SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-4748
SUN INTERNATIONAL NORTH AMERICA, 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.)
1415 E. Sunrise Blvd., Ft. Lauderdale, FL 33304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 954-713-2500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
- continued -
Total Number of Pages 91.
Exhibit Index is presented on pages 60 through 64.
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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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
As of February 28, 1999, there were 100 shares of the registrant's
common stock outstanding, all of which were owned by one shareholder.
Accordingly there is no current market for any of such shares.
The registrant meets the conditions set forth in General Instruction
I(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with
the reduced disclosure format permitted by that General Instruction.
<PAGE>
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Sun International North America, Inc. ("SINA") is a holding company
which, through its indirect wholly owned subsidiary, Resorts
International Hotel, Inc. ("RIH"), is engaged in the ownership and
operation of Resorts Casino Hotel in Atlantic City, New Jersey. SINA
also provides management services to certain affiliated companies and
owns a tour operator which wholesales tour packages and provides
reservation services. SINA was known as Resorts International, Inc.
until June 30, 1995, and as Griffin Gaming & Entertainment, Inc. from
June 30, 1995 until February 6, 1997. "SINA" is used herein to refer to
the corporation for all periods. SINA was incorporated in Delaware in
1958. Unless stated otherwise, the term "Company" as used herein
includes SINA and its consolidated subsidiaries.
On December 16, 1996, SINA became a wholly owned subsidiary of Sun
International Hotels Limited ("SIHL"), a corporation organized and
existing under the laws of the Commonwealth of The Bahamas.
In Atlantic City, the Company owns and operates the Resorts Casino
Hotel, which has approximately 660 guest rooms, a 68,000 square foot
casino, an 8,000 square foot simulcast pari-mutuel betting area and
related facilities, located on the Boardwalk.
Casino operations in Atlantic City are conducted under a casino
license which is subject to periodic review and renewal by action of the
New Jersey Casino Control Commission (the "Casino Control Commission").
The Company's current license was renewed in January 1996 through
January 31, 2000. See "Regulation and Gaming Taxes and Fees" under
"Narrative Description of Business" below.
Approximately 10 acres of Boardwalk property previously owned by
the Company was sold to Atlantic City Showboat, Inc. ("ACS") in January
1998. Prior to its sale, the property was leased to ACS under a 99-year
net lease (the "Showboat Lease"). All lease payments received under the
Showboat Lease directly and completely serviced the Company's interest
obligations under the Company's First Mortgage Non-Recourse Pass-Through
Notes due June 30, 2000 (the "Showboat Notes"). See "Narrative
Description of Business - Showboat Lease" below. The Company also owns
other real estate in the Atlantic City area, most of which is vacant
land.
Effective January 1, 1997, SIHL contributed the capital stock of
Sun International Resorts, Inc. ("Sun Resorts"), a wholly owned
subsidiary of SIHL, to SINA. Sun Resorts, along with its subsidiaries,
is a tour operator and wholesaler of tour packages and provides
reservation services. In addition, Sun Resorts provides certain support
services for SIHL's operations in The Bahamas.
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Effective July 1, 1997, SIHL contributed the capital stock of Sun
Cove Limited, ("Sun Cove"), a wholly owned subsidiary of SIHL, to SINA.
Sun Cove has a 50% interest in Trading Cove Associates ("TCA"), a
Connecticut general partnership which holds a management agreement (the
"Management Agreement") with the Mohegan Tribal Gaming Authority
relating to the development and management of a casino resort and
entertainment complex in the town of Uncasville, Connecticut (the
"Mohegan Sun Casino"). The Management Agreement provides that TCA is
entitled to receive between 30% and 40% of the net profits, as defined,
of the Mohegan Sun Casino. TCA is obligated to pay certain amounts to
its partners or their affiliates, as priority payments from its
management fee income for services provided. These amounts are paid as
TCA receives sufficient management fees to meet the priority
distributions.
In February 1998, the Mohegan Tribe of Indians of Connecticut (the
"Tribe") announced that it had appointed TCA to develop its proposed
approximate $750 million expansion of the Mohegan Sun Casino. In
addition, TCA and the Tribe agreed that effective January 1, 2000, TCA
will turn over management of the Mohegan Sun Resort complex, (which
comprises the existing operations and the proposed expansion), to the
Tribe. In exchange for relinquishing its rights under its existing
agreements, beginning January 1, 2000, TCA will receive annual payments
of five percent of the gross revenues of the Mohegan Sun Resort complex
for a 15-year period. Until January 1, 2000, there will be no change in
TCA's existing agreements with the Tribe.
In early 1998, SINA opened a corporate marketing, retail and public
relations office in New York City.
As a result of these transactions, SINA is a holding company
through which SIHL owns and operates its properties and investments in
the United States and provides certain support services for SIHL.
(b) Financial Information about Industry Segments
Not applicable
(c) Narrative Description of Business
ATLANTIC CITY
Gaming Facilities
The Resorts Casino Hotel in Atlantic City, New Jersey, has a
68,000-square foot casino and a simulcast pari-mutuel betting facility
of approximately 8,000 square feet. At December 31, 1998, these gaming
areas contained approximately 76 table games that consisted of 42
blackjack tables, eight roulette tables, seven craps tables, and 19
other specialty games that included Caribbean Stud, Baccarat, Let It
Ride, Three-card Poker, Pai Gow Poker, Big Six, and Pai Gow. There were
also 2,190 slot machines and five betting windows and four
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customer-operated terminals for simulcast pari-mutuel betting.
Management of Resorts Casino Hotel continuously monitors the
configuration of the casino floor and the games it offers to patrons
with a view towards making changes and improvements. As new games have
been approved by the Casino Control Commission, management has
integrated such games into its casino operations to the extent it deems
appropriate.
Casino gaming in Atlantic City is highly competitive and is
strictly regulated under the New Jersey Casino Control Act and
regulations promulgated thereunder (the "Casino Control Act"), which
affect virtually all aspects of RIH's casino operations. See
"Competition" and "Regulation and Gaming Taxes and Fees" below.
Resort and Hotel Facilities
The Resorts Casino Hotel commenced operations in May 1978 and was
the first casino/hotel opened in Atlantic City. This was accomplished
by the conversion of the former Haddon Hall Hotel, a classic hotel
structure originally built in the early 1900's, into a casino/hotel. It
is situated on approximately seven acres of land with approximately 310
feet of Boardwalk frontage overlooking the Atlantic Ocean. The Resorts
Casino Hotel consists of two hotel towers, the 15-story East Tower and
the 9-story North Tower. In addition to the casino facilities described
above, the casino/hotel complex includes approximately 660 guest rooms
and suites, the 1,400-seat Superstar Theater, seven restaurants, a VIP
slot and table player lounge, an indoor swimming pool, a health club and
retail stores. The complex also has approximately 50,000 square feet of
convention facilities, including eight large meeting rooms and a 16,000
square foot ballroom.
RIH owns a garage that is connected to the Resorts Casino Hotel by
a covered walkway. This garage is used for patrons' self parking and
accommodates approximately 700 vehicles. In October 1996 and August
1997, RIH purchased additional adjacent properties consisting of
approximately 3.5 acres which were previously leased, and which provide
parking for approximately 350 cars. In June 1995, SINA acquired
approximately 4.4 acres adjoining the Resorts Casino Hotel which acreage
currently provides additional uncovered self-parking for approximately
130 cars and valet parking for approximately 415 cars. This acreage was
previously leased by RIH.
Consistent with industry practice, RIH reserves a portion of its
hotel rooms and suites as complimentary accommodations for high-level
casino wagerers. For 1998, 1997 and 1996 the average occupancy rates,
including complimentary rooms, which were primarily provided to casino
patrons, were 90%, 91% and 93%, respectively. The average occupancy
rate and weighted average daily room rate, excluding complimentary
rooms, were 36% and $71, respectively, for 1998. This compares with 41%
and $62, respectively, for 1997, and 50% and $54, respectively, for
1996.
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Entertainment
Resorts Casino Hotel offers headline entertainment as part of its
strategy to attract high-level and other patrons. Resorts Casino Hotel
has entered into exclusive contracts with entertainers to perform at
Resorts Casino Hotel including the following who are scheduled for 1999:
Tony Orlando, Debbie Reynolds, Neil Sedaka, Diahann Carroll, and Wayne
Newton. Resorts Casino Hotel currently offers headline entertainment on
a Wednesday-through-Monday schedule and has plans to continue this
schedule throughout 1999.
Player Development/Casino Hosts/Junkets
RIH employs junket representatives, player development
representatives, and Asian marketing representatives to promote Resorts
Casino Hotel to prospective gaming patrons. RIH currently employs junket
representatives in New Jersey, New York, Maryland, and other states
around the country. RIH also employs player development representatives
and Asian marketing representatives who work out of Resorts Casino
Hotel. Resorts Casino Hotel has casino hosts who assist patrons on the
casino floor, make room and dinner reservations and provide general
assistance. They also encourage Star Card membership (the player
identification card) sign-ups in order to increase Resorts Casino
Hotel's marketing base.
Promotional Activities
The Star Card constitutes a key element in Resorts Casino Hotel's
direct marketing program. Slot machine players are encouraged to
register for and utilize their personalized Star Card to earn various
complementaries based upon their level of play. The Star Card is
inserted during play into a card reader attached to the slot machine for
use in computerized rating systems. These computer systems record data
about the cardholder, including playing preferences, frequency and
denomination of play and the amount of gaming revenues produced.
Resorts Casino Hotel designs promotional offers, conveyed via
direct mail and telemarketing, to patrons expected to provide revenues
based upon their historical gaming patterns. Such information is
gathered on slot wagering by the Star Card and on table game wagering by
the casino hosts. Promotional activities include the mailing of
vouchers for complimentary slot play.
Resorts Casino Hotel conducts slot machine and table game
tournaments in which cash prizes are offered to a select group of
players invited to participate in the tournament based upon their
tendency to play. Such players tend to play at their own expense during
"off-hours" of the tournament. At times, tournament players are also
offered special dining and entertainment privileges that encourage them
to remain at Resorts Casino Hotel.
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Capital Improvements
In 1998, RIH's capital expenditures at Resorts Casino Hotel
included the acquisition of 137 slot machines and computer equipment.
An additional 191 slot machines were acquired through a capital lease.
During 1997, RIH enhanced the Resorts Casino Hotel through the
construction of additional parking and various improvements to the
public areas. Other capital expenditures in 1997 included the purchase
of 494 slot machines and computer equipment. In 1996, capital
expenditures included computer system upgrades, the purchase of 147 slot
machines (replacements for older models) and other capital maintenance
projects. RIH is in the process of a significant renovation to the
existing property, which is discussed below under "Expansion Plans."
Expansion Plans
Management is in the process of renovating the Resorts Casino
Hotel. The project includes plans to renovate the casino area, the
exterior of the building, and existing guestrooms; the development of
new restaurants and lounge areas; and the enhancement of public spaces.
The development is expected to cost approximately $50 million and be
completed by June 30, 1999, subject to regulatory and other approvals.
As of December 31, 1998, RIH had spent $13.1 million on the renovation.
New Convention Center and Casino/Hotel Expansions
In May 1997, the State of New Jersey opened a new convention
center. The new convention center has 500,000 square feet of continuous
exhibit space, and an additional 109,000 square feet of meeting rooms,
making it the largest center from Atlanta to Boston.
The convention center is part of a broader plan that includes
expansion of the Atlantic City International Airport, a new 500-room
convention hotel, which opened in November 1997, and the transformation
of the main entryway into Atlantic City into a new corridor. In 1997,
this new corridor, which links the new convention center and hotel with
the Boardwalk, was completed. In all, six blocks were transformed into
an expansive park with extensive landscaping, night-time lighting, and
a large fountain and pool with an 86-foot lighthouse. Officials have
commented upon the need for improved commercial air service into
Atlantic City as a factor in the success of the convention center. See
further discussion under "Transportation Facilities" below.
It is believed that additional hotel rooms are necessary to support
the convention center as well as to allow Atlantic City to become a
competitive destination resort. In November 1997, the new 500-room
convention hotel opened. To further spur construction of new hotel rooms
and renovation of substandard hotel rooms into deluxe accommodations, a
total of $175 million has been set aside by the Casino Reinvestment
Development Authority (the "CRDA"), a public authority, to aid in
financing such projects. To date, the CRDA has authorized financing in
the amount of $105 million which has resulted in the construction of
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approximately 2,680 new hotel rooms and has reserved funding in the
amount of $70 million to four casinos, including Resorts Casino Hotel,
for the construction up to 3,770 additional hotel rooms. RIH's share of
the funding reserved by the CRDA is $27.3 million to construct up to
1,500 rooms. Also, Mirage Resorts, Inc. ("Mirage"), a Las Vegas, Nevada
casino/hotel company, has been selected to be the developer of an
approximate 180-acre tract in the Marina area of Atlantic City (the "H-
Tract"). Mirage has announced plans to build a 2,000-room destination
resort. Mirage has also entered into an agreement with Boyd Gaming
Corp. to build a $750 million, 1,500-room casino/hotel to be called the
Borgata. Groundbreaking for the Borgata is expected in the fall of 1999
with an opening in 2002. Circus Circus Enterprises, Inc., an original
partner in the development of the H-Tract, has been dropped from the
project, leaving room for the possibility of another property to be
developed in the area. Also included in the development of the H-Tract
is the construction of a tunnel and connector road link between the
Atlantic City Expressway and the Marina area, for which infrastructure
improvements were considered requisite to the expansion plans announced
for the Marina area. The groundbreaking for the tunnel construction
occurred in November 1998 and is expected to be completed in 2001.
Mirage has indicated that its proposed resort will open shortly after
the roadway is complete. MGM Grand, Inc. has also announced plans for
the construction of a new casino/hotel in the South Inlet section of
Atlantic City, the size and scope of which has yet to be formally
announced.
Although these developments are viewed as positive and favorable to
the future prospects of the Atlantic City gaming industry, management of
RIH, at this point, can make no representations as to whether, to what
extent or to how these developments may affect RIH's operations.
Transportation Facilities
The lack of an adequate transportation infrastructure in the
Atlantic City area continues to negatively affect the industry's ability
to attract patrons from outside a core geographic area. In 1989, Amtrak
express rail service to Atlantic City commenced from Philadelphia, New
York, Washington and other major cities in the northeast. This service
was expected to improve access to Atlantic City and expand the
geographic size of the Atlantic City casino industry's marketing base.
However, Amtrak discontinued its express rail service to Atlantic City
in 1995.
Also, in 1989 the terminal at the Atlantic City International
Airport (located approximately 12 miles from Atlantic City) was expanded
to handle additional air carriers and large passenger jets. A further
expansion, which doubled the size of the terminal and added departure
gates, an improved baggage handling system and sheltered walkways
connecting the terminal and planes was completed in 1996. However,
scheduled service to that airport from major cities by national air
carriers remains extremely limited.
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Since the inception of gaming in Atlantic City there has been no
significant change in the industry's marketing base or in the principal
means of transportation to Atlantic City, which continues to be
automobile and bus. The resulting geographic limitations and traffic
congestion have restricted Atlantic City's growth as a major destination
resort.
RIH continues to utilize day-trip bus programs. A non-exclusive
easement enables the Resorts Casino Hotel to utilize a bus tunnel under
the adjacent Trump Taj Mahal Casino Resort (the "Taj Mahal"), which
connects Pennsylvania and Maryland Avenues, and a service road exit from
the bus tunnel. This reduces congestion around the Pennsylvania Avenue
bus entrance to the Resorts Casino Hotel. To accommodate its bus
patrons, Resorts Casino Hotel has a waiting facility which is located
indoors adjacent to the casino and offers various amenities.
In conjunction with a street beautification and housing project
that was given approval by the CRDA, that agency has engaged consultants
to explore the feasibility of the beautification and widening of North
Carolina Avenue which would allow for improved traffic flow in a more
appealing corridor from Absecon Boulevard (Route 30) to the main
entrance of Resorts Casino Hotel. Also, as noted in "New Convention
Center and Casino/Hotel Expansions" above, construction of a tunnel and
connector road link between the Atlantic City Expressway and the Marina
area began in November 1998.
Competition
Competition in the Atlantic City casino/hotel industry is intense.
Casino/hotels compete primarily on the basis of promotional allowances,
entertainment, advertising, services provided to patrons, caliber of
personnel, attractiveness of the hotel and casino areas and related
amenities and parking facilities. The Resorts Casino Hotel competes
directly with 11 casino/hotels in Atlantic City which, in the aggregate,
contain approximately 1,173,000 square feet of gaming area, including
simulcast betting and poker rooms, and 11,218 hotel rooms. Adding to the
competition for patrons, expansions at two competing Atlantic City
properties opened in mid-1996 which, combined, added approximately 1,100
hotel rooms and approximately 85,000 square feet of gaming space. In
July 1997, a competitor added approximately 75,000 square feet of casino
space which included approximately 1,766 slot machines and 58 table
games. Also, a competitor added a new hotel tower with 620 rooms and
opened additional casino space in 1998. Significant additional
expansion is expected in the near future due to the previously discussed
expansion projects to be financed by the CRDA, as well as the
construction of new casino/hotels announced for the Marina area and the
South Inlet section.
The Resorts Casino Hotel is located at the northern end of the
Boardwalk adjacent to the Taj Mahal, which is next to the Showboat
Casino Hotel (the "Showboat"). These three properties have a total of
approximately 2,700 hotel rooms and approximately 325,000 square feet of
gaming space in close proximity to each other. In 1998, the three
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casino/hotels combined generated approximately 28% of the gross gaming
revenue of Atlantic City. A 28-foot wide enclosed pedestrian bridge
between the Resorts Casino Hotel and the Taj Mahal allows patrons of
both hotels and guests for events being held at the Resorts Casino Hotel
and at the Taj Mahal to move between the facilities without exposure to
the weather. A similar enclosed pedestrian bridge connects the Showboat
to the Taj Mahal, allowing patrons to walk under cover among all three
casino/hotels. The remaining nine Atlantic City casino/hotels are
located approximately one-half mile to one and one-half miles to the
south on the Boardwalk or in the Marina area of Atlantic City.
