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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 7, 1996
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TRUMP HOTELS & CASINO RESORTS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-13794 13-3818402
- ---------------------------- ----------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 441-6060
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<PAGE>
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
On October 7, 1996, Trump Hotels & Casino Resorts Holdings, L.P. ("THCR
Holdings"), a subsidiary of Trump Hotels & Casino Resorts, Inc. ("THCR"),
acquired from Donald J. Trump ("Trump") all of the outstanding equity of Trump's
Castle Associates, ("Castle Associates"), the owner and operator of Trump's
Castle Casino Resort ("Trump's Castle") in Atlantic City, New Jersey (the
"Acquisition"). Trump serves as the Chairman of the Board of Directors of THCR
and was, prior to the consummation of the Acquisition, the beneficial owner of
approximately 29% of the outstanding equity of THCR and 100% of the outstanding
equity of Castle Associates.
Pursuant to the terms of the Agreement, dated as of June 24, 1996, as
amended (the "Agreement"), by and among THCR, THCR Holdings, Trump Casinos II,
Inc. (formerly known as TC/GP, Inc.) ("TCI-II"), Trump's Castle Hotel & Casino,
Inc. ("TCHI") and Trump, the aggregate consideration payable for all of the
outstanding equity interests of Castle Associates (assuming, as of the date of
the Agreement, a value of $30 per share for the Common Stock of THCR, par value
$.01 per share (the "THCR Common Stock")) was $176.9 million, payable in limited
partnership interests in THCR Holdings (exchangeable into shares of THCR Common
Stock) and cash as set forth below. The consideration represented, as of the
date of the Agreement, (A) $525.0 million (the agreed-upon value for the
business and operations of Castle Associates) minus (B) $314.0 million (the sum
of all the aggregate principal amounts of (i) Castle Associates' capital lease
obligations and indebtedness under the loan with Midlantic Bank, N.A., (ii)
Increasing Rate Subordinated Pay-in-Kind Notes due 2005 (the "Castle PIK Notes")
of Trump's Castle Funding, Inc. ("Castle Funding") not held by THCR Holdings,
(iii) 11 1/2% Senior Secured Notes due 2000 of Castle Funding and (iv) 11 3/4%
Mortgage Notes due 2003 of Castle Funding outstanding as of the date of the
Agreement) minus (C) $40.8 million (the aggregate principal amount of all Castle
PIK Notes held by THCR Holdings estimated (on the date of the Agreement) to be
outstanding as of the closing date of the Acquisition (the "Closing Date") less
the aggregate discount at which Trump could have repurchased the Castle PIK
Notes held by THCR Holdings) plus (D) $6.7 million (the estimated (as of the
date of the Agreement) excess cash over the operating needs of Castle Associates
on the Closing Date).
As contemplated in the Agreement, on October 7, 1996, the Closing Date, the
following transactions were effected:
(i) Trump contributed to THCR Holdings his 61.5% equity interest in
Castle Associates, in consideration of which he received a 9.52854% limited
partnership interest in THCR Holdings (the "Trump Consideration"),
exchangeable into 3,626,450 shares of THCR Common Stock (valuing each such
share at $30.00 (the "THCR Stock Contribution Value"));
(ii) TCI-II contributed to THCR Holdings its 37.5% equity interest in
Castle Associates, in consideration of which it received a 5.81009% limited
partnership interest in THCR Holdings (the "TCI-II Consideration"),
exchangeable into 2,211,250 shares of THCR Common Stock (valuing each such
share at the THCR Stock Contribution Value); and
(iii) THCR-TCHI Merger Corp., a Delaware corporation and a wholly
owned subsidiary of THCR Holdings ("Merger Sub"), merged (the "TCHI
Merger") with and into TCHI (holder of a 1% equity interest in Castle
Associates) whereupon (x) each share of common stock of TCHI, par value
$.01 per share (the "TCHI Common Stock"), outstanding immediately prior to
the TCHI Merger was converted into the right to receive $.8845 in cash (the
"TCHI Consideration") and each share of common stock of Merger Sub was
converted into the right to receive one share of common stock of the
surviving corporation of the TCHI Merger and (y) each holder of the
outstanding warrants (the "Castle Warrants") issued under the Warrant
Agreement, dated as of December 30, 1993, between TCHI and First Bank
National Association, as warrant agent, became entitled to receive, for
each former share of TCHI Common Stock for which each Castle Warrant was
exercisable, an amount in cash equal to the TCHI Consideration (the "Castle
Warrant Consideration").
In the aggregate, Trump received (i) a limited partnership interest in THCR
Holdings convertible into 5,837,700 shares of THCR Common Stock and (ii)
$884,550 in cash. On October 7, 1996, the closing sale price of the THCR Common
Stock on the New York Stock Exchange was $22.625 per share.
In connection with the Acquisition, Castle Associates was designated a
limited partnership with THCR Holdings as a 99% limited partner and TCHI, as the
surviving corporation of the TCHI Merger, a 1% general partner. The Acquisition
was approved by the stockholders of THCR on September 30, 1996.
2
<PAGE>
As a result of the Acquisition, on October 7, 1996, THCR's and Trump's
beneficial equity interest in THCR Holdings was approximately 63.4% and 36.6%,
respectively, and Trump's beneficial equity interest in THCR Holdings was
exchangeable into 13,918,723 shares of Common Stock.
The assets acquired by THCR and its subsidiaries in the Acquisition
(including equipment and other physical property) relate to the operation of the
Trump's Castle as a casino hotel facility and are expected to continue to be
used in this manner.
ITEM 5 OTHER EVENTS
On October 16, 1996, a stockholder of THCR filed a derivative action in the
United States District Court, Southern District of New York (96 Civ. 7820)
against each member of the Board of Directors of THCR, THCR, THCR Holdings,
Castle Associates, Trump Casinos, Inc., TCI-II, TCHI and Salomon Brothers Inc
("Salomon"). The plaintiff claims that the defendants breached their fiduciary
duties and engaged in ultra vires acts in connection with the Acquisition and
that Salomon was negligent in the issuance of its fairness opinion with respect
to the Acquisition. The plaintiff also alleges violations of the federal
securities laws for alleged omissions and misrepresentations in THCR's proxies,
and that Trump, TCI-II and TCHI breached the Agreement by supplying THCR with
untrue information for inclusion in the proxy statement delivered to THCR's
stockholders in connection with the Acquisition. The plaintiff seeks removal of
the directors of THCR, an injunction, rescission and damages. THCR and the other
defendants in the action believe that this suit is without merit and intend to
contest vigorously the allegations against them.
3
<PAGE>
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of the business acquired
INDEX TO FINANCIAL STATEMENTS
Page
----
Trump's Castle Associates and Subsidiary
Condensed and Consolidated Balance Sheets of Trump's
Castle Associates and Subsidiary at June 30, 1996
(unaudited) and December 31, 1995 .................................. 5
Condensed and Consolidated Statements of Operations
of Trump's Castle Associates and Subsidiary for the
six month period ended June 30, 1996 and 1995 (unaudited) .......... 6
Condensed and Consolidated Statement of Partners'
Capital (Deficit) of Trump's Castle Associates and
Subsidiary for the six months ended June 30, 1996 (unaudited) ...... 7
Condensed and Consolidated Statements of Cash Flows
for Trump's Castle Associates and Subsidiary for the
six months ended June 30, 1996 and 1995 (unaudited) ................ 8
Notes to Condensed and Consolidated Financial
Statements (unaudited) ............................................ 9
Trump's Castle Associates and Subsidiary
Report of Independent Public Accountants ............................. 11
Consolidated Balance Sheets of Trump's Castle Associates
and Subsidiary at December 31, 1995 and 1994 ....................... 12
Consolidated Statements of Operations of Trump's
Castle Associates and Subsidiary for the years ended
December 31, 1995, 1994, and 1993 ................................... 13
Consolidated Statement of Partners' Capital of Trump's
Castle Associates and Subsidiary for the years ended
December 31, 1995, 1994, and 1993 .................................. 14
Consolidated Statements of Cash Flows of Trump's Castle
Associates and Subsidiary for the years ended
December 31, 1995, 1994 and 1993 ................................... 15
Notes to Consolidated Financial Statements ........................... 16
4
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONDENSED AND CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
June 30, December 31,
1996 1995
-------- --------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 17,767 $ 21,038
Receivables, net ................................... 8,535 10,259
Due from affiliates, net ........................... 197 1,146
Inventories ........................................ 1,458 1,567
Other current assets ............................... 2,424 4,961
-------- --------
Total current assets ............................ 30,381 38,971
-------- --------
PROPERTY AND EQUIPMENT ................................ 319,280 322,115
-------- --------
OTHER ASSETS .......................................... 9,509 9,495
-------- --------
Total assets .................................... $359,170 $370,581
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Current maturities--other borrowings ............... $ 3,271 $ 2,903
Accounts payable and accrued expenses .............. 32,180 31,108
Accrued interest payable ........................... 4,413 4,391
-------- --------
Total current liabilities ....................... 39,864 38,402
MORTGAGE NOTES, due 2003 .............................. 207,773 206,569
(Net of unamortized discount of $34,368 and
$35,572, respectively)
PIK NOTES, due 2005 ................................... 58,514 54,110
(Net of unamortized discount of $7,637 and
$7,750, respectively)
OTHER BORROWINGS ...................................... 62,410 62,336
OTHER LONG TERM LIABILITIES ........................... 3,728 3,351
-------- --------
Total liabilities ............................... 372,289 364,768
-------- --------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL (DEFICIT) ........................... (13,119) 5,813
-------- --------
Total liabilities and capital ................... $359,170 $370,581
======== ========
The accompanying notes to consolidated financial statements are
an integral part of these consolidated financial statements.
