366) 258,300
Earnings from operations 12,898 8,339 21,237
Other income (deductions):
Interest income 3,174 6,350 (a) 2,774
(6,750) (e)
Interest expense (57,244) 50 (a) (26,034)
48,891 (f)
(17,731) (g)
Amortization of debt discount (51,203) 49,170 (f) (3,362)
(1,329) (g)
Recapitalization costs (8,789) 3,335 (a) 0
5,454 (h)
Loss before income taxes (101,164) 95,779 (5,385)
Income tax expense (1,000) (1,000)
Net loss $(102,164) $ 95,779 $ (6,385)
Net loss per share $ (5.07) $ (.17)
Weighted average number of
shares outstanding 20,157 37,754(i)
See Notes to Pro Forma Consolidated Statements of Operations
14<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Reflects the elimination of operating results of operations
disposed of in the SIHL Sale (the "PIRL Group").
(b) Reflects the elimination of the management fee charged to PIRL
Group by RII. Such fee was based on 3% of certain PIRL Group gross
revenues.
(c) Reflects the elimination of costs incurred by RII for services
provided to the PIRL Group including accounting, data processing and
other support services.
(d) Reflects elimination of loss on SIHL Sale.
(e) Reflects the elimination of interest income on RIH's $50,000,000
note receivable from a former Bahamian affiliate which was cancelled
pursuant to the terms of the Restructuring.
(f) Reflects the elimination of interest expense and amortization of
debt discount on the Series Notes.
(g) Reflects interest expense and amortization of debt discount on
the Mortgage Notes and the Junior Mortgage Notes.
(h) Reflects the elimination of recapitalization costs incurred in
connection with the Restructuring.
(i) Reflects the issuance, as of January 1, 1993, of (x) 612,500
shares of common stock to financial advisers in settlement of certain
recapitalization costs and (y) 40% of RII's outstanding common stock
(after giving effect to the Restructuring, assuming the Griffin
Warrant is exercised) to holders of the Series Notes.
15<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
Liquidity
As described in Note B of Notes to Consolidated Financial
Statements, the Company recently restructured its Series Notes
pursuant to a prepackaged bankruptcy plan. The Plan was confirmed by
the Bankruptcy Court on April 22, 1994 and became effective on May 3,
1994. Pursuant to the terms of the Plan, the Company exchanged the
Series Notes for, among other things: (i) Excess Cash; (ii) Mortgage
Notes and Junior Mortgage Notes; and (iii) 40% of the common stock of
RII on a fully diluted basis (excluding certain stock options). The
Restructuring resulted in a significant reduction in the Company's
unrestricted cash and equivalents due to the distribution of Excess
Cash to holders of the Series Notes. However, the Restructuring also
resulted in a significant decrease in the Company's long-term debt
outstanding. The Company believes that the Restructuring will
improve its long term liquidity and enhance its ability to meet its
financial obligations as they become due.
At June 30, 1994 the Company's working capital amounted to
$ 2 , 7 6 5,000, including unrestricted cash and equivalents of
$28,546,000. A substantial amount of the unrestricted cash and
e q u ivalents is required for day-to-day operations, including
approximately $10,000,000 of currency and coin on hand which amount
varies by days of the week, holidays and seasons, as well as
additional cash balances necessary to meet current working capital
needs.
In addition, the Company has the $20,000,000 Senior Facility
available for the one-year period ending May 2, 1995 should the
Company have unforeseen cash needs. The Company believes that the
Senior Facility will serve as a safeguard if an emergency arises from
current operations, or serve as a source of funds for a profitable
investment opportunity.
Capital Expenditures
During the first half of 1994 the Company expended almost
$3,000,000 for the purchase of 115 slot machines, most of which were
replacements for older models, and for capital maintenance projects
at its facilities in Atlantic City. Prior to the disposition of its
P a r adise Island assets, the Company expended approximately
$2,000,000 on its Paradise Island facilities; a significant portion
of these expenditures were required by the purchase agreement.
RESULTS OF OPERATIONS
General
The following discussion addresses the Company's Atlantic City
operations as well as certain operations which were disposed of
through the SIHL Sale. Operations disposed of include the Paradise
Island portion of the casino/hotel segment and the airline segment.