In recent years, competition for the gaming patron outside of
Atlantic City has become extremely intense. In 1988, only Nevada and
New Jersey had legalized casino operations. Currently, almost every
state in the United States has some form of legalized gaming. Also, The
Bahamas and other destination resorts in the Caribbean and Canada have
increased the competition for gaming revenue. Directly competing with
Atlantic City for the day-trip patron are two gaming properties on
Indian reservations in Connecticut. One is Foxwoods Resort and Casino
("Foxwoods") operated by the Pequot Tribe. Foxwoods currently has more
than 5,600 slot machines, and for the year 1998 had slot revenue of
approximately $680 million, which is more than twice the slot revenue of
the largest casino/hotel in Atlantic City. The other, the Mohegan Sun
Casino, which opened in October 1996 and is managed by TCA, has more
than 3,000 slot machines and had slot revenue of approximately $435
million in 1998. In 1993, the Oneida Indians opened a casino near
Syracuse, New York. Other Indian tribes in the states of New York,
Rhode Island and Connecticut are seeking federal recognition in order to
establish gaming operations which would further increase the competition
for day-trip patrons. In addition, in late 1995 and during 1996, three
racetracks in the State of Delaware began operating slot machines. An
amendment to Delaware state law allows the three racetracks to expand to
2,000 slot machines each.
This rapid expansion of casino gaming, particularly that which has
been or may be introduced into jurisdictions in close proximity to
Atlantic City, adversely affects RIH's operations as well as the
Atlantic City gaming industry.
Gaming Credit Policy
Credit is extended to selected gaming customers primarily in order
to compete with other casino/hotels in Atlantic City which also extend
credit to customers. Credit play represented 17% of table game volume
at the Resorts Casino Hotel in 1998, 18% in 1997 and 19% in 1996. The
credit play percentage of table game volume for the Atlantic City
industry was 23% in 1998, 25% in 1997, and 24% in 1996. RIH's gaming
receivables, net of allowance for uncollectible amounts, were $3.3
million, $3.4 million and $3.8 million as of December 31, 1998, 1997 and
1996, respectively. The collectibility of gaming receivables has an
effect on results of operations, and management believes that overall
collections have been satisfactory. Atlantic City gaming debts are
enforceable under the laws of New Jersey and certain other states,
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although it is not clear whether other states will honor this policy or
enforce judgments rendered by the courts of New Jersey with respect to
such debts.
Security Controls
Gaming at the Resorts Casino Hotel is conducted by personnel
trained and supervised by RIH. Prior to employment, all casino
personnel must be licensed under the Casino Control Act. Security
checks are made to determine, among other matters, that job applicants
for key positions have had no criminal ties or associations. RIH
employs extensive security and internal controls at its casino. Security
in the Resorts Casino Hotel utilizes closed circuit video cameras to
monitor the casino floor and money counting areas. The count of moneys
from gaming is observed daily by government representatives.
Seasonal Factors
RIH's business activities are strongly affected by seasonal factors
that influence the New Jersey beach tourist trade. Higher revenues and
earnings are typically realized during the middle third of the year.
Employees
RIH had a maximum of approximately 3,400 employees during 1998, and
RIH believes that its employee relations are satisfactory. Approximately
1,430 of RIH's employees are represented by unions. Of these employees,
approximately 1,100 are represented by the Hotel Employees and
Restaurant Employees International Union Local 54, whose contract
expires in September 1999. There are several union contracts covering
other union employees.
All of RIH's casino employees and certain of its hotel employees
must be licensed under the Casino Control Act. Casino employees are
those employees whose work requires access to the casino, the casino
simulcasting facility or restricted casino areas. Casino and certain
hotel employees must meet applicable standards pertaining to such
matters as financial responsibility, good character, ability, casino
training and experience and New Jersey residency. Certain hotel
employees are no longer required to be registered with the Casino
Control Commission.
Regulation and Gaming Taxes and Fees
General
RIH's operations in Atlantic City are subject to regulation under
the Casino Control Act, which authorizes the establishment of casinos in
Atlantic City, provides for licensing, regulation and taxation of
casinos and created the Casino Control Commission and the Division of
Gaming Enforcement to administer the Casino Control Act. In general,
the provisions of the Casino Control Act concern: the ability, character
and financial stability and integrity of casino operators, their
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officers, directors and employees and others financially interested in
a casino; the nature and suitability of hotel and casino facilities,
operating methods and conditions; and financial and accounting
practices. Gaming operations are subject to a number of restrictions
relating to the rules of games, type of games, credit play, size of
hotel and casino operations, hours of operation, persons who may be
employed, companies which may do business with casinos, the maintenance
of accounting and cash control procedures, security and other aspects of
the business.
There were significant regulatory changes in recent years. In
addition to the approval of new games, the Casino Control Act was
amended to allow casinos to expand their casino floors before building
the requisite number of hotel rooms, subject to approval of the Casino
Control Commission. This amendment was designed to encourage hotel room
construction by giving casino licensees an incentive and an added
ability to generate cash flow to finance hotel construction. Previous
law only allowed for casino expansion if a casino built new hotel rooms
first. In addition, the minimum casino square footage has been
increased from 50,000 square feet to 60,000 square feet for the first
500 qualifying rooms and allows for an additional 10,000 square feet for
each additional 100 qualifying rooms over 500, up to a maximum of
200,000 square feet. Future costs of regulation have been reduced as
new legislation (i) no longer requires hotel employees to be registered,
(ii) extends the term for casino and casino key employee license
renewals from two years to four years and (iii) allows greater
efficiency by either reducing or eliminating the time permitted the
Casino Control Commission to approve internal controls, patron
complimentary programs and the movement of gaming equipment.
Casino License
A casino license is initially issued for a term of one year and
must be renewed annually by action of the Casino Control Commission for
the first two renewal periods succeeding the initial issuance of a
casino license. The Casino Control Commission may renew a casino
license for a period of four years, although the Casino Control
Commission may reopen licensing hearings at any time. A license is not
transferable and may be conditioned, revoked or suspended at any time
upon proper action by the Casino Control Commission. The Casino Control
Act also requires an operations certificate which, in effect, has a term
coextensive with that of a casino license.
On February 26, 1979, the Casino Control Commission granted a
casino license to RIH for the operation of Resorts Casino Hotel. In
January 1996, RIH's license was renewed until January 31, 2000.
Restrictions on Ownership of Equity and Debt Securities
The Casino Control Act imposes certain restrictions upon the
ownership of securities issued by a corporation which holds a casino
license or is a holding, intermediary or subsidiary company of a
corporate licensee (collectively, "holding company"). Among other
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restrictions, the sale, assignment, transfer, pledge or other
disposition of any security issued by a corporation which holds a casino
license is conditional and shall be ineffective if disapproved by the
Casino Control Commission. If the Casino Control Commission finds that
an individual owner or holder of any securities of a corporate licensee
or its holding company must be qualified and is not qualified under the
Casino Control Act, the Casino Control Commission has the right to
propose any necessary remedial action. In the case of corporate holding
companies and affiliates whose securities are publicly traded, the
Casino Control Commission may require divestiture of the security held
by any disqualified holder who is required to be qualified under the
Casino Control Act.
In the event that entities or persons required to be qualified
refuse or fail to qualify and fail to divest themselves of such security
interest, the Casino Control Commission has the right to take any
necessary action, including the revocation or suspension of the casino
license. If any security holder of the licensee or its holding company
or affiliate who is required to be qualified is found disqualified, it
will be unlawful for the security holder to (i) receive any dividends or
interest upon any such securities, (ii) exercise, directly or through
any trustee or nominee, any right conferred by such securities or (iii)
receive any remuneration in any form from the corporate licensee for
services rendered or otherwise. The Amended and Restated Certificate of
Incorporation of SINA provides that all securities of SINA are held
subject to the condition that if the holder thereof is found to be
disqualified by the Casino Control Commission pursuant to provisions of
the Casino Control Act, then that holder must dispose of his or her
interest in the securities. The 11% Mortgage Notes due 2003, 11.375%
Junior Mortgage Notes due 2004 and 9% Senior Subordinated Notes due 2007
are all subject to the qualification, divestiture and redemption
provisions under the Casino Control Act described herein.
Remedies
In the event that it is determined that a licensee has violated the
Casino Control Act, or if a security holder of the licensee required to
be qualified is found disqualified but does not dispose of his
securities in the licensee or holding company, under certain
circumstances the licensee could be subject to fines or have its license
suspended or revoked.
The Casino Control Act provides for the mandatory appointment of a
conservator to operate the casino and hotel facility if a license is
revoked or not renewed and permits the appointment of a conservator if
a license is suspended for a period in excess of 120 days. If a
conservator is appointed, the suspended or former licensee is entitled
to a "fair rate of return out of net earnings, if any, during the period
of the conservatorship, taking into consideration that which amounts to
a fair rate of return in the casino or hotel industry."
Under certain circumstances, upon the revocation of a license or
failure to renew, the conservator, after approval by the Casino Control
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Commission and consultation with the former licensee, may sell, assign,
convey or otherwise dispose of all of the property of the casino/hotel.
In such cases, the former licensee is entitled to a summary review of
such proposed sale by the Casino Control Commission and creditors of the
former licensee and other parties in interest are entitled to prior
written notice of sale.
License Fees, Taxes and Investment Obligations
The Casino Control Act provides for casino license renewal fees,
other fees based upon the cost of maintaining control and regulatory
activities and various license fees for the various classes of
employees. In addition, a casino licensee is subject annually to a tax
of 8% of "gross revenue" (defined under the Casino Control Act as casino
win, less provision for uncollectible accounts up to 4% of casino win)
and license fees of $500 on each slot machine. Also, the Casino Control
Act has been amended to create an Atlantic City fund (the "AC Fund") for
economic development projects other than the construction and renovation
of casino/hotels. Beginning in fiscal year 1995/1996 and for the
following three fiscal years, if the amount of money expended by the
Casino Control Commission and the Division of Gaming Enforcement is less
than $57.3 million, the prior year's budget for these agencies, the
amount of the difference is to be contributed to the AC Fund.
Thereafter, beginning with fiscal year 1999/2000 and for the following
three fiscal years, an amount equal to the average paid into the AC Fund
for the previous four fiscal years shall be contributed to the AC Fund.
Each licensee's share of the amount to be contributed to the AC Fund is
based upon its percentage of the total industry gross revenue for the
relevant fiscal year. After eight years, the casino licensee's
requirement to contribute to this fund ceases.
The following table summarizes, for the periods shown, the fees,
taxes and contributions assessed upon RIH by the Casino Control
Commission.
<TABLE><CAPTION> For the Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Gaming tax $18,785,000 $19,581,000 $20,661,000
License, investigation,
inspection and other fees 3,733,000 3,453,000 3,672,000
Contribution to AC Fund 496,000 392,000 570,000
$23,014,000 $23,426,000 $24,903,000
</TABLE>
The Casino Control Act, as originally adopted, required a licensee
to make investments equal to 2% of the licensee's gross revenue (the
"investment obligation") for each calendar year, commencing in 1979, in
which such gross revenue exceeded its "cumulative investments" (as
defined in the Casino Control Act). A licensee had five years from the
end of each calendar year to satisfy this investment obligation or
become liable for an "alternative tax" in the same amount. In 1984 the
New Jersey legislature amended the Casino Control Act so that these
provisions now apply only to investment obligations for the years 1979
through 1983.
<PAGE>
Effective for 1984 and subsequent years, the amended Casino Control
Act requires a licensee to satisfy its investment obligation by
purchasing bonds to be issued by the CRDA or by making other investments
authorized by the CRDA, in an amount equal to 1.25% of a licensee's
gross revenue. If the investment obligation is not satisfied, then the
licensee will be subject to an investment alternative tax of 2.5% of
gross revenue. Licensees are required to make quarterly deposits with
the CRDA against their current year investment obligations. RIH's
investment obligations for the years 1998, 1997, and 1996 amounted to
$2.9 million, $3.1 million, and $3.2 million, respectively, and, with
the exception of minor credits received in 1996 for making donations,
have been satisfied by deposits made with the CRDA. At December 31,
1998, RIH held $10.9 million face amount of bonds issued by the CRDA and
had $16.0 million on deposit with the CRDA. The CRDA bonds issued
through 1998 have interest rates ranging from 3.6% to 7.0% and have
repayment terms of between 20 and 50 years.
Showboat Lease
The Showboat is situated on approximately 10 acres of land which,
prior to January 1998, were owned by the Company and leased to ACS
pursuant to the Showboat Lease.
Prior to January 1998, the Showboat Notes were secured and serviced
by the Showboat Lease, and all lease payments were made to the indenture
trustee for the Showboat Notes to meet the Company's interest
obligations under those notes. See Note 6 of Notes to Consolidated
Financial Statements.
In January 1998, the Company sold the land under the Showboat to
ACS. The proceeds from that sale were used to repay the Showboat Notes
with the remaining funds used for general corporate purposes.
Other Properties
The Company owns approximately 15 acres of land adjacent to the
Resorts Casino Hotel and an additional nine acres at various sites in
Atlantic City that the Company intends to develop or are available for
sale. See "ITEM 2. PROPERTIES."
CONNECTICUT
Sun Cove has a 50% interest in, and is a managing partner of, TCA,
a Connecticut general partnership, that developed and manages the
Mohegan Sun Casino, a casino and entertainment complex in Uncasville,
Connecticut. TCA manages the Mohegan Sun Casino pursuant to the
Management Agreement. The Management Agreement provides that TCA is
entitled to receive between 30% and 40% of the net profits, as defined,
of the Mohegan Sun Casino. TCA is obligated to pay certain amounts to
its partners, and certain of their affiliates, as priority payments from
its management fee income for services provided by those entities.
These amounts are paid as TCA receives sufficient management fees to
<PAGE>
meet the priority distributions.
In February 1998, the Tribe announced that it had appointed TCA to
develop its proposed $750 million expansion of the Mohegan Sun Casino.
In addition, TCA and the Tribe agreed that effective January 1, 2000,
TCA will turn over management of the Mohegan Sun Resort complex, (which
comprises the existing operations and the proposed expansion), to the
Tribe. In exchange for relinquishing its rights under its existing
agreements, beginning January 1, 2000, TCA will receive annual payments
of five percent of the gross revenues of the Mohegan Sun Resort complex
for a 15-year period. Until January 1, 2000, there will be no change in
TCA's existing agreements with the Tribe.
The Mohegan Sun Casino has a Native American theme that is conveyed
through architectural features and the use of natural design elements
such as timber, stone and water. Guests enter the Mohegan Sun Casino
through one of four major entrances, each of which is distinguished by
a separate seasonal theme; winter, spring, summer and fall, emphasizing
the importance of the seasonal changes to tribal life. The Mohegan Sun
Casino includes approximately 150,000 square feet of gaming space and
features approximately 3,000 slot machines, 152 table games, 42 poker
tables and parking for 7,200 cars. The site for the Mohegan Sun Casino
is located approximately one mile from the interchange of Interstate 395
and Connecticut Route 2A, which is a four-lane expressway. A four-lane
access road from Route 2A (with its own exit) gives patrons of the
Mohegan Sun Casino direct access to Interstate 395, which is connected
to Interstate 95, the main highway linking Boston, Providence and New
York. This road system allows customers to drive directly into the
property from the interstate highway system without encountering any
traffic light.
Sun Cove is one of two managing partners of TCA. All decisions of
the managing partners require the concurrence of Sun Cove and the other
managing partner, Waterford Gaming, L.L.C. In the event of deadlock
there are mutual buy-out provisions.
FLORIDA
Sun Resorts, together with its subsidiaries based in Florida,
provides general and administrative support services, marketing
services, travel reservations and wholesale tour services for SIHL's
properties in The Bahamas.
NEW YORK
In early 1998, SINA leased office space in New York City and opened
a corporate retail, marketing and public relations office which provides
services to SINA and its affiliated companies.
(d) Financial Information about Foreign and Domestic Operations
and Export Sales
Not applicable
<PAGE>
ITEM 2. PROPERTIES
Casino, Hotel and Related Properties
The Company's core real estate assets consist of approximately 26
acres of developed land and land available for development in Atlantic
City.
Land used in the operation of the casino/hotel consists of
approximately 12 acres and is owned in fee simple, except for
approximately 1.2 acres of the Resorts Casino Hotel site which are
leased pursuant to ground leases expiring from 2056 through 2067. The
12 acres includes approximately seven acres under the Resorts Casino
Hotel building complex, approximately 3.5 acres of parking lots
available for future expansion and the approximate one acre in front of
the casino/hotel which is utilized for patron valet and related
services.
The Company also owns in fee simple approximately 15 acres of real
property immediately adjacent to its existing casino hotel in Atlantic
City. These properties are zoned for casino hotel use and available for
future expansion. Some of the properties are currently utilized as
surface parking lots and others are vacant lots. Among these properties
is an approximate 5.5 acre Atlantic Ocean pier site, two acres of which
contained the former Steeplechase Pier. The pier has been removed and
the Company has current Federal and State permits to construct a new
pier on two acres of the 5.5-acre site, although no decision has been
made at this time to develop this location. Atlantic City has recently
amended its zoning ordinances to permit casinos, hotel rooms and
ancillary amusements on five of the City's pier sites, including the
Steeplechase Pier site. State environmental regulations are currently
under review as a result of the City's recent zoning changes.
Other Properties
The Company also owns in fee simple real estate at several
different locations in Atlantic City consisting of approximately 11
acres. Among these are an approximate six acres of land adjacent to
Delaware Avenue in Atlantic City, a portion of which is utilized by the
Company for a warehouse operation servicing Resorts Casino Hotel, and an
approximate four acres of real estate in the Southeast Inlet section of
Atlantic City.