5
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Dollars In Thousands)
For the Six Months
Ended June 30,
---------------------------
1996 1995
--------- ---------
REVENUES:
Gaming .................................... $ 127,173 $ 124,511
Rooms ..................................... 9,005 9,194
Food and beverage ......................... 15,590 12,980
Other ..................................... 3,917 3,834
--------- ---------
Gross Revenues ......................... 155,685 150,519
Less--Promotional allowances ............... 18,943 14,363
--------- ---------
Net Revenues ........................... 136,742 136,156
COSTS AND EXPENSES:
Gaming .................................... 80,198 73,677
Rooms ..................................... 755 1,327
Food and beverage ......................... 5,566 5,973
General and administrative ................ 38,140 35,536
Depreciation and amortization ............. 7,677 7,113
--------- ---------
Total costs and expenses ............... 132,336 123,626
--------- ---------
Income From Operations ................. 4,406 12,530
INTEREST INCOME ............................ 258 224
INTEREST EXPENSE ........................... (23,596) (22,589)
--------- ---------
Net Loss ............................... ($ 18,932) ($ 9,835)
========= =========
The accompanying notes to consolidated financial statements are
an integral part of these consolidated financial statements.
6
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONDENSED AND CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the Six Months Ended June 30, 1996
(unaudited)
(Dollars In Thousands)
Partners'
Partners' Accumulated
Capital Deficit Total
-------- ----------- -----
Balance at December 31, 1995 ..... $73,395 ($67,582) $ 5,813
Net Loss ......................... -- (18,932) (18,932)
------- -------- --------
Balance at June 30, 1996 ......... $73,395 ($86,514) ($13,119)
======= ======== ========
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
7
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars In Thousands)
For the Six Months
Ended June 30,
-------------------
1996 1995
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................. ($18,932) ($ 9,835)
Adjustments to reconcile net loss to net cash
flows provided by operating activities
Noncash charges--
Depreciation and amortization ....................... 7,677 7,113
Accretion of bond discount .......................... 1,318 1,151
Provision for losses on receivables ................. 640 516
Valuation allowance--CRDA investments ............... 650 714
------- -------
(8,647) (341)
Decrease in receivables ............................. 2,033 1,168
Decrease in inventories ............................. 109 211
Decrease (increase) in other current assets ......... 2,427 (3,632)
Decrease (increase) in other assets ................. 934 (155)
Increase in current liabilities ..................... 924 1,442
Increase in other liabilities ....................... 4,300 3,739
------- -------
Net cash flows provided by operating activities .... 2,080 2,432
------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment, net .............. (4,305) (5,215)
Purchase of CRDA investments .......................... (1,365) (1,241)
------- -------
Net cash flows used in investing activities .......... (5,670) (6,456)
------- -------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from issuance of debt ........................ 1,738 875
Repayment of other borrowings ......................... (1,419) (349)
------- -------
Net cash flows provided by investing activities ...... 319 526
------- -------
Net decrease in cash and cash equivalents ............ (3,271) (3,498)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 21,038 19,122
------- -------
CASH AND CASH EQUIVALENTS AT JUNE 30 ................... $17,767 $15,624
======= =======
SUPPLEMENTAL INFORMATION:
Cash paid for interest ................................ $17,974 $17,676
======= =======
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
8
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) ORGANIZATION AND OPERATIONS
The accompanying consolidated financial statements include those of Trump's
Castle Associates, a New Jersey general partnership (the "Partnership") and its
wholly owned subsidiary, Trump's Castle Funding, Inc., a New Jersey corporation
("Funding").
The Partnership owns and operates Trump's Castle Casino Resort, a luxury
casino hotel located in the Marina District of Atlantic City, New Jersey.
The accompanying consolidated financial statements have been prepared by
the Partnership without audit. In the opinion of the Partnership, all
adjustments, consisting of only normal recurring adjustments necessary to
present fairly the financial position, results of operations and cash flows for
the periods presented have been made. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
The accompanying consolidated financial statements have been prepared by
the Partnership pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and note disclosures
normally included in the financial statements prepared in conformity with
generally accepted accounting principles have been omitted.
These financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the annual
report on Form 10-K for the year ended December 31, 1995 filed with the
Securities and Exchange Commission by the Partnership and Funding. Certain
reclassifications have been made to conform prior year financial information
with the current year presentation.
The results of operations for the six month period ending June 30, 1996 are
not necessarily indicative of the operating results to be attained for any other
period.
(2) PIK NOTES
On June 23, 1995, the Partnership entered into an Option Agreement with
Hamilton Partners, L.P. ("Hamilton") which grants the Partnership an option (the
"Option") to acquire the Increasing Rate Subordinated Pay-in-Kind Notes due 2005
(the "PIK Notes") owned by Hamilton. Hamilton has represented to the Partnership
that it is the owner of at least 92% of the outstanding principal amount of the
PIK Notes. The Option was granted to the Partnership in consideration of $1.9
million of aggregate payments to Hamilton. The Option is exercisable at a price
equal to 60% of the aggregate principal amount and accrued interest of the PIK
Notes delivered by Hamilton, with accrued but unpaid interest, plus 100% of the
PIK Notes issued to Hamilton as interest subsequent to June 23, 1995. Pursuant
to the terms of the Option Agreement, upon the occurrence of certain events
within 18 months of the time the Option is exercised, the Partnership is
required to make an additional payment to Hamilton of up to 40% of the principal
amount of the PIK Notes. On May 21, 1996, the Partnership assigned the Option to
Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings") a Delaware
limited partnership and a subsidiary of Trump Hotels & Casino Resorts, Inc.
("THCR"), which, on that same date, exercised the Option and acquired
approximately 90% of the PIK Notes for approximately $38.7 million (the
"Purchase Price"), in exchange for which THCR Holdings received an aggregate of
approximately $59.3 million of PIK Notes. Concurrently with the exercise of the
Option, THCR Holdings entered into an agreement with the Partnership and Donald
J. Trump ("Trump"), which granted THCR Holdings a six-month exclusive right to
negotiate with Trump and the Partnership with respect to the acquisition of the
Partnership (the "Transaction") (see Note 3). If an agreement with respect to
the Transaction had not been entered into within six months, the Partnership
would then have had the right to repurchase from THCR Holdings, for a period of
90 days (the "Castle Repurchase Date"), the acquired PIK Notes for an amount in
cash equal to the Purchase Price plus 16% interest thereon (the "Repurchase
Price"). In the event that the Partnership would have not repurchased the
acquired PIK Notes, Trump would then have had the right to purchase from THCR
Holdings, for a period of 90 days following the Castle Repurchase Date, the
acquired PIK Notes for an amount in cash equal to the Repurchase Price
calculated to the date of such purchase.
On May 15, 1996, the semi-annual interest payment of $4,292,000 was paid by
issuance of additional PIK Notes.
9
<PAGE>
(3) PROPOSED ACQUISITION OF THE PARTNERSHIP
In consideration for the Partnership's assignment of the PIK Note Option to
THCR Holdings, an agreement was reached which gives THCR Holdings exclusive
rights to negotiate the acquisition of the Partnership (See Note 2).
