Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF l934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 33-50733-02
Resorts International Hotel, Inc.
(Exact name of registrant as specified in its charter)
NEW JERSEY 21-0423320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1133 Boardwalk, Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 344-6000
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No
Number of shares outstanding of registrant's common stock as of May 6,
1994: 1,000,000, all of which are owned by one shareholder. Accordingly
there is no current market for any of such shares.
Total No. of Pages 24
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RESORTS INTERNATIONAL HOTEL, INC.
FORM l0-Q
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements
of Operations for the
Quarters Ended March 31,
1994 and 1993 3
Consolidated Balance Sheets
at March 31, 1994 and
December 31, 1993 4
Consolidated Statements
of Cash Flows for the
Quarters Ended March 31,
1994 and 1993 5
Notes to Consolidated
Financial Statements 6
Pro Forma Financial Data 14
Item 2. Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 19
Part II. Other Information
Item 6. Exhibits and Reports on
Form 8-K 21
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
(Unaudited)
Quarter Ended
March 31,
1994 1993
Revenues:
Casino $53,649 $54,907
Rooms 1,178 1,263
Food and beverage 3,114 3,294
Other casino/hotel revenues 932 872
58,873 60,336
Expenses:
Casino 33,692 30,437
Rooms 710 807
Food and beverage 3,577 3,718
Other casino/hotel operating expenses 8,605 8,266
Selling, general and administrative 10,540 11,478
Provision for doubtful receivables 168 137
Depreciation 3,272 3,049
60,564 57,892
Earnings (loss) from operations (1,691) 2,444
Other income (deductions):
Interest income 1,924 1,883
Interest expense (4) (87)
Recapitalization costs (604) (198)
Net earnings (loss) $ (375) $ 4,042
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RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, except par value)
March 31, December 31,
1994 1993
(Unaudited)
ASSETS
Current assets:
Cash (including cash equivalents
of $12,592 and $11,446) $ 24,225 $ 25,947
Receivables, less allowance for doubtful
accounts of $4,427 and $4,538 4,470 5,114
Interest receivable from affiliate 2,813 1,125
Note receivable from affiliate 50,000 50,000
Inventories 1,485 1,754
Prepaid expenses 4,596 5,642
Total current assets 87,589 89,582
Property and equipment, net of accumulated
depreciation of $39,093 and $35,821 161,656 163,320
Deferred charges and other assets 11,524 11,262
$ 260,769 $ 264,164
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Current maturities of long-term debt $ 66 $ 74
Accounts payable and accrued liabilities 25,002 24,813
Notes payable to affiliate 325,000 325,000
Due to parent company 39,659 42,859
Total current liabilities 389,727 392,746
Long-term debt 12 13
Deferred income taxes 19,400 19,400
Shareholder's deficit:
Common stock - $1 par value, 100 shares
issued and outstanding
Excess of liabilities over assets at
August 31, 1990 reorganization (198,829) (198,829)
Retained earnings 50,459 50,834
Total shareholder's deficit (148,370) (147,995)
$ 260,769 $ 264,164
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RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Quarter Ended
March 31,
1994 1993
Cash flows from operating activities:
Cash received from customers $ 58,547 $ 60,077
Cash paid to suppliers and employees (54,361) (54,105)
Cash flow from operations
before interest 4,186 5,972
Interest received 210 3,554
Interest paid (4) (87)
Net cash provided by operating
activities 4,392 9,439
Cash flows from investing activities:
Payments for property and equipment (1,608) (5,489)
CRDA deposits and bond purchases (693) (664)
Net cash used in investing
activities (2,301) (6,153)
Cash flows from financing activities:
Repayments of advances from parent
company and affiliates (3,200) (7,584)
Recapitalization costs paid to parent (604) (198)
Debt repayments (9) (200)
Net cash used in financing
activities (3,813) (7,982)
Net decrease in cash
and cash equivalents (1,722) (4,696)
Cash and cash equivalents at
beginning of period 25,947 22,643
Cash and cash equivalents at
end of period $ 24,225 $ 17,947
5
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RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. General:
The accompanying consolidated interim financial statements, which are
unaudited, include the operations of Resorts International Hotel, Inc.
("RIH") and its subsidiaries. RIH owns and operates Merv Griffin's Resorts
Casino Hotel ("Resorts Casino Hotel"), a casino/hotel complex located in
Atlantic City, New Jersey.
