Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 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
September 30, 1994: 1,000,000, all of which are owned by one
shareholder. Accordingly there is no current market for any of such
shares.
Exhibit Index is presented on page 22.
Total No. of Pages 23
1<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
FORM 10-Q
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements
of Operations for the
Quarters and Three Quarters
Ended September 30, 1994
and 1993 3
Consolidated Balance Sheets
at September 30, 1994 and
December 31, 1993 4
Consolidated Statements
of Cash Flows for the
Three Quarters Ended
September 30, 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 18
Part II. Other Information
Item 5. Other Information 20
Item 6. Exhibits and Reports on
Form 8-K 20
2<PAGE>
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 Three Quarters Ended
September 30, September 30,
1994 1993 1994 1993
Revenues:
Casino $69,582 $72,396 $188,509 $187,803
Rooms 2,424 2,216 5,509 5,370
Food and beverage 4,267 4,873 11,324 12,340
Other casino/hotel
revenues 1,406 1,315 3,430 3,301
77,679 80,800 208,772 208,814
Expenses:
Casino 37,700 40,009 106,736 105,013
Rooms 873 793 2,431 2,502
Food and beverage 4,412 5,093 12,276 13,430
Other casino/hotel
operating expenses 9,002 8,981 26,333 25,748
Selling, general
and administrative 10,952 11,722 34,217 36,052
Depreciation 3,295 3,406 10,037 10,264
66,234 70,004 192,030 193,009
Earnings from operations 11,445 10,796 16,742 15,805
Other income (deductions):
Interest income 443 1,894 3,194 5,631
Interest expense (4,510) (12) (7,374) (190)
Amortization of
debt discount (252) (459)
Recapitalization costs (1,065) (975) (1,580)
Earnings before income
taxes 7,126 11,613 11,128 19,666
Income tax expense (400) (400)
Net earnings $ 7,126 $11,213 $ 11,128 $ 19,266
3<PAGE>
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, except par value)
September 30, December 31,
1994 1993
(Unaudited)
ASSETS
Current assets:
Cash (including cash equivalents
of $20,985 and $11,446) $ 33,525 $ 25,947
Restricted cash equivalents 1,000
Receivables, less allowance for doubtful
accounts of $4,029 and $4,538 5,721 5,114
Interest receivable from affiliate 1,125
Note receivable from affiliate 50,000
Inventories 1,444 1,754
Prepaid expenses 9,239 5,642
Total current assets 50,929 89,582
Property and equipment, net of accumulated
depreciation of $45,795 and $35,821 156,799 163,320
Deferred charges and other assets 11,376 11,262
$219,104 $ 264,164
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 5 $ 74
Accounts payable and accrued liabilities 24,973 24,813
Interest payable to affiliate 2,210
Notes payable to affiliate 325,000
Due to RII 6,316 42,859
Total current liabilities 33,504 392,746
Notes payable to affiliate, net
of unamortized discount 135,759
Other long-term debt 9 13
Deferred income taxes 19,400 19,400
Shareholder's equity (deficit):
Common stock - $1 par value 1,000
Capital in excess of par (excess
of liabilities over assets at
August 31, 1990 reorganization) 21,366 (198,829)
Retained earnings 8,066 50,834
Total shareholder's equity (deficit) 30,432 (147,995)
$219,104 $ 264,164
4<PAGE>
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Three Quarters Ended
September 30,
1994 1993
Cash flows from operating activities:
Cash received from customers $ 206,695 $ 208,297
Cash paid to suppliers and employees (181,174) (189,019)
Cash flow from operations
before interest 25,521 19,278
Interest received 782 7,289
Interest paid (5,164) (190)
Net cash provided by operating
activities 21,139 26,377
Cash flows from investing activities:
Payments for property and equipment (3,885) (20,394)
Proceeds from the sale of property 116
CRDA deposits and bond purchases (2,175) (2,121)
Net cash used in investing
activities (5,944) (22,515)
Cash flows from financing activities:
Distribution to GGRI (12,262)
Advances from RII 6,693 7,951
Recapitalization costs paid to RII (975) (1,580)
Debt repayments (73) (2,056)
Net cash provided by (used in)
financing activities (6,617) 4,315
Net increase in cash and cash equivalents 8,578 8,177
Cash and cash equivalents at beginning
of period 25,947 22,643
Cash and cash equivalents at end of period $ 34,525 $ 30,820
5<PAGE>
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
I n ternational, 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.