The Company also owns in fee simple an approximate 552 acre parcel
located in Atlantic City on Blackhorse Pike, of which approximately 545
acres are considered to be woodlands and wetland.
ITEM 3. LEGAL PROCEEDINGS
U.S. Bankruptcy Court Action - Nathan Rogers v. Merv Griffin, et al.
On September 25, 1995, Nathan Rogers, then a shareholder of SINA,
filed a Complaint in Adversary Proceeding in the Bankruptcy Court for
<PAGE>
the District of New Jersey (the "NJ Bankruptcy Court"), which Court
approved the Company's 1990 plan of reorganization. The complaint
alleges that the Company did not comply with its 1990 plan of
reorganization in relation to the repayment by Merv Griffin of his $11
million promissory note. The complaint further alleges that the Company
violated the court order approving the 1990 plan of reorganization by
filing a pre-packaged plan of reorganization in another district. The
complaint seeks to have a trustee appointed for the Company and to have
the issuance of SINA common stock to Merv Griffin pursuant to the 1990
plan of reorganization voided. The Company's Motion For Summary
Judgment dismissing the complaint in its entirety was granted by the NJ
Bankruptcy Court on September 16, 1997. Rogers subsequently appealed
the NJ Bankruptcy Court decision to the US District Court of New Jersey.
In September, 1998, the US District Court entered an order upholding the
NJ Bankruptcy Court's decision dismissing Rogers' claim.
US District Court Action - SINA v. Lowenschuss
As previously reported, in September 1989 SINA filed an action in
the US District Court for the Eastern District of Pennsylvania to
recover certain sums paid to the defendant, as trustee for two
Individual Retirement Accounts and the Fred Lowenschuss Associates
Pension Plan (the "Pension Plan"), for SINA stock in a 1988 merger, in
which SINA was acquired by Merv Griffin. This action was transferred to
the NJ Bankruptcy Court in connection with the Company's former
bankruptcy case commenced there in 1989.
In February 1992, the NJ Bankruptcy Court issued an opinion
granting partial summary judgment in favor of SINA on one of its six
causes of action. The NJ Bankruptcy Court reserved the issue of
remedies for trial.
In August 1992, Fred Lowenschuss filed for chapter 11
reorganization in the US Bankruptcy Court for the District of Nevada
(the "Nevada Bankruptcy Court"). As a result, the NJ Bankruptcy Court
stayed SINA's action against Lowenschuss.
The Nevada Bankruptcy Court confirmed Fred Lowenschuss' plan of
reorganization in October 1993. SINA appealed certain portions of the
confirmation order and other orders of the Nevada Bankruptcy Court. In
June 1994, the US District Court for the District of Nevada (the "Nevada
District Court") granted SINA's appeal in all respects. In October
1995, the US Court of Appeals for the Ninth Circuit affirmed the Nevada
District Court's ruling in all respects, and in November 1995, the Court
of Appeals denied Fred Lowenschuss' petition for rehearing. On June 10,
1996, the United States Supreme Court denied Fred Lowenschuss' petition
for a writ of certiorari.
All interested parties, including SINA, have filed motions with the
Nevada Bankruptcy Court regarding their respective claims and priority
rights under the US Bankruptcy Code. The motions were orally argued on
March 16, 1998 and the parties are awaiting the Nevada Bankruptcy Courts
decision.
<PAGE>
On November 2 and 3, 1995, the NJ Bankruptcy Court held a trial on
the merits of SINA's claims against the trustee of the Pension Plan. On
April 22, 1997, the NJ Bankruptcy Court issued a final opinion in SINA's
favor, and on May 20, 1997 entered a judgment in SINA's favor finding
that the trustee for the two Individual Retirement Accounts and the
Pension Plan committed fraud against SINA and that SINA was entitled to
restitution. The NJ Bankruptcy Court awarded SINA $3.8 million plus
prejudgment interest and $250,000 punitive damages, for a total award of
approximately $5.7 million. On July 7, 1997 the NJ Bankruptcy Court
amended the judgment to apportion the damages between the Pension Plan
and the Individual Retirement Accounts. The NJ Bankruptcy Court also
denied Defendant's request for a stay of enforcement of the judgment.
Subsequently, the Defendants have filed an appeal of the NJ Bankruptcy
Court's decision in the US District Court for the District of New Jersey
(the "New Jersey District Court"). On March 26, 1998, The New Jersey
District Court reversed the judgment of the NJ Bankruptcy Court. SINA
has filed an appeal of the New Jersey District Court's decision with the
US Court of Appeals for the Third Circuit, which appeal has been fully
briefed and argued and is pending a court ruling.
On March 8, 1996, Fred Lowenschuss, as trustee of various
Lowenschuss children's trusts (the "Trusts"), and Laurance Lowenschuss,
as trustee for the Pension Plan, filed a counterclaim and a third party
claim against SINA and First Interstate Trust Company, in the NJ
Bankruptcy Court alleging that the Pension Plan and the Trusts timely
surrendered certain securities for exchange under the Company's 1990
plan of reorganization and that those securities were wrongfully
dishonored and returned. The Company replied to the counterclaims in
April 1996 and denied the allegations.
In connection with that litigation, Laurance Lowenschuss, as
trustee for the Pension Plan, and Fred Lowenschuss, as trustee of the
Trusts and as custodian, filed an action in May 1996 against SINA for
preliminary and permanent injunctive relief. The Lowenschusses sought
an order from the US Bankruptcy Court for the District of Delaware (the
"Delaware Bankruptcy Court") to extend the post-confirmation bar date of
the Plan and to secure the return of certain escrowed distributions to
holders of Old Series Notes (as defined in the Plan).
On May 9, 1996, the Delaware Bankruptcy Court entered an order, to
which the parties had stipulated, extending the Lowenschuss' date of
surrender for Old Series Notes through November 10, 1996. By further
stipulations, the date of surrender has been further extended through
May 12, 1998 during which time any funds held in escrow under the Plan
will not be distributed.
The foregoing litigation and bankruptcy proceedings have spawned
additional and related litigation, including the following: (a) an
injunction action brought by Fred Lowenschuss, wherein the Nevada
Bankruptcy Court enjoined SINA from proceeding against Fred Lowenschuss
individually; the Nevada District Court dismissed appeals by both SINA
and Fred Lowenschuss, and the Ninth Circuit, on March 6, 1997, affirmed
the District Court's dismissal of Fred Lowenschuss' appeal; (b) a
<PAGE>
malicious prosecution action brought by Fred Lowenschuss against SINA
and its counsel that was dismissed by the Nevada Bankruptcy Court and
the Nevada District Court; on March 6, 1997, the Ninth Circuit affirmed
the District Court's dismissal of Lowenschuss' appeal and awarded SINA
monetary sanctions, finding that the Lowenschuss' appeal was frivolous;
and (c) an action filed by Laurance Lowenschuss, as trustee of the
Pension Plan, in the Nevada District Court against SINA, which was
transferred to the NJ District Court; in January, 1996, the NJ District
Court referred the matter to the NJ Bankruptcy Court which has stayed
the action pending that Court's issuance of its decision on the merits
of the November 2 and 3, 1995 trial.
David Goldkrantz vs. Merv Griffin, Sun International Hotels Limited,
et.al;
A complaint was filed in December 1997, on behalf of David
Goldkrantz and a purported class of Company shareholders against SIHL,
the Company and various affiliates, certain directors and officers of
SIHL and the Company. The complaint alleges that the Proxy Statement
and Prospectus issued by SIHL and the Company in November 1996, in
connection with their merger, was false and misleading with regard to
statements made about a license and service agreement entered into
between GGE and The Griffin Group. The Company believes that the case
is without merit and intends to vigorously defend its actions. In
September 1998, the Company filed a Motion for Summary Judgment to
dispose of the claim, which motion has been fully briefed and is pending
a court decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The disclosure required by Item 4 has been omitted pursuant to
General Instruction I of Form 10-K.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
There is no trading market for SINA common stock, all of which is
owned by SIHL.
No dividends were paid on SINA common stock during the last two
fiscal years. The indentures for certain of SINA's indebtedness contain
certain restrictions as to the payment of dividends by SINA.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
The information presented below should be read in conjunction with the
consolidated financial statements,
including notes thereto, presented under "ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA."
(In Thousands of Dollars)
<CAPTION>
For the Year Ended December 31,
Operating Information (Note A) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
(Successor) (Predecessor)
Operating revenues (Note B) $280,008 $297,633 $295,940 $304,047 $ 353,016
Earnings (loss) from operations (Note B) $ 15,503 $ 29,149 $ 25,903 $ 41,678 $ (48,570)
Recapitalization costs (Note C) - - - - (5,232)
Proceeds from litigation trust (Note D) - - - - 2,542
Other deductions, net (Note E) (17,375) (23,873) (25,640) (25,779) (47,631)
Earnings (loss) before benefit (provision)
for income taxes and extraordinary items (1,872) 5,276 263 15,899 (98,891)
Benefit (provision) for income taxes (Note F) 38 (4,340) - - -
Earnings (loss) before extraordinary items (1,834) 936 263 15,899 (98,891)
Extraordinary items (Note G) - (2,957) - - 190,008
Net earnings (loss) $ (1,834) $ (2,021) $ 263 $ 15,899 $ 91,117
At December 31,
Balance Sheet Information (Note A) 1998 1997 1996 1995 1994
Total assets $485,966 $595,204 $552,848 $338,451 $317,248
Current maturities of long-term debt
(Note H) $ 2,235 $ 282 $ 636 $ 589 $ 5
Long-term debt, excluding current
maturities (Note H) $205,940 $311,258 $261,543 $217,356 $212,466
Shareholder's equity $189,153 $190,987 $193,000 $ 25,947 $ 10,031
</TABLE>
<PAGE>
Notes to Selected Financial Data
Note A: In 1998, the Company sold a 10 acre parcel of land under the
Showboat in Atlantic City for net proceeds of $110.0 million, its net
book value. The majority of the proceeds were used to redeem the
Showboat Notes.
See Note 1 of Notes to Consolidated Financial Statements for
discussion of SIHL's contribution of the stock of Sun Resorts and Sun
Cove to SINA in 1997 and for a discussion of the Merger in 1996 and the
related change in basis of accounting.
On May 3, 1994, the Company's bankruptcy plan of reorganization
(the "Restructuring") became effective. The Restructuring included,
among other things, (a) the sale of the Company's operations on Paradise
Island to SIHL, which was an unaffiliated company prior to the sale,
(the "SIHL Sale") and (b) the exchange of $481.9 million principal
amount of Senior Secured Redeemable Notes (the "Series Notes")for $160.0
million principal amount of new debt, 40% of SINA common stock, the
proceeds from the SIHL Sale and approximately $36.7 million cash.
Note B: In 1996, operating revenues included net proceeds of $1.3
million from the sale of approximately two acres of undeveloped property
in Atlantic City and $65,000 of additional proceeds from a prior year's
sale of various parcels in Atlantic City. Earnings from operations for
1996 included a net gain of $935,000 on these transactions.
The loss from operations in 1994 included a $72.5 million loss
on the SIHL Sale and a charge of $20.5 million for the write-down of
certain non-operating properties to net realizable value. Operating
revenues for 1994 included the sales of various parcels of land in
Atlantic City for net proceeds of $534,000. Earnings from operations
included a net loss of $99,000 on those sales.
Note C: Recapitalization costs incurred in 1994 relate to the
Restructuring described above. Also, recapitalization costs in 1994
included credits of $3.3 million that resulted from the reversal of
reserves provided in connection with a previous plan of reorganization.
Note D: Proceeds from litigation trust represent cash distributed to
the Company from a litigation trust established under a previous plan of
reorganization to pursue certain claims against a former affiliate.
Note E: This item includes interest income, interest expense and
amortization of debt discounts, premiums and issuance costs.
Note F: See Note 13 of Notes to Consolidated Financial Statements for
further discussion of income taxes for 1998, 1997, and 1996. In 1995,
taxable income from operations resulted in the Company paying federal
alternative minimum taxes of $350,000 which were offset by a deferred
tax benefit. In 1994, taxable income was largely generated by the SIHL
Sale.
<PAGE>
Note G: In 1997, SINA retired certain of its debt which resulted in an
extraordinary loss of $5.0 million which was partially offset by the
related income tax benefit of $2.0 million.
In 1994, as part of the Restructuring, the Company exchanged
the Series Notes for certain consideration. 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 $186 million which is
reported as an extraordinary item.
In November 1994, RIH purchased $12.9 million principal amount
of Junior Mortgage Notes and 12,899 shares of Class B stock of SINA, at
a price of $6.7 million. The resulting after tax gain of $4.0 million
was recorded as an extraordinary item.
Note H: These items are presented net of unamortized premiums and
discounts.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Liquidity
At December 31, 1998 the Company's current liabilities exceeded its
current assets by $1.7 million. At December 31, 1998, unrestricted cash
and cash equivalents were $25.1 million. A portion of the unrestricted
cash and equivalents is required for day-to-day operations of the
Resorts Casino Hotel, including approximately $10 million 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.
At December 31, 1998, the Company had advanced $10.1 million to
affiliated companies. Such amounts are payable on demand by the
Company.
In January 1998, the Company sold the land under the Showboat in
Atlantic City for proceeds of $110.0 million. The majority of the
proceeds were used to redeem the $105.3 million Showboat Notes,
effective February 28, 1998.
Capital Expenditures and Resources
During 1998, 1997 and 1996 operations were a significant source of
funds to the Company.
Expenditures for improvements at Resorts Casino Hotel during 1996
totaled $8.3 million. These included computer system upgrades, the
purchase of 147 slot machines (replacements for older models), carpeting
<PAGE>
and other maintenance projects. In 1997, the Company began enhancing the
Resorts Casino Hotel through the construction of additional parking and
various improvements to the public areas at a cost of $3.3 million.
Other capital expenditures included $4.2 million for the purchase of 494
slot machines and computer equipment. In addition, approximately $21
million was expended for the purchase of land in Atlantic City, and the
Company sold certain parcels of land in Atlantic City for proceeds of
$7.4 million.
In 1998, the Company invested $32.5 million in capital
expenditures, which included $11.7 million for the renovation of the
Resorts Casino Hotel in Atlantic City described below and $11.7 million
for land in Atlantic City. Other capital expenditures included the
purchase of 137 slot machines and computer equipment in Atlantic City
as well as costs incurred in establishing a corporate marketing, retail
and public relations office in New York City.
In Atlantic City, the Company has begun a renovation of the Resorts
Casino Hotel which will include the renovation of public spaces as well
as the existing guestrooms. It is anticipated that the renovation will
cost approximately $50.0 million. Management expects the renovation to
be complete by early July 1999. As of December 31, 1998 the Company had
spent $13.1 million on the renovation.
Management believes that available cash on hand at December 31,
1998, combined with funds generated from operations and, if required,
funds available under an existing revolving credit facility of an
affiliated company will be sufficient to finance its planned operating
and development activities for at least the next twelve months.
RESULTS OF OPERATIONS
Comparison of Years Ended December 31, 1998 and 1997
Resorts Casino Hotel
Gaming revenues were $234.7 million for the year ended December 31,
1998, a decrease of $9.5 million or 3.9% from gaming revenues of $244.2
million for the comparable period in 1997. This decrease in gaming
revenues consisted of a reduction in table games revenues partially
offset by an increase in slot revenues.
Slot revenues were $170.4 million for the year ended December 31,
1998, an increase of $400,000 or 0.2% from $170.0 million for the
comparable period in 1997. The increase is directly due to a shift in
marketing strategy to focus on $0.25 denomination slot play and was
supported by new slot product. Management is continuing the process of
upgrading its slot product and in 1998 finalized agreements to include
new high-tech slot products as part of the slot mix that could be
replaced at no cost with new product if customer demand should change at
any time.
<PAGE>
Table games revenues were $62.1 million for the year ended December
31, 1998, a decrease of $6.9 million or 10.0% from $69.0 million for the
comparable period in 1997. This decrease was due to a combination of a
reduction in table games drop (the dollar amount of chips purchased) of
$43.0 million or 9.4% to $415.6 million for the year ended December 31,
1998 from $458.6 million for the comparable period in 1997, and a
reduction in hold percentage (ratio of casino win to total amount of
chips purchased) of 0.1 percentage points to 14.9% for the year ended
December 31, 1998 from 15.0% for the comparable period in 1997. The
decrease in table games drop is directly associated with a 0.4% decrease
in table games drop for the Atlantic City market and a decrease in
market gaming capacity associated with management's decision to
eliminate table game market segments that did not provide incremental
profit.
Simulcast revenues were $2.1 million for the year ended December
31, 1998, a decrease of $400,000 or 16.0% of $2.5 million for the
comparable period in 1997.
Poker and Keno revenues were $134,000 for the year ended December
31, 1998, down from $2.7 million for the comparable period in 1997. In
March 1998, management elected to eliminate both poker and keno as a
result of less than desired operating results.
Other non-gaming resort revenues were $54.3 million for the year
ended December 31, 1998, a decrease of $600,000 or 1.1 % from other non-
gaming resort revenues of $54.9 million for the comparable period of
1997. Other non-gaming resort revenues include revenues from rooms,
food and beverage, and miscellaneous items. The decrease is primarily
attributable to a $400,000 or 1.5% decrease in food and beverage
revenues to $26.7 million for the year ended December 31, 1998 from
$27.1 million for the comparable period in 1997. The decrease is
primarily due to a $577,000 decrease in complimentary items given to
casino patrons compared to the year 1997.
Gaming costs and expenses were $147.1 million for the year ended
December 31, 1998, a decrease of $7.5 million or 4.9% from expenses of
$154.6 million for the comparable period in 1997. This represents costs
and expenses associated with table games, slot operations, gaming taxes
and fees, and promotional items and services provided to patrons. The
decrease is primarily due to management's continuing implementation of
various cost containment efforts and the discontinuance of marketing
efforts toward certain unprofitable table game market segments.