Prior to May 3, 1994, RIH was a wholly owned subsidiary of Resorts
International, Inc. ("RII"). As part of a restructuring (the
"Restructuring") of certain publicly held debt securities of RII (the
"Series Notes") which was effective on May 3, 1994 (the "Effective Date"),
RIH became a wholly owned subsidiary of GGRI, Inc. ("GGRI"), which is a
wholly owned subsidiary of RII.
While the accompanying interim financial information is unaudited,
management of RIH believes that all adjustments necessary for a fair
presentation of these interim results have been made and all such
adjustments are of a normal recurring nature.
Significant accounting principles and policies used in the preparation
of the accompanying consolidated financial statements are summarized below.
Principles of Consolidation
The consolidated financial statements include the accounts of RIH and
its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.
Revenue Recognition
RIH records as revenue the win from gaming activities which represents
the difference between amounts wagered and amounts won by patrons.
Revenues from hotel and related services and from theatre ticket sales are
recognized at the time the related service is performed.
Complimentary Services
The Consolidated Statements of Operations reflect each category of
operating revenues excluding the retail value of complimentary services
provided to casino patrons without charge. The rooms, food and beverage,
and other casino/hotel operations departments allocate a percentage of
their total operating expenses to the casino department for complimentary
services provided to casino patrons. These allocations do not necessarily
represent the incremental cost of providing such complimentary services to
casino patrons.
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Amounts allocated to the casino department from the other operating
departments were as follows:
Quarter Ended
March 31,
(In Thousands of Dollars) 1994 1993
Rooms $ 972 $ 905
Food and beverage 3,583 4,072
Other casino/hotel operations 1,607 1,702
Total allocated to casino $6,162 $6,679
Cash Equivalents
RIH considers all of its short-term money market securities purchased
with maturities of three months or less to be cash equivalents. The
carrying value of cash equivalents approximates fair value due to the short
maturity of these instruments.
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 depreciated over their estimated useful
lives using the straight-line method for financial reporting purposes.
Casino Reinvestment Development Authority ("CRDA") Obligations
Under the New Jersey Casino Control Act ("Casino Control Act"), RIH is
obligated to purchase CRDA bonds, which will bear a below-market interest
rate, or make an alternative qualifying investment. RIH 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 RIH actually
purchases the CRDA bond, the estimated discount previously recorded is
adjusted to reflect the actual 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.
Income Taxes
RIH and RII's other domestic subsidiaries file consolidated federal
income tax returns with RII.
RIH accounts for income taxes under the liability method of accounting
prescribed by Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes." Although RIH is a member of a
consolidated group for federal income tax purposes, RIH applies SFAS 109 on
a separate return basis for financial reporting purposes.
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B. Restructuring of RII Series Notes:
RII and GGRI, RII's subsidiary which guaranteed the Series Notes,
proposed the Restructuring of the Series Notes which was accomplished
through a prepackaged bankruptcy plan of reorganization (the "Plan"). On
March 21, 1994, after receiving the requisite acceptances for confirmation
of the Plan from holders of the Series Notes and equity interests in RII,
RII and GGRI filed their prepackaged bankruptcy cases with the United
States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). The Plan was confirmed by the Bankruptcy Court on April 22, 1994
and on the Effective Date all conditions to the effectiveness of the Plan
were either met or waived and the Plan became effective.
Pursuant to the Plan, the Series Notes were exchanged for, among other
things, $125,000,000 principal amount of 11% Mortgage Notes (the "Mortgage
Notes") due September 15, 2003 and $35,000,000 principal amount of 11.375%
Junior Mortgage Notes (the "Junior Mortgage Notes") due December 15, 2004.
Hereinafter the Mortgage Notes and the Junior Mortgage Notes, collectively,
are referred to as the "New Debt Securities." The New Debt Securities were
issued by Resorts International Hotel Financing, Inc. ("RIHF"), a recently
formed subsidiary of RII, and are guaranteed by RIH. Also pursuant to the
Plan, RIHF, RIH and RII entered into the senior note purchase agreement
(the "Senior Facility") described below.
The Mortgage Notes are secured by a $125,000,000 promissory note made
by RIH (the "RIH Promissory Note"), the terms of which mirror the terms of
the Mortgage Notes. The RIH Promissory Note and RIH's guaranty of the
Mortgage Notes are secured by liens on the Resorts Casino Hotel, consisting
of RIH's fee and leasehold interests comprising the Resorts Casino Hotel,
the contiguous parking garage and property, all additions and improvements
thereto, and related personal property. The liens securing the Mortgage
Notes will be subordinated to the lien securing the Senior Facility Notes
(described below), if the Senior Facility Notes are issued.
