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, 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 September 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 14
Total number of pages 15
1<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
FORM 10-Q
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
at September 30, 1996 and
December 31, 1995 3
Consolidated Statements of
Operations for the Quarters
and Three Quarters Ended
September 30, 1996 and 1995 4
Consolidated Statements of
Cash Flows for the Three
Quarters Ended September 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 9
Part II. Other Information
Item 6. Exhibits and Reports on
Form 8-K 12
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)
September 30, December 31,
1996 1995
(Unaudited)
ASSETS
Current assets:
Cash (including cash equivalents
of $25,251 and $22,334) $ 38,322 $ 38,027
Restricted cash equivalents 750 750
Receivables, less allowance for
doubtful accounts of $3,319
and $3,570 7,498 6,933
Inventories 2,064 2,447
Prepaid expenses 4,848 6,078
Total current assets 53,482 54,235
Property and equipment, net of
accumulated depreciation of
$69,841 and $62,074 153,090 157,340
Deferred charges and other assets 15,917 12,822
$222,489 $224,397
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 626 $ 589
Accounts payable and accrued
liabilities 26,703 26,044
Interest payable to affiliate 1,365 4,244
Due to GGE 713 1,214
Total current liabilities 29,407 32,091
Notes payable to affiliate, net of
unamortized discounts 127,845 126,761
Other long-term debt 447 919
Deferred income taxes 18,710 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 23,714 23,310
Total shareholder's equity 46,080 45,676
$222,489 $224,397
3<PAGE>
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
(Unaudited)
Quarter Ended Three Quarters Ended
September 30, September 30,
1996 1995 1996 1995
Revenues:
Casino $71,770 $76,058 $198,551 $206,690
Rooms 1,800 2,113 5,023 5,180
Food and beverage 3,782 3,811 9,908 9,708
Other casino/hotel
revenues 1,486 1,474 3,921 4,118
78,838 83,456 217,403 225,696
Expenses:
Casino 43,892 42,035 123,149 118,021
Rooms 720 819 2,705 2,701
Food and beverage 4,216 4,091 11,392 10,731
Other casino/hotel
operating expenses 8,797 8,737 25,647 25,858
Selling, general and
administrative 8,422 8,697 25,822 27,459
GGE parent services fee 2,657 2,790 7,197 7,436
Depreciation 3,092 3,340 9,276 10,284
71,796 70,509 205,188 202,490
Earnings from operations 7,042 12,947 12,215 23,206
Other income (deductions):
Interest income 612 574 1,776 1,750
Interest expense (4,198) (4,204) (12,503) (12,540)
Amortization of debt
discounts (371) (318) (1,084) (1,083)
Net earnings $ 3,085 $ 8,999 $ 404 $ 11,333
4<PAGE>
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Three Quarters Ended
September 30,
1996 1995
Cash flows from operating activities:
Cash received from customers $ 215,915 $ 224,429
Cash paid to suppliers and employees (193,589) (187,078)
Cash flow from operations before
interest and income taxes 22,326 37,351
Interest received 1,723 1,681
Interest paid (15,382) (15,288)
Income taxes paid to GGE (240)
Net cash provided by operating
activities 8,427 23,744
Cash flows from investing activities:
Payments for property and equipment (5,026) (10,791)
CRDA deposits and bond purchases (2,170) (2,234)
Net cash used in investing
activities (7,196) (13,025)
Cash flows from financing activities:
Proceeds from borrowing 1,815
Repayments to GGE (501) (2,777)
Debt repayments (435) (181)
Net cash used in financing
activities (936) (1,143)
Net increase in cash and cash
equivalents 295 9,576
Cash and cash equivalents at beginning
of period 38,777 26,876
Cash and cash equivalents at end of
period $ 39,072 $ 36,452
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").
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.
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. Agreement and Plan of Merger of GGE:
On August 19, 1996, GGE entered into an Agreement and Plan of
Merger, which was subsequently amended on October 10, 1996, (as
amended, the "Merger Agreement") with Sun International Hotels Limited
("SIHL"), a Bahamian corporation, and Sun Merger Corp., a wholly owned
subsidiary of SIHL. Under the Merger Agreement, a wholly owned
subsidiary of SIHL will be merged with and into GGE (the "Merger"),
with GGE surviving as a wholly owned subsidiary of SIHL. The Merger
is subject to certain customary conditions. Management can give no
assurance as to whether or when the Merger will be effected.
C. Reverse Repurchase Agreements:
Cash equivalents at September 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 October 1996.