16<PAGE>
Revenues
Revenues by geographic and business segment were as follows (in
thousands of dollars):
Quarter Ended Half Ended
June 30, June 30,
1994 1993 1994 1993
Casino/hotel:
Atlantic City, New Jersey:
Casino $65,278 $ 60,500 $118,927 $115,407
Rooms 1,907 1,891 3,085 3,154
Food and beverage 3,943 4,173 7,057 7,467
Other casino/hotel 1,092 1,114 2,024 1,986
72,220 67,678 131,093 128,014
Paradise Island, The Bahamas:
Casino 7,036 13,093 28,115 36,018
Rooms 3,097 7,208 13,419 16,917
Food and beverage 3,416 7,913 13,646 17,063
Other casino/hotel 1,811 4,565 7,708 10,242
15,360 32,779 62,888 80,240
Total casino/hotel 87,580 100,457 193,981 208,254
Real estate related -
Atlantic City, New Jersey 2,100 2,029 4,130 3,998
Airline 1,446 5,188 5,674 10,601
Other segments 2 40 7 97
Intersegment eliminations (312) (1,017) (1,104) (2,099)
Revenues from operations $90,816 $106,697 $202,688 $220,851
Second Quarter and First Half 1994 Compared to 1993
Casino/hotel - Atlantic City, New Jersey
Casino revenues were up by $4,778,000 for the second quarter and
$3,520,000 for the first half of 1994. Poker and simulcasting, which
activities commenced in late June 1993, accounted for $2,204,000 of the
increase for the second quarter and a $4,380,000 increase for the half.
Both the Company and the Atlantic City casino industry had a slight
decline in table and slot win combined for the first half of 1994
compared to the prior year. The Company believes that increased
competition from other newly opened or expanded jurisdictions which
permit gaming has slowed the growth of gaming revenue in Atlantic City
and, for the Company, has significantly increased the cost of obtaining
additional revenue. In addition, poor weather conditions during the
first quarter of 1994 adversely affected operations as the principal
means of transportation to Atlantic City is by automobile or bus.
The Company's increase in casino revenue for the second quarter
resulted from increased slot win and poker and simulcast revenues.
Slot win was up due to an increase in amounts wagered by patrons and,
to a
17<PAGE>
lesser extent, an increase in the slot hold percentage (ratio of casino
win to total amount wagered for slots or total amount of chips
purchased for table games). Table game win was down slightly as the
effect of a decrease in amounts wagered more than offset the effect of
an increase in the table game hold percentage.
The Company's increase for the first half resulted as increases in
simulcast and poker revenue and slot win more than offset the decrease
in table game win. Slot win increased as an increase in amounts
wagered by patrons more than offset the effect of a reduction in the
hold percentage. The decrease in table game win was due to both a
reduction in amounts wagered by patrons and the effect of a reduction
in the hold percentage.
Casino/hotel - Paradise Island, The Bahamas
T h e Company's Paradise Island casino/hotel facilities were
disposed of in the SIHL Sale effective May 3, 1994. The Company's
Paradise Island revenues for 1994 reflect the Company's operation of
the Paradise Island properties through April 30, 1994.
Airline
The Company's airline operation was effectively disposed of in the
SIHL Sale. The only aircraft owned by the Company was transferred to a
subsidiary of SIHL as part of the SIHL Sale. Pursuant to an agreement,
the Company is to operate the airline on behalf of SIHL for a nominal
management fee for a period not to exceed 14 months. All profits
earned or losses incurred in such operation are to accrue to or be
borne by SIHL. Airline revenues reflect airline operations through
April 30, 1994.
18<PAGE>
Contribution to Consolidated Loss Before Extraordinary Item
Results by geographic and business segment were as follows (in
thousands of dollars):
Quarter Ended Half Ended
June 30, June 30,
1994 1993 1994 1993
Casino/hotel:
Atlantic City, New Jersey $ 6,988 $ 2,567 $ 5,297 $ 5,009
Paradise Island,
The Bahamas* 3,794 (3,214) 10,206 870
10,782 (647) 15,503 5,879
Real estate related -
Atlantic City, New Jersey (18,902) 1,604 (17,194) 3,198
Airline* (2) 7 (7)
Other segments (7) (21) (24) (31)
Unallocated general
corporate expense 1,473 848 3,178 1,851
Loss on SIHL Sale (73,108) (73,108)
Earnings (loss) from
operations (79,764) 1,791 (71,652) 10,897
Other income (deductions):
Interest income 537 666 1,226 1,509
Interest expense (4,960) (14,075) (23,085) (24,972)
Amortization of debt
discount (761) (12,594) (13,331) (23,951)
Recapitalization costs (5,406) (1,156) (9,788) (1,749)
Proceeds from Litigation
Trust 2,542
Loss before extraordinary
item $(90,354) $(25,368) $(114,088) $(38,266)
* The Paradise Island casino/hotel segment subsidized the operations of
Paradise Island Airlines, Inc., a subsidiary of RII whose operations
were effectively disposed of in the SIHL Sale, in the quarters
presented of 1994 and 1993 and in the halves presented of 1994 and 1993
i n the amounts of $388,000, $494,000, $993,000 and $668,000,
respectively.
