Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 June 30, 1996: 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 13
Total number of pages 14
1<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
FORM 10-Q
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
at June 30, 1996 and
December 31, 1995 3
Consolidated Statements of
Operations for the Quarters
and Halves Ended June 30,
1996 and 1995 4
Consolidated Statements of
Cash Flows for the Halves
Ended June 30, 1996 and 1995 5
Notes to Consolidated
Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations 8
Part II. Other Information
Item 6. Exhibits and Reports on
Form 8-K 11
2<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, except par value)
June 30, December 31,
1996 1995
(Unaudited)
ASSETS
Current assets:
Cash (including cash equivalents
of $24,053 and $22,334) $ 39,181 $ 38,027
Restricted cash equivalents 750 750
Receivables, less allowance for
doubtful accounts of $3,306
and $3,570 6,830 6,933
Inventories 2,109 2,447
Prepaid expenses 6,458 6,078
Total current assets 55,328 54,235
Property and equipment, net of
accumulated depreciation of
$66,858 and $62,074 154,629 157,340
Deferred charges and other assets 13,671 12,822
$223,628 $224,397
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 613 $ 589
Accounts payable and accrued
liabilities 28,503 26,044
Interest payable to affiliate 4,237 4,244
Due to GGE 322 1,214
Total current liabilities 33,675 32,091
Notes payable to affiliate, net of
unamortized discounts 127,474 126,761
Other long-term debt 609 919
Deferred income taxes 18,875 18,950
Shareholder's equity:
Common stock - $1 par value 1,000 1,000
Capital in excess of par 21,366 21,366
Retained earnings 20,629 23,310
Total shareholder's equity 42,995 45,676
$223,628 $224,397
3<PAGE>
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
(Unaudited)
Quarter Ended Half Ended
June 30, June 30,
1996 1995 1996 1995
Revenues:
Casino $68,094 $68,514 $126,781 $130,632
Rooms 1,789 1,721 3,223 3,067
Food and beverage 3,414 2,867 6,126 5,897
Other casino/hotel
revenues 1,259 1,458 2,435 2,644
74,556 74,560 138,565 142,240
Expenses:
Casino 41,544 38,922 79,257 75,986
Rooms 949 907 1,985 1,882
Food and beverage 3,906 3,251 7,176 6,640
Other casino/hotel
operating expenses 8,233 8,489 16,850 17,121
Selling, general and
administrative 8,654 9,340 17,400 18,762
GGE parent services fee 2,451 2,446 4,540 4,646
Depreciation 3,229 3,765 6,184 6,944
68,966 67,120 133,392 131,981
Earnings from operations 5,590 7,440 5,173 10,259
Other income (deductions):
Interest income 580 510 1,164 1,176
Interest expense (4,154) (4,141) (8,305) (8,336)
Amortization of debt
discounts (349) (296) (713) (765)
Net earnings (loss) $ 1,667 $ 3,513 $ (2,681) $ 2,334
4<PAGE>
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Half Ended
June 30,
1996 1995
Cash flows from operating activities:
Cash received from customers $ 138,041 $ 141,203
Cash paid to suppliers and employees (123,510) (118,316)
Cash flow from operations before
interest and income taxes 14,531 22,887
Interest received 1,116 1,145
Interest paid (8,312) (8,212)
Income taxes paid (75)
Net cash provided by operating
activities 7,260 15,820
Cash flows from investing activities:
Payments for property and equipment (3,473) (8,570)
CRDA deposits and bond purchases (1,455) (1,420)
Net cash used in investing
activities (4,928) (9,990)
Cash flows from financing activities:
Proceeds from borrowing 1,815
Repayments to GGE (892) (1,926)
Debt repayments (286) (47)
Net cash used in financing
activities (1,178) (158)
Net increase in cash and cash
equivalents 1,154 5,672
Cash and cash equivalents at beginning
of period 38,777 26,876
Cash and cash equivalents at end of
period $ 39,931 $ 32,548
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 (the "Resorts Casino Hotel"), a
casino/hotel complex located in Atlantic City, New Jersey. RIH is a
wholly owned subsidiary of GGRI, Inc. ("GGRI"), which is a wholly
owned subsidiary of Griffin Gaming & Entertainment, Inc. ("GGE"). GGE
was known as Resorts International, Inc. until its name change, which
was effective June 30, 1995. "GGE" is used herein to refer to RIH's
ultimate parent corporation both before and after its name change.