S i gnificant 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 theater
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
f o r complimentary services provided to casino patrons. These
allocations do not necessarily represent the incremental cost of
providing such complimentary services to casino patrons.
6<PAGE>
Amounts allocated to the casino department from the other operating
departments were as follows:
Quarter Ended Three Quarters Ended
September 30, September 30,
(In Thousands of Dollars) 1994 1993 1994 1993
Rooms $1,071 $ 996 $ 3,022 $ 2,828
Food and beverage 3,688 4,144 10,614 12,195
Other casino/hotel operations 1,974 2,005 5,314 5,066
Total allocated to casino $6,733 $7,145 $18,950 $20,089
Cash Equivalents
RIH considers all of its short-term money market securities
p u rchased 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.
7<PAGE>
B. Restructuring of RII's 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
S e c urities." The New Debt Securities were issued by Resorts
International Hotel Financing, Inc. ("RIHF"), a 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
m i r r or the terms of the Junior Mortgage Notes. In certain
circumstances, interest payable on the Junior Mortgage Notes may be
satisfied by the issuance of additional Junior Mortgage Notes, in which
case the balance of the RIH Junior Promissory Note would increase
accordingly. 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
a n d its subsidiaries from paying dividends, from making other
distributions in respect of their capital stock, and from purchasing or
redeeming their capital stock, with certain exceptions, unless certain
interest coverage ratios are attained.
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
8<PAGE>
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 Resorts Casino Hotel, if such loans or credit
transactions are in the ordinary course of business of operating a
c a sino/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 F, the parent services agreement with RII which provides for
payment of the three percent services fee described in Note F, 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 ending May 2, 1995, through the issuance of
notes (the "Senior Facility Notes"). If issued, the Senior Facility
Notes will bear interest at 11% and will be due in 2002. The Senior
Facility Notes will be senior obligations of RIHF secured by a
promissory note from RIH in an aggregate principal amount of up to
$20,000,000 payable in amounts and at times necessary to pay the
principal of and interest on the Senior Facility Notes. The Senior
Facility Notes will be guaranteed by RIH and secured by a lien on the
Resorts Casino Hotel property as described above. The Senior Facility
Notes will also be secured by a pledge by GGRI 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.
Market interest rates and other economic conditions, among other
factors, will determine if it is appropriate for RII or RIH to draw on
the Senior Facility.
The Restructuring also prescribed the following transactions
between RIH and its affiliates:
- RIH issued the RIH Promissory Note and the RIH Junior
Promissory Note in repayment of RIH's balance due to RII on
the Effective Date with the remainder a distribution to RII.
RIH's retained earnings of $53,896,000 at April 30, 1994 was
included in that distribution.
- GGRI exchanged the $325,000,000 Second Amended RIH-GGRI Notes
(see Note E) for 999,900 shares of common stock of RIH. In
order to accomplish this, RIH authorized an additional
4,997,500 shares of its common stock.
- RII contributed to GGRI the 100 shares of common stock of RIH
which RII owned. This resulted in RIH's becoming a wholly-
owned subsidiary of GGRI and an indirect subsidiary of RII.
RIH now has a total of 5,000,000 shares of common stock
a u t horized, of which 1,000,000 shares are issued and
outstanding.
9<PAGE>
- RIH distributed to GGRI, as a return of surplus, the
$50,000,000 RIB Note (see Note D).
- RIH distributed all of its cash and equivalents in excess of
$ 1 5,000,000 as of the Effective Date to GGRI. GGRI
distributed such cash to RII so that RII, in turn, could
distribute Excess Cash (as defined in the Plan) to holders of
Series Notes.
For pro forma effects of the Restructuring on continuing operations
of RIH assuming the Restructuring occurred on January 1, 1993 see "Pro
Forma Financial Data" following Note I.
C. Reverse Repurchase Agreements:
C a sh equivalents at September 30, 1994 included a reverse
repurchase agreement (federal government securities purchased under an
agreement to resell those securities) with National Westminster Bank NJ
in the amount of $21,346,000 under which RIH had not taken delivery of
the underlying securities. The agreement matured on October 3, 1994.