The Junior Mortgage Notes are secured by a $35,000,000 promissory note
made by RIH (the "RIH Junior Promissory Note"), the terms of which mirror
the terms of the Junior Mortgage Notes. The RIH Junior Promissory Note and
RIH's guaranty of the Junior Mortgage Notes are also secured by liens on
the Resorts Casino Hotel property as described above. The liens securing
the Junior Mortgage Notes will be subordinated to the lien securing the
Senior Facility Notes, if the Senior Facility Notes are issued, and are
subordinated to the liens securing the Mortgage Notes.
The indentures pursuant to which the Mortgage Notes and the Junior
Mortgage Notes were issued (collectively, the "Indentures") prohibit RIH
and its subsidiaries from paying dividends, from making other distributions
in respect of their capital stock, and from purchasing or redeeming their
capital stock, with certain exceptions, unless certain interest coverage
ratios are attained.
The Indentures also contain certain other restrictive covenants on the
part of RIH and its subsidiaries, including (i) limitations on incurring
additional indebtedness, with certain exceptions; (ii) restrictions on
making loans to an affiliate or other person other than (x) intercompany
advances to RII not in excess of $1,000,000 in the aggregate at any time
outstanding and (y) loans to RII from the proceeds of the Senior Facility
(or similar working capital facility), provided, however, that RIH can make
certain loans or engage in certain credit transactions in the operation of
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Resorts Casino Hotel, if such loans or credit transactions are in the
ordinary course of business of operating a casino/hotel; and (iii)
restrictions from entering into certain transactions with affiliates on
terms less favorable to RIH or its subsidiaries than an arm's length
transaction. In this regard, the Indentures specifically permit affiliated
transactions in connection with the Senior Facility, the Griffin Services
Agreement described in Note E, the parent services agreement with RII which
provides for payment of the three percent services fee described in Note E,
and a tax sharing agreement with RII which limits RIH's tax payments to RII
to reimbursements of cash payments made by RII for income or alternative
minimum taxes arising from the earnings or operations of RIH.
The Senior Facility among RIHF, RII and RIH and certain funds and
accounts advised or managed by Fidelity Management & Research Company
("Fidelity"), is available for a single borrowing of up to $20,000,000
during the one-year period following the Effective Date, through the
issuance of notes (the "Senior Facility Notes"). If issued, the Senior
Facility Notes will bear interest at 11% and will be due in 2002. The
Senior Facility Notes will be senior obligations of RIHF secured by a
promissory note from RIH in an aggregate principal amount of up to
$20,000,000 payable in amounts and at times necessary to pay the principal
of and interest on the Senior Facility Notes. The Senior Facility Notes
will be guaranteed by RIH and secured by a lien on the Resorts Casino Hotel
property as described above. The Senior Facility Notes will also be
secured by a pledge by GGRI of all issued and outstanding shares of RIH
common stock. In addition, the Senior Facility Notes will be guaranteed by
RII, which guaranty will be secured by a pledge of all the issued and
outstanding stock of GGRI and RIHF.
The Restructuring prescribed various intercompany transactions in
connection with RIH's issuance of the promissory notes collateralizing the
New Debt Securities which resulted in (i) the cancellation of the
$325,000,000 Second Amended RIH-GGRI Notes (see Note D), (ii) the
cancellation of the $50,000,000 RIB Note (see Note C), (iii) RIH
distributing all of its cash and equivalents in excess of $15,000,000 to
RII, so that RII, in turn, could distribute Excess Cash (as defined in the
Plan) to holders of Series Notes, and (iv) RIH becoming a wholly owned
subsidiary of GGRI. In order to accomplish the last preceding item, (x)
RIH authorized an additional 4,997,500 shares of its common stock, (y) RIH
issued 999,900 shares of its common stock to GGRI, and (z) RII transferred
the 100 shares of RIH common stock which it had owned to GGRI. RIH now has
a total of 5,000,000 shares of common stock authorized, of which 1,000,000
shares are issued and outstanding.
Because the Plan became effective on May 3, 1994, the Restructuring
transactions are not reflected in the accompanying consolidated financial
statements. See "Pro Forma Financial Data" following Note H.
C. Note Receivable from Affiliate:
In 1988, RIH loaned $50,000,000 pursuant to a pre-arranged
back-to-back loan to Resorts International (Bahamas) 1984 Limited ("RIB"),
an indirect wholly owned subsidiary of RII which was disposed of as part of
the Restructuring, in exchange for a promissory note (the "RIB Note").