W h i l e 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.
The notes presented herein are intended to provide supplemental
disclosure of items of significance occurring subsequent to December
31, 1995 and should be read in conjunction with the Notes to
Consolidated Financial Statements contained in pages 29 through 43 of
RIH's Annual Report on Form 10-K for the year ended December 31, 1995.
B. Reverse Repurchase Agreements:
Cash equivalents at June 30, 1996 included reverse repurchase
agreements (federal government securities purchased under agreements
to resell those securities) with the institutions listed in the
following table under which RIH had not taken delivery of the
underlying securities. These agreements matured during the first week
of July 1996.
(In Thousands of Dollars)
Prudential Securities, Inc. $16,132
National Westminster Bank NJ $ 7,921
C. 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 retail value
of such complimentary services excluded from revenues amounted to
$7,143,000 and $6,968,000 for the second quarter of 1996 and 1995,
respectively, and $12,782,000 and $12,639,000 for the first half of
1996 and 1995, respectively. The rooms, food and beverage, and other
casino/hotel operations departments allocate a percentage of their
total operating
6<PAGE>
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. Amounts allocated to the casino department from the other
operating departments were as follows:
Quarter Ended Half Ended
June 30, June 30,
(In Thousands of Dollars) 1996 1995 1996 1995
Rooms $1,224 $1,248 $ 2,334 $ 2,299
Food and beverage 4,045 4,203 7,868 8,149
Other casino/hotel operations 1,527 1,397 2,845 2,715
Total allocated to casino $6,796 $6,848 $13,047 $13,163
D. Statements of Cash Flows:
Supplemental disclosures required by Statement of Financial
Accounting Standards No. 95 "Statement of Cash Flows" are presented
below.
Half Ended
June 30,
(In Thousands of Dollars) 1996 1995
Reconciliation of net earnings (loss) to
net cash provided by operating
activities:
Net earnings (loss) $(2,681) $ 2,334
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation 6,184 6,944
Amortization of debt discounts 713 765
Provision for doubtful receivables 255 500
Provision for discount on CRDA
obligations, net of amortization 723 654
Deferred tax benefit (75)
Net increase in receivables (152) (1,611)
Net increase in inventories and
prepaid expenses (42) (492)
Net (increase) decrease in deferred
charges and other assets (29) 467
Net increase in accounts payable
and accrued liabilities 2,371 6,135
Net increase (decrease) in interest
payable to affiliate (7) 124
Net cash provided by operating activities $ 7,260 $15,820
7<PAGE>
Half Ended
June 30,
(In Thousands of Dollars) 1996 1995
Non-cash investing and financing
activities:
Increase in liabilities for
additions to other assets $88 $81
E. Commitments and Contingencies:
Casino Reinvestment Development Authority ("CRDA")
As previously reported, certain issues have been raised by the
CRDA and the State of New Jersey Department of the Treasury (the
"Treasury") concerning the satisfaction of investment obligations for
the years 1979 through 1983 by RIH. These matters were dormant for an
extensive period of time until late 1995 when RIH was contacted by the
CRDA. CRDA legal representatives have recently indicated that
Treasury may take a position that RIH owes additional investment
alternative taxes including interest and possibly penalties. If
these issues are determined adversely, RIH could be required to pay
the relevant amount in cash. Management of RIH intends to contest
t h e s e issues and believes a negotiated settlement with an
insignificant monetary cost to RIH is possible.