Pursuant to an Agreement (the "Agreement"), dated as of June 24, 1996, by
and among THCR, THCR Holdings, TC/GP, Inc. ("TC/GP"), a Delaware corporation
wholly owned by Trump, Trump's Castle Hotel & Casino, Inc. ("TCHI"), a New
Jersey corporation wholly owned by Trump, and Trump, THCR Holdings agreed to
acquire all of the outstanding equity interests of the Partnership for an
aggregate consideration of $176.9 million. The Agreement contemplates the
following transactions will take place:
(i) Trump will contribute to THCR Holdings his 61.5% equity interest in the
Partnership, in consideration of which he will receive a 9.52854% limited
partnership interest in THCR Holdings, exchangeable into 3,626,450 shares of
THCR common stock (valuing each share at $30.00 (the "THCR Stock Contribution
Value");
(ii) TC/GP will contribute to THCR Holdings its 37.5% equity interest in
the Partnership, in consideration of which it will receive a 5.81009% limited
partnership in THCR Holdings, exchangeable into 2,211,250 shares of THCR common
stock valuing each share at the THCR Stock Contribution Value; and
(iii) THCR-TCHI Merger Corp., a Delaware corporation and wholly owned
subsidiary of THCR Holdings ("Merger Sub"), will merge (the "THCI Merger") with
and into THCI (holder of a 1.0% equity interest in the Partnership), whereupon
each share of common stock of TCHI ("TCHI Common Stock"), outstanding
immediately prior to the TCHI Merger will be converted into the right to receive
one share of common stock of the surviving corporation of the TCHI Merger and
each holder of the outstanding warrants ("Castle Warrants") issued under the
Warrant Agreement, dated as of December 30, 1993, will be entitled to receive
for each former share of TCHI Common Stock for which each Castle Warrant was
exercisable an amount in cash equal to the TCHI Consideration.
The acquisition will be accounted for as a purchase.
The acquisition is subject to satisfaction of a number of conditions,
including the affirmative vote of a majority of the outstanding shares of THCR
common stock (excluding the shares held by Trump and the other officers and
directors of THCR and their affiliates) and the receipt of various third party
approvals and consents.
(4) FINANCIAL INFORMATION OF FUNDING
Financial information relating to Funding is as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
Total Assets (including Mortgage Notes Receivable $242,141, net of
unamortized discount of $34,368 and $35,572 at June 30, 1996 and December 31,
1995, PIK Notes Receivable of $66,151, net of unamortized discount of $7,637
at June 30, 1996 and $61,860, net of unamortized discount of $7,750 at
December 31, 1995, and Senior Notes Receivable of $27,000 at
June 30, 1996 and December 31, 1995.) .......................................... $293,287 $287,679
======== ========
Total Liabilities and Capital (including Mortgage Notes Payable of $242,141,
net of unamortized discount of $34,368 and $35,572 at June 30, 1996 and
December 31, 1995, PIK Notes Payable of $66,151, net of unamortized discount
of $7,637, at June 30, 1996 and $7,750 at December 31, 1995 and Senior Notes
Payable of $27,000 at June 30, 1996 and December 31, 1995.) .................... $293,287 $287,679
======== ========
<CAPTION>
For the Six Months
Ended June 30,
-------------------------
1996 1995
-------- --------
Interest Income ................................................................ $ 21,395 $ 20,692
Interest Expense ............................................................... 21,395 20,692
-------- --------
Net Income ..................................................................... $ -- $ --
======== ========
</TABLE>
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump's Castle Associates and Subsidiary:
We have audited the accompanying consolidated balance sheets of Trump's
Castle Associates (a New Jersey general partnership) and Subsidiary as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, partners' capital and cash flows for each of the three years in the
period ended December 31, 1995. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free ofmaterial
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Trump's Castle Associates
and Subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ending
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 16, 1996
11
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
------------ ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ...................................... $ 21,038,000 $ 19,122,000
Trade receivables, less allowance for doubtful accounts
of $1,969,000 and $3,704,000 respectively (Note 3) ............ 9,007,000 7,395,000
Accounts receivable, other ..................................... 1,252,000 1,463,000
Due from affiliates, net (Note 6) .............................. 1,146,000 434,000
Inventories (Note 3) ........................................... 1,567,000 1,790,000
Prepaid expenses and other current assets (Note 4) ............. 4,961,000 2,880,000
------------ ------------
Total current assets ............................................ 38,971,000 33,084,000
------------ ------------
PROPERTY AND EQUIPMENT (Notes 3, 4, and 5):
Land and land improvements ..................................... 62,706,000 62,706,000
Buildings and building improvements ............................ 327,487,000 327,487,000
Furniture, fixtures and equipment .............................. 114,253,000 108,308,000
Construction in progress ....................................... 5,436,000 3,196,000
------------ ------------
509,882,000 501,697,000
Less--Accumulated depreciation ................................. 187,767,000 173,523,000
------------ ------------
322,115,000 328,174,000
------------ ------------
OTHER ASSETS .................................................... 9,495,000 7,539,000
------------ ------------
Total assets ................................................ $370,581,000 $368,797,000
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities--other borrowings (Note 5) ................. . $ 2,903,000 $ 1,108,000
Trade accounts payable ......................................... 9,413,000 6,191,000
Accrued payroll and related expenses ........................... 7,358,000 8,625,000
Accrued interest payable (Note 2) .............................. 4,391,000 3,994,000
Gaming liabilities (Note 3) .................................... 2,988,000 3,126,000
Self insurance reserves ........................................ 4,141,000 4,660,000
Other .......................................................... 7,208,000 6,380,000
------------ ------------
Total current liabilities ....................................... 38,402,000 34,084,000
MORTGAGE NOTES, due 2003 (Notes 4 and 10) ....................... 206,569,000 204,412,000
(Net of discount of $ 35,572,000 and $ 37,729,000, respectively)
PIK NOTES, due 2005 (Notes 4 and 10) ............................ 54,110,000 46,129,000
(Net of discount of $ 7,750,000 and $ 7,965,000, respectively)
OTHER BORROWINGS (Note 5) ....................................... 62,336,000 63,892,000
OTHER LONG TERM LIABILITIES ..................................... 3,351,000 3,315,000
------------ ------------
Total liabilities ............................................... 364,768,000 351,832,000
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (Notes 2 and 6):
Contributed capital ............................................ 73,395,000 73,395,000
Accumulated deficit ............................................ (67,582,000) (56,430,000)
------------ ------------
Total partners' capital ......................................... 5,813,000 16,965,000
------------ ------------
Total liabilities and capital ............................... $370,581,000 $368,797,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
12
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
REVENUES:
<S> <C> <C> <C>
Gaming (Note 3) .............................. $280,124,000 $258,455,000 $246,370,000
Rooms ........................................ 20,052,000 19,514,000 19,647,000
Food and beverage ............................ 30,804,000 28,447,000 30,608,000
Other ........................................ 9,130,000 8,969,000 8,201,000
------------- ------------- -------------
Gross Revenues ............................ 340,110,000 315,385,000 304,826,000
Less--Promotional allowances (Note 3) ........ 34,547,000 31,572,000 31,599,000
------------- ------------- -------------
Net Revenues .............................. 305,563,000 283,813,000 273,227,000
------------- ------------- -------------
COSTS AND EXPENSES (Notes 2, 6 and 7)
Gaming ....................................... 165,679,000 151,036,000 145,717,000
Rooms ........................................ 2,534,000 2,533,000 2,980,000
Food and beverage ............................ 13,516,000 12,396,000 14,595,000
General and administrative ................... 61,431,000 61,974,000 54,558,000
Depreciation and amortization ................ 14,639,000 14,437,000 16,425,000
Other ........................................ 13,403,000 12,613,000 11,086,000
------------- ------------- -------------
271,202,000 254,989,000 245,361,000
------------- ------------- -------------
Income from operations .................... 34,361,000 28,824,000 27,866,000
INTEREST INCOME ............................... 504,000 636,000 675,000
INTEREST EXPENSE, including approximately
$9,000,000 in transaction costs related to the
Recapitalization Plan in 1993 (Note 2) ....... (46,017,000) (44,173,000) (56,926,000)
------------- ------------- -------------
Net Loss .................................. ($ 11,152,000) ($ 14,713,000) ($ 28,385,000)
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
13
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
Contributed Accumulated
Capital Deficit Total
----------- ------------ -------------
<S> <C> <C> <C>
Balance at December 31, 1992 ................... $73,395,000 ($12,596,000) $ 60,799,000
Net loss ...................................... -- (28,385,000) (28,385,000)
Partnership distribution (Note 6) ............. -- (736,000) (736,000)
----------- ------------ -------------
Balance at December 31, 1993 ................... 73,395,000 (41,717,000) 31,678,000
Net loss ...................................... -- (14,713,000) (14,713,000)
----------- ------------ -------------
Balance at December 31, 1994 ................... 73,395,000 (56,430,000) 16,965,000
Net loss ...................................... -- (11,152,000) (11,152,000)
----------- ------------ -------------
Balance at December 31, 1995 ................... $73,395,000 ($67,582,000) $ 5,813,000
=========== ============ =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
14
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Loss .......................................... ($11,152,000) ($14,713,000) ($28,385,000)
Adjustments to reconcile net loss to net cash flows
provided by (used in) operating activities--
Noncash charges--
Depreciation and amortization ................... 14,639,000 14,437,000 16,425,000
Accretion of bond discount ...................... 2,372,000 2,148,000 10,395,000
Provision for losses on receivables ............. 1,370,000 3,438,000 755,000
Amortization of CRDA tax credits ................ 720,000 955,000 115,000
Valuation allowance--CRDA investments ........... 936,000 735,000 953,000
----------- ----------- -----------
8,885,000 7,000,000 258,000
Increase in receivables ......................... (3,486,000) (2,461,000) (3,461,000)
Decrease (increase) in inventories .............. 223,000 525,000 (155,000)
Increase in other current assets ................ (2,800,000) (320,000) (701,000)
Increase in other assets ........................ (86,000) (881,000) (42,000)
Increase (decrease) in current liabilities ...... 2,527,000 2,112,000 (4,980,000)
Increase in other liabilities ................... 7,802,000 3,315,000 --
----------- ----------- -----------
Net cash flows provided by (used in)
operating activities ......................... 13,065,000 9,290,000 (9,081,000)
----------- ----------- -----------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchases of property and equipment, net .......... (8,580,000) (8,257,000) (10,396,000)
Purchase of CRDA investments ...................... (2,805,000) (2,350,000) (2,958,000)
----------- ----------- -----------
Net cash flows used in investing activities ... (11,385,000) (10,607,000) (13,354,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Senior Notes .......................... -- -- 27,000,000
Repayment of other borrowings ..................... (1,470,000) -- (7,000,000)
Other borrowings .................................. 1,706,000 -- --
Distributions to TC/GP, Inc. ...................... -- -- (736,000)
----------- ----------- -----------
Net cash flows from financing activities ...... 236,000 -- 19,264,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents .................................. 1,916,000 (1,317,000) (3,171,000)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR .............................. 19,122,000 20,439,000 23,610,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR .................................... $21,038,000 $19,122,000 $20,439,000
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
15
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND OPERATIONS
The accompanying consolidated financial statements include those of Trump's
Castle Associates, a New Jersey general partnership (the "Partnership") and its
wholly-owned subsidiary, Trump's Castle Funding, Inc., a New Jersey corporation
("Funding"). All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
The Partnership was formed as a limited partnership in 1985 for the sole
purpose of acquiring and operating Trump's Castle Casino Resort ("Trump's
Castle"). The Partnership converted to a general partnership in February 1992.