6<PAGE>
(In Thousands of Dollars)
Prudential Securities, Inc. $16,345
National Westminster Bank NJ $ 8,906
D. Complimentary Services:
The Consolidated Statements of Operations reflect each category
of operating revenues excluding the retail value of complimentary
services provided to casino patrons without charge. The retail value
of such complimentary services excluded from revenues amounted to
$9,775,000 and $9,554,000 for the third quarter of 1996 and 1995,
respectively, and $22,557,000 and $22,193,000 for the first three
quarters of 1996 and 1995, respectively. 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. 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) 1996 1995 1996 1995
Rooms $1,588 $1,438 $ 3,922 $ 3,737
Food and beverage 4,723 4,653 12,591 12,802
Other casino/hotel
operations 1,920 2,185 4,765 4,900
Total allocated to casino $8,231 $8,276 $21,278 $21,439
7<PAGE>
E. Statements of Cash Flows:
Supplemental 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) 1996 1995
Reconciliation of net earnings to net
cash provided by operating activities:
Net earnings $ 404 $11,333
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation 9,276 10,284
Provision for doubtful receivables 501 887
Provision for discount on CRDA
obligations, net of amortization 1,150 1,175
Deferred tax benefit (240)
Amortization of debt discounts 1,084 1,083
Net increase in receivables (1,066) (2,001)
Net decrease in inventories and
prepaid expenses 1,613 570
Net (increase) decrease in deferred
charges and other assets (1,939) 525
Net increase in accounts payable
and accrued liabilities 523 2,636
Net decrease in interest payable
to affiliate (2,879) (2,748)
Net cash provided by operating activities $ 8,427 $23,744
Non-cash investing and financing
activities:
Increase in liabilities for
additions to other assets $136 $179
F. Commitments and Contingencies:
Land Lease/Option
RIH and GGE entered into a five year lease effective August
1, 1996 (the "Lease Agreement"), pursuant to which RIH is leasing
approximately 3 acres to the north of Resorts Casino Hotel and GGE
is leasing an additional .6 acres nearby (the "Leased Property").
In accordance with the Lease Agreement (i) RIH and GGE
(collectively, the "Lessees") are required to pay rent of
$825,000 per year plus related real estate taxes, (ii) the Lessees
have an option to purchase the Leased Property for $12,000,000 on
July 31, 1997 and every consecutive July 31 until and including the
expiration date of the lease, July 31, 2001, and (iii) the
8<PAGE>
lessor has an option to require the Lessees to purchase the Leased
Property for $12,000,000 upon the expiration date of the lease.
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
these 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
GENERAL
See Note B of Notes to Consolidated Financial Statements for
discussion of the Merger Agreement to which GGE is a party. Because
consummation of the Merger is subject to various conditions,
management can make no representations as to whether, or when, the
Merger will be consummated or as to the possible impact of the Merger
on RIH's financial condition and results of operations should the
Merger be consummated.
FINANCIAL CONDITION
Liquidity
At September 30, 1996 RIH had working capital of $24,075,000
including $38,322,000 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.
RIH is the principal source of funds for servicing the
$125,000,000 principal amount 11% Mortgage Notes due 2003 (the
"Mortgage Notes") and
9<PAGE>
the $35,000,000 principal amount 11.375% Junior Mortgage Notes due
2004 (the "Junior Mortgage Notes") issued by Resorts International
Hotel Financing, Inc. ("RIHF"), a subsidiary of GGE. RIH owns
$12,899,000 principal 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.
RIHF will satisfy the interest payment due December 16, 1996 on
its Junior Mortgage Notes by cash payment. Therefore, on that date
RIH will pay interest due on its affiliated note payable to RIHF in
cash. Also on December 16, 1996, RIH will receive interest due on the
$12,899,000 principal amount of Junior Mortgage Notes owned by RIH.
Capital Expenditures and Resources
As previously disclosed GGE planned to construct up to 700 new
hotel rooms, 70,000 square feet of casino space and a 2,000 space
parking garage and transportation center on the 4.4 acre tract on the
Boardwalk (the "Chalfonte Site") adjacent to Resorts Casino Hotel
which GGE purchased in 1995. Subject to receipt of regulatory
approvals, GGE planned to break ground in the fall of 1996 on the
infrastructure necessary to support the full expansion. The first
phase of construction was expected to consist of 500 new hotel rooms,
50,000 square feet of casino floor space and the new garage.