Selling, General and Administrative
Selling, general and administrative costs were $38.7 million for
the year ended December 31, 1998, an increase of $5.4 million or 16.2%
from expenses of $33.3 million for the comparable period in 1997. In
1998, the Company opened a corporate marketing, retail and public
relations office in New York City. The total cost to operate this
office in 1998 was $4.4 million.
<PAGE>
Tour Operations
These revenues and expenses in 1998 are from operations of Sun
Resorts and its subsidiaries, which entities were contributed to SINA by
SIHL effective January 1, 1997. Sun Resorts, through a subsidiary, is
a tour operator and wholesaler of tour packages and provides
reservations services, primarily to SIHL's properties in The Bahamas.
See Note 1 of Notes to Consolidated Financial Statements.
Real Estate Related
Real estate related revenues in 1998 and 1997 represent rent from
ACS pursuant to the Showboat Lease. Such rent receipts were restricted
for the payment of interest on the Showboat Notes. See Note 6 of Notes
to Consolidated Financial Statements.
Management Fees and Other
In 1998, these revenues consisted of $3.8 million for management
services provided to certain unconsolidated affiliated companies and
$1.0 million in priority payments from TCA related to the Mohegan Sun
Casino.
In 1997, these revenues were priority payments from TCA to repay
certain previous capital contributions.
Other Income (Deductions)
Interest expense decreased in 1998 as compared to the prior year
due to the redemption of the Showboat Notes in February 1998.
Income Taxes
See Note 13 of Notes to Consolidated Financial Statements for a
discussion of the Company's income taxes for the years 1998 and 1997.
Comparison of Years Ended December 31, 1997 and 1996
Resorts Casino Hotel
Gaming revenues were $244.2 million for the year ended December 31,
1997, a decrease of $14.5 million or 5.6% from gaming revenues of $258.7
million for the comparable period in 1996. The decrease in gaming
revenues consisted of a reduction in both table games and slot revenues.
Slot revenues were $170.0 million for the year ended December 31,
1997, a decrease of $10.4 million or 5.8% from $180.4 million for the
comparable period in 1996. This decrease was due to a decrease in slot
handle (dollar amounts wagered) of $102.6 million or 5.0% to $1.9
billion for the year ended December 31, 1997. In September 1997
management completed an upgrade consisting of 35% of its $0.25
denomination slot product to include more popular machines.
<PAGE>
Table games revenues were $69.0 million for the year ended December
31, 1997, a decrease of $2.6 million or 3.6% from $71.6 million for the
comparable period in 1996. This decrease was due to a combination of a
reduction in table games drop of $12.3 million or 2.6% to $458.6 million
for the year ended December 31, 1997 from $470.9 million for the
comparable period in 1996, and a reduction in hold percentage of 0.2
percentage points to 15.0% for the year ended December 31, 1997 from
15.2% for the comparable period in 1996. Additionally, management
eliminated table game market segments that it determined had not
provided incremental profit.
Poker, Simulcast and Keno revenues were $5.2 million for the year
ended December 31, 1997, a decrease of $1.5 million or 23.9% from $6.7
million for the comparable period in 1996. Management significantly
reduced the hours of operations for these gaming activities because of
unfavorable returns, and in March 1998 elected to eliminate both Poker
and Keno as a result of less than desired operating results.
Other non-gaming resort revenues were $54.9 million for the year
ended December 31, 1997, an increase of $1.5 million or 2.8% from other
non-gaming resort revenues of $53.4 million for the comparable period of
1996. The increase is primarily attributable to management's decision
to introduce more entertainers on a more frequent basis while
eliminating its revue act, which contributed to a $1.7 million or 32.7%
increase in total entertainment head liner revenues to $6.9 million for
the year ended December 31, 1997 from $5.2 million for the comparable
period in 1996. This is partially offset by a $782,000 decrease in food
and beverage revenues due to a $0.54 or 4.5% decrease in the average
check from 1996.
Gaming costs and expenses were $154.6 million for the year ended
December 31, 1997, a decrease of $10.4 million or 6.3% from expenses of
$165.0 million for the comparable period in 1996. The decrease is
primarily due to management's implementation of various cost containment
efforts and the discontinuance of marketing efforts toward certain
unprofitable table game market segments.
Selling, general and administrative costs were $33.3 million for
the year ended December 31, 1997, a decrease of $3.9 million or 10.5%
from expenses of $37.2 million for the comparable period in 1996. The
decrease is primarily due to management's implementation of various
efficiency programs and the consolidation of its management
organizational structure.
Real Estate Related
Real estate related revenues in 1997 and 1996 largely represent
rent from ACS pursuant to the Showboat Lease. Real estate related
revenues for 1996 included $1.4 million from the sale of certain
properties in Atlantic City.
<PAGE>
Income Taxes
See Note 13 of Notes to Consolidated Financial Statements for a
discussion of the Company's income taxes for the years 1997 and 1996.
Other Matters
Year 2000 Compliance
The Company utilizes software and related technologies in parts of
its business that may be affected by the date change in the year 2000
("Y2K"). The Company is currently addressing the impact of Y2K on its
computer programs and third party suppliers. The Company has developed
a dedicated Year 2000 Program Office and has contracted with independent
consultants to coordinate the compliance efforts and ensure that the
project status is monitored and reported throughout the organization.
The Company primarily uses industry standard automated applications
in most of its locations. The majority of these applications are
believed to be Y2K compliant, but the Company is currently testing
compliance in coordination with the vendors.
The Company has finalized its assessment of systems and third party
suppliers. As information is received related to these areas, the
Company develops a strategy for repair or replacement of non-compliant
systems as well as testing and validation of such items. The
remediation phase is expected to be complete by the third quarter of
1999.
To date the Company estimates that it has spent approximately
$500,000 on Y2K efforts across all areas and expects to spend a total of
approximately $2.0 million when complete. The Company expects to fund
Y2K costs through operating cash flows. All system costs associated
with Y2K will be expensed as incurred.
The Company presently believes that upon remediation of its
business software applications, as well as other equipment, the Y2K
issue will not present a materially adverse risk to the Company's future
consolidated results of operations, liquidity and capital resources.
However, if such remediation is not completed in a timely manner or the
level of timely compliance by key suppliers or vendors is not
sufficient, the Y2K issue could have a material impact on the Company's
operations including, but not limited to the ability of major airlines
to service the Company's resort destination and the provision of
adequate utility services at the resort, resulting in loss of revenue,
increased operating costs, loss of customers or suppliers, or other
significant disruptions to the Company's business. The Company has
initiated contingency and business continuity plans which address these
issues as far as can be practical.
<PAGE>
Determining the Y2K readiness of third party products and business
dependencies (including suppliers) requires pursuit, collection and
appraisal of voluntary statements made or provided by those parties, if
available, together with independent factual research. Although the
Company has taken, and will continue to take, reasonable efforts to
gather information to determine and verify the readiness of such
products and business dependencies, there can be no assurance that
reliable information will be offered or otherwise available.
Accordingly, notwithstanding the foregoing efforts, there are no
assurances that the Company is correct in its determination or belief
that a business dependency is Y2K ready.
New Accounting Pronouncements
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1, "Accounting for the Cost
of Computer Software Developed or Obtained for Internal Use" ("SOP 98-
1"). SOP 98-1 requires computer software costs associated with internal
use software to be expensed as incurred until certain capitalization
criteria are met. The Company will adopt SOP 98-1 beginning January 1,
1999. Adoption of this statement will not have a material impact on the
Company's consolidated financial position or results of operations.
In the first quarter of 1999, the Company will be required to adopt
Statement of Position 98-5 which states that all start up costs will be
charged to expense as incurred. Adoption of this is not expected to
have a material impact on the consolidated financial statements.
Forward Looking Statements
The statements contained herein include forward looking statements
based on management's current expectations of SINA's future performance.
Predictions relating to future performance are inherently uncertain and
subject to a number of risks. Consequently, SINA's actual results could
differ materially from the expectations expressed in this report.
Factors that could cause SINA's actual results to differ materially from
the expected results include, among other things: the intensely
competitive nature of the casino gaming industry; increases in the
number of competitors in the market in which SINA operates; the
seasonality of the industry in which SINA operates; the susceptibility
of SINA's operating results to adverse weather conditions and natural
disasters; the risk that certain governmental approvals may not be
obtained and changes in governmental regulations governing SINA's
activities.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are presented on
the following pages:
Page
Financial Statements Reference
Reports of Independent Public Accountants 31
Consolidated Balance Sheets at December 31,
1998 and 1997 33
Consolidated Statements of Operations for the
years ended December 31, 1998, 1997 and 1996 35
Consolidated Statements of Changes in
Shareholder's Equity for the years ended
December 31, 1998, 1997 and 1996 36
Consolidated Statements of Cash Flows for the
years ended December 31, 1998, 1997 and 1996 37
Notes to Consolidated Financial Statements 39
Financial Statement Schedule:
Schedule II: Valuation and Qualifying
Accounts for the years
ended December 31, 1998,
1997 and 1996 54
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Sun International North America, Inc.:
We have audited the accompanying consolidated balance sheets of Sun
International North America, Inc. (a Delaware corporation) and
subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, changes in shareholder's equity
and cash flows for the years then ended. These financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Sun
International North America, Inc. and subsidiaries as of December 31,
1998 and 1997, and the results of their operations and their cash flows
for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in the
index to the financial statements is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements, and in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation
to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 29, 1999
<PAGE>
REPORT OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors and Shareholder
Sun International North America, Inc.
We have audited the accompanying consolidated statements of
operations, changes in shareholder's equity, and cash flows for the year
ended December 31, 1996 (pre-acquisition basis) of Sun International
North America, Inc. (formerly Griffin Gaming & Entertainment, Inc.). Sun
International North America, Inc. is a wholly owned subsidiary of Sun
International Hotels Limited. Our audit also included the information
for the year ended December 31, 1996, included in the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated results
of operations and cash flows for the year ended December 31, 1996 (pre-
acquisition basis) of Sun International North America, Inc. in
conformity with generally accepted accounting principles. Also, in our
opinion, the information for the year ended December 31, 1996, included
in the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
Ernst & Young LLP
Philadelphia, Pennsylvania
February 14, 1997
<PAGE>
<TABLE>
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
<CAPTION>
December 31,
Assets 1998 1997
<S> <C> <C>
Current assets:
Cash (including cash equivalents
of $12,212 and $32,508) $ 25,063 $ 46,912
Restricted cash equivalents 97 3,902
Receivables, net 8,088 8,691
Inventories 1,523 1,730
Prepaid expenses 2,091 1,961
Due from affiliates 10,096 4,528
Total current assets 46,958 67,724
Land held for investment,
development or resale 56,839 193,682
Property and equipment:
Land and land rights 111,907 73,593
Land improvements 1,001 1,001
Hotels and other buildings 123,837 123,213
Furniture, machinery and equipment 31,344 22,310
Construction in progress 17,448 2,365
285,537 222,482
Less accumulated depreciation (22,843) (11,630)
Net property and equipment 262,694 210,852
Deferred charges and other assets, net 22,604 21,536
Goodwill, net 96,871 101,410
$485,966 $595,204
- Continued -
</TABLE>
<PAGE>
<TABLE>
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, except share data)
<CAPTION>
December 31,
Liabilities and Shareholder's Equity 1998 1997
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 2,235 $ 282
Accounts payable and accrued
liabilities 46,385 46,677
Total current liabilities 48,620 46,959
Long-term debt, net of unamortized
premiums 205,940 311,258
Deferred income taxes 42,253 46,000
Commitments and contingencies
Shareholder's equity:
SINA common stock - 100 shares
outstanding - $.01 par value - -
Capital in excess of par 193,008 193,008
Accumulated deficit (3,855) (2,021)
Total shareholder's equity 189,153 190,987
$485,966 $595,204
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
<CAPTION> For the Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Revenues: (Successor) (Predecessor)
Gaming $234,736 $244,156 $258,672
Rooms 16,148 16,514 16,010
Food and beverage 26,692 27,085 27,867
Other resort revenues 11,460 11,344 9,535
289,036 299,099 312,084
Less promotional allowances (28,295) (28,465) (26,272)
Net gaming and resort revenues 260,741 270,634 285,812
Tour operations 13,758 15,403 -
Management fees and other 4,755 2,609 -
Real estate related 754 8,987 10,128
280,008 297,633 295,940
Expenses:
Gaming 147,141 154,554 165,017
Rooms 3,454 3,036 3,604
Food and beverage 16,638 15,973 16,746
Other resort expenses 30,509 33,019 35,047
Tour operations 12,583 14,193 -
Selling, general and
administrative 38,651 33,337 37,237
Depreciation and amortization 15,529 14,372 12,386
264,505 268,484 270,037
Operating income 15,503 29,149 25,903
Other income (expenses):
Interest income 3,602 3,539 3,233
Interest expense, net of
capitalized interest (20,466) (27,515) (24,529)
Amortization of debt premiums,
discounts and issue costs (511) (211) (4,344)
Other, net - 314 -
Earnings (loss) before benefit
(provision)for income taxes and
extraordinary item (1,872) 5,276 263
Benefit (provision) for income
taxes 38 (4,340) -
Earnings (loss) before
extraordinary item (1,834) 936 263
Extraordinary item-loss on
extinguishment of debt (net of
income tax benefit of $2,043) - (2,957) -
Net earnings (loss) $ (1,834) $ (2,021) $ 263
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(In Thousands of Dollars)
<CAPTION>
Capital
Common in excess Accumulated
stock of par deficit
<S> <C> <C> <C>
Balance at December 31, 1995 $ 79 $ 129,572 $(103,704)
Issuance of shares for stock options
exercised - 9 -
Net earnings for year 1996 - - 263
Transactions related to Merger:
Cancellation of public shares (79) 79 -
Issue shares to SIHL - - -
Eliminate pre-Merger accumulated
deficit - (103,441) 103,441
Fair value adjustments - 166,781 -
Balance at December 31, 1996 - 193,000 -
Contribution of Sun Resorts - 368 -
Contribution of Sun Cove - (360) -
Net loss for year 1997 - - (2,021)
Balance at December 31, 1997 - 193,008 (2,021)
Net loss for year 1998 - - (1,834)
Balance at December 31, 1998 $ - $ 193,008 $ (3,855)
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<CAPTION> For the Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities: (Successor) (Predecessor)
Net earnings (loss) $ (1,834) $ (2,021) $ 263
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Extraordinary item - 2,957 -
Depreciation and amortization 16,363 15,153 16,730
Gain on sale of assets - (607) (873)
Utilization of tax benefits acquired in Merger 1,887 4,085 -
Provision for doubtful receivables 708 830 1,417
Provision for discount on CRDA obligations, net 572 987 1,497
Net change in deferred tax liability (3,747) - 77
Net change in working capital accounts:
Receivables (105) (1,117) (1,211)
Due from affiliates - 4,559 -
Inventories and prepaid expenses 77 (48) (7,426)
Other assets - 2,000 (1,474)
Accounts payable and accrued liabilities 472 (3,325) (2,410)
Net cash provided by operating activities 14,393 23,453 6,590
Cash flows from investing activities:
Payments for operating capital expenditures (20,786) (10,595) (18,498)
Acquisition of other fixed assets (11,727) (21,721) (1,177)
Proceeds from the sale of assets 110,256 7,950 1,385
Payments for expenses of Merger (745) (8,057) (6,417)
CRDA deposits and bond purchases (2,955) (3,122) (3,070)
Sun Resorts cash and equivalents at date
of contribution - 1,159 -
Advances to affiliates (5,610) (10,327) -
Net cash provided by (used in)
investing activities 68,433 (44,713) (27,777)
</TABLE>
<PAGE>
-continued-
<TABLE>
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<CAPTION> For the Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
(Successor) (Predecessor)
Cash flows from financing activities:
Borrowings - 199,084 -
Debt repayments (108,480) (154,355) (589)
Debt issuance costs - (6,460) -
Proceeds from exercise of stock options - - 9
Net cash provided by (used in) financing activities (108,480) 38,269 (580)
Net increase (decrease) in cash and cash equivalents (25,654) 17,009 (21,767)
Cash and cash equivalents at beginning of period 50,814 33,805 55,572
Cash and cash equivalents at end of period $ 25,160 $ 50,814 $ 33,805
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
SUN INTERNATIONAL NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
Merger and Basis of Accounting
Sun International North America, Inc.("SINA") is a holding company
principally engaged in the operation of resort and casino properties.
Through its indirect wholly owned subsidiary, Resorts International
Hotel, Inc. ("RIH"), SINA owns and operates the Resorts Casino Hotel in
Atlantic City, New Jersey. In addition, SINA provides management
services to certain of its affiliated companies and owns a tour operator
which wholesales tour packages and provides reservation services. Prior
to the merger described below, SINA was known as Griffin Gaming &
Entertainment, Inc. "SINA" is used herein to refer to the corporation
for all periods. The term "Company" as used herein includes SINA and its
subsidiaries.
Pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), on December 16, 1996 (the "Effective Date"), SINA became
a wholly owned subsidiary of Sun International Hotels Limited ("SIHL"),
a corporation organized under the laws of the Commonwealth of The
Bahamas, when Sun Merger Corp., a wholly owned subsidiary of SIHL, was
merged with and into SINA (the "Merger").
Pursuant to the Merger Agreement, each share of SINA common stock
outstanding immediately prior to the Effective Date of the Merger was
converted into the right to receive .4324 ordinary shares of SIHL (the
"Ordinary Shares"). Also, each outstanding share of Class B common stock
of SINA was converted into the right to receive .1928 Ordinary Shares.
Each .1928 Ordinary Share received in exchange for a share of SINA's
Class B common stock trades as part of a unit along with $1,000 principal
amount of 11.375% Junior Mortgage Notes due December 15, 2004, issued by
a special purpose finance subsidiary of SINA.