Trump's Castle is a luxury casino hotel located in the Marina District of
Atlantic City, New Jersey. A substantial portion of Trump's Castle's revenues
are derived from its gaming operations. Competition in the Atlantic City gaming
market is intense and the Partnership believes that the competition will
continue as new entrants to the gaming industry become operational.
The partners in the Partnership are TC/GP, Inc. ("TC/GP"), which has a
37.5% interest in the Partnership, Donald J. Trump ("Trump"), who has a 61.5%
interest in the Partnership, and Trump's Castle Hotel & Casino, Inc. ("TCHI"),
which has a 1% interest in the Partnership. Trump, by virtue of his ownership of
TC/GP and TCHI, is the beneficial owner of 100% of the common equity interest in
the Partnership, subject to the right of holders of warrants for 50% of the
common stock of TCHI (the "TCHI Warrants") to acquire an indirect beneficial
interest in 0.5% of the common equity interest in the Partnership. Trump has
pledged his direct and indirect ownership interest in the Partnership as
collateral under various personal debt agreements.
Funding was incorporated on May 28, 1985 solely to serve as a financing
company to raise funds through the issuance of bonds to the public (Note 4).
Since Funding has no business operations, its ability to repay the principal and
interest on the 11 1/2% Senior Secured Notes due 2000 (the "Senior Notes"), the
11 3/4% Mortgage Notes due 2003 (the "Mortgage Notes"), and its Increasing Rate
Subordinated Pay-in-Kind Notes due 2005 (the "PIK Notes") is completely
dependent upon the operations of the Partnership.
(2) PLAN OF RECAPITALIZATION
On December 28, 1993, the Partnership, Funding, and TC/GP consummated a
recapitalization plan (the "Recapitalization Plan") whereby each $1,000 of
principal of the 9.5% Mortgage Bonds issued as part of an earlier plan of
reorganization was exchanged for $750 principal amount of Funding's Mortgage
Notes, $120 principal amount of Funding's PIK Notes, and a cash payment of $6.19
plus all accrued and unpaid interest. Those bondholders who did not elect to
exchange their Mortgage Bonds received a cash payment in redemption of their
Mortgage Bonds of $750 for each $1,000 of principal amount of bonds plus accrued
and unpaid interest. In addition, each share of TC/GP common stock was exchanged
for $35 principal amount of PIK Notes.
As a result of the Recapitalization Plan, approximately 96% of the
principal amount of the previously issued Mortgage Bonds were exchanged for
Mortgage Notes and PIK Notes and the TC/GP common stock was redeemed. Those
Bonds that were redeemed for cash were purchased at an amount which approximated
their net book value at the date of purchase. The net book value of the
exchanged Bonds has been carried forward and allocated to the Mortgage Notes and
PIK Notes in proportion to the principal amount of Mortgage Notes and PIK Notes
issued. The difference between the principal amount and net book value of these
Mortgage Notes and PIK Notes is being accreted as a charge to interest expense
over the life of the Mortgage Notes and PIK Notes using the effective interest
method.
In addition to the Mortgage Notes and PIK Notes, Funding issued $27,000,000
of the Senior Notes. A portion of the proceeds from the Senior Notes were used
to repay $7,000,000 of outstanding indebtedness.
Transaction costs related to the Recapitalization Plan of approximately
$9,000,000 were included in interest expense. Included in these costs was a
$1,500,000 bonus to Trump for the services he provided in connection with the
Recapitalization Plan.
16
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(3) ACCOUNTING POLICIES
Pervasiveness of Estimates
The preparation of these financial statements in conformity with generally
accepted accounting principals requires the Partnership to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates.
Revenue Recognition
Casino revenues consist of the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues from hotel and other
services are recognized at the time the related services are performed.
The Partnership provides an allowance for doubtful accounts arising from
casino, hotel, and other services, which is based upon a specific review of
certain outstanding receivables and historical collection performance. In
determining the amount of the allowance, the Partnership is required to make
certain estimates and assumptions and actual results may differ from these
estimates and assumptions.
Promotional Allowances
Gross revenues include the retail value of the complimentary food,
beverage, and hotel services provided to patrons. The retail value of these
promotional allowances is deducted from gross revenues to arrive at net
revenues. The cost of such complimentaries have been included in gaming costs
and expenses in the accompanying consolidated statements of operations. The
estimated departmental costs of providing such promotional allowances are
included in gaming costs and expenses and are as follows:
1995 1994 1993
---- ---- ----
Rooms ................... $ 6,261,000 $ 6,554,000 $ 5,834,000
Food and Beverage ....... 18,240,000 17,342,000 17,332,000
Other ................... 2,483,000 2,693,000 2,073,000
----------- ----------- -----------
$26,984,000 $26,589,000 $25,239,000
=========== =========== ===========
Income Taxes
The accompanying consolidated financial statements do not include a
provision for Federal income taxes of the Partnership, since any income or
losses allocated to the partners are reportable for Federal income tax purposes
by the Partners.
Under the Casino Control Act (the "Act") and the regulations promulgated
thereunder, the Partnership and Funding are required to file a consolidated New
Jersey corporation business tax return.
As of December 31, 1995, the Partnership had New Jersey State net operating
losses of approximately $162,000,000, which are available to offset taxable
income through the year 2002. The net operating loss carryforwards result in a
deferred tax asset of $15,200,000, which has been offset by a valuation
allowance of $15,200,000, as utilization of such carryforwards is not considered
to be more likely than not.
Inventories
Inventories of provisions and supplies are carried at the lower of cost
(first-in, first-out basis) or market.
Property and Equipment
Property and equipment is recorded at cost and is depreciated on the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives for furniture, fixtures, and equipment and buildings are from three
to eight years and forty years, respectively.
17
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(3) ACCOUNTING POLICIES--(CONTINUED)
Long Lived Assets
During 1995, the Partnership adopted the provisions of Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of Long
Lived Assets" ("SFAS 121"). SFAS 121 requires, among other things, that an
entity review its long lived assets and certain related intangibles for
impairment whenever changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable. As a result of its review, the
Partnership does not believe that any impairment exists in the recoverability of
its long lived assets.
Statements of Cash Flows
For purposes of the statements of cash flows, Funding and the Partnership
consider all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
The following supplemental disclosures are made to the statements of cash
flows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for interest
(net of amounts capitalized) ............................... $35,338,000 $31,255,000 $44,857,000
=========== =========== ===========
Issuance of debt in exchange for accrued interest ........... $ 7,766,000 $ 3,559,000 $ --
=========== =========== ===========
</TABLE>
Reclassification
Certain reclassifications have been made to the 1994 and 1993 financial
statements in order to conform to the classifications used in 1995.