Second Quarter and First Half 1994 Compared to 1993
Casino/hotel - Atlantic City, New Jersey
Casino, hotel and related operating results for the second quarter
of 1994 increased by $4,421,000 due to the increased revenues described
above. Total operating expenses for this period were virtually flat.
The most significant variances in operating expenses were an increase
in the accrual for management incentive bonuses ($1,300,000), a
decrease in advertising expense ($500,000) and a decrease in food and
beverage costs ($500,000). The decrease in advertising resulted as the
second quarter of 1993 had higher advertising costs associated with the
introduction of the "cash-back" program, a promotion which rewards slot
players by giving cash back to patrons based on their level of play,
and the 15th anniversary celebration of Resorts Casino Hotel. The
decrease in food and beverage costs resulted primarily from reduced
patronage at the Company's "all-you-
19<PAGE>
can-eat" Beverly Hills Buffet due to price increases, although there
has been a general decline in the number of patrons served at all of
the Company's food and beverage outlets. Prices at the Beverly Hills
Buffet were increased as management determined that this promotion was
not cost effective.
Casino, hotel and related operating results for the first half of
1994 increased by $288,000 as increased revenues discussed above were
almost completely offset by a net increase in operating expenses. The
most significant increase in operating expenses was casino promotional
costs ($2,300,000), due primarily to the "cash-back" program noted
above, which commenced in late April 1993. Since the introduction of
the "cash-back" program the Company has reduced cash giveaways to bus
patrons and through other promotional mailings. Other significant
cost increases were in fees associated with simulcasting ($1,100,000)
and the accrual for management incentive bonuses ($800,000). The most
significant decrease in operating expenses was in food and beverage
costs ($900,000) due to the reasons described above.
Casino/hotel - Paradise Island, The Bahamas
The Company's Paradise Island casino/hotel facilities were
disposed of in the SIHL Sale effective May 3, 1994. The Paradise
Island operating results for 1994 reflect the Company's operation of
the Paradise Island properties through April 30, 1994.
Real Estate Related - Atlantic City, New Jersey
Atlantic City real estate related results for the second quarter
and first half of 1994 include a charge of $20,525,000 for the write-
down of certain non-operating properties to net realizable value.
See Note E of Notes to Consolidated Financial Statements.
Airline
The Company's airline operation was effectively disposed of in
the SIHL Sale. Pursuant to an agreement, the Company is to operate
the airline on behalf of SIHL for a nominal management fee for a
period not to exceed 14 months. All profits earned or losses incurred
in such operation are to accrue to or be borne by SIHL. Operating
results of the airline segment presented herein include airline
operations through April 30, 1994.
Unallocated Corporate Expense
For both the second quarter and the first half of 1994 the
decrease in corporate expenses resulted primarily from decreases in
payroll and related costs associated with certain executives whose
service to the Company terminated in 1993.
T h e Environmental Protection Agency ("EPA") has named a
predecessor to RII as a potentially responsible party in the Bay Drum
hazardous waste site (the "Site") in Tampa, Florida which the EPA has
listed on the National Priorities List. No formal action has
commenced against RII and RII intends to dispute any claims of this
nature, if asserted. Although it may ultimately be determined that
RII is one of several hundred parties that are jointly and severally
liable for the costs of Site remediation and
20<PAGE>
for damages to natural resources at the Site caused by hazardous
wastes, the extent of any such liability, if any, cannot be determined
at this time.
Loss on SIHL Sale
See Note B of Notes to Consolidated Financial Statements for a
description of the SIHL Sale.
Other Income (Deductions)
The decreases in interest expense and amortization of debt
discount for the second quarter and the first half of 1994 are
attributable to the Restructuring, which resulted in a significant
decrease in the principal amount of debt outstanding as well as a
reduction in interest rates.
Also affecting the comparison of these expenses is the fact that
the Company stopped accruing interest and amortizing debt discounts on
the Series Notes as of March 21, 1994, the date the Company entered
bankruptcy proceedings, while the accrual of interest and amortization
of discount on the New Debt Securities did not start until May 3,
1994. See Note B of Notes to Consolidated Financial Statements for a
description of the Company's New Debt Securities.
Recapitalization costs include legal and other advisory fees
incurred in connection with the Restructuring.
Proceeds from Litigation Trust represent the distribution that
the Company received as a holder of units of beneficial interest in
t h e L itigation Trust established under a previous plan of
reorganization.
PART II. - OTHER INFORMATION
Certain changes in securities, defaults on securities (none of
which are continuing), and resignations of directors during the second
quarter of 1994 were previously reported in RII's Form 10-Q for the
quarter ended March 31, 1994.