Such note was payable on demand and bore interest at 13 1/2% per annum,
with interest payments due each May 1 and November 1. The note was
guaranteed by certain of RIB's subsidiaries. The guarantees were secured
by mortgages on the Paradise Island Resort & Casino, the Ocean Club Golf
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& Tennis Resort, and the Paradise Paradise Beach Resort on Paradise Island
in The Bahamas, and all furniture, machinery and equipment used in
connection therewith. The RIB Note was cancelled pursuant to the
Restructuring. See Note B.
D. Notes Payable to Affiliate:
In 1988, GGRI issued $325,000,000 principal amount of publicly traded
notes. GGRI loaned the proceeds of the notes to RIH in exchange for (i)
two promissory notes payable to GGRI (the "RIH-GGRI Notes"); (ii) a first
mortgage on the Resorts Casino Hotel and the other properties owned by RIH,
and a first priority security interest in the personal property of RIH; and
(iii) the assignment of the RIB Note and mortgages securing such note.
In 1990 the terms of the RIH-GGRI Notes were modified and such amended
notes were pledged as collateral for the Series Notes issued by RII. In
1992 the notes were further amended (the "Second Amended RIH-GGRI Notes").
The sole purpose of the Second Amended RIH-GGRI Notes was to collateralize
RII's Series Notes. The Second Amended RIH-GGRI Notes were payable on
demand after April 15, 1994 and were non-interest bearing, but the
principal due on demand by GGRI accreted according to a schedule. The
Second Amended RIH-GGRI Notes were cancelled pursuant to the Restructuring.
See Note B.
E. Related Party Transactions:
Affiliated Charges from RII
RII charges RIH a fee of three percent of gross revenues for
administrative and other services. Recapitalization costs reflected on the
Consolidated Statements of Operations represent RIH's allocated portion,
approximately one-third, of RII's consolidated recapitalization costs.
Also, RII charges RIH $325,000 annually for rental of a warehouse.
In addition to the above, charges for insurance cost are allocated to
RIH based on relative amounts of operating revenue, payroll, property
value, or other appropriate measures.
License and Services Agreement
In April 1993, RII, RIH and The Griffin Group, Inc. (the "Griffin
Group"), a corporation controlled by Merv Griffin, Chairman of the Board of
RII, entered into a license and services agreement (the "Griffin Services
Agreement") effective as of September 17, 1992, upon the expiration of the
previous license and services agreement.
Pursuant to the Griffin Services Agreement, Griffin Group granted RII
and RIH a non-exclusive license to use the name and likeness of Merv
Griffin to advertise and promote the facilities and operations of RII and
its subsidiaries. Also pursuant to the Griffin Services Agreement, Mr.
Griffin is to provide certain services to RII and RIH, including serving as
Chairman of the Board of RII and as a host, producer and featured performer
in various shows to be presented in Resorts Casino Hotel, and furnishing
marketing and consulting services.
The Griffin Services Agreement will continue in force until September
17, 1997 unless earlier terminated under certain circumstances including,
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among others, a change of control (as defined) of the Company and Mr.
Griffin ceasing to serve as Chairman of the Board of RII.
The Griffin Services Agreement provides for compensation to Griffin
Group in the amount of $2,000,000 for the year ended September 16, 1993,
and in specified amounts for each of the following years, which increase at
approximately 5% per year. In accordance with the Griffin Services
Agreement, upon signing RIH paid Griffin Group $4,100,000, representing
compensation for the first two years. Thereafter, the Griffin Services
Agreement calls for annual payments on September 17, each representing a
prepayment for the year ending two years hence. In the event of an early
termination of the Griffin Services Agreement, and depending on the
circumstances of such early termination, all or a portion of the
compensation paid to Griffin Group in respect of the period subsequent to
the date of termination may be required to be repaid to RII and RIH.
RII and RIH agreed to indemnify, defend and hold harmless Griffin
Group and Mr. Griffin against certain claims, losses and costs, and to
maintain certain insurance coverage with Mr. Griffin and Griffin Group as
named insureds.
F. Income Taxes:
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.
Significant components of RIH's deferred tax liabilities and assets as of
March 31, 1994 were as follows:
(In Thousands of Dollars)
Deferred tax liabilities:
Basis differences on land $(19,300)
Other (1,500)
Total deferred tax liabilities (20,800)
Deferred tax assets:
Net operating loss carryforwards 65,800
Basis differences on property and
equipment, excluding land 2,900
Book reserves not yet deductible for tax 14,100
Tax credit carryforwards 2,000
Other 100
Total deferred tax assets 84,900
Valuation allowance for deferred tax assets (83,500)
Deferred tax assets, net of valuation allowance 1,400
Net deferred tax liabilities $(19,400)
For federal tax purposes RIH had net operating loss carryforwards of
approximately $188,000,000 at March 31, 1994 which expire from 2003 through
2005. These loss carryforwards were produced in periods prior to a change
in ownership of the consolidated group of which RIH is a part; therefore,
these loss carryforwards are limited in their availability to offset future
taxable income.