(4) MORTGAGE NOTES AND PIK NOTES
As discussed in Note 2, on December 28, 1993 all of the outstanding
Mortgage Bonds and TC/GP common stock were either redeemed or exchanged for
Mortgage Notes and PIK Notes by Funding. The Mortgage Notes bear interest,
payable in cash, semi-annually, at 11 3/4% and mature on November 15, 2003. As
discussed in Note 2, the net book value of the exchanged bonds has been carried
forward and allocated to the Mortgage Notes and PIK Notes in proportion to the
principal amount of Mortgage Notes and PIK Notes issued. In the event the PIK
Notes are redeemed prior to November 15, 1998, the interest rate on the Mortgage
Notes will be reduced to 11 1/2%. The Mortgage Notes may be redeemed at
Funding's option at a specified percentage of the principal amount commencing in
1998.
The PIK Notes bear interest payable, at Funding's option in whole or in
part in cash and through the issuance of additional PIK Notes, semi-annually at
the rate of 7% through September 30, 1994 and 13 7/8% through November 15,
2003. After November 15, 2003, interest on the Notes is payable in cash at the
rate of 13 7/8%. The PIK Notes mature on November 15, 2005. The PIK Notes may
be redeemed at Funding's option at 100% of the principal amount under certain
conditions, as defined in the PIK Note Indenture, and are required to be
redeemed from a specified percentage of any equity offering which includes the
Partnership. Interest has been accrued using the effective interest method. On
May 15, 1995 and November 15, 1995, the semi-annual interest payments of
$3,753,000 and $4,013,000, respectively, were paid by the issuance of additional
PIK Notes.
On June 23, 1995, the Partnership entered into an Option Agreement with
Hamilton Partners, L.P. ("Hamilton") which grants the Partnership an option (the
"Option") to acquire the PIK Notes owned by Hamilton. Hamilton has represented
to the Partnership that it is the owner of at least 92% of the outstanding
principal amount of the PIK Notes. The Option was granted to the Partnership in
consideration of $1,900,000 of aggregate payments to Hamilton, which is included
in prepaid expenses and other current assets.
The Option is exercisable at a price equal to 60% of the aggregate
principal amount and accrued interest of the PIK Notes delivered by Hamilton.
Pursuant to the terms of the Option Agreement, upon the occurrence of certain
18
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) MORTGAGE NOTES AND PIK NOTES--(CONTINUED)
events within 18 months of the time the Option is exercised, the Partnership is
required to make an additional payment to Hamilton of up to 40% of the principal
amount of the PIK Notes. The option expires on March 19, 1996 and may be
extended to June 21, 1996.
The terms of both the Mortgage Notes and PIK Notes include limitations on
the amount of additional indebtedness the Partnership may incur, distributions
of Partnership capital, investments, and other business activities.
The Mortgage Notes are secured by a promissory note of the Partnership to
Funding (the "Partnership Note") in an amount and with payment terms necessary
to service the Mortgage Notes. The Partnership Note is secured by a mortgage on
Trump's Castle and substantially all of the other assets of the Partnership. The
Partnership Note has been assigned by Funding to the Trustee to secure the
repayment of the Mortgage Notes. In addition, the Partnership has guaranteed
(the "Guaranty") the payment of the Mortgage Notes, which Guaranty is secured by
a mortgage on Trump's Castle. The Partnership Note and the Guaranty are
expressly subordinated to the indebtedness described in Note 5 (the "Senior
Indebtedness") and the liens of the mortgages securing the Partnership Note and
the Guaranty are subordinate to the liens securing the Senior Indebtedness.
The PIK Notes are secured by a subordinated promissory note of the
Partnership to Funding (the "Subordinated Partnership Note"), which has been
assigned to the Trustee for the PIK Notes, and the Partnership has issued a
subordinated guaranty (the "Subordinated Guaranty") of the PIK Notes. The
Subordinated Partnership Note and the Subordinated Guaranty are expressly
subordinated to the Senior Indebtedness, the Partnership Note, and the Guaranty.
The ability of Funding and the Partnership to pay their indebtedness when
due, will depend on their ability to either generate cash from operations
sufficient for such purposes or to refinance such indebtedness on or before the
date on which it becomes due. The Partnership does not currently anticipate
being able to generate sufficient cash flow from operations to repay a
substantial portion of the principal amounts of the Mortgage Notes and the PIK
Notes when due. Thus, the repayment of the principal amount of this indebtedness
will likely depend primarily upon the ability of Funding and the Partnership to
refinance this debt when due. The future operating performance of the
Partnership and the ability to refinance this debt will be subject to the then
prevailing economic conditions, industry conditions, and numerous other
financial, business, and other factors, many of which are beyond the control of
Funding or the Partnership. There can be no assurance that the future operating
performance of the Partnership will be sufficient to meet these repayment
obligations or that the general state of the economy, the status of the capital
markets generally, or the receptiveness of the capital markets to the gaming
industry will be conducive to refinancing this debt or other attempts to raise
capital.
(5) OTHER BORROWINGS
Bank Borrowings
The Partnership has a term loan with Midlantic National Bank (the "Term
Loan") in the amount of $38,000,000. The Term Loan had an initial maturity date
of May 29, 1995 and under its terms, the Partnership had the option, subject to
certain conditions, to extend the Term Loan an additional five years. The
Partnership exercised its option to extend the Term Loan on May 28, 1995. The
interest rate was revised to be a fluctuating rate of 3% above the bank's prime
rate, which was 8.5% at December 31, 1995, but in no event less than 9% per
annum. In addition, the outstanding principal amount of the Term Loan will be
amortized over the five-year extension period on a twenty year amortization
schedule requiring principal payments of approximately $158,000 per month over
the period. At December 31, 1995, $36,892,000 was outstanding on this Term Loan.
The Term Loan is secured by a mortgage lien on Trump's Castle that is prior
to the lien securing the Mortgage Notes (Note 4) and the Senior Notes described
below.
19
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(5) OTHER BORROWINGS--(CONTINUED)
Senior Notes
On December 28, 1993, Funding issued the Senior Notes. Similar to the
Mortgage Notes, the Senior Notes are secured by an assignment of a promissory
note of the Partnership (the "Senior Partnership Note") which is in turn secured
by a mortgage on Trump's Castle and substantially all of the other assets of the
Partnership. In addition, the Partnership has guaranteed (the "Senior Guaranty")
the payment of the Senior Notes, which Senior Guaranty is secured by a mortgage
on Trump's Castle. The Senior Partnership Note and the Senior Guaranty are
subordinated to the Term Loan described above.
Interest on the Senior Notes is payable semiannually at the rate of
11 1/2%; however in the event that the PIK Notes are redeemed prior to November
15, 1998, the interest rate will be reduced to 11 1/4%. The Senior Notes are
subject to a required partial redemption, as defined, commencing on June 1, 1998
at 100% of the principal amount of the amount redeemed.
(6) RELATED PARTY TRANSACTIONS
Trump Management Fee
The Partnership had a management agreement (the "Management Agreement")
with Trump's Castle Management Corp. ("TCMC"), a corporation wholly-owned by
Trump. The Management Agreement provided that the day-to-day operation of
Trump's Castle and all ancillary properties and businesses of the Partnership
was to be under the exclusive management and supervision of TCMC.
Pursuant to the Management Agreement, the Partnership was required to pay
an annual fee in the amount of $1,500,000 to TCMC for each year in which
Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), as
defined, exceeds certain levels. In addition, TCMC, beginning with the fiscal
year ended December 31, 1994, was to receive an incentive fee equal to 10% of
the excess EBITDA over $45,000,000 for such fiscal year. During the year ended
December 31, 1993, the Partnership incurred fees and expenses of $1,647,000
under the Management Agreement.
As a result of the Recapitalization Plan described in Note 2, on December
28, 1993, the Partnership terminated the Management Agreement with TCMC and
entered into a services agreement (the "Services Agreement") with TC/GP.
Pursuant to the terms of the Services Agreement, TC/GP is obligated to provide
the Partnership, from time to time, when reasonably requested, consulting
services on a non-exclusive basis, relating to marketing, advertising,
promotional, and other similar and related services with respect to the business
and operations of the Partnership, including such other services as the Managing
Partner may reasonably request.
In consideration for the services to be rendered, the Partnership will pay
TC/GP an annual fee on the same basis as that of the previous Management
Agreement, discussed above. During the years ended December 31, 1995 and 1994,
the Partnership incurred fees and expenses of $2,087,000 and $2,111,000,
respectively, under the Services Agreement. The Services Agreement expires on
December 31, 2005.
Other Payments To Trump
During 1994, the Board of Partner Representatives approved a $1,000,000
bonus to be paid to Trump, based upon 1994 operating results. The amount was
paid in two equal installments in June and August 1995. No such bonus was
approved for 1995.
Due From Affiliates
Amounts due from affiliates were $1,146,000 and $434,000 as of December 31,
1995 and 1994, respectively. The Partnership has engaged in limited intercompany
transactions with Trump Plaza Associates, Trump Taj Mahal Associates, and the
Trump Organization, which are affiliates of Trump. These transactions include
certain shared payroll costs as well as complimentary services offered to
customers, for which the Partnership makes initial payments and is then
reimbursed by the affiliates.