Construction costs for this phase were estimated at approximately
$200,000,000. RIH also recently entered into a five year lease with
an option to purchase approximately 3 acres to the north of the
Resorts Casino Hotel, purchased an adjacent parcel and was successful
in vacating the portion of North Carolina Avenue that lies between the
Chalfonte Site and Resorts Casino Hotel. These parcels together with
the Chalfonte Site total more than 9 acres, all of which would play a
role in GGE's expansion plans. Although the Merger Agreement limits
the amount of capital expenditures that GGE can make on this project
prior to consummation of the Merger or termination of the Merger
Agreement, GGE is continuing with the process of obtaining permits and
limited design activities. SIHL has advised GGE that if and when the
Merger is consummated, SIHL expects to proceed with development of the
Chalfonte Site, although it expects to reconsider the type of facility
to be developed and significantly increase the amount to be invested.
During the first three quarters of 1996 RIH's capital
expenditures of $5,026,000 included computer system upgrades, the
purchase of 81 slot machines (replacements for older models), 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 third quarter and first three
quarters of 1996 compared to 1995. The discussion should be read in
conjunction with the Consolidated Financial Statements included
herein.
10<PAGE>
Revenues
Casino revenues were down $4,288,000 for the third quarter and
$8,139,000 for the first three quarters of 1996. For the third
quarter slot win was down $3,140,000 and table game win was down
$1,008,000. The decrease in slot win was primarily 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), though the
amount wagered by patrons also decreased. Table game win was down due
to both a decrease in amounts wagered by patrons and the effects of a
decreased hold percentage.
For the first three quarters of 1996 slot win was down $6,588,000
and table game win was down $1,347,000. The decrease in slot win was
almost totally attributable to a decrease in hold percentage. The
decrease in table game win resulted as the decrease in amounts wagered
by patrons more than offset the effects of an increased hold
percentage.
Two factors negatively affected RIH's performance in the first
three quarters - heightened competition in the Atlantic City market
for patrons and severe weather conditions during the first quarter of
1996.
As 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
somewhat during the first quarter and more significantly during the
second and third quarters, 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. Adding to the competition for patrons, 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.
11<PAGE>
Earnings from Operations
For the third quarter and first three quarters of 1996 casino,
hotel and related operating results decreased by $5,905,000 and
$10,991,000, respectively, due to a combination of decreased revenues
discussed above and a net increase in operating expenses. For the
third quarter the most significant variance in operating expenses was
an increase in casino promotional costs ($2,400,000). This was
primarily due to an increase in the amount of cash giveaways to bus
patrons as the cash giveaway per person increased, though RIH's number
of bus passengers was down slightly.
For the first three quarters the most significant variances in
operating expenses were increases in casino promotional costs
($6,200,000) and payroll and related expenses ($1,100,000) and
decreases in the accrual for performance incentive bonuses
($1,600,000) and depreciation expense ($1,000,000). Casino
promotional costs increased primarily due to bus cash giveaways for
the reasons noted above. The increase in payroll and related costs
was due to increased salary and wage rates, while the average number
of employees was down slightly for the period, and, to a lesser
extent, increased costs of union and other benefits.
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.
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 1996. No amendments to previously filed
Forms 8-K were filed during the third quarter of 1996.
12<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 12, 1996
13<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
Form 10-Q for the quarterly period
ended September 30, 1996
EXHIBIT INDEX
Exhibit Reference to Previous Filing
Number Exhibit or Page Number in Form 10-Q
(27) Financial data schedule Page 15.
14<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 SEPTEMBER 30, 1996, 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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> $39,072<F1>
<SECURITIES> 0
<RECEIVABLES> $8,936
<ALLOWANCES> $3,319
<INVENTORY> $2,064
<CURRENT-ASSETS> $53,482
<PP&E> $222,931
<DEPRECIATION> $69,841
<TOTAL-ASSETS> $222,489
<CURRENT-LIABILITIES> $29,407
<BONDS> $128,292<F2>
<COMMON> $1,000
0
0
<OTHER-SE> $45,080
<TOTAL-LIABILITY-AND-EQUITY> $222,489
<SALES> 0
<TOTAL-REVENUES> $217,403
<CGS> 0
<TOTAL-COSTS> $162,893<F3>
<OTHER-EXPENSES> $9,276<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $13,587
<INCOME-PRETAX> $404
<INCOME-TAX> 0
<INCOME-CONTINUING> $404
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $404
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES NON-RESTRICTED CASH EQUIVALENTS OF $25,251 AND
RESTRICTED CASH EQUIVALENTS OF $750.
<F2>NET OF UNAMORTIZED DISCOUNTS.
<F3>EXCLUDES DEPRECIATION EXPENSE.
<F4>DEPRECIATION EXPENSE.
</FN>
</TABLE>