The Merger was accounted for in accordance with APB 16, "Business
Combinations" utilizing the purchase method of accounting. Accordingly,
the Company adjusted its consolidated net assets to reflect the amount
of SIHL's investment in SINA. In doing so, the Company's consolidated
assets and liabilities were adjusted to their estimated fair values based
on independent appraisals, evaluations, estimations and other studies.
The allocation, as adjusted, of the excess of SIHL's investment in
SINA over SINA's net book value was as follows:
<PAGE>
<TABLE><CAPTION>
(In Thousands of Dollars)
<S> <C>
Decrease in current assets $(13,475)
Increase in land held for investment,
development or resale 91,247
Increase in property and equipment 40,618
Decrease in deferred charges and other
assets (11,602)
Increase in goodwill 105,823
Increase in current liabilities (12,778)
Increase in long-term debt (40,479)
Decrease in deferred tax liability 7,427
$166,781
</TABLE>
Goodwill, the excess of SIHL's investment over the fair value of
SINA's net assets, is amortized on a straight-line basis over 40 years.
Because the impact of the basis adjustments on the Company's
consolidated statement of operations for the period between the Effective
Date and December 31, 1996, was immaterial, the Company recorded the
basis adjustments as of December 31, 1996. The impact on the Company's
operations is reflected in the Company's consolidated statements of
operations commencing January 1, 1997.
Pro Forma Information (Unaudited)
The following unaudited pro forma information for the year ended
December 31, 1996, reflects the results of the Company's operations as
though the Merger had occurred on January 1, 1996 and includes (i)
adjustments for amortization of goodwill, (ii) changes in amortization
of debt discounts (premiums) and depreciation due to basis adjustments,
(iii) elimination of a gain on a property sale and (iv) tax effects: pro
forma operating revenues would have been $291.9 million and pro forma net
income would have been $2.3 million. The pro forma information is not
necessarily indicative of future results or what the Company's results
of operations would actually have been had the Merger occurred on January
1, 1996.
Contributed Companies
Effective January 1, 1997, SIHL contributed the capital stock of Sun
International Resorts, Inc. ("Sun Resorts"), a wholly owned subsidiary
of SIHL, to SINA. Sun Resorts, along with its subsidiaries, is a tour
operator and wholesaler of tour packages and provides reservation
services. In addition, Sun Resorts provides certain support services for
SIHL's resort and casino operations in The Bahamas. As of January 1,
1997, Sun Resorts' consolidated assets, liabilities and shareholder's
equity amounted to $6.1 million, $5.7 million and $368,000, respectively.
Sun Resorts consolidated revenues and net income for the year ended
December 31, 1996 totaled $15.0 million and $617,000, respectively.
<PAGE>
Effective July 1, 1997, SIHL contributed the capital stock of Sun
Cove Limited, ("Sun Cove"), a wholly owned subsidiary of SIHL, to SINA.
Sun Cove has a 50% interest in Trading Cove Associates ("TCA"), a
Connecticut general partnership which holds a management agreement (the
"Management Agreement") with the Mohegan Tribal Gaming Authority relating
to the development and management of a casino resort and entertainment
complex (the "Mohegan Sun Casino"). The Management Agreement provides
that TCA is entitled to receive between 30% and 40% of the net profits,
as defined, of the Mohegan Sun Casino. TCA is obligated to pay certain
amounts to its partners and certain of their affiliates, as priority
payments from its management fee income for services provided by those
entities. In addition, TCA is obligated to pay certain amounts to its
partners, as priority payments from its management fee income, for
certain capital contributions to TCA. These amounts are paid as TCA
receives sufficient management fees to meet the priority distributions.
As of July 1, 1997, Sun Cove's assets, liabilities and shareholder's
deficit amounted to $7.9 million, $8.3 million and $360,000,
respectively. Sun Cove's revenues and net loss for the six months ended
June 30, 1997 were $0 and $360,000, respectively. Sun Cove had no
revenues or expenses prior to 1997.
The contributions of Sun Resorts and Sun Cove were recorded based
upon their respective carrying values by SIHL.
In February 1998, The Mohegan Tribe of Indians of Connecticut (the
"Tribe") announced that it had appointed TCA to develop its proposed
expansion of the Mohegan Sun Casino which is currently expected to cost
approximately $750.0 million. In addition, TCA and the Tribe agreed that
effective January 1, 2000, TCA will turn over management of the Mohegan
Sun Resort complex, (which comprises the existing operations and the
proposed expansion), to the Tribe. In exchange for relinquishing its
rights under its existing agreements, beginning January 1, 2000, TCA will
receive annual payments of five percent of the gross revenues of the
Mohegan Sun Resort complex for a 15-year period. Until January 1, 2000,
there will be no change in TCA's existing agreements with the Tribe.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of SINA
and its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Reclassifications
Certain balances in the accompanying consolidated financial
statements for 1997 and 1996 have been reclassified to conform with the
current year presentation.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Company provides allowances for doubtful accounts arising from
casino, hotel and other services, which are based upon a specific review
of certain outstanding receivables. In determining the amounts of the
allowances, the Company is required to make certain estimates and
assumptions and actual results may differ from those estimates and
assumptions.
Revenue Recognition
The Company recognizes the net win from casino gaming activities
(the difference between gaming wins and losses) as casino revenues.
Revenues from hotel and related services are recognized at the time the
related service is performed. Management fees and other operating
revenues include fees charged to unconsolidated affiliates primarily for
executive management services. Revenues are recorded at the time the
service is performed.
Promotional Allowances
The retail value of accommodations, food, beverage and other
services provided to customers without charge is included in gross
revenues and deducted as promotional allowances. The estimated
departmental costs of providing such promotional allowances are included
in gaming costs and expenses as follows:
<TABLE>
<CAPTION>
(In Thousands of Dollars) 1998 1997 1996
<S> <C> <C> <C>
Rooms $ 5,655 $ 5,092 $ 5,207
Food and beverage 13,448 15,042 15,274
Other 5,570 5,192 5,258
$24,673 $25,326 $25,739
</TABLE>
Cash Equivalents
The Company considers all of its short-term money market securities
purchased with original maturities of three months or less to be cash
equivalents.
<PAGE>
Inventories
Inventories of provisions, supplies and spare parts are carried at
the lower of cost (first-in, first-out) or market.
Property and Equipment
Property and equipment are stated at cost and are depreciated over
the estimated useful lives reported below using the straight-line method
for financial reporting purposes.
Land improvements 14 years
Hotels and other buildings 40 years
Furniture, machinery and equipment 2 - 5 years
In conjunction with the Merger, certain estimated useful lives were
revised and were used to depreciate property and equipment for financial
reporting purposes commencing in 1997.
Deferred Charges and Other Assets
Debt issuance costs are amortized over the terms of the related
indebtedness.
Goodwill
Goodwill is amortized on a straight line basis over 40 years.
Amortization expense included in the accompanying consolidated statements
of income related to goodwill was $2.7 million, $2.4 million and $0 for
the years ended December 31, 1998, 1997 and 1996, respectively.
Capitalized Interest
Interest is capitalized on construction expenditures and land under
development at the weighted average rate of the Company's long-term debt
excluding one issue, redeemed in 1998, which was non-recourse to the
Company.
Casino Reinvestment Development Authority ("CRDA") Obligations
Under the New Jersey Casino Control Act ("Casino Control Act"), the
Company is obligated to purchase CRDA bonds, which will bear a
below-market interest rate, or make an alternative qualifying investment.
The Company charges to expense an estimated discount related to CRDA
investment obligations as of the date the obligation arises based on fair
market interest rates of similar quality bonds in existence as of that
date. On the date the Company actually purchases the CRDA bond, the
estimated discount previously recorded is adjusted to reflect the actual
<PAGE>
terms of the bonds issued and the then existing fair market interest rate
for similar quality bonds.
The discount on CRDA bonds purchased is amortized to interest income
over the life of the bonds using the effective interest rate method.
Long Lived Assets
The Company reviews its long lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. As
a result of its review, the Company does not believe that any asset
impairment exists in the recoverability of its long lived assets.
Income Taxes
SINA and all of its subsidiaries file consolidated United States
federal income tax returns.
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Under this standard, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of
assets and liabilities at enacted tax rates which will be in effect for
the years in which the differences are expected to reverse. A valuation
allowance is recognized based on an estimate of the likelihood that some
portion or all of the deferred tax asset will not be realized.
Comprehensive Income
Comprehensive income is equal to net earnings (loss) for all periods
presented.
NOTE 3 - CASH EQUIVALENTS
Cash equivalents at December 31, 1998 and 1997 included reverse
repurchase agreements (federal government securities purchased under
agreements to resell those securities) under which the Company had not
taken delivery of the underlying securities and investments in a money
market fund which invests exclusively in United States Treasury
obligations. At December 31, 1998, the Company held reverse repurchase
agreements of $6.7 million, all of which matured January 4, 1999.
<PAGE>
NOTE 4 - RECEIVABLES
<TABLE>
Components of receivables at December 31 were as follows:
<CAPTION>
(In Thousands of Dollars) 1998 1997
<S> <C> <C>
Gaming $ 5,700 $ 6,440
Less allowance for doubtful accounts (2,401) (3,011)
3,299 3,429
Non-gaming:
Hotel and related 568 529
Other 4,256 4,796
4,824 5,325
Less allowance for doubtful accounts (35) (63)
4,789 5,262
$ 8,088 $ 8,691
</TABLE>
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
Components of accounts payable and accrued liabilities at December
31 were as follows:
<CAPTION>
(In Thousands of Dollars) 1998 1997
<S> <C> <C>
Accrued payroll and related taxes and
benefits $10,621 $ 9,928
Accrued interest 5,483 9,304
Accrued gaming taxes, fees and related
assessments 2,494 2,658
Accrued professional fees 2,503 2,174
Trade payables 11,710 8,790
Customer deposits and unearned revenues 4,127 4,184
Other accrued liabilities 9,447 9,639
$46,385 $46,677
</TABLE>
<PAGE>
NOTE 6 - LONG-TERM DEBT
<TABLE>
Components of long-term debt at December 31 were as follows:
<CAPTION>
(In Thousands of Dollars) 1998 1997
<S> <C> <C>
9% Senior Notes $200,000 $200,000
Unamortized discount (807) (869)
199,193 199,131
11% Mortgage Notes due 2003 5,352 5,354
Unamortized premium 246 285
5,598 5,639
11.375% Junior Mortgage Notes
due 2004 1,095 1,095
Unamortized premium 54 60
1,149 1,155
Showboat Notes - 105,333
Other 2,235 282
208,175 311,540
Less current maturities (2,235) (282)
$205,940 $311,258
</TABLE>
9% Senior Notes
The 9% senior subordinated unsecured notes due 2007 (the "9% Senior
Notes"), are unconditionally guaranteed by certain subsidiaries of SINA.
Interest on the 9% Senior Notes is payable on March 15 and September 15
each year. The Indenture for the 9% Senior Notes contains certain
covenants, including limitations on the ability of the issuers and the
guarantors to, among other things: (i) incur additional indebtedness,
(ii) incur certain liens, (iii) engage in certain transactions with
affiliates and (iv) pay dividends and make certain other payments.
Showboat Notes
The First Mortgage Non-Recourse Pass-Through Notes due June 30, 2000
(the "Showboat Notes") were non-recourse notes, secured by a mortgage
encumbered by a collateral assignment of the lease of 10 acres of land
under the Showboat Casino Hotel (the "Showboat Lease"), and by a pledge
of any proceeds of the sale of such mortgage and collateral assignment.
Interest on the Showboat Notes consisted of a pass-through of the lease
payments received pursuant to the Showboat Lease.
On January 29, 1998, the Company sold the land under the Showboat
Casino Hotel and the Showboat Lease for $110 million, its net book value.
The majority of the proceeds were used to redeem the Showboat Notes
effective February 28, 1998.
<PAGE>
Co-obligation
The Company is a co-obligator, with SIHL, on $100 million senior
subordinated, unsecured notes due December 2007 (the "8.625% Notes").
Interest on the 8.625% Notes is payable on June 15 and December 15 each
year. The cash was drawn down by and the debt is reflected in the
consolidated financials of SIHL.
NOTE 7 - SHAREHOLDER'S EQUITY
SINA is authorized to issue 100 million shares of SINA common stock,
120,000 shares of Class B Stock and 10 million shares of preferred stock.
As a result of the Merger, the only shares of SINA stock outstanding are
100 shares of SINA common stock, all of which are owned by SIHL.
NOTE 8 - RELATED PARTY TRANSACTIONS
Due from Affiliates
Amounts due from affiliates represent non-interest bearing due on
demand advances.
Management and Other Fees
Effective January 1, 1998, the Company entered into an agreement to
provide management services to certain unconsolidated affiliated
companies. For the year ended December 31, 1998, such fees amounted to
$3.8 million.
In the third quarter of 1998, a subsidiary of SINA received $1.0
million in priority payments from TCA related to the Mohegan Sun Casino.
License and Services Agreement
In connection with the Merger, SINA and RIH entered into a license
and services agreement (the "License and Services Agreement") with The
Griffin Group, Inc. (the "Griffin Group"), a corporation controlled by
Merv Griffin, Chairman of the Board of SINA until the Effective Date.
The License and Services Agreement grants to the Company a non-exclusive
license to use the name and likeness of Merv Griffin to advertise and
promote the Company's resort properties as well as SIHL's other
properties in Connecticut and The Bahamas (the "Casino Properties"). The
Company also has the non-exclusive right to use certain shows and gaming
concepts set forth therein and the non-exclusive right to services
provided by Mr. Griffin as marketing consultant and as host, producer,
presenter and featured performer in various shows to be presented at the
Casino Properties.
As compensation under the License and Services Agreement, at the
Effective Date, the Company paid Griffin Group fees totaling $11 million
for the license and services through September 16, 2001.
<PAGE>
The License and Service Agreement is to continue until September 16,
2001 and provides for earlier termination by either the Company or
Griffin Group under certain circumstances. Upon any termination of the
agreement, Griffin Group is entitled to retain all monies paid to it and
is entitled to be paid all amounts owing to it as of the date of
termination.
Because of changes in the Company's marketing strategy, the
significant reduction in Mr. Griffin's participation in activities
related to the Company's business and uncertainties as to Mr. Griffin's
providing future services to the Company, all prepaid fees under the
License and Services Agreement were written off as having indeterminable
future value in connection with valuing the Company's assets and
liabilities as of December 31, 1996.
Sale of Resorts Entertainment, Inc. ("REI")
In March 1996, the Company sold the assets and ongoing operations
of REI (formerly Griffin Entertainment, Inc.), a subsidiary of SINA, at
a purchase price equal to the amount of the Company's expenditures on
these assets and operations from their inception in September 1995
through the consummation of the transaction. There were no revenues
offsetting these expenditures, which totaled approximately $340,000
through April 30, 1996, the effective date of the sale.
Other
The Company reimbursed Griffin Group $157,000 for charter air
services related to Company business rendered in 1996.
NOTE 11 - SHOWBOAT LEASE
Prior to January 1998, the Company leased to a subsidiary of
Showboat, Inc., a resort and casino operator, 10 acres of land under the
Showboat Casino Hotel (included in land held for investment, development
or resale in the accompanying Consolidated Balance Sheets). The lease
payments were $754,000, $9.0 million and $8.7 million for the years 1998,
1997 and 1996, respectively.
As described in Note 6, the Company sold the Showboat Land and the
Showboat Lease in January 1998.
NOTE 12 - EMPLOYEE BENEFIT PLANS
SINA and certain of its subsidiaries participate, and certain of
SINA's former subsidiaries participated, in a defined contribution plan
covering substantially all of their non-union employees. The Company
makes contributions to this plan based on a percentage of eligible
employee contributions. Total pension expense for this plan was
$869,000, $810,000 and $725,000 in 1998, 1997 and 1996, respectively.
In addition to the plan described above, union and certain other
<PAGE>
employees of RIH and certain former subsidiaries of SINA are covered by
multi-employer defined benefit pension plans to which the subsidiaries
make, or made, contributions. The Company's pension expense for these
plans totaled $1.1 million, $1.0 million and $1.0 million in 1998, 1997,
and 1996, respectively.
Certain of the Company's employees participate in SIHL's stock
option plans (the "Plans") whereby options to purchase shares of SIHL's
capital stock (the "Ordinary Shares") are granted. Pursuant to the
Plans, the option prices are equal to the market value per share of the
Ordinary Shares on the date of grant. The Plans provide for options to
become exercisable either one year or two years after the grant date in
respect of 20% of such options, and thereafter in installments of 20% per
year over a four-year period. The options have a term of ten years from
the date of grant.
In addition, certain employees held options to purchase SINA
ordinary shares when the Company was acquired by SIHL. All such shares
were converted to options to purchase Ordinary Shares and became
exercisable as of the acquisition date.
As of December 31, 1998, the Company had 1,085,000 options
outstanding, 146,000 of which were exercisable.
NOTE 13 - INCOME TAXES
The Company recorded income tax provisions (benefits) as follows
from continuing operations:
<TABLE>
<CAPTION>
(In Thousands of Dollars) 1998 1997 1996
<S> <C> <C> <C>
Current:
Federal $ 3,430 $3,726 $ (77)
State 279 614 -
3,709 4,340 (77)
Deferred:
Federal (3,747) - 77
State - - -
(3,747) - 77
$ (38) $4,340 $ -
</TABLE>
In 1997, the Company also recorded $1,593,000 and $450,000 in
current federal and state benefits, respectively, resulting from an
extraordinary loss.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.