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At March 31, 1994, RIH had net operating loss carryforwards in New
Jersey of approximately $156,000,000, which expire from 1994 through 1997.
Also, for federal tax purposes, RIH had tax credit carryforwards of
$2,000,000 at March 31, 1994 which expire from 1998 through 2008.
G. Statements of Cash Flows:
Supplemental disclosures required by Statement of Financial Accounting
Standards No. 95 "Statement of Cash Flows" are presented below.
Quarter Ended
March 31,
(In Thousands of Dollars) 1994 1993
Reconciliation of net earnings (loss) to net
cash provided by operating activities:
Net earnings (loss) $ (375) $4,042
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation 3,272 3,049
Provision for doubtful receivables 168 137
Provision for discount on CRDA
obligations, net of amortization 311 354
Recapitalization costs 604 198
Net decrease in accounts receivable 476 125
Net (increase) decrease in interest
receivable from affiliate (1,688) 1,687
Net (increase) decrease in inventories and
prepaids 1,315 (563)
Net decrease in deferred charges
and other assets 95 56
Net increase in accounts payable
and accrued liabilities 214 354
Net cash provided by operating activities $ 4,392 $9,439
Non-cash investing and financing transactions:
Increase in liabilities for additions to
property and equipment and other assets $ 415
H. Commitments and Contingencies:
CRDA
The Casino Control Act, as originally adopted, required a licensee to
make investments equal to 2% of the licensee's gross revenue (as defined
under the Casino Control Act) (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. Certain issues have been raised concerning the
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satisfaction of RIH's investment obligations for the years 1979 through
1983. Although these matters have been dormant for some time, RIH was
recently verbally contacted by the State of New Jersey Department of the
Treasury (the "Treasury") and expects further communication regarding the
Treasury's proposal for a resolution of these matters in the near future.
If these issues are determined adversely, RIH could be required to pay the
relevant amount in cash to the CRDA. In the opinion of management, based
upon advice of counsel, the aggregate liability, if any, arising from these
issues will not have a material adverse effect on the accompanying
consolidated financial statements.
Litigation
RIH is a defendant in certain litigation. In the opinion of
management, based upon the 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.
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PRO FORMA FINANCIAL DATA
Set forth below is certain unaudited pro forma financial information
for RIH. The pro forma balance sheet information as of March 31, 1994
gives effect to the Restructuring as if it occurred on that date. The pro
forma statements of operations information for the year ended December 31,
1993 and the quarter ended March 31, 1994 gives effect to the Restructuring
as if it occurred on January 1, 1993. The pro forma statements of
operations information excludes the costs associated with the
Restructuring. The unaudited pro forma information is not necessarily
indicative of future results or what RIH's financial position or results of
operations would actually have been had the transactions occurred on the
dates indicated. Such information should not be used as a basis to project
results for any future period.