20
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(6) RELATED PARTY TRANSACTIONS--(CONTINUED)
During 1995, 1994, and 1993, the Partnership incurred expenses of
approximately $1,673,000, $1,631,000, and $1,332,000, respectively, in corporate
salaries and $1,109,000, $1,047,000, and $952,000, respectively, of other
transactions on behalf of these related entities. In addition, the Partnership
received payments totaling $1,401,000, $2,438,000, and $2,004,000, respectively,
for services rendered and had $580,000, $441,000, and $407,000, respectively, of
charges for similar costs incurred by these related entities on behalf of the
Partnership.
Partnership Agreement
Under the terms of the Partnership Agreement, the Partnership was required
to pay all costs incurred by TC/GP. For the years ended December 31, 1995, 1994,
and 1993, the Partnership paid $1,248,000, $1,188,000, and $736,000,
respectively, of expenses on behalf of TC/GP. For the years ended December 31,
1995 and 1994 these costs were charged to general and administrative expense in
the accompanying consolidated financial statements. For the year ended December
31, 1993 these costs were expenses of TC/GP and recorded as a capital
contribution.
(7) COMMITMENTS AND CONTINGENCIES
Casino License Renewal
The Partnership is subject to regulation and licensing by the CCC. The
Partnership's casino license must be renewed periodically, is not transferable,
is dependent upon the financial stability of the Partnership, and can be revoked
at any time. Due to the uncertainty of any license renewal application, there
can be no assurance that the license will be renewed. Upon revocation,
suspension for more than 120 days, or failure to renew the casino license due to
the Partnership's financial condition or for any other reason, the Casino
Control Act (the "Act") provides that the CCC may appoint a conservator to take
possession of and title to the hotel and casino's business and property, subject
to all valid liens, claims, and encumbrances.
On June 22, 1995, the CCC renewed the casino license of the Partnership
through 1999 subject to certain continuing reporting and compliance conditions.
Self Insurance Reserves
Self insurance reserves represent the estimated amounts of uninsured claims
settlements related to employee health medical costs, workers compensation, and
other legal proceedings in the normal course of business. These reserves are
established by the Partnership based upon a specific review of open claims as of
the balance sheet date as well as historical claims settlement experience.
Actual results may differ from these reserve amounts.
Employment Agreements
The Partnership has entered into employment agreements with certain key
employees which expire at various dates through July 30, 1998. Total minimum
commitments on these agreements at December 31, 1995 were approximately
$4,061,000.
Legal Proceedings
The Partnership is involved in legal proceedings incurred in the normal
course of business. In the opinion of management and its counsel, if adversely
decided, none of these proceedings would have a material effect on the
consolidated financial position of the Partnership.
Casino Reinvestment Development Authority Obligations
Pursuant to the provisions of the Act, the Partnership, must either obtain
investment tax credits, as defined in the Act, in an amount equivalent to 1.25%
of its gross casino revenues, as defined in the Act, or pay an alternative tax
of 2.5% of its gross casino revenues. Investment tax credits may be obtained by
making qualified investments, as defined, or by depositing funds which may be
converted to bonds by the Casino Reinvestment Development Authority (the
"CRDA"), both of which bear interest at below market interest rates. The
Partnership is required to make quarterly deposits with the CRDA to satisfy its
investment obligations.
21
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
From time-to-time the Partnership has elected to donate funds that it has
on deposit with the CRDA in return for tax credits to satisfy substantial
portions of the Partnership's future investment alternative tax obligations.
Donations in the amount of $375,000, $6,440,000, and $568,000 were made in 1995,
1994, and 1993, respectively. These donations, net of the tax credits received,
were charged against operations in the year in which they were made and resulted
in CRDA tax credits of $191,000, $1,474,000, and $290,000 to be applied to the
years ending December 31, 1995, 1994, and 1993, respectively. For the years
ended December 31, 1995, 1994, and 1993 the Partnership charged to operations
$720,000, $955,000, and $115,000, respectively, which represents amortization of
a portion of the tax credits discussed above.
In addition, for the years ended December 31, 1995, 1994, and 1993, the
Partnership charged to operations $936,000, $735,000, and $953,000,
respectively, to give effect to the below market interest rates associated with
purchased CRDA bonds.
(8) EMPLOYEE BENEFIT PLANS
The Partnership has a retirement savings plan for its nonunion employees
under Section 401(k) of the Internal Revenue Code. Employees are eligible to
contribute up to 15% of their earnings to the plan up to the maximum amount
permitted by law, and the Partnership will match 50% of an eligible employee's
contributions up to a maximum of 5% of the employee's earnings. The Partnership
recorded charges of approximately $1,013,000, $899,000, and $864,000 for
matching contributions for the years ended December 31, 1995, 1994, and 1993,
respectively.
The Partnership makes payments to various trusteed pension plans under
industry-wide union agreements. The payments are based on the hours worked by or
gross wages paid to covered employees. It is not practical to determine the
amount of payments ultimately used to fund pension benefit plans or the current
financial condition of the plans. Under the Employee Retirement Income Security
Act, the Partnership may be liable for its share of the plans' unfunded
liabilities, if any, if the plans are terminated. Pension expense for the years
ended December 31, 1995, 1994, and 1993 were $497,000, $455,000, and $407,000,
respectively.
The Partnership provides no other material post employment benefits.
(9) FINANCIAL INFORMATION OF FUNDING
Financial information relating to Funding as of and for the years ended
December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Total Assets (including Mortgage Notes Receivable of $242,141,000, net of
unamortized discount of $35,572,000 and $37,729,000 at December 31, 1995 and
1994 respectively; PIK Notes Receivable of $61,860,000, net of unamortized
discount of $7,750,000 at December 31, 1995 and $54,094,000, net of unamortized
discount of $7,965,000 at December 31, 1994, and Senior Notes Receivable of
$27,000,000 at December 31, 1995 and 1994.) .................................. $287,679,000 $277,541,000
============ ============
Total Liabilities and Capital (including Mortgage Notes Payable of
$242,141,000, net of unamortized discount of $35,572,000 and $37,729,000 at
December 31, 1995 and 1994 respectively; PIK Notes Payable of $61,860,000, net
of unamortized discount of $7,750,000 at December 31, 1995 and $54,094,000, net
of unamortized discount of $7,965,000, at December 31, 1994 and Senior Notes
Payable of $27,000,000 at December 31, 1995 and 1994.) ....................... $287,679,000 $277,541,000
============ ============
Interest Income ............................................................... $ 41,768,000 $ 40,600,000
Interest Expense .............................................................. $ 41,768,000 $ 40,600,000
------------ ------------
NET INCOME .................................................................... $ -- $ --
============ ============
</TABLE>
22
<PAGE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments of the
Partnership and Funding approximate fair value, as follows: (a) cash and cash
equivalents and accrued interest receivables and payables based on the
short-term nature of the financial instruments, (b) CRDA bonds and deposits
based on the allowances to give effect to the below market interest rates.
The fair values of the Mortgage Notes and PIK Notes are based on quoted
market prices. The fair value of the Mortgage Bonds was based on quoted market
prices obtained by the Partnership from its investment advisoras follows:
December 31, 1995
--------------------------------
Carrying Amount Fair Value
--------------- -------------
11 3/4% Mortgage Notes ................... $206,569,000 $212,479,000
PIK Notes ................................ $ 54,110,000 $ 48,096,000
December 31, 1994
--------------------------------
Carrying Amount Fair Value
--------------- -------------
11 3/4% Mortgage Notes ................... $204,412,000 $131,967,000
PIK Notes ................................ $ 46,129,000 $ 43,546,000
There are no quoted market prices for the Partnership Term Loan and Senior
Notes. A reasonable estimate of their value could not be made without incurring
excessive costs.
23
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1996 and
the Unaudited Pro Forma Consolidated Statements of Operations of THCR for the
year ended December 31, 1995 and for the six months ended June 30, 1996 (the
"Unaudited Pro Forma Financial Statements") are set forth below.
The Unaudited Pro Forma Consolidated Balance Sheet has been prepared
assuming the Acquisition had occurred on June 30, 1996. The Unaudited Pro Forma
Consolidated Statements of Operations have been prepared assuming that the Taj
Merger Transaction (as defined) and the Acquisition had occurred on January 1,
1995.
The Unaudited Pro Forma Financial Statements are presented for
informational purposes only and do not purport to present what the Balance Sheet
would have been had the Acquisition, in fact, occurred on June 30, 1996 or what
the results of operations for the year ended December 31, 1995 or for the six
months ended June 30, 1996 would have been had the Taj Merger Transaction and
the Acquisition, in fact, occurred on January 1, 1995 or to project the results
of operations for any future period.