<PAGE>
The components of the deferred tax assets and liabilities at
December 31 were as follows:
<TABLE>
<CAPTION>
(In Thousands of Dollars) 1998 1997
<S> <C> <C>
Deferred tax liabilities:
Basis differences on land held for
investment, development or resale $ (6,200) $ (50,600)
Basis differences on property and
equipment (44,300) (44,300)
Other (2,100) (3,100)
Total deferred tax liabilities (52,600) (98,000)
Deferred tax assets:
NOL carryforwards 187,300 215,400
Book reserves not yet deductible
for tax return purposes 15,800 18,400
Basis difference on debt 400 9,500
Tax credit carryforwards 2,800 1,000
Other 6,000 5,300
Total deferred tax assets 212,300 249,600
Valuation allowance for deferred
tax assets (201,953) (197,600)
Deferred tax assets, net of
valuation allowance 10,347 52,000
Net deferred tax liabilities $ (42,253) $ (46,000)
</TABLE>
A valuation allowance has been recorded against the portion of those
deferred tax assets that the Company believes will more likely than not
remain unrealized. If such deferred tax assets were to be realized, the
corresponding reduction to the valuation allowance would reduce the
carrying value of goodwill. During 1998, the Company experienced an
increase to it valuation allowance aggregating $4.3 million.
The effective income tax rate on earnings (loss) before
extraordinary item varies from the statutory federal income tax rate as
a result of the following factors:
<TABLE>
<CAPTION> 1998 1997 1996
<S> <C> <C> <C>
Statutory federal income tax
rate ( 35.0%) 35.0% 35.0%
State tax costs 14.9% 11.6% -
NOLs and temporary differences
for which no taxes were provided
or benefits recognized (100.8%) - (44.7%)
Nondeductible expenses, primarily
amortization of goodwill 87.6% 25.3% -
Other 31.3% 10.3% 9.7%
Effective income tax rate (2.0%) 82.2% 0.0%
</TABLE>
<PAGE>
For federal income tax purposes, the Company had NOL carryforwards
however, due to the change of ownership of SINA in 1996, $434 million of
these NOL carryforwards (the "Pre-Change NOLs") are limited in their
availability to offset future taxable income of the Company. As a result
of these limitations, approximately $11.3 million of Pre-Change NOLs will
become available for use each year through the year 2008; an additional
$8.4 million will be available in 2009. An additional $13.0 million of
these Pre-Change NOLs would be available to offset gains on sales of
assets owned at the date of change in ownership of the Company which are
sold within five years of that date. The remaining Pre-Change NOLs are
expected to expire unutilized.
The restricted NOLs which the Company believes may become available
to the Company for utilization in spite of the limitations expire as
follows: $60 million in 2005, $23 million in 2006, $31 million in 2007,
$12 million in 2008, $1 million in 2009 and $8 million in 2011. The
unrestricted NOLs which the Company believes may be used to offset future
income expire as follows: $44 million in 2008 and $57 million in 2012.
NOTE 14 - SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid, net of amounts capitalized, was $5.4 million, $26.1
million and $24.4 million for the years ended December 31, 1998, 1997 and
1996, respectively. Income taxes refunded (paid) amounted to $(2.1)
million, $87,000 and $(244,000) for the years ended December 31, 1998,
1997 and 1996, respectively. Non-cash investing and financing activities
were as follows:
<TABLE>
<CAPTION>
(In Thousands of Dollars) 1998 1997 1996
<S> <C> <C> <C>
Increase (decrease) for valuation
adjustments:
Goodwill - $ 6,950 -
Land held for investment,
development or resale - $(5,000) -
Accounts payable and accrued
liabilities - $ 1,950 -
Exchange of real estate in Atlantic
City for reduction in CRDA
obligation - $ 2,200 -
Adjustments to consolidated
net assets to reflect SIHL's
investment in SINA (see Note 1) - $166,781
Property and equipment acquired
under capital lease obligations $5,098 - -
</TABLE>
<PAGE>
NOTE 15 - COMMITMENTS AND CONTINGENCIES
Casino License
The operation of a casino in Atlantic City is subject to regulatory
controls. A casino license must be obtained by the operator and the
license must be periodically renewed and is subject to revocation at any
time. In the event that the Company is not able to maintain its license,
management believes that the Company would still realize the carrying
value of its related assets.
CRDA Obligations
The Casino Control Act, as amended, requires RIH to purchase bonds
issued by the CRDA, or to make other investments authorized by the CRDA,
in an amount equal to 1.25% of its gross gaming revenues, as defined.
The CRDA bonds have interest rates ranging from 3.6% to 7.0% and have
repayment terms of between 20 and 50 years.
At December 31, 1998, RIH had $10.9 million face value of bonds
issued by the CRDA and had $16.0 million on deposit with the CRDA. These
bonds and deposits, net of an estimated discount to reflect the below-
market interest rates payable on the bonds, are included in deferred
charges and other assets in the accompanying Consolidated Balance Sheets.
Litigation
SINA 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.
A complaint was filed in December 1997 on behalf of a plaintiff and
a purported class of Company shareholders against SIHL, the Company and
various affiliates, directors and officers of SIHL and the Company. The
complaint alleges that the Proxy Statement and Prospectus issued by SIHL
and the Company in November 1996, in connection with the Merger, was
false and misleading with regard to statements made about a license and
services agreement entered into between the Company and The Griffin
Group. The Company believes that the case is without merit and intends
to vigorously defend its actions. In September 1998, the Company filed
a Motion for Summary Judgment to dispose of the claim, which motion has
been fully briefed and is pending a court decision.
Purchase Commitments
At December 31, 1998, the Company had unfunded contracts in place
for capital expenditures related to room renovations at the Resorts
Casino Hotel of $12.0 million.
<PAGE>
Note 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at
which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced sale or liquidation.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with
precision. The assumptions used have a significant effect on the
estimated amounts reported.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments: (a) Cash and
cash equivalents, receivables, other current assets, accounts payable,
accrued liabilities and variable rate debt: The amounts reported in the
accompanying consolidated balance sheets approximate fair value; (b)
Fixed-rate debt: Fixed rate debt is valued based upon published market
quotations, as applicable. The carrying amount of remaining fixed-rate
debt approximates fair value.
Note 17 - SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION
The Company operates in one industry segment in the United States.
<PAGE>
<TABLE> SCHEDULE II
SUN INTERNATIONAL NORTH AMERICA, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands of Dollars)
<CAPTION>
Balance at Additions Balance at
beginning charged to Deductions end of
of period expenses (a) period
<S> <C> <C> <C> <C>
For the year ended December 31, 1998
Allowance for doubtful receivables:
Gaming $3,011 $ 644 $(1,254) $2,401
Other 63 64 (92) 35
$3,074 $ 708 $(1,346) $2,436
For the year ended December 31, 1997:
Allowance for doubtful receivables:
Gaming $3,626 $ 836 $(1,451) $3,011
Other 132 (6) (63) 63
$3,758 $ 830 $(1,514) $3,074
For the year ended December 31, 1996:
Allowance for doubtful receivables:
Gaming $3,519 $1,317 $(1,210) $3,626
Other 51 100 (19) 132
$3,570 $1,417 $(1,229) $3,758
(a) Write-off of uncollectible accounts, net of recoveries.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
The following Items have been omitted pursuant to General
Instruction I of Form 10-K: ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT; ITEM 11. EXECUTIVE COMPENSATION; ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT and ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Documents Filed as Part of This Report
1. The financial statement index required herein is incorporated by
reference to "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
2. The index of financial statement schedules required herein is
incorporated by reference to "ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA." Financial statement schedules not included
have been omitted because they are either not applicable or the
required information is shown in the consolidated financial
statements or notes thereto.
3. The following exhibits are filed herewith or incorporated by
reference:
Exhibit
Numbers Exhibit
(2)(a) Agreement and Plan of Merger, dated August 19, 1996, among
SIHL, Sun Merger Corp. and SINA. (Incorporated by reference
to Exhibit (2)(a) to Registrant's Form 8-K Current Report
dated August 19, 1996, in File No. 1-4748.)
(2)(b) Amendment dated October 10, 1996 to the Agreement and Plan
of Merger among SIHL, Sun Merger Corp. and SINA.
(Incorporated by reference to Annex I to Registrant's
Definitive Proxy Statement dated November 1, 1996 on
Schedule 14A in File No. 1-4748.)
<PAGE>
(2)(c) Stockholder Agreement, dated August 19, 1996, among SIHL and
the various Stockholders of SINA set forth therein.
(Incorporated by reference to Exhibit (2)(b) to Registrant's
Form 8-K Current Report dated August 19, 1996, in File No.
1-4748.)
(2)(d) Amendment dated October 10, 1996 to the Stockholder
Agreement among SIHL and the various Stockholders of SINA
set forth therein. (Incorporated by reference to Annex II
to Registrant's Definitive Proxy Statement dated November 1,
1996 on Schedule 14A in File No. 1-4748.)
(2)(e) Stockholder Agreement, dated August 19, 1996, between SINA
and SIIL. (Incorporated by reference to Exhibit (2)(c) to
Registrant's Form 8-K Current Report dated August 19, 1996,
in File No. 1-4748.)
(2)(f) Amendment dated October 10, 1996 to the Stockholder
Agreement between SINA and SIIL. (Incorporated by reference
to Annex III to Registrant's Definitive Proxy Statement
dated November 1, 1996 on Schedule 14A in File No. 1-4748.)
(3)(a)(1) Restated Certificate of Incorporation of SINA.
(Incorporated by reference to Exhibit (3)(a) to Registrant's
Form 10-Q Quarterly Report for the quarter ended June 30,
1996, in File No. 1-4748.)
(3)(a)(2) Certificate of Amendment of Restated Certificate of
Incorporation of SINA. (Incorporated by reference to
Exhibit (3)(a)(2) to Registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1996, in File No. 1-
4748).
(3)(b) Amended and Restated By-Laws of SINA. (Incorporated by
reference to Exhibit (3)(b) to Registrant's Form 10-Q
Quarterly Report for the quarter ended June 30, 1996, in
File No. 1-4748.)
(4)(a) See Exhibits (3)(a)(1), (3)(a)(2) and (3)(b) as to the
rights of holders of Registrant's common stock.
(4)(b)(1) Form of Purchase Agreement for $200,000,000 principal amount
of 9% Senior Subordinated Notes due 2007 dated March 5,
1997, among SIHL and SINA, as issuers, Bear, Stearns & Co.
Inc., Societe Generale Securities Corporation and Scotia
Capital Markets (USA) Inc., as purchasers, and various
subsidiaries of SIHL, including RIH and GGRI, as guarantors.
(Incorporated by reference to Exhibit (4)(e)(1) to
Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1996, in File No. 1-4748.)
(4)(b)(2) Form of Indenture dated as of March 10, 1997, between SIHL
<PAGE>
and SINA, as issuers, various subsidiaries of SIHL,
including RIH and GGRI, as guarantors, and The Bank of New
York, as trustee, with respect to $200,000,000 principal
amount of 9% Senior Subordinated Notes due 2007, and
exhibits thereto. (Incorporated by reference to Exhibit
(4)(e)(2) to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1996, in File No. 1-4748.)
(4)(b)(3) Form of Registration Rights Agreement dated as of March 5,
1997, by and among SIHL and SINA, as issuers, various
subsidiaries of SIHL, including RIH and GGRI, as guarantors,
and Bear, Stearns & Co. Inc., Societe Generale Securities
Corporation and Scotia Capital Markets (USA) Inc., as
purchasers. (Incorporated by reference to Exhibit (4)(e)(3)
to Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1996, in File No. 1-4748.)
(4)(b)(4) Form of Inter-Borrower Agreement dated as of March 10, 1997,
between SIHL and SINA. (Incorporated by reference to Exhibit
(4)(e)(4) to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1996, in File No. 1-4748.)
(10)(a)* Resorts Retirement Savings Plan. (Incorporated by reference
to Exhibit (10)(c)(2) to registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1991, in File
No. 1-4748.)
(10)(b)* Non-Competition and Confidentiality Agreement dated December
16, 1996, among SINA, SIHL and Thomas E. Gallagher.
(Incorporated by reference to Exhibit (10)(d) to
Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1996, in File No. 1-4748.)
(10)(c)(1)* License and Services Agreement, dated as of September 17,
1992, among Griffin Group, SINA and RIH. (Incorporated by
reference to Exhibit 10.34(a) to registrant's Form S-4
Registration Statement in File No. 33-50733.)
(10)(c)(2)* Form of Amendment to License and Services Agreement, dated
as of September 17, 1992, among Griffin Group, SINA and RIH.
(Incorporated by reference to Exhibit 10.34(b) to
registrant's Form S-4 Registration Statement in File No. 33-
50733.)
(10)(c)(3) Form of License and Services Agreement among Griffin Group,
SINA and RIH. (Incorporated by reference to Annex VI to
registrant's Definitive Proxy Statement dated November 1,
1996 on Schedule 14A in File No. 1-4748.)
(10)(d) Litigation Trust Agreement, dated as of September 17, 1990,
among SINA, Resorts International Financing, Inc., Griffin
Resorts Holding Inc. and Griffin Resorts Inc. (now GGRI,
<PAGE>
Inc.). (Incorporated by reference to Exhibit 1.46 to
Exhibit 35 to the Form 8 Amendment dated November 16, 1990,
to registrant's Form 8-K Current Report dated August 30,
1990, in File No. 1-4748.)
(10)(e) Amended and Restated Partnership Agreement of Trading Cove
Associates dated as of August 29, 1995, among Sun Cove
Limited, RJH Development Corp., Leisure Resort Technology,
Inc., Slavik Suites, Inc. and LMW Investments, Inc.
(Incorporated by reference to Exhibit 10.7 of Registration
Statement No. 33-80477 of the registrant on Form F-3.)
(10)(f) Agreement of Purchase and Sale between Sun International
North America, Inc., seller and Showboat Land LLC, buyer,
dated: as of January 29, 1998.
(21) Subsidiaries of the registrant.
(27)(a) Financial data schedule for the year ended December 31,
1998.
(27)(b) Restated financial data schedule for the year ended December
31, 1997.
* Management contract or compensatory plan.
Registrant agrees to file with the Securities and Exchange
Commission, upon request, copies of any instrument defining the rights
of the holders of its consolidated long-term debt.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the fourth quarter
of 1998. No amendments to previously filed Forms 8-K were filed during
the fourth quarter of 1998.
(c) Exhibits Required by Item 601 of Regulation S-K
The exhibits listed in Item 14(a)3. of this report, and not
incorporated by reference to a separate file, follow "SIGNATURES."
(d) Financial Statement Schedules Required by Regulation S-X
The financial statement schedules required by Regulation S-X are
incorporated by reference to "ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA."
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SUN INTERNATIONAL NORTH AMERICA, INC.
(Registrant)
Date: March 30, 1999 By /s/
John R. Allison
Executive Vice President - Finance
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
By /s/ Howard B. Kerzner March 30, 1999
Howard B. Kerzner
Director
By /s/ Charles D. Adamo March 30, 1999
Charles D. Adamo
Director
<PAGE>
SUN INTERNATIONAL NORTH AMERICA, INC.
Form 10-K for the fiscal year
ended December 31, 1998
EXHIBIT INDEX
Reference to previous
Exhibit filing or this
Number Exhibit Form 10-K
<TABLE>
<S> <C> <C>
(2)(a) Agreement and Plan of Incorporated by reference to
Merger, dated August 19, Exhibit (2)(a) to
1996, among SIHL, Sun Merger Registrant's Form 8-K Current
Corp. and SINA. Report dated August 19, 1996,
in File No. 1-4748.
(2)(b) Amendment dated October 10, Incorporated by reference to
1996 to the Agreement and Annex I to Registrant's
Plan of Merger among SIHL, Definitive Proxy Statement
Sun Merger Corp. and SINA. dated November 1, 1996 on
Schedule 14A in File No. 1-
4748.
(2)(c) Stockholder Agreement, dated Incorporated by reference to
August 19, 1996, among SIHL Exhibit (2)(b) to
and the various Stockholders Registrant's Form 8-K Current
of SINA set forth therein. Report dated August 19, 1996
in File No. 1-4748.
(2)(d) Amendment dated October 10, Incorporated by reference to
1996 to the Stockholder Annex II to Registrant's
Agreement among SIHL and the Definitive Proxy Statement
various Stockholders of SINA dated November 1, 1996 on
set forth therein. Schedule 14A in File No. 1-
4748.
<PAGE>
(2)(e) Stockholder Agreement, dated Incorporated by reference to
August 19, 1996, between Exhibit (2)(c) to
SINA and SIIL. Registrant's Form 8-K Current
Report dated August 19, 1996,
in File No. 4748.
(2)(f) Amendment dated October 10, Incorporated by reference to
1996 to the Stockholder Annex III to Registrant's
Agreement between SINA and Definitive Proxy Statement
SIIL. dated November 1, 1996 on
Schedule 14A in File No. 1-
4748.
(3)(a)(1) Restated Certificate of Incorporated by reference to
Incorporation of SINA. Exhibit (3)(a) to
Registrant's Form 10-Q
Quarterly Report for the
quarter ended June 30, 1996,
in File No. 1-4748.
(3)(a)(2) Certificate of Amendment of Incorporated by reference to
Restated Certificate of Exhibit (3)(a)(2) to
Incorporation of SINA. Registrant's Form 10-K Annual
Report.
(3)(b) Amended and Restated By-Laws Incorporated by reference to
of SINA. Exhibit (3)(b) to
Registrant's Form 10-Q
Quarterly Report for the
quarter ended June 30, 1996,
in File No. 1-4748.
(4)(a) See Exhibits (3)(a)(1),
(3)(a)(2) and (3)(b) as to
the rights of holders of
Registrant's common stock.
<PAGE>
(4)(b)(1) Form of Purchase Agreement Incorporated by reference to
for $200,000,000 principal Exhibit (4)(e)(1) to
amount of 9% Senior registrant's Form 10-K Annual
Subordinated Notes due 2007 Report for the fiscal year
dated March 5, 1997, among ended December 31,1996, in
SIHL and SINA, as issuers, File No. 1-4748.
Bear, Stearns & Co. Inc.,
Societe Generale Securities
Corporation and Scotia
Capital Markets (USA) Inc.,
as purchasers, and various
subsidiaries of SIHL,
including RIH and GGRI, as
guarantors.