D. 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 & 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.
E. 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.
10<PAGE>
F. 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 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 a 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, among others, a change of control (as defined) of RII and RIH
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.
As part of the Restructuring, the payment due Griffin Group on
September 17, 1994 was settled by applying $2,310,000 as a reduction of
the balance of a note payable to RII by Griffin Group. On August 1,
1994,
11<PAGE>
following review and approval by the independent members of RII's Board
of Directors, RII agreed to issue 1,940,000 shares of common stock of
RII to an affiliate of Griffin Group in satisfaction of the final
payment obligation of RIH and RII under the Griffin Services Agreement.
This payment of $2,425,000 would have been due on September 17, 1995.
The closing price of RII's common stock on the date of the agreement was
$1.0625 per share. RII will issue the shares as of August 1, 1994 and
the balance of prepaid expenses at September 30, 1994 reflects the
issuance of these shares. The shares will not be registered under the
Securities Act of 1933 and will be restricted securities.
G. 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 September 30, 1994 were as follows:
(In Thousands of Dollars)
Deferred tax liabilities:
Basis differences on land $(19,300)
Other (400)
Total deferred tax liabilities (19,700)
Deferred tax assets:
Net operating loss carryforwards 65,800
Book reserves not yet deductible for tax 10,800
Tax credit carryforwards 2,000
Basis differences on property and
equipment, excluding land 6,400
Other 2,800
Total deferred tax assets 87,800
Valuation allowance for deferred
tax assets (87,500)
Deferred tax assets, net of
valuation allowance 300
Net deferred tax liabilities $(19,400)
For federal tax purposes RIH had net operating loss carryforwards of
approximately $188,000,000 at September 30, 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
p a rt; therefore, these loss carryforwards are limited in their
availability to offset future taxable income.
At September 30, 1994, RIH had net operating loss carryforwards in
New Jersey of approximately $151,000,000, which expire from 1994 through
1997.
Also, for federal tax purposes, RIH had tax credit carryforwards of
approximately $2,000,000 at September 30, 1994 which expire from 1998
through 2008.
12<PAGE>
H. Statements of Cash Flows:
S u p plemental disclosures required by Statement of Financial
Accounting Standards No. 95 "Statement of Cash Flows" are presented
below.
Three Quarters Ended
September 30,
(In Thousands of Dollars) 1994 1993
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $11,128 $19,266
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 10,037 10,264
Provision for doubtful receivables 181 536
Provision for discount on CRDA
obligations, net of amortization 1,098 1,196
Deferred tax provision 400
Amortization of debt discount 459
Recapitalization costs 975 1,580
Net increase in receivables (788) (812)
Net (increase) decrease in interest
receivable from affiliate (2,250) 1,687
Net increase in inventories
and prepaid expenses (3,287) (5,320)
Net (increase) decrease in deferred
charges and other assets 1,139 (731)
Net increase (decrease) in accounts
payable and accrued liabilities 237 (1,689)
Net increase in interest payable
to affiliate 2,210
Net cash provided by operating activities $21,139 $26,377
Non-cash investing and financing transactions:
Distribute RIH Promissory Note and RIH
Junior Promissory Note as:
Repayment of advances from RII $ 43,236
Distribution to RII 92,064
Exchange Second Amended RIH-GGRI Notes
for shares of RIH common stock 325,000
Distribute RIB Note and accrued interest
thereon to GGRI 53,375
Increase in liabilities for additions to
property and equipment and other assets 176 $843
13<PAGE>
I. 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 satisfaction of RIH's investment
obligations for the years 1979 through 1983. Although these matters
have been dormant for some time, RIH was verbally contacted by the
State of New Jersey Department of the Treasury (the "Treasury") in late
1993 and expects further communication regarding the Treasury's proposal
for a resolution of these matters. 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.
PRO FORMA FINANCIAL DATA
S e t forth below is certain unaudited pro forma financial
information for RIH. The pro forma statements of operations information
for the year ended December 31, 1993 and the three quarters ended
September 30, 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 results of operations would actually have been had the
transactions occurred on January 1, 1993. Such information should not
be used as a basis to project results for any future period.