The Unaudited Pro Forma Consolidated Balance Sheet gives effect to the
Acquisition and the Unaudited Pro Forma Statements of Operations give effect to
the Taj Merger Transaction and the Acquisition as follows:
I. The Taj Merger Transaction, which was completed on April 17, 1996,
included, (a) the consolidation of Trump Taj Mahal Associates ("Taj
Associates"), which is an indirect subsidiary of THCR after the Taj
Merger Transaction, (b) the redemption of the 11.35% Mortgage Bonds,
Series A due 1999 of Trump Taj Mahal Funding, Inc. and the Class B
Common Stock, par value $.01 per share, of Taj Mahal Holding Corp.
("Taj Holding") and the retirement of the 10 7/8% Mortgage Notes due
2001 of Trump Plaza Funding, Inc. (the "Plaza Notes"), (c) the
offering of $1.2 billion aggregate principal amount of 11 1/4% First
Mortgage Notes due 2006 of Trump Atlantic City Associates ("Trump AC")
and Trump Atlantic City Funding, Inc., a wholly owned subsidiary of
Trump AC, (d) the offering of 13,250,000 shares of THCR Common Stock,
(e) purchase accounting adjustments required by the merger of a wholly
owned subsidiary of THCR Holdings with and into Taj Holding, (f) the
termination of the services agreement between Taj Associates and
Trump, dated as of April 1, 1991 (the "Taj Services Agreement"), (g)
the cancellation of payments to Trump Taj Mahal Realty Corp. and First
Union National Bank in connection with the acquisition of certain real
property used in the operation of the Trump Taj Mahal Casino Resort
(the "Specified Parcels") and (h) the payment to Bankers Trust Company
("Bankers Trust") to obtain releases of liens that Bankers Trust had
with respect to certain equity interests in Taj Associates and related
guarantees (collectively, the "Taj Merger Transaction"). In addition,
the Unaudited Pro Forma Consolidated Statements of Operations give
effect also to the June 12, 1995 offerings of 10 million shares of
THCR Common Stock and $155 million aggregate principal amount of
15 1/2% Senior Secured Notes due 2005 (the "THCR Senior Notes") of
THCR Holdings and Trump Hotels & Casino Resorts Funding, Inc.
(collectively, the "June 1995 Offerings") for the full period
presented.
II. The Acquisition, which includes (a) the consolidation of Castle
Associates, an indirect subsidiary of THCR after the Acquisition, (b)
the contribution by Trump of his 61.5% equity interest in Castle
Associates in consideration for the Trump Consideration, (c) the
contribution by TCI-II of its 37.5% equity interest in Castle
Associates in consideration for the TCI-II Consideration, (d) the TCHI
Merger in which each share of TCHI Common Stock outstanding
immediately prior to the TCHI Merger will be converted into the right
to receive the TCHI Consideration and (e) payment of the Castle
Warrant Consideration to the holders of the Castle Warrants.
The Acquisition will be accounted for as a "purchase" for accounting and
reporting purposes.
The Unaudited Pro Forma Financial Statements should be read in conjunction
with the financial statements of Castle Associates and its subsidiary and
related notes thereto included elsewhere in this Current Report.
24
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Trump's for THCR
Current Assets: THCR Castle Acquisition Pro Forma
------------ ------------ ----------- ---------
(Historical) (Historical)
<S> <C> <C> <C> <C>
Cash and cash equivalents .......................... $ 181,750 $ 17,767 $ (1,769)(a) $ 197,748
Restricted cash .................................... 25,000 25,000
Accounts receivable, net ........................... 55,091 8,535 63,626
Inventories ........................................ 10,341 1,458 11,799
Prepaid expenses and other current assets .......... 18,688 2,424 (1,900)(b) 19,212
Due from affiliates, net ........................... 616 197 813
---------- -------- ---------
Total current assets ............................. 291,486 30,381 318,198
Property and equipment, net ........................ 1,463,264 319,280 183,014 (a) 1,965,558
Investment in Castle PIK Notes ..................... 41,943 (41,943)(b) 0
Investment in Buffington Harbor .................... 40,771 40,771
Land rights ........................................ 29,135 29,135
Deferred loan costs ................................ 52,319 52,319
Other assets ....................................... 25,043 9,509 34,552
---------- -------- ---------
Total Assets ..................................... 1,943,961 359,170 2,440,533
========== ======== ==========
Current Liabilities:
Current maturities of long-term debt ............... 9,914 3,271 13,185
Accounts payable and accrued expenses .............. 89,021 32,180 121,201
Accrued interest payable ........................... 28,751 4,413 33,164
---------- -------- ---------
Total current liabilities ......................... 127,686 39,864 167,550
Other long-term liabilities ........................ 5,640 3,728 (3,013)(b) 6,355
Long-term debt, net of discount and
current maturities ............................... 1,391,531 328,697 (58,516)(b) 1,661,712
Deferred state income taxes ........................ 4,167 4,167
---------- -------- ---------
Total Liabilities ................................. 1,529,024 372,289 1,839,784
---------- -------- ---------
Minority interest .................................. 15,672 168,126)(a) 183,798
---------- -------- ---------
Capital:
Common stock ...................................... 241 241
Additional paid in capital ........................ 455,218 73,395 (73,395)(c) 472,904
17,686 (b)
Accumulated (deficit) ............................. (56,194) (86,514) 13,119 (a) (56,194)
73,395 (c)
---------- -------- ---------
Total capital ...................................... 399,265 (13,119) 416,951
---------- -------- ---------
Total Liabilities and Capital ..................... $1,943,961 $359,170 $2,440,533
========== ======== ==========
</TABLE>
25
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TRUMP HOTELS & CASINO RESORTS, INC.
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Trump AC
and
Trump Plaza
THCR Associates
------------ ---------- Pro Forma
June 12, January 1, Adjustments
1995- 1995- for the THCR
December 31, June 12, June 1995 Pro Forma Taj
1995 1995 Offerings Combined Associates
------------ ---------- ----------- ---------- ----------
(Historical) (Historical)
<S> <C> <C> <C> <C> <C>
Revenues:
Gaming ................... $175,208 $122,865 $298,073 $501,378
Rooms .................... 12,310 7,676 19,986 43,309
Food and Beverage ........ 26,065 18,537 44,602 57,195
Other .................... 6,284 3,310 9,594 15,864
-------- -------- -------- --------
Gross Revenues .......... 219,867 152,388 372,255 617,746
Less--Promotional
allowances .............. 24,394 14,540 38,934 63,998
-------- -------- -------- --------
Net Revenues ............. 195,473 137,848 333,321 553,748
-------- -------- -------- --------
Cost and Expenses:
Gaming ................... 95,533 69,467 165,000 283,786
Rooms .................... 1,305 958 2,263 15,230
Food and Beverage ........ 11,178 7,128 18,306 24,612
General and
administrative .......... 42,826 30,081 72,907 96,843
Depreciation and
amortization ............ 9,219 6,999 16,218 43,387
Other .................... 1,966 1,397 3,363
-------- -------- -------- --------
162,027 116,030 278,057 463,858
-------- -------- -------- --------
Income from
operations .............. 33,446 21,818 55,264 89,890
Interest income .......... 3,741 403 134 (d) 4,278 3,922
Interest expense ......... (35,014) (22,516) (11,239)(e) (63,711) (120,435)
5,058 (f)
Other non-operating ...... (4,094) (1,649) (5,743)
-------- -------- -------- --------
Loss before
income taxes
and minority
interest ................. (1,921) (1,944) (9,912) (26,623)
Benefit for state
income taxes ............. (161) (161)
-------- -------- -------- --------
Loss before minority
interest ................. (1,921) (1,783) (9,751) (26,623)
Minority interest ......... -- -- -- --
-------- -------- -------- --------
Net loss .................. ($1,921) ($1,783) ($9,751) ($26,623)
======== ======== ======== ========
Net loss per share ........
Weighted Average
Shares
Outstanding (r) ..........