(4)(b)(2) Form of Indenture dated as Incorporated by reference to
of March 10, 1997, between Exhibit (4)(e)(2) to
SIHL and SINA, as issuers, registrant's Form 10-K Annual
various subsidiaries of Report for the fiscal year
SIHL, including RIH and ended December 31, 1996, in
GGRI, as guarantors, and The File No. 1-4748.
Bank of New York, as
trustee, with respect to
$200,000,000 principal
amount of 9% Senior
Subordinated Notes due 2007,
and exhibits thereto.
(4)(b)(3) Form of Registration Rights Incorporated by reference to
Agreement dated as of March Exhibit (4)(e)(3) to
5, 1997, by and among SIHL registrant's Form 10-K Annual
and SINA, as issuers, Report for the fiscal year
various subsidiaries of ended December 31, 1996, in
SIHL, including RIH and File No. 1-4748.
GGRI, as guarantors, and
Bear, Stearns & Co. Inc.,
Societe Generale Securities
Corporation and Scotia
Capital Markets (USA) Inc.,
as purchasers.
<PAGE>
(4)(b)(4) Form of Inter-Borrower Incorporated by reference to
Agreement dated as of March Exhibit (4)(e)(4) to
10, 1997, between SIHL and registrant's Form 10-K Annual
SINA. Report for the fiscal year
ended December 31, 1996, in
File No. 1-4748.
(10)(a) Resorts Retirement Savings Incorporated by reference to
Plan. Exhibit (10)(c)(2) to
registrant's Form 10-K Annual
Report for the fiscal year
ended December 31, 1991, in
File No. 1-4748.
(10)(b) Non-Competition and Incorporated by reference to
Confidentiality Agreement Exhibit (10)(c)(2) to
dated December 16, 1996, registrant's Form 10-K Annual
among SINA, SIHL and Thomas Report for the fiscal year
E. Gallagher. ended December 31, 1996, in
File No. 1-4748.
(10)(c)(1) License and Services Incorporated by reference to
Agreement, dated as of Exhibit 10.34(a) to
September 17, 1992, among registrant's Form S-4
Griffin Group, SINA and RIH. Registration Statement in
File No. 33-50733.
(10)(c)(2) Form of Amendment to License Incorporated by reference to
and Services Agreement, Exhibit 10.34(b) to
dated as of September 17, registrant's Form S-4
1992, among Griffin Group, Registration Statement in
SINA and RIH. File No. 33-50733.
(10)(c)(3) Form of License and Services Incorporated by reference to
Agreement among Griffin Annex VI to registrant's
Group, SINA and RIH. Definitive Proxy Statement
dated November 1, 1996 on
Schedule 14A in File No. 1-
4748.
<PAGE>
(10)(d) Litigation Trust Agreement, Incorporated by reference to
dated as of September 17, Exhibit 1.46 to Exhibit 35 to
1990, among SINA, Resorts the Form 8 Amendment dated
International Financing, November 16, 1990, to
Inc., Griffin Resorts registrant's Form 8-K Current
Holding Inc. and Griffin Report dated August 30, 1990,
Resorts Inc. (now GGRI, in File No. 1-4748.
Inc.).
(10)(e) Amended and Restated Incorporated by reference to
Partnership Agreement of Exhibit 10.7 of Registration
Trading Cove Associates Statement No. 33-80477 of the
dated as of August 29, 1995, registrant on Form F-3.
among Sun Cove Limited, RJH
Development Corp., Leisure
Resort Technology, Inc.,
Slavik Suites, Inc. and LMW
Investments, Inc.
(10)(f) Agreement of Purchase and Page 65
Sale between Sun
International North America,
Inc., seller and Showboat
Land LLC, buyer, dated: as
of January 29, 1998.
(21) Subsidiaries of the Page 89
registrant.
(27)(a) Financial data schedule for Page 90
the year ended December 31,
1998.
(27)(b) Restated financial data Page 91
scheduled for the year ended
December 31, 1997.
</TABLE>
AGREEMENT OF PURCHASE AND SALE
SUN INTERNATIONAL NORTH AMERICA, INC., SELLER
AND
SHOWBOAT LAND LLC, BUYER
Dated: As of January 29,1998
Lot 140, Block 13
Tax Map of City of Atlantic City
Atlantic County, New Jersey
<PAGE>
AGREEMENT OF SALE
This Agreement of Sale ("Agreement") is made and entered into as of January
29, 1998 by and between Sun International North America, Inc., formerly
known as Resorts International, Inc., A Delaware corporation ("Seller"), and
Showboat Land LLC, a Nevada limited liability company
("Buyer").
BACKGROUND
A. Seller owns certain real property located on the Boardwalk in the City
of Atlantic City, County of Atlantic, currently designated as Block 13,
Lot 140 on the current Atlantic City Tax
Map and more particularly described on Exhibit A attached hereto and made a
part hereof, together with the right, title and interest of Seller,
if any, in and to the streets and in and to the land lying in
the bed of any streets, roads or avenues, open or proposed, public or private,
in front of, adjoining or abutting said real property to the center line
thereof, the air space and development rights
pertaining to said real property and the right to use such air space and
development rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging, or in any way
appertaining thereto, all easements now or hereafter benefitting said real
property and all royalties and rights appertaining to the use and enjoyment
of said real property, including, but without
limiting the generality of the foregoing, all riparian, alley, vault,
drainage, mineral, water, oil, coal,
gas and other similar rights (all of the foregoing being hereinafter
collectively referred to as the "Property").
B. Seller currently leases the Property to Atlantic City Showboat, Inc.
("Tenant"), a New Jersey corporation, pursuant to that certain Lease
Agreement dated October 26, 1983, by and
between Resorts, as landlord, and Tenant, as lessee. Thereafter, the said
lease was amended by the
parties thereto by the First Amendment to Lease Agreement dated January 15,
1985 the Second Amendment to Lease Agreement dated July 5,1985, the
Third Amendment to Lease Agreement
dated October 28,1985, the Restated Third Amendment to Lease Agreement dated
August 28,1986, the Fourth Amendment to Lease Agreement dated
December 16, 1986, the Fifth Amendment dated
2
<PAGE>
March 2,1987, the Sixth Amendment to Lease Agreement dated March 13,1987, the
Seventh Amendment to Lease Agreement dated October 18, 1988 and the Eighth
Amendment to Lease Agreement dated May 18,1993 (collectively, the "Lease").
C. Seller desires to sell to Buyer and Buyer desires to purchase the
Property from Seller,
and Seller desires to assign the Lease and Buyer desires to assume the Lease
on the terms and conditions set forth in this Agreement.
ARTICLE I
DEFINED TERMS
1.1 Definitions. In addition to the abbreviations and definitions
set forth above and in the preamble to this Agreement, the following
defined terms used in this Agreement shall have the
meanings specified below:
"Additional Exceptions" is defined in Section 3.1 of this Agreement.
"Closing" means consummation of the purchase of the Property by Buyer from
Seller in accordance with the terms and conditions of Article II of this
Agreement.
"Closing Date" means the date specified in Section 2.3 of this Agreement on
which the Closing will be held.
"Environmental Laws" means any and all federal, state or local laws,
regulations, ordinances, orders, permits and judgments and common law,
including the law of strict liability and
the law of conducting abnormally dangerous activities relating to the
protection of health and/or the
environment, including, without limitation, provisions pertaining to or
regulating air pollution, water
pollution, noise control, wetlands, water courses, natural resources,
wildlife, Hazardous Substances,
or any other activities or conditions which impact or relate to the
environment or nature.
3
<PAGE>
"Hazardous Substances" shall mean any flammable substance, explosive,
radioactive material, hazardous material, hazardous waste, toxic substance,
gasoline, petroleum product,
pollutant, contaminant or any other substance which is regulated under any
Environmental Law, including, but not limited to, asbestos, PCBs
and any "hazardous substance", "hazardous material",
"hazardous waste", "industrial waste" or similar term as defined in any and
all Environmental Laws such as, for example, Section 101(14) of the
Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. Section 9601(14) ("CERCLA"), as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"); Section 307
and 311 of the Clean Water Act, 33 U.S.C. Sections 137 and 1321; the
Hazardous Materials Transportation Act, as amended, 49
U.S.C. Sections 1801-1812; Section 1004 (5); of the Resource Conservation
Recovery Act, 42 U.S.C. Section 6903 (5); the New Jersey Industrial Sight
Recovery Act, N.J.S.A. 13:1K-6, et seq.
("ISRA"); the New Jersey Water Pollution Control Act, N.J.S.A. 58:1OA-3, et
seq.; the New Jersey Underground Storage of Hazardous Substances Act,
N.J.S.A. 58:1OA-21, et seq.; the New Jersey
Spill Compensation and Control Act, N.J.S.A. 58:10-23.11, et seq. (the "Spill
Act"); and in the rules and regulations adopted in connection with any
and all of the aforementioned Statutes and all other Environmental Laws.
"NJDEP" means New Jersey Department of Environmental Protection.
"Permitted Exceptions" is defined in Section 3.1 of this Agreement.
"Purchase Price" means the total consideration to be paid by Buyer to
Seller for the purchase of the Property pursuant to Section 2.2 of this
Agreement.
4
<PAGE>
3
"Title Company" means Commonwealth Land Title Insurance Company, Lawyers
Title Insurance Corporation and/or such other title insurance company or
companies selected by Buyer and licensed by the State of New Jersey.
"Title Policy" means the ALTA owners policy of title insurance issued by
the Title Company to Buyer which insures title to the Property as provided in
Section 3.1 of this Agreement.
1.2 Other Defined Terms. Certain other defined terms shall have the
respective meanings assigned to them elsewhere in this Agreement.
ARTICLE II
PURCHASE AND SALE
2.1 Property. On the terms and conditions stated in this Agreement,
Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees to
purchase and acquire from Seller, the Property.
2.2 Purchase Price. The Purchase Price to be paid by Buyer to Seller shall
be One Hundred Ten Million ($110,000,000.00) Dollars allocated as follows:
$57,000,000.00 - land
$53,000,000.00 - excess rent attributable to leased fee estate
The Purchase Price shall be payable to, or at the direction of Seller through,
the Title Company at the Closing by wire transfer of immediately available
funds to an account designated by Seller.
2.3 Closing. The Closing of the purchase and sale of the Property
shall take place at 10:00 a.m. on January 29,1998, at the offices of
Latham & Watkins, 885 Third
5
<PAGE>
Avenue, New York, New York 10022-4802 or such other place as may be mutually
agreed upon by Buyer and Seller.
2.4 Adiustments at Closing. There shall be no adjustments between
Buyer and Seller at Closing.
2.5 Costs of Closing. Each party is responsible for paying the legal
fees of its counsel in negotiating, preparing, and closing the transaction
contemplated by this Agreement. Buyer shall be
responsible for the cost of recording the deed, the Title Policy (as
hereinafter defined) and for all fees
and expenses of the Title Company. Buyer shall be responsible for the payment
of the realty transfer fee in connection with the transfer of title to
the Property. Each party shall be responsible for paying
any other fees, costs and expenses identified herein as being the
responsibility of such party.
Notwithstanding the foregoing, in the event a determination is made that
an additional realty transfer fee is due in connection with the conveyance of
the Property to Buyer, each party shall
be responsible for the payment of one-half of such additional realty transfer
fee and any penalties and/or interest related thereto within ten (10)
days of the date of such determination. The parties
agree to share equally any and all costs and expenses, including legal fees
with regard to any action or proceeding commenced related to the realty
transfer fee. The provisions of this sentence shall survive Closing.
2.6 Assignment of Lease and Rents. At closing, Seller shall assign and
set over to Buyer all of Seller's right, title and interest in the Lease and
rents thereunder, free and clear of all liens and encumbrances, except
Permitted Exceptions and Additional Exceptions, and Buyer
shall assume the Lease.
6
<PAGE>
ARTICLE III
CONDITION OF TITLE
3.1 Condition of Title. Title to the Property shall be good and marketable
and insurable at standard rates by the Title Company, and shall be free and
clear of all liens, encumbrances and rights of others, except for (a) those
matters set forth on Exhibit 3.1 attached hereto and made a part
hereof (the "Permitted Exceptions"). At Closing, title to the Property shall
be conveyed to Buyer, in fee simple, by bargain and sale deed with a
covenant as to grantor's acts (the "Deed") and (b) such
other matters as the Title Company shall be willing, at Buyer's request, to
omit as exceptions to coverage or to except, without special premium, with
insurance against collection out of or
enforcement against the Property (the "Additional Exceptions").
ARTICLE IV
CONDITIONS PRECEDENT; DELIVERIES
4.1 Conditions Precedent.
A. The obligation of Buyer to complete the Closing is subject to the
fulfillment (or waiver in writing by Buyer) of each of the following
conditions at or prior to the Closing:
(a) All representations and warranties made by Seller hereunder are
true, complete and correct in all material respects on the date hereof, and
shall be true, complete and accurate in all
material respects as of the Closing Date (as if then made).
(b) All covenants, agreements and obligations required by the terms of
this Agreement to be performed by Seller on or before the Closing Date shall
have been fully performed in all material respects.
7
<PAGE>
(c) Seller shall have furnished or caused to be furnished to Buyer all
of the items required to be furnished by Seller under Section 4.2 of this
Agreement.
(d) Approval of the transactions contemplated by this Agreement by the
New Jersey Casino Control Commission.
B. The obligation of Seller to complete the Closing is subject to the
fulfillment (or waiver in writing by Seller) of each of the following conditions
at or prior to Closing:
(a) All representations and warranties made by Buyer hereunder are true,
complete and correct on the date hereof, and shall be true, complete and
correct in all material respects as of the Closing Date (as if then made).
(b) All covenants, agreements and obligations required by the terms of
this Agreement to be performed by Buyer on or before the Closing Date shall have
been fully performed in all material respects.
(c) Buyer shall have furnished or caused to be furnished to Seller all
of the items required to be furnished by Buyer under Section 4.3 of this
Agreement.
4.2 Seller's Deliveries. At the Closing, Seller shall deliver or cause
to be delivered to Buyer, the following items duly executed, witnessed and/or
attested, sealed and acknowledged where so indicated by all necessary parties:
(a) The Deed, duly executed in recordable form by Seller.
8
<PAGE>
(b) The Assignment and Assumption of Lease in the form attached
hereto as Exhibit 4.2(b).
(c) Affidavit of title attached hereto as Exhibit 4.2(c).
(d) Resolution of the Board of Directors of Seller authorizing the sale
of the Property to Buyer in accordance with the terms of this Agreement.
(e) Discharge of Mortgage recorded in Mortgage Book 4445, page 209 et seq.
and Assignment recorded in Deed Book 5136, page 45.
(f) The Estoppel Certificate in the form attached hereto as Exhibit
4.2(h).
4.3 Buyer's Deliveries. At the Closing, Buyer shall deliver or cause to
be delivered to Seller or the Title Company, the following items:
(a) The payment required by Section 2.2 of this Agreement.
(b) The Assignment and Assumption of Lease in the form attached
hereto as Exhibit 4.2(b).
(c) The Estoppel Certificate of Tenant in the form attached hereto
as Exhibit 4.3(c).
(d) Resolution of the Buyer authorizing the purchase of the Property in
accordance with the terms of this Agreement.
9
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 Representations and Warranties. The following representations and
warranties of Seller are true, complete and correct in all material respects
on the date hereof and shall be true, complete and correct in all material
respects on the Closing Date (as if then made):
(a) Seller has the full legal right, power and authority to enter into,
execute, deliver and perform all of its obligations under this Agreement.
All requisite action necessary to authorize
Seller to enter into this Agreement and to carry out its obligations hereunder
have been, or on the Closing Date will have been, taken. The execution and
delivery of this Agreement by Seller constitutes the valid and legally
binding obligation of Seller to perform this Agreement, enforceable
against Seller in accordance with its terms.
(b) Seller has not received any written notice of any pending or
threatened condemnation action with respect to all or any portion of the
Property, and to the best of Seller's knowledge, there are no existing
condemnation or other legal proceedings affecting the Property by
any governmental authority having jurisdiction over or affecting all or any
part of the Property.
(c) No permission, consent or approval by any third party or, to the
best of Seller's knowledge, any governmental authority is required to be
obtained by Seller in order for Seller to
consummate the transactions contemplated by this Agreement.
10
<PAGE>
(d) There are no actions, suits or proceedings pending or, to the
best of Seller's knowledge or the knowledge of its affiliates, threatened
affecting the Property or any portion thereof.
(e) Seller and each of its affiliates have not received written notice
that the Property is in violation of any Environmental Laws. Seller and each
of its affiliates have no knowledge of the
release of Hazardous Substance on or from the Property or to the Property from
any adjacent property, or any potential or known liability which has
resulted in or may result in a lien on the
Property or which is or may result in a violation of any Environmental Laws.
Seller and each of its affiliates have not received written notice of a
threatened or pending Regulatory Action (hereinafter
defined) and has not received any written notification that it is or may be
potentially responsible or liable for clean-up, testing or other remedial
activities at any site including, without limitation, the
Property. "Regulatory Action" is defined as any violation, complaint,
citation, request for information, order, directive, compliance schedule,
notice of claim, consent decree, action, litigation
or proceeding brought by or instituted by any governmental authority under or
in connection with any Environmental Law.
(f) To the best of Seller's knowledge and belief, the Lease is in full
force and effect and no default or event, which with notice, the passage of
time or both would constitute a default,
has occurred thereunder. Tenant under the Lease is current in the payment of
rent and all other amounts due under the Lease.
(g) The representations and warranties of Seller contained herein shall
not survive the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
11
<PAGE>
The following representations and warranties of Buyer are true, complete
and correct in all material respects on the date hereof and shall be true,
complete and correct in all material respects on the Closing Date (as if
then made):
(a) Buyer has the full legal right, power and authority to enter into,
execute, deliver and perform all of its obligations under this Agreement.