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.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
Liquidity
At June 30, 1996 RIH had working capital of $21,653,000 including
$39,181,000 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.
R I H is the principal source of funds for servicing the
$125,000,000 principal amount 11% Mortgage Notes due 2003 (the
"Mortgage Notes") and the $35,000,000 principal amount 11.375% Junior
Mortgage Notes due 2004 (the "Junior Mortgage Notes") issued by
Resorts International Hotel Financing, Inc., a subsidiary of GGE. RIH
owns $12,899,000 principal
8<PAGE>
amount of the Junior Mortgage Notes. Annual interest expense on the
Mortgage Notes and Junior Mortgage Notes, after reduction for interest
on the $12,899,000 principal amount of Junior Mortgage Notes owned by
RIH, totals approximately $16,500,000.
Capital Expenditures and Resources
GGE continues the development of its expansion plans for the 4.4
acre tract on the Boardwalk, adjacent to the Resorts Casino Hotel.
The entire addition is anticipated to include up to 700 new hotel
rooms, 70,000 square feet of casino space and a 2,000 space parking
garage and transportation center. Subject to receipt of regulatory
approvals, GGE plans to break ground in the fall of 1996 on the
infrastructure necessary to support the full expansion. The first
phase of construction is expected to consist of 500 new hotel rooms,
50,000 square feet of casino floor space and the new garage.
C o nstruction costs for this phase are currently estimated at
approximately $200,000,000. Initial cash outlays are expected to be
from existing working capital and cash flow generated by operations
during the construction period. External sources of financing will
also be required. In this regard, GGE is exploring various
alternatives in both the public and private sectors.
During the first half of 1996 RIH's $3,473,000 of capital
expenditures included computer system upgrades, corridor carpeting and
other maintenance projects.
RESULTS OF OPERATIONS
RIH operates in one business segment. Following is a discussion
of the results of operations for the second quarter and first half of
1996 compared to 1995. The discussion should be read in conjunction
with the Consolidated Financial Statements included herein.
Revenues
Casino revenues were down $420,000 for the second quarter of 1996
and down $3,851,000 for the first half. Of the decrease for the half,
$3,448,000 was due to decreased slot win, which was down due to a
decrease in hold percentage (ratio of casino win to total amount
wagered for slots or total amount of chips purchased for table games)
while the amount wagered by patrons increased slightly. Table game
win was down by $339,000 as the effects of an increased hold
percentage were offset by a decrease in amounts wagered. Revenues
from poker, simulcasting and keno were also down slightly.
Two factors negatively affected RIH's performance in the first
half - heightened competition in the Atlantic City market for patrons
and severe weather conditions during the first quarter of 1996.
A s competition for patrons has intensified, promotions -
complimentary services (rooms, food and beverage provided to patrons
without charge), cash giveaways and events - have increased. In
recent quarters certain competitors have increased complimentaries and
cash giveaways dramatically. Although RIH did increase its promotions
9<PAGE>
somewhat during the first quarter and more significantly during the
second quarter, it still has elected not to keep pace with the
industry's increased promotions due to the belief that the resulting
increase in gaming win would not be sufficient to justify the
incremental costs incurred. (In this regard, see "Earnings from
Operations" below for a discussion of RIH's increased costs of
promotions.) Consequently, RIH's market share of revenues has
suffered. Also, expansions at two competing Atlantic City properties
opened in May 1996 which, combined, added approximately 1,100 hotel
rooms and approximately 60,000 square feet of gaming space. Several
other companies have announced plans to expand existing or construct
new casino/hotels in Atlantic City. Management can give no assurance
that the increased cost of obtaining gaming revenues will not continue
in future periods.
As noted above, the severe weather experienced during the first
quarter of 1996 adversely affected operations in that period as the
principal means of transportation to Atlantic City is by automobile or
bus. The impact of inclement weather is more severe on the Resorts
Casino Hotel than on competing properties which are more accessible
from main thoroughfares and which currently have more covered parking
and covered terminals for bus patrons.