<CAPTION>
Pro Forma
Adjustments Pro Forma
for Taj Taj Merger Adjustments
Merger Transaction Trump's for THCR
Transaction Pro Forma Castle Acquisition Pro Forma
----------- ----------- --------- ------------- ----------
(Historical)
<S> <C> <C> <C> <C> <C>
Revenues:
Gaming ................... $799,451 $280,124 $1,079,575
Rooms .................... 63,295 20,052 83,347
Food and Beverage ........ 101,797 30,804 132,601
Other .................... 25,458 9,130 34,588
-------- -------- ----------
Gross Revenues .......... 990,001 340,110 1,330,111
Less--Promotional
allowances .............. 102,932 34,547 137,479
-------- -------- ----------
Net Revenues ............. 887,069 305,563 1,192,632
-------- -------- ----------
Cost and Expenses:
Gaming ................... 448,786 165,679 614,465
Rooms .................... 17,493 2,534 20,027
Food and Beverage ........ 42,918 13,516 56,434
General and
administrative .......... (2,725)(g) 160,076 61,431 (3,500)(j) 218,007
2,738 (h)
(1,743)(i)
(7,944)(j)
Depreciation and
amortization ............ 420 (g) 65,439 14,639 4,904 (p) 84,982
5,414 (k)
Other .................... 3,363 13,403 16,766
-------- -------- ----------
738,075 271,202 1,010,681
-------- -------- ----------
Income from
operations .............. 148,994 34,361 181,951
Interest income .......... 8,200 504 8,704
Interest expense ......... (709)(l) (168,149) (46,017) 7,217 (l) (206,949)
16,706 (m)
Other non-operating ...... 3,120 (n) (2,623) (2,623)
-------- -------- ----------
Loss before
income taxes
and minority
interest ................. (13,578) (11,152) (18,917)
Benefit for state
income taxes ............. 161 (o) -- -- --
-------- -------- ----------
Loss before minority
interest ................. (13,578) (11,152) (18,917)
Minority interest ......... -- -- 6,327 (q) 6,327
-------- -------- ----------
Net loss .................. ($13,578) ($11,152) ($12,590)
======== ======== ==========
Net loss per share ........ ($0.52)
==========
Weighted Average
Shares
Outstanding (r) .......... 24,206,756
==========
</TABLE>
26
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TRUMP HOTELS & CASINO RESORTS, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Pro Forma
Adjustments Taj Merger Pro Forma THCR
Taj for Taj Merger Transaction Trump's Adjustments Pro
THCR Associates Transaction Pro Forma Castle for Acquisition Forma
-------- ---------- -------------- ----------- -------- ---------------- ------
(Historical) (Historical) (Historical)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming ........................ $288,361 $132,870 $421,231 $127,173 $548,404
Rooms ......................... 24,154 11,301 35,455 9,005 44,460
Food and Beverage ............. 38,523 15,359 53,882 15,590 69,472
Other ......................... 8,353 4,206 12,559 3,917 16,476
-------- -------- -------- -------- --------
Gross Revenues ............... 359,391 163,736 523,127 155,685 678,812
Less--Promotional
allowances .................. 38,385 17,770 56,155 18,943 75,098
-------- -------- -------- -------- --------
Net Revenues .................. 321,006 145,966 466,972 136,742 603,714
-------- -------- -------- -------- --------
Cost and Expenses:
Gaming ........................ 169,611 86,331 255,942 80,198 336,140
Rooms ......................... 4,895 4,388 9,283 755 10,038
Food and beverage ............. 16,124 6,537 22,661 5,566 28,227
General and administrative .... 65,652 27,761 (908)(g) 88,026 38,140 (1,750)(j) 124,416
(507)(i)
(3,972)(j)
Depreciation and
amortization ................. 21,622 13,647 210 (g) 38,186 7,677 2,452 (k) 48,315
2,707 (h)
Pre-opening expenses ........... 9,966 9,966 -- 9,966
Other ......................... 1,861 1,861 0 1,861
-------- -------- -------- -------- --------
289,731 138,664 425,925 132,336 558,963
-------- -------- -------- -------- --------
Income from operations ........ 31,275 7,302 41,047 4,406 44,751
Interest income ............... 3,721 1,092 4,813 258 (891)(k) 4,180
Interest expense .............. (54,147) (36,591) 5,497 (m) (85,241) (23,596) 3,862 (k) (104,975)
Other non-operating ........... 9,182 520 (n) 9,702 -- 9,702
-------- -------- -------- -------- --------
Loss before extraordinary
loss and minority interest .... (9,969) (28,197) (29,679) (18,932) (46,342)
Extraordinary loss ............. (59,132) (59,132) (59,132)
Minority interest .............. 14,828 0 14,828 0 23,690 (q) 38,518
-------- -------- -------- -------- --------
Net loss ....................... ($54,273) ($28,197) ($73,983) ($18,932) ($66,956)
======== ======== ======== ======== ========
Net loss per share ............. ($2.77)
Weighted Average Shares ==========
Outstanding (r) ............... 24,206,756
==========
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(a) To record the contribution by Trump of his equity interests in Castle
Associates for $168,126, which represents the issuance of a 15.33863%
limited partnership interest in THCR Holdings to Trump (directly and
indirectly), exchangeable into 5,837,700 shares of THCR Common Stock
(valuing each share at $28.80 based on the price of the THCR Common Stock
several days before and after the date of the Agreement), the payment of
$1,769 ($.8845 for each share of TCHI Common Stock and for each outstanding
Castle Warrant) and the historical negative book value of Castle Associates
of $13,119. The total purchase price has been allocated to property and
equipment.
(b) To eliminate $59,300 ($58,516 net of discount) of the Castle PIK Notes
purchased by THCR Holdings for $38,660 which represents approximately 89.6%
of the outstanding Castle PIK Notes, plus accrued interest resulting in an
extraordinary gain of $17,686 and elimination of related interest expense
and interest income.
(c) To reclassify the remaining accumulated deficit of Castle Associates to
contributed capital as the carryforward accumulated deficit should be that
of THCR in accordance with purchase accounting.
(d) To record interest income on a $3,000 note receivable from Trump at prime
plus 1%. On March 27, 1996, this note was cancelled in accordance with its
terms based on a prior THCR Common Stock trading range.
(e) To record interest expense (including amortization of deferred financing
costs) relating to the THCR Senior Notes issued in June 1995.
(f) To eliminate interest expense (including amortization of deferred financing
costs) on the 121?@?2% Pay-in-Kind Notes due 2003 of Trump Plaza Holding
Associates (currently Trump AC) which were redeemed with the proceeds from
the June 1995 Offerings.
(g) To eliminate the lease payments on the Specified Parcels which were
acquired in the Taj Merger Transaction and to record the additional
depreciation associated with the purchase.
(h) To record $2,083 of additional general and administrative expenses relating
to corporate overhead of THCR Holdings and THCR prior to formation, and
$655 of operating expenses incurred at THCR's riverboat casino at
Buffington Harbor, Indiana (the "Indiana Riverboat"), prior to opening.
(i) To record the elimination of the fee resulting from the termination of the
Taj Services Agreement.
(j) To reflect the estimated reduction of identifiable costs resulting from the
consolidation of departments and the reduction of personnel. Management
believes that within two years annual cost savings from the Taj Merger
Transaction and the Acquisition would total $18,000 to $20,000 and $6,000
to $10,000, respectively.
(k) To record the additional depreciation expense resulting from the allocation
of the purchase price of the Taj Merger Transaction ($189,114) to property
and equipment. Amounts allocated to land ($9,456) and building ($179,658)
on a pro rata basis and are being depreciated over the remaining life of
the building (35 years).
(l) To record interest expense on amounts obtained under the equipment and
vessel financing line in connection with the Indiana Riverboat. To date,
THCR has obtained a commitment for $17,000, has signed a letter of intent
for an equipment lease for $14,200 and has obtained advances of $9,750 at a
rate of 10.5%. Although THCR expects to borrow an additional $15,000, no
assurances can be given that such financing will be available.
(m) To record adjustments to historical interest expense to give effect to the
Taj Merger Transaction.
(n) To give effect to the termination of the lease of the hotel adjacent to the
main tower of the Trump Plaza Hotel and Casino and the $3,120 of associated
annual expense.
(o) To eliminate income tax benefits.
(p) To record the additional depreciation expense resulting from the allocation
of the purchase price of the Acquisition ($183,014) to property and
equipment (see (a) above). Amounts are being allocated to land ($35,871)
and building ($147,143) on a pro rata basis and are being depreciated over
the remaining life of the building (30 years).
(q) To reflect minority interest as pro forma adjustments result in a loss at
THCR Holdings and there is a minority interest basis on THCR's pro forma
balance sheet.
(r) Weighted Average Shares Outstanding includes the number of shares
outstanding on June 30, 1996 and shares awarded to the Chief Executive
Officer of THCR pursuant to THCR's 1995 Stock Incentive Plan. Shares of
THCR's Class B Common Stock, par value $.01 per share, which are
beneficially owned by Trump have no economic interest and, therefore, are
not considered.
28
<PAGE>
(c) EXHIBITS
2.1* Agreement, dated as of June 24, 1996, as amended, by and among Trump Hotels
& Casino Resorts, Inc. Trump Hotels & Casino Resorts Holdings, L.P., Trump
Casinos II, Inc. (formerly known as TC/GP, Inc.), Trump's Castle Hotel &
Casino, Inc. and Donald J. Trump.
- ---------------
* Incorporated herein by reference to Annex A to the Proxy Statement of Trump
Hotels & Casino Resorts, Inc. on Schedule 14A, previously filed with the
Securities and Exchange Commission on August 29, 1996.
29
<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 hereunto duly authorized.
October 22, 1996 TRUMP HOTELS & CASINO RESORTS, INC.
By: /s/ JOHN P. BURKE
---------------------------------------------
Name: John P. Burke
Title: Senior Vice President of Corporate
Finance and Corporate Treasurer
30