Item 1. Legal Proceedings
New York Supreme Court - Friedman Derivative Action
RII has been named as the nominal defendant in an action (Arthur
M. Friedman suing derivatively on behalf of RII v. Merv Griffin et al.
and RII, Nominal Defendant) brought derivatively on its behalf by a
shareholder, Arthur Friedman. The complaint was filed in the Supreme
Court of the State of New York, New York County on January 27, 1994
and was amended in February 1994. The defendants in the action, as
amended, are Merv Griffin, Griffin Group, Thomas Gallagher, David P.
Hanlon, who was President, Chief Executive Officer and a director of
RII through October 31, 1993, and four former directors of RII who
served in that capacity until the Effective Date. The complaint seeks
to recover for the Company an unspecified sum of money as compensatory
d a mages for allegedly wrongful acts by the defendants. The
allegations include that the defendants improperly (i) permitted
defendant Griffin not to repay money he allegedly owed to the Company
and (ii) paid defendant Hanlon excessive compensation.
21<PAGE>
On April 26, 1994, RII removed this action to the United States
District Court for the Southern District of New York. On May 26,
1994, RII filed a motion to transfer the action to the Bankruptcy
Court. A response to the motion to transfer has not been filed and no
deadline has been set. Plaintiff's counsel has filed a motion to
withdraw as counsel. The United States District Court for the
Southern District of New York has given the plaintiff until August 5,
1994 to retain new counsel.
Item 5. Other Information
See Note F of Notes to Consolidated Financial Statements for a
discussion of additional shares of common stock of RII to be issued to
an affiliate of Merv Griffin, Chairman of the Board of Directors of
RII.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following Part II exhibit is filed herewith:
Exhibit
Number Exhibit
(10) Letter agreement between RII and Griffin Group regarding
issuance of shares of RII's common stock in satisfaction of
payment obligation pursuant to Griffin Services Agreement.
b. Reports on Form 8-K
No Current Report on Form 8-K was filed by RII covering an event
during the second quarter of 1994. No amendments to previously filed
Forms 8-K were filed during the second quarter of 1994.
22<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.
RESORTS INTERNATIONAL, INC.
(Registrant)
/s/ Matthew B. Kearney
Matthew B. Kearney
Executive Vice President -
Finance
(Authorized Officer of
Registrant and Chief
Financial Officer)
Date: August 10, 1994
23<PAGE>
RESORTS INTERNATIONAL, INC.
Form 10-Q for the quarterly
period ended June 30, 1994
EXHIBIT INDEX
Exhibit Page
Number Exhibit Number
(10) Letter agreement between RII and Griffin Group
regarding issuance of shares of RII's common
stock in satisfaction of payment obligation
pursuant to Griffin Services Agreement. 25
24<PAGE>
EXHIBIT (10)
Mr. Thomas E. Gallagher
President & Chief Executive Officer
The Griffin Group, Inc.
780 Third Avenue
New York, NY 10017
RE: License and Services Agreement, dated as of
September 17, 1992 (the "License Agreement")
Dear Mr. Gallagher:
As agreed to at the Board of Directors meeting of Resorts
International, Inc. ("Resorts") on August 1, 1994, Resorts hereby
agrees to issue to The Griffin Group, Inc. 1,940,000 shares of Resorts
C o mmon Stock (the "Shares") in full satisfaction of Resorts'
obligation to pay to TGG the amount of $2,425,000 for services to be
rendered for the year ended September 17, 1997 pursuant to the License
Agreement, which amount was to become due on September 17, 1995. By
execution of this letter agreement, TGG agrees to accept the Shares in
full satisfaction of Resorts' payment obligations under the License
Agreement due on September 17, 1995. Resorts further acknowledges
that TGG has assigned its right to receive the Shares to Atlantic
Resorts Holdings, Inc. ("ARH"). Resorts agrees that it shall issue
the Shares to ARH as soon as reasonably practicable. Other than as
set forth herein, each party hereto acknowledges and agrees that its
other rights and obligations under the License Agreement shall not be
modified or affected in any manner.
This letter agreement may be executed in two or more
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall be deemed to be one and the
same instrument.
By your execution of this letter agreement below in the
space provided you acknowledge and agree to the terms set forth herein
and agree to be bound hereby.
RESORTS INTERNATIONAL, INC.
By: /s/ Matthew B. Kearney
Matthew B. Kearney
Office of the President
Executive Vice President-
Finance and Chief Financial
Officer
AGREED AND ACCEPTED AS OF
THIS FIRST DAY OF AUGUST 1994 ON
BEHALF OF THE GRIFFIN GROUP, INC.
BY:/s/ Thomas E. Gallagher
Thomas E. Gallagher
President & Chief Executive Officer
25<PAGE>