Food and beverage revenues were up for the second quarter and
first half of 1996 due largely to a decrease in complimentary meals
served. Also, the number of patrons served at RIH's food and beverage
outlets increased for the second quarter of 1996.
Earnings from Operations
For the second quarter of 1996 casino, hotel and related
operating results decreased by $1,850,000 due to a net increase in
operating expenses. The most significant variances in operating
expenses were increases in casino promotional costs ($3,000,000) and
payroll and related costs ($500,000) and decreases in the accrual for
performance incentive bonuses ($500,000) and depreciation expense
($500,000). Casino promotional costs increased primarily due to an
increase in the amount of cash giveaways to bus patrons, as both the
cash giveaway per person and the number of bus passengers increased.
Payroll and related costs increased primarily due to increased cost of
union and other benefits.
For the first half of 1996 casino, hotel and related operating
results decreased by $5,086,000 due to a combination of the decreased
revenues discussed above and a net increase in operating expenses.
The most significant variances in operating expenses were increases in
casino promotional costs ($3,900,000) and payroll and related expenses
($900,000) and decreases in the accrual for performance incentive
bonuses ($1,200,000) and depreciation expense ($800,000). Casino
promotional costs increased primarily due to bus cash giveaways as the
cash giveaway per person increased, though the number of bus
passengers was down slightly. The increase in payroll and related
costs for the half was due to increased salary and wage rates,
although the average number of employees was down slightly for the
period, and, to a lesser extent, increased cost of union benefits.
10<PAGE>
PART II. OTHER INFORMATION
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.
The following Part II exhibit is filed herewith:
Exhibit
Number Exhibit
(10) GGE 1994 Stock Option Plan (as amended on May 10,
1996). (Incorporated by reference to Exhibit (4) to
GGE's Form 10-Q Quarterly Report for the quarter
ended June 30, 1996, in File No. 1-4748.)
b. Reports on Form 8-K
No Current Report on Form 8-K was filed by RIH covering an event
during the second quarter of 1996. No amendments to previously filed
Forms 8-K were filed during the second quarter of 1996.
11<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: August 7, 1996
12<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
Form 10-Q for the quarterly period
ended June 30, 1996
EXHIBIT INDEX
Exhibit Reference to Previous Filing
Number Exhibit or Page Number in Form 10-Q
(10) GGE 1994 Stock Option Incorporated by reference to
Plan (as amended on Exhibit (4) to GGE's Form
May 10, 1996) 10-Q Quarterly Report for
the Quarter ended June 30,
1996, in File No. 1-4748.
(27) Financial data schedule Page 14.
13<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 QUARTER ENDED JUNE 30, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> $39,931<F1>
<SECURITIES> 0
<RECEIVABLES> $8,218
<ALLOWANCES> $3,306
<INVENTORY> $2,109
<CURRENT-ASSETS> $55,328
<PP&E> $221,487
<DEPRECIATION> $66,858
<TOTAL-ASSETS> $223,628
<CURRENT-LIABILITIES> $33,675
<BONDS> $128,083<F2>
<COMMON> $1,000
0
0
<OTHER-SE> $41,995
<TOTAL-LIABILITY-AND-EQUITY> $223,628
<SALES> 0
<TOTAL-REVENUES> $138,565
<CGS> 0
<TOTAL-COSTS> $105,268<F3>
<OTHER-EXPENSES> $6,184<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $9,018
<INCOME-PRETAX> $(2,681)
<INCOME-TAX> 0
<INCOME-CONTINUING> $(2,681)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $(2,681)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES NON-RESTRICTED CASH EQUIVALENTS OF $24,053 AND
RESTRICTED CASH EQUIVALENTS OF $750.
<F2>NET OF UNAMORTIZED DISCOUNTS.
<F3>EXCLUDES DEPRECIATION EXPENSE.
<F4>DEPRECIATION EXPENSE.
</FN>
</TABLE>