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RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
March 31, 1994
Pro Forma
Historical Adjustments Pro Forma
ASSETS
Current assets:
Cash and cash equivalents $ 24,225 $ (9,225) (a) $ 15,000
Receivables, net 4,470 4,470
Interest receivable from affiliate 2,813 (2,813) (b) 0
Note receivable from affiliate 50,000 (50,000) (b) 0
Inventories 1,485 1,485
Prepaid expenses 4,596 2,310 (c) 6,906
Total current assets 87,589 (59,728) 27,861
Property and equipment, net 161,656 161,656
Deferred charges and other assets 11,524 11,524
$ 260,769 $ (59,728) $ 201,041
LIABILITIES AND SHAREHOLDER'S
EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-
term debt $ 66 $ 66
Accounts payable and accrued
liabilities 25,002 25,002
Notes payable to affiliate 325,000 $(325,000) (d) 0
Due to parent company 39,659 2,310 (c) 0
(41,969) (e)
Total current liabilities 389,727 (364,659) 25,068
Notes payable to affiliate -
RIH Promissory Note and
RIH Junior Promissory Note, net 147,600 (e) 147,600
Other long-term debt 12 12
Deferred income taxes 19,400 19,400
Shareholder's equity (deficit):
Common stock 1,000 (d) 1,000
Excess of liabilities over assets
at August 31, 1990
reorganization (198,829) (198,829)
Capital in excess of par (9,225) (a) 206,790
(52,813) (b)
324,000 (d)
(55,172) (e)
Retained earnings 50,459 (50,459) (e) 0
Total shareholder's equity
(deficit) (148,370) 157,331 8,961
$ 260,769 $ (59,728) $ 201,041
See Notes to Pro Forma Consolidated Balance Sheet
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RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands of Dollars)
Quarter Ended March 31, 1994
Pro Forma
Historical Adjustments Pro Forma
Revenues:
Casino $53,649 $53,649
Rooms 1,178 1,178
Food and beverage 3,114 3,114
Other casino/hotel revenues 932 932
58,873 58,873
Expenses:
Casino 33,692 33,692
Rooms 710 710
Food and beverage 3,577 3,577
Other casino/hotel operating
expenses 8,605 8,605
Selling, general and
administrative 10,540 10,540
Provision for doubtful
receivables 168 168
Depreciation 3,272 3,272
60,564 60,564
Loss from operations (1,691) (1,691)
Other income (deductions):
Interest income 1,924 $(1,688) (f) 236
Interest expense (4) (4,433) (g) (4,437)
Amortization of debt discount (195) (g) (195)
Recapitalization costs (604) 604 (h) 0
Net loss $ (375) $(5,712) $(6,087)
See Notes to Pro Forma Consolidated Statement of Operations
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RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands of Dollars)
Year Ended December 31, 1993
Pro Forma
Historical Adjustments Pro Forma
Revenues:
Casino $244,116 $244,116
Rooms 6,974 6,974
Food and beverage 15,926 15,926
Other casino/hotel revenues 4,463 4,463
271,479 271,479
Expenses:
Casino 141,608 141,608
Rooms 3,402 3,402
Food and beverage 17,710 17,710
Other casino/hotel operating
expenses 34,764 34,764
Selling, general and
administrative 47,362 47,362
Provision for doubtful
receivables 901 901
Depreciation 13,664 13,664
259,411 259,411
Earnings from operations 12,068 12,068
Other income (deductions):
Interest income 7,615 $ (6,750) (f) 865
Interest expense (193) (17,731) (g) (17,924)
Amortization of debt discount (729) (g) (729)
Recapitalization costs (2,727) 2,727 (h) 0
Earnings (loss) before income
taxes 16,763 (22,483) (5,720)
Income tax expense (400) (400)
Net earnings (loss) $ 16,363 $(22,483) $ (6,120)
See Notes to Pro Forma Consolidated Statement of Operations
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NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects the distribution to GGRI of cash not needed for current
operations. GGRI, in turn, distributed these funds to RII for its
distribution of Excess Cash to holders of Series Notes.
(b) Reflects (i) the assumption by GGRI of RIB's note payable to RIH
and accrued interest thereon and (ii) RIH's distribution to GGRI of such
note and accrued interest as a return of surplus.
(c) Reflects prepayment of fees due Griffin Group through September 17,
1994 pursuant to the Griffin Services Agreement by application of such
amount as a reduction of the Griffin Group note balance receivable by
RII.
(d) Reflects GGRI's exchange of the Second Amended RIH-GGRI Notes for
RIH's issuance to GGRI of 999,900 shares of RIH common stock, which is
to represent 99.99% of the issued and outstanding common stock of RIH.
(e) Reflects the distribution to RII of the RIH Promissory Note and the
RIH Junior Promissory Note in repayment of the intercompany debt owed to
RII by RIH, with the balance being a return of surplus.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(f) Reflects the elimination of interest income on the note receivable
from RIB, which note is to be distributed to GGRI as a return of
surplus.
(g) Reflects interest expense and amortization of debt discount on the
RIH Promissory Note and the RIH Junior Promissory Note.
(h) Reflects the elimination of recapitalization costs incurred in
connection with the Restructuring.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
Liquidity
At March 31, 1994 RIH's current liabilities exceeded its current
assets by $302,138,000 because the Second Amended RIH-GGRI Notes in the
amount of $325,000,000, which were due upon demand, were classified as
current liabilities. RIH's working capital at March 31, 1994 included
$24,225,000 of cash and equivalents. The day-to-day operations of RIH
require approximately $10,000,000 of currency and coin on hand which amount
varies by days of the week, holidays and seasons. Additional cash balances
are necessary to meet current working capital needs.