14<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
Three Quarters Ended September 30, 1994
Pro Forma
Historical Adjustments Pro Forma
Revenues:
Casino $188,509 $188,509
Rooms 5,509 5,509
Food and beverage 11,324 11,324
Other casino/hotel revenues 3,430 3,430
208,772 208,772
Expenses:
Casino 106,736 106,736
Rooms 2,431 2,431
Food and beverage 12,276 12,276
Other casino/hotel operating
expenses 26,333 26,333
Selling, general and
administrative 34,217 34,217
Depreciation 10,037 10,037
192,030 192,030
Earnings from operations 16,742 16,742
Other income (deductions):
Interest income 3,194 $(2,250)(a) 944
Interest expense (7,374) (5,932)(b) (13,306)
Amortization of debt discount (459) (667)(b) (1,126)
Recapitalization costs (975) 975 (c) -0-
Net earnings $ 11,128 $(7,874 ) $ 3,254
See Notes to Pro Forma Consolidated Statements of Operations
15<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED STATEMENTS 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 48,263 48,263
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) (a) 865
Interest expense (193) (17,731) (b) (17,924)
Amortization of debt discount (1,329) (b) (1,329)
Recapitalization costs (2,727) 2,727 (c) -0-
Earnings (loss) before income
taxes 16,763 (23,083) (6,320)
Income tax expense (400) (400)
Net earnings (loss) $ 16,363 $(23,083) $ (6,720)
See Notes to Pro Forma Consolidated Statements of Operations
16<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Reflects the elimination of interest income on the note receivable
from RIB, which note was distributed to GGRI as a return of surplus.
(b) Reflects interest expense and amortization of debt discount on the
RIH Promissory Note and the RIH Junior Promissory Note.
(c) Reflects the elimination of recapitalization costs incurred in
connection with the Restructuring.
17<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
Liquidity
At September 30, 1994 RIH had working capital of $17,425,000
including $33,525,000 of unrestricted 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.
RIHF will satisfy the $2,499,000 of interest due December 15, 1994
on the Junior Mortgage Notes by cash payment. Therefore, on that date
RIH will pay interest due on the RIH Junior Promissory Note in cash.
Capital Expenditures
During the first three quarters of 1994 RIH expended $3,885,000 for
capital improvements at Resorts Casino Hotel including the purchase of
115 slot machines, most of which were replacements for older models, and
capital maintenance projects.
RESULTS OF OPERATIONS
RIH operates in one business segment. Following is a discussion of
the results of operations for the third quarter and first three quarters
of 1994 compared to 1993. The discussion should be read in conjunction
with the Consolidated Financial Statements included herein.
Revenues
Casino revenues were down by $2,814,000 for the third quarter and
increased by $706,000 for the first three quarters of 1994. The modest
growth in the Atlantic City casino industry continues with the increase
in slot win more than offsetting the decline in table game win. The
addition of poker and simulcast betting in June 1993 and keno in June
1994 has added to the industry's revenues, though not significantly.
RIH believes that increased competition from other newly opened or
expanded jurisdictions which permit gaming has slowed the growth of
gaming revenue in Atlantic City. Expansion of existing Atlantic City
casinos has also adversely
18<PAGE>
affected RIH's operations. These factors have significantly increased
RIH's cost of obtaining additional revenue.
RIH's revenue from poker, simulcasting and keno combined decreased
by $905,000 for the third quarter and increased by $3,475,000 for the
first three quarters. RIH's win from slot and table games decreased by
$1,909,000 for the third quarter and by $2,769,000 for the first three
quarters of 1994. RIH's growth in slot win has more than kept pace with
the industry's, as slot players have been the prime focus of RIH's
marketing efforts. However, RIH's decline in table game win has been
much greater than that experienced by the industry as a whole because
RIH's marketing programs have not targeted table players and RIH's hold
percentage (ratio of casino win to total amount of chips purchased) has
been below the industry's average. RIH recently increased its program
of charter flights and is reevaluating its marketing efforts with a view
to recapturing some of its lost market share of table win.