All requisite action necessary to authorize
Buyer to enter into this Agreement and to carry out Buyer's obligations
hereunder has been, or on the Closing Date will have been, taken. The
execution and delivery of this Agreement by Buyer
constitutes the valid and legally binding obligation of Buyer to perform this
Agreement, enforceable in accordance with its terms.
(b) Buyer and each of Buyer's affiliates have not received any written
notice of any pending or threatened condemnation action with respect to all
or any portion of the Property, and to the best of Buyer's knowledge,
there are no existing condemnation or other legal proceedings
affecting the Property by any governmental authority having jurisdiction over
or affecting all or any part of the Property.
(c) No permission, consent or approval by any third party or, to the
best of Buyer's knowledge, any governmental authority is required to be
obtained by Buyer in order for Buyer to
consummate the transactions contemplated by this Agreement, except the consent
or approval of the New Jersey Casino Control Commission which may be required to
be obtained by Buyer and/or Tenant.
12
<PAGE>
(d) There are no actions, suits or proceedings pending or, to the best
of Buyer's knowledge or the knowledge of its affiliates, threatened affecting
the Property or any portion thereof.
(e) Buyer and each of its affiliates have not received written notice
that the Property is in violation of any Environmental Laws. Buyer and each of
its affiliates have no knowledge of the
release of Hazardous Substance on or from the Property or to the Property from
any adjacent property, or any potential or known liability which has resulted
in or may result in a lien on the Property or which is or may result in a
violation of any Environmental Laws. Buyer and each of its
affiliates have not received written notice of a threatened or pending
Regulatory Action and has not received any notification that it is or may be
potentially responsible or liable for clean-up, testing
or other remedial activities at any site including, without limitation, the
Property.
(f) To the best of Tenant's knowledge and belief, the Lease is in full
force and effect and no default or event, which with notice, the passage of
time or both would constitute a default, has occurred thereunder.
(g) The representations and warranties of Buyer contained herein shall not
survive the Closing.
13
<PAGE>
ARTICLE VII
BROKERAGE COMMISSIONS
Seller and Buyer each warrant to the other that neither has incurred any
obligation for a real
estate or brokerage commission with respect to this transaction, and each
hereby agrees to defend,
indemnify, and hold harmless the other for any loss, cost, or expense which
may result from a breach
of this warranty.
ARTICLE VIII
CONDEMNATION
If, prior to the Closing, there shall occur a threatened or actual taking or
condemnation of all
or any substantial portion of the Property, then, in such event, Buyer shall
have the right to terminate
this Agreement by written notice delivered to Seller within ten (10) days
after Buyer has received
written notice from Seller of such an event ("Seller's Condemnation Notice").
If Buyer elects to
terminate this Agreement pursuant to the preceding sentence, the parties shall
have no further rights
or obligations under this Agreement, one to the other with respect to the
subject matter of this
Agreement. If this Agreement is not terminated by Buyer, it shall remain in
full force and effect, and
Seller, upon the Closing, at Buyer's election, shall either (i) pay to Buyer
any award collected by
Seller as a result of said taking, deducting from same the reasonable expenses
of Seller, including
attorneys' fees, incurred in the collection of same, or (ii) assign, transfer
and set over to Buyer all of
Seller's right, title and interest in and to any awards to be made on account
of said taking, as the case
may be.
ARTICLE IX
MISCELLANEOUS
14
<PAGE>
9.1 Notices. All notices, demands, approvals, consents, requests and other
communications required or permitted hereunder shall be in writing, and shall
be deemed to be properly delivered (i) on receipt if delivered by hand, (ii)
the next business day if delivered overnight
delivery by a nationally recognized overnight courier service provided it is
delivered, and (iii) whether actually received or refused three (3) days after
having been deposited in a regularly
maintained receptacle for the United States mail, registered or certified,
return receipt requested, postage prepaid, addressed as follows:
If to Seller: Sun International North America, Inc.
1133 Boardwalk
Atlantic City, NJ 08401
Attn: Charles D. Adamo, Esq.
With a copy to: William C. Murtha, Esq.
Senior Corporate Counsel
Sun International North America, Inc.
1133 Boardwalk
Atlantic City, NJ 08401
and to: James P. Gerkis, Esq.
Whitman, Breed, Abbott & Morgan LLP
200 Park Avenue
New York, NY 10166
If to Buyer: R. Craig Bird, Executive Vice President
Finance and Administration
Showboat Incorporated
6601 Ventnor Avenue
Ventnor, NJ 08406
With a copy to: John Brewer, Esq.
Kummer, Kaempfer, Bonner & Renshaw
Seventh Floor
3800 Howard Hughes Parkway
Las Vegas, Nevada 89109
15
<PAGE>
and to: Arthur E. Sklar, Esq.
Levine, Staller, Sklar, Chan, Brodsky & Donnelly, P.A.
3030 Atlantic Avenue
Atlantic City, NJ 08401
Any of the addresses for notice may be changed by delivery of written
notice in connection herewith.
9.2 Entire Agreement and Amendments. This Agreement embodies the entire
agreement between the parties with respect to the Property and supersedes
all prior agreements and understandings, if any, relating to the Property,
and may be amended or supplemented only by an
instrument in writing executed by the party against whom enforcement is sought.
9.3 Parties Bound. This Agreement shall be binding upon and inure to the
benefit of Seller and Buyer, and their respective legal representatives,
successors and assigns.
9.4 Time is of the Essence. It is expressly agreed by Seller and Buyer
that time is of the essence with respect to this Agreement.
9.5 Attorney's Fees. If either party hereto shall be required to
employ an attorney to enforce or defend the rights of such party hereunder,
the prevailing party will be entitled to recover
its reasonable attorneys fees, costs and disbursements.
9.6 Multiple Counterparts; Facsimile Signatures. This Agreement may be
executed and delivered in any number of counterparts, all of which taken
together shall constitute one and the
same agreement and either of the parties hereto may execute this
16
<PAGE>
Agreement by signing and delivering any such counterpart. Signatures
delivered by telecopier or similar device shall be deemed the equivalent
of an original signature. At the request of a party, the
other party shall deliver to the requesting party a signature page bearing
the original signature of such party.
9.7 Severability. If any provision of this Agreement shall, for any
reason, be held violative of any applicable law, and so much of this Agreement
is held to be unenforceable, then the invalidity of such specific provision
shall not be held to invalidate any other provision of this
Agreement which shall remain in full force and effect.
9.8 Assignment. This Agreement may not be assigned by Buyer, in whole or
in part, without the prior written consent of Seller.
9.9 Governing Law. The terms and conditions of this Agreement shall be
governed by the internal laws of the State of New Jersey.
9.10 Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts and when executed by each of the parties hereto shall constitute a
binding, single agreement and execution of this document and any Exhibits
hereto by facsimile signature shall be acceptable and
deemed the same as original signatures. The party delivering the facsimile
signature shall promptly deliver a live signature page to the other party.
17
<PAGE>
EXECUTED by Buyer this ___ day of January, 1998
Showboat Land LLC
By: Showboat Operating Company, a
member
By:
R. Craig Bird
Executive Vice-President and
Chief Financial Officer
Acknowledged and Agreed to:
Atlantic City Showboat, Inc.
By:
Herbert R. Wolfe
President
18
<PAGE>
EXECUTED by Seller this ___ day of January, 1998
Sun International North America, Inc.
By:
John Allison
Executive Vice President-Finance &
Chief Financial Officer
19
<PAGE>
INDEX OF EXHIBITS
A. Legal Description
3.1 Permitted Exceptions
4.2(b) Assignment and Assumption of Lease
4.2(c) Affidavit of Title
4.2(h) Estoppel Certificate of Seller
4.3(c) Estoppel Certificate of Tenant
20
<PAGE>
EXHIBIT A
Legal Description
21
<PAGE>
EXHIBIT 3.1
Permitted Exceptions
1. LANDLORDS WAIVER: between Resorts International Inc. and Maryland
National
Leasing Corporation dated September 18,1986 recorded December 30,1986 in
Deed Book 4372 page 282.
2. AGREEMENT AS TO ASSUMPTION OF OBLIGATIONS WITH RESPECT TO
PROPERTIES: between Atlantic City Showboat Inc., a New Jersey
Corporation,
Trump Taj Mahal Associates Limited Partnership, a New Jersey Limited
Partnership, Trump Taj Mahal Realty Corp., a New Jersey Corporation and
Resorts International Inc., a Delaware Corporation dated September 21,
1988 and
recorded November 17,1988 in Deed Book 4795 page 243 and as amended by
First Amendment recorded in Deed Book 4966 page 181.
3. AGREEMENT AS TO ASSUMPTION OF OBLIGATIONS WITH RESPECT TO
PROPERTIES: Between Atlantic City Showboat, Inc., a New Jersey
Corporation,
Trump Taj Mahal Associates Limited Partnership, a New Jersey Limited
Partnership, Trump Taj Mahal Realty Corp., a New Jersey Corporation, and
Resorts International Inc. a Delaware Corporation dated September 21, 1988
recorded March 14,1989 in Deed book 4863 page 5.
4. Restrictions, covenants, agreements, and easements contained in Deed
Book 2436 page 110; Misc. Book 12 page 242; and Misc. Book 12 page 377.
5. Restrictions, covenants, agreements and easements, contained in Deed
Book 3978 page 219, Certification in Deed Book 4524 page 192 as modified in
Deed Book 4646 page 166 and in Deed Book 3846 page 199 as amended by
Correction and Confirmatory Deed in Deed Book 4636 page 218, and Deed Book
4016 page 70.
6. Rights granted to the Atlantic City Electric Company in Deed Book 1991
page 100.
7. Rights of the Federal Government to take, without compensation, any
land now or
formerly flowed by tidal waters for the purpose of commerce and navigation
and its authority to regulate and control navigation and in that connection
to establish and change bulkhead and pierhead lines.
8. Easement for Service Road over a portion of premises (Lot 140 Block
13) described as Parcel D on Exhibit A.
22
<PAGE>
9. Estate and interest under the terms and provisions of lease by Resorts
International Inc. a Delaware Corporation to Ocean Showboat Inc. a New Jersey
Corporation Short Form Lease dated October 26,1983 recorded January 18,1984
in Deed Book 3878 page 1.
10. Taxes, charges and assessments.
11. Liability for additional assessment for tax in connection with new
construction pursuant to N.J.S.A. 54:4-63.1 et seq.
12. Water charges, if any, affecting the premises in question.
13. Rights or claims of parties in possession not shown by the public
records, limited, however, to the Lease.
14. Encroachments, overlaps, boundary line disputes, or other matters
which would be disclosed by an accurate survey and inspection of the Property.
15. Any liens, or right to a lien, for services, labor, or material
heretofore or hereafter furnished,
imposed by law and not shown by the public record, except such liens
attributable to Seller.
16. Terms and conditions contained in Riparian Grants from the State of
New Jersey to Benjamin Brown, recorded March 28,1882 in Deed Book 88, page 80
and to James B. Reilly,
recorded August 11,1899 in Deed Book 233, page 417 provided, however, the Title
Company insures that the grantees in the Riparian Grants were the upland
owners at the time said Grants were given.
DECLARATION OF COMMENCEMENT DATE OF LEASE: by Resorts International Inc. a
Delaware Corporation and Ocean Showboat Inc. a New Jersey Corporation dated
December 15,1983 recorded May 1,1984 in Deed Book 3911 page 63.
ASSIGNMENT AND ASSUMPTION OF LEASE: by Ocean Showboat Inc. a New Jersey
Corporation to Atlantic City Showboat, Inc. a New Jersey Corporation dated
December 3, 1984 recorded December 24,1984 in Deed Book 4004 page 310.
FIRST AMENDMENT TO LEASE: between Resorts International Inc. a Delaware
Corporation and Atlantic City Showboat Inc. a New Jersey Corporation dated
January 15, 1985 recorded August 16,1985 in Deed Book 4107 page 141.
23
<PAGE>
SECOND AMENDMENT TO LEASE: between Resorts International Inc. a Delaware
Corporation and Atlantic City Showboat Inc. a New Jersey Corporation dated
July 5,1985 recorded November 25,1985 in Deed Book 4158, page 221.
THIRD AMENDMENT TO LEASE: between Resorts International Inc. a Delaware
Corporation and Atlantic City Showboat Inc. a New Jersey Corporation dated
October 28, 1985 recorded November 25,1985 in Deed Book 4158, page 227.
RESTATED THIRD AMENDMENT TO LEASE: between Resorts International Inc. a
Delaware Corporation and Atlantic City Showboat, Inc. a New Jersey Corporation
dated October 28,1985 recorded February 20,1987 in Deed Book 4406 page 17.
FOURTH AMENDMENT TO LEASE: between Resorts International Inc. a Delaware
Corporation and Atlantic City Showboat Inc. a New Jersey Corporation dated
December 16,1986 recorded February 20,1987 in Deed Book 4406, page 37.
FIFTH AMENDMENT TO LEASE: between Resorts International Inc. a Delaware
Corporation and Atlantic City Showboat Inc. a New Jersey Corporation dated
March 2, 1987 recorded March 23,1987 in Deed Book 4421 page 10.
SIXTH AMENDMENT TO LEASE: between Resorts International Inc. a Delaware
Corporation and Atlantic City Showboat, Inc. a New Jersey Corporation dated
March 13, 1987 recorded March 23, 1987 in Deed Book 4421 page 17.
SEVENTH AMENDMENT TO LEASE: between Resorts International Inc. a Delaware
Corporation and Atlantic City Showboat, Inc. a New Jersey Corporation date
October 18, 1988 recorded December 19,1988 in Deed Book 4814 page 231.
EIGHTH AMENDMENT TO LEASE: between Resorts International Inc., a Delaware
Corporation and Atlantic City Showboat, Inc. a New Jersey Corporation dated
May 18, 1993 recorded May 18,1993 in Deed Book 5500, page 284.
24
EXHIBIT (21)
SUN INTERNATIONAL NORTH AMERICA, INC.
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1998
Percentage of
Outstanding
Place of Stock Held
Name of Subsidiary Incorporation By Registrant
GGRI, Inc. Delaware 100%
New Pier Operating Company, Inc. New Jersey 100%
Resorts International
Hotel Financing, Inc. Delaware 100%
Resorts International Hotel, Inc. New Jersey (1)
Sun Cove Ltd. Connecticut 100%
Sun International Development
Group, Inc. New Jersey 100%
Sun International New York, Inc. New York 100%
Sun International Resorts, Inc. Florida 100%
PIV, Inc. Florida (2)
_____________________
(1) 100% owned by GGRI, Inc.
(2) 100% owned by Sun International Resorts, Inc.
The registrant's subsidiaries generally do business in their
respective corporate names or distinctive short forms thereof which are
readily identifiable. Resorts International Hotel, Inc. uses the name
Resorts Casino Hotel extensively.
The names of certain subsidiaries, which considered in the
aggregate did not constitute a "significant subsidiary" as of December
31, 1998 as defined in Rule 1-02(w) of Regulation S-X, have been
omitted.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUN
INTERNATIONAL NORTH AMERICA, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO INCLUDED IN THE FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> $25,160<F1>
<SECURITIES> 0
<RECEIVABLES> $6,670
<ALLOWANCES> $2,436
<INVENTORY> $1,523
<CURRENT-ASSETS> $46,958
<PP&E> $285,537
<DEPRECIATION> $22,843
<TOTAL-ASSETS> $485,966
<CURRENT-LIABILITIES> $48,620
<BONDS> $205,940<F2>
0
0
<COMMON> 0
<OTHER-SE> $189,153
<TOTAL-LIABILITY-AND-EQUITY> $485,966
<SALES> 0
<TOTAL-REVENUES> $280,008
<CGS> 0
<TOTAL-COSTS> $210,325
<OTHER-EXPENSES> $15,529<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $20,977
<INCOME-PRETAX> $(1,872)
<INCOME-TAX> $38
<INCOME-CONTINUING> $(1,834)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $(1,834)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES NON-RESTRICTED CASH EQUIVALENTS OF $12,212.
<F2>NET OF UNAMORTIZED (DISCOUNTS) PREMIUMS.
<F3>DEPRECIATION EXPENSE OF $12,398 AND AMORTIZATION EXPENSE OF $3,131.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUN
INTERNATIONAL NORTH AMERICA, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO INCLUDED IN THE FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> $50,814<F1>
<SECURITIES> 0
<RECEIVABLES> $7,317
<ALLOWANCES> $3,074
<INVENTORY> $1,730
<CURRENT-ASSETS> $67,724<F2>
<PP&E> $222,482
<DEPRECIATION> $11,630
<TOTAL-ASSETS> $595,204
<CURRENT-LIABILITIES> $46,959
<BONDS> $311,258<F3>
0
0
<COMMON> 0
<OTHER-SE> $190,987
<TOTAL-LIABILITY-AND-EQUITY> $595,204
<SALES> 0
<TOTAL-REVENUES> $297,633
<CGS> 0
<TOTAL-COSTS> $220,775
<OTHER-EXPENSES> $14,372<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $27,726
<INCOME-PRETAX> $5,276
<INCOME-TAX> $(4,340)
<INCOME-CONTINUING> $936
<DISCONTINUED> 0
<EXTRAORDINARY> $(2,957)
<CHANGES> 0
<NET-INCOME> $(2,021)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES NON-RESTRICTED CASH EQUIVALENTS OF $32,508 AND RESTRICTED CASH
EQUIVALENTS OF $3,902.
<F2>RESTATED DUE TO CERTAIN RECLASSES MADE TO CONFORM WITH CURRENT YEAR
PRESENTATION.
<F3>NET OF UNAMORTIZED (DISCOUNTS) PREMIUMS.
<F4>INCLUDES DEPRECIATION EXPENSE OF $11,705 AND AMORTIZATION OF $2,667.
</FN>
</TABLE>