As described in Note B of Notes to Consolidated Financial Statements,
RII recently restructured its Series Notes pursuant to a prepackaged
bankruptcy plan. The Plan was confirmed by the Bankruptcy Court on April
22, 1994 and became effective on May 3, 1994. Pursuant to the Plan,
through its affiliated notes payable to RIHF, RIH will be the principal
source of funds for servicing the Mortgage Notes and the Junior Mortgage
Notes, as well as the Senior Facility Notes to the extent issued. Annual
interest expense on the Mortgage Notes and the Junior Mortgage Notes will
total approximately $17,700,000. Based on projected operating results,
management believes that RIH's liquidity will continue to be satisfactory;
however, management can give no assurances as to RIH's future liquidity due
to the possibility of unanticipated events and circumstances inherent in
any projections. Pursuant to the Restructuring, the $325,000,000 Second
Amended RIH-GGRI Notes were cancelled, as was a $50,000,000 note receivable
from RIB, and RIH distributed all of its cash and equivalents in excess of
$15,000,000 to RII.
Capital Expenditures
During the first quarter of 1994 RIH expended $1,608,000 for
maintenance projects at Resorts Casino Hotel.
RESULTS OF OPERATIONS
RIH operates in one business segment. Following is a discussion of
the results of operations for the first quarter of 1994 compared to 1993.
The discussion should be read in conjunction with the Consolidated
Financial Statements included herein.
Revenues
Casino revenues were down $1,258,000 for the first quarter of 1994.
Disregarding revenues derived from poker and simulcasting, which activities
commenced in late June 1993, the decrease in table and slot win was
$3,435,000, or 6%. The Atlantic City casino industry had a net decrease in
table and slot win of 4% for the first quarter of 1994 compared to the same
quarter in the prior year. The Company believes that increased competition
from other newly opened or expanded jurisdictions which permit gaming has
slowed the growth of gaming revenue in Atlantic City and, for the Company,
has significantly increased the cost of obtaining additional
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revenue. In addition, poor weather conditions during the first quarter of
1994 adversely affected operations as the principal means of transportation
to Atlantic City is by automobile or bus.
The Company's decrease in casino revenue resulted as decreased table
game win offset an increase in slot win and revenues generated from poker
and simulcasting. The decrease in table game win was due to a reduction in
the hold percentage (ratio of casino win to total amount of chips purchased
for table games or total amount wagered for slots), which declined from
15.6% in the first quarter of 1993 to 13.2% in 1994, as well as the effect
of a reduction in amounts wagered by patrons. Slot win increased as a
reduction in the hold percentage was offset by an increase in amounts
wagered by patrons. The reduction in slot hold percentage reflects
management's decision to try to attract more slot players and to encourage
increased slot wagering per player. Slot play was also favorably impacted
by targeted marketing programs.
Earnings (Loss) from Operations
Casino, hotel and related operating results decreased by $4,135,000
for the first quarter of 1994 as decreased revenues discussed above
combined with a net increase in operating expenses. The most significant
increase in operating expenses was casino promotional costs ($2,600,000),
due primarily to a program started in the second quarter of 1993 which
rewards slot players by giving cash back to patrons based on their level of
play. Since the introduction of the "cash-back" program the Company has
reduced cash giveaways to bus patrons and through other promotional
mailings.
Other Income (Deductions)
RIH's interest income has been largely attributable to the $50,000,000
note receivable from RIB, a former Bahamian affiliate. This note was
cancelled as part of the Restructuring.
RIH's interest expense has recently been limited to minor amounts
incurred on capitalized lease obligations. After the Restructuring RIH is
to bear, indirectly, the interest on the Mortgage Notes, the Junior
Mortgage Notes and, to the extent issued, the Senior Facility Notes,
through notes payable to RIHF, the terms of which mirror the terms of such
debt of RIHF. See Note B of Notes to Consolidated Financial Statements for
the terms of such new debt.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following exhibits are incorporated by reference:
Exhibit
Numbers Exhibits
2.01 Plan of Reorganization. (Incorporated by reference to
Appendix A of the Information Statement/Prospectus included
in Form S-4 Registration Statement No. 33-50733.)
3.01-3.04 Not Used.
3.05 Certificate of Incorporation of RIH.*
3.05(a) Form of Certificate of Amendment of Certificate of
Incorporation of RIH. (Incorporated by reference to
Exhibit 3.05(a) to Form S-1 Registration Statement No. 33-
53371.)
3.06 By-laws of RIH.*
4.01-4.03 Not used.