Earnings from Operations
For the third quarter of 1994 casino, hotel and related operating
results increased by $649,000 as the decreased revenues described above
were more than offset by a net decrease in operating costs. The most
significant variances in operating expenses were decreases in payroll
and related costs ($1,400,000), casino promotional costs ($800,000),
other casino operating costs ($500,000) and food and beverage costs
($400,000). Payroll and related costs were down primarily due to
decreased staffing levels. Other casino operating costs were higher in
the third quarter of 1993 due to certain start up costs associated with
the opening of the simulcast and poker room in late June 1993 and the
larger volume of activity during its first full quarter of operation.
The decrease in food and beverage costs resulted primarily from reduced
patronage at RIH's "all-you-can-eat" Beverly Hills Buffet due to price
increases, although there has been a general decline in the number of
patrons served at all of RIH's food and beverage outlets. Prices at the
Beverly Hills Buffet were increased as management determined that this
promotion was no longer cost effective at the prior price levels.
Casino, hotel and related operating results for the first three
quarters of 1994 increased by $937,000 due to a net decrease in
operating expenses. The most significant decreases in operating
expenses in 1994 were in food and beverage costs ($1,300,000) and
payroll and related costs ($1,000,000) due to the reasons described
above. Advertising costs were also down ($600,000) as the second
q u arter of 1993 included advertising costs associated with the
introduction of the "cash-back" program (a promotion which rewards slot
players by giving cash back to patrons based on their level of play) and
the 15th anniversary celebration for Resorts Casino Hotel. Favorable
variances in these and other costs were partially offset by increases in
other expenses. The most significant increase was in casino promotional
costs ($1,500,000) due primarily to the "cash-back" program noted above,
which commenced in late April 1993. Since the introduction of the
"cash-back" program RIH has reduced certain other cash giveaways. Other
significant cost increases were in entertainment ($600,000) and the
accrual for management incentive bonuses ($700,000). Entertainment
costs were up as more revue and headliner shows were presented in 1994
and the revue shows included more featured performers.
19<PAGE>
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 before the Restructuring was 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.
PART II. OTHER INFORMATION
Item 5. Other Information
RIHF has determined the issue price of the Mortgage Notes and the
Junior Mortgage Notes to be used in calculating the related original
issue discount for Federal income tax purposes to be 85% and 83%,
respectively.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following Part I exhibit is filed herewith:
Exhibit
Number Exhibit
(27) Financial data schedule
b. Reports on Form 8-K
No Current Report on Form 8-K was filed by RIH covering an event
during the third quarter of 1994. No amendments to previously filed
Forms 8-K were filed during the third quarter of 1994.
20<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
RESORTS INTERNATIONAL HOTEL, INC.
(Registrant)
/s/ Matthew B. Kearney
Matthew B. Kearney
Executive Vice President
(Authorized Officer of
Registrant and Chief
Financial Officer)
Date: November 9, 1994
21<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
Form 10-Q for the quarterly period
ended September 30, 1994
EXHIBIT INDEX
Exhibit Page
Number Exhibit Number
(27) Financial data schedule 23
22<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RESORTS
INTERNATIONAL HOTEL, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO INCLUDED IN THE FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1994,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $34,525<F1>
<SECURITIES> 0
<RECEIVABLES> $8,534
<ALLOWANCES> $4,029
<INVENTORY> $1,444
<CURRENT-ASSETS> $50,929
<PP&E> $202,594
<DEPRECIATION> $45,795
<TOTAL-ASSETS> $219,104
<CURRENT-LIABILITIES> $33,504
<BONDS> $135,768<F2>
<COMMON> $1,000
0
0
<OTHER-SE> $29,432
<TOTAL-LIABILITY-AND-EQUITY> $219,104
<SALES> 0
<TOTAL-REVENUES> $208,772
<CGS> 0
<TOTAL-COSTS> $147,776<F3>
<OTHER-EXPENSES> $10,037<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $7,833
<INCOME-PRETAX> $11,128
<INCOME-TAX> 0
<INCOME-CONTINUING> $11,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $11,128
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES NON-RESTRICTED CASH EQUIVALENTS OF $20,985
AND RESTRICTED CASH EQUIVALENTS OF $1,000.
<F2>INCLUDES NOTES PAYABLE TO AFFILIATE, NET OF UNAMORTIZED
DISCOUNT - $135,759.
<F3>EXCLUDES DEPRECIATION.
<F4>DEPRECIATION EXPENSE.
</FN>
</TABLE>