4.04 Form of Indenture among RIHF, as issuer, RIH, as guarantor,
and State Street Bank and Trust Company of Connecticut,
National Association, as trustee, with respect to RIHF 11%
Mortgage Notes due 2003.*
4.05 Form of Indenture between RIHF, as issuer, RIH, as
guarantor, and U.S. Trust Company of California, N.A., as
trustee, with respect to RIHF 11.375% Junior Mortgage Notes
due 2004.*
4.06-4.21 Not used.
4.22 Form of Mortgage between RIH and State Street Bank and
Trust Company of Connecticut, National Association,
securing Guaranty of RIHF Mortgage Notes.*
4.23 Form of Mortgage between RIH and RIHF, securing RIH
Promissory Note.*
4.24 Form of Assignment of Agreements made by RIHF, as Assignor,
to State Street Bank and Trust Company of Connecticut,
National Association, as Assignee, regarding RIH Promissory
Note.*
4.25 Form of Assignment of Leases and Rents made by RIH, as
Assignor, to RIHF, as Assignee, regarding RIH Promissory
Note.*
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4.26 Form of Assignment of Leases and Rents made by RIH, as
Assignor, to State Street Bank and Trust Company of
Connecticut, National Association, as Assignee, regarding
Guaranty of RIHF Mortgage Notes.*
4.27 Form of Assignment of Operating Assets made by RIH, as
Assignor, to RIHF, as Assignee, regarding RIH Junior
Promissory Note.*
4.28 Form of Assignment of Operating Assets made by RIH, as
Assignor, to State Street Bank and Trust Company of
Connecticut, National Association, as Assignee, regarding
Guaranty of RIHF Mortgage Notes.*
4.29 Form of Mortgage between RIH and U.S. Trust Company of
California, N.A., securing Guaranty of RIHF Junior Mortgage
Notes.*
4.30 Form of Mortgage between RIH and RIHF, securing RIH Junior
Promissory Note.*
4.31 Form of Assignment of Agreements made by RIHF, as Assignor,
to U.S. Trust Company of California, N.A., as Assignee,
regarding RIH Junior Promissory Note.*
4.32 Form of Assignment of Leases and Rents made by RIH, as
Assignor, to RIHF, as Assignee, regarding RIH Junior
Promissory Note.*
4.33 Form of Assignment of Leases and Rents made by RIH, as
Assignor, to U.S. Trust Company of California, N.A., as
Assignee, regarding Guaranty of RIHF Junior Mortgage
Notes.*
4.34 Form of Assignment of Operating Assets made by RIH, as
Assignor, to RIHF, as Assignee, regarding RIH Promissory
Note.*
4.35 Form of Assignment of Operating Assets made by RIH, as
Assignor, to U.S. Trust Company of California, N.A., as
Assignee, regarding the Guaranty of the RIHF Junior
Mortgage Notes.*
4.36 Form of Amended and Restated $125,000,000 RIH Promissory
Note (Incorporated by reference to Exhibit A to Exhibit
4.04 hereto.)
4.37 Form of Amended and Restated $35,000,000 RIH Junior
Promissory Note (Incorporated by reference to Exhibit A to
Exhibit 4.05 hereto.)
10.01-10.33 Not Used.
10.34(a) License and Services Agreement, dated as of September 17,
1992, among Griffin Group, RII and RIH.*
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10.34(b) Form of Amendment to License and Service Agreement, dated
as of September 17, 1992 among Griffin Group, RII and RIH.*
10.35-10.63 Not Used.
10.64 Form of Intercreditor Agreement by and among RIHF, RIH,
RII, GGRI, State Street Bank and Trust Company of
Connecticut, National Association, U.S. Trust Company of
California, N.A. and any lenders which provide additional
facilities.*
10.65 Form of Note Purchase Agreement dated May 3, 1994, among
RIHF, RII and RIH, and certain funds advised or managed by
Fidelity with respect to issuance of Senior Facility Notes.
(Incorporated by reference to Exhibit 10.65 in Form S-1
Registration Statement No. 33-53371.)
10.66 Form of Registration Rights Agreement dated as of April 29,
1994, among RII, RIHF, RIH, Fidelity and TCW.
(Incorporated by reference to Exhibit 10.66 in Form S-1
Registration Statement No. 33-53371.)
______________________
*Incorporated by reference to the same exhibit number in Form S-4
Registration Statement No. 33-50733.
b. Reports on Form 8-K
No Current Report on Form 8-K was filed by RIH covering an event
during the first quarter of 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
RESORTS INTERNATIONAL HOTEL, INC.
(Registrant)
/s/ Matthew B. Kearney
Matthew B. Kearney
Vice President
(Authorized Officer of
Registrant and Chief
Financial Officer)
Date: May 12, 1994
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