================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
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COMMISSION FILE NUMBER: 33-90786
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3818407
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
COMMISSION FILE NUMBER: 33-90786
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3818405
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE 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
REGISTRANTS WERE REQUIRED TO FILE SUCH REPORTS), AND (2) HAVE BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO _____
---
THE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE $.01 PER
SHARE, OF TRUMP HOTELS & CASINO RESORTS FUNDING, INC. AS OF MAY 9, 1997 WAS 100.
TRUMP HOTELS & CASINO RESORTS FUNDING, INC. MEETS THE CONDITIONS SET FORTH
IN GENERAL INSTRUCTION (H)(1)(A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING
THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
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<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
----------
INDEX TO FORM 10-Q
PAGE NO.
--------
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Condensed Consolidated Balance Sheets of Trump Hotels & Casino
Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc. as of March 31, 1997 (unaudited) and December
31, 1996 ........................................................ 1
Condensed Consolidated Statements of Operations of Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels &
Casino Resorts Funding, Inc. for the Three Months Ended March
31, 1997 and 1996 (unaudited) ................................... 2
Condensed Consolidated Statement of Capital of Trump Hotels &
Casino Resorts Holdings, L.P. and Trump Hotels & Casino
Resorts Funding, Inc. for the Three Months Ended March 31,
1997 (unaudited) ................................................ 3
Condensed Consolidated Statements of Cash Flows of Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels &
Casino Resorts Funding, Inc. for the Three Months Ended March
31, 1997 and 1996 (unaudited) ................................... 4
Notes to Condensed Consolidated Financial Statements of Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels &
Casino Resorts Funding, Inc. (unaudited) ........................ 5-12
ITEM 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 13-17
ITEM 3 -- Quantitative and Qualitative Disclosures About Market
Risk ................................................... 17
PART II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings ....................................... 18
ITEM 2 -- Changes in Securities ................................... 18
ITEM 3 -- Defaults Upon Senior Securities ......................... 18
ITEM 4 -- Submission of Matters to a Vote of Security Holders ..... 18
ITEM 5 -- Other Information ....................................... 18
ITEM 6 -- Exhibits and Reports on Form 8-K ........................ 18-19
SIGNATURES
SIGNATURE-- Trump Hotels & Casino Resorts Holdings, L.P. .............. 20
SIGNATURE-- Trump Hotels & Casino Resorts Funding, Inc. ............... 21
i
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents ........................ $ 187,814 $ 175,745
Receivables, net ................................. 57,175 54,395
Inventories ...................................... 11,110 10,710
Prepaid expenses and other current assets ........ 11,551 12,729
----------- -----------
Total Current Assets ........................... 267,650 253,579
INVESTMENT IN CASTLE PIK NOTES ..................... 46,319 44,191
INVESTMENT IN BUFFINGTON HARBOR, L.L.C ............. 46,165 45,782
PROPERTY AND EQUIPMENT, NET ........................ 2,014,598 2,009,261
DEFERRED LOAN COSTS, NET ........................... 46,600 48,602
OTHER ASSETS ....................................... 57,782 54,017
----------- -----------
Total Assets ................................... $ 2,479,114 $ 2,455,432
=========== ===========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt ............. $ 19,575 $ 19,356
Accounts payable and accrued expenses ............ 130,023 117,811
Accrued interest payable ......................... 75,611 28,393
Due to affiliates, net ........................... 157 1,171
----------- -----------
Total Current Liabilities ...................... 225,366 166,731
LONG-TERM DEBT, net of current maturities .......... 1,710,393 1,713,425
DEFERRED INCOME TAXES PAYABLE ...................... 4,272 4,272
OTHER LONG TERM LIABILITIES ........................ 13,086 10,309
----------- -----------
Total Liabilities .............................. 1,953,117 1,894,737
----------- -----------
CAPITAL:
Partners' Capital ................................ 639,607 652,503
Accumulated Deficit .............................. (113,610) (91,808)
----------- -----------
Total Capital .................................. 525,997 560,695
----------- -----------
Total Liabilities and Capital .................. $ 2,479,114 $ 2,455,432
=========== ===========
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
1
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
1997 1996
--------- --------
REVENUES:
Gaming ................................................ $ 316,889 $ 74,270
Rooms ................................................. 21,625 5,798
Food and Beverage ..................................... 34,967 11,383
Other ................................................. 9,717 2,100
--------- --------
Gross Revenues ....................................... 383,198 93,551
Less-- Promotional allowances ........................... 39,818 10,683
--------- --------
Net Revenues ......................................... 343,380 82,868
--------- --------
COSTS AND EXPENSES:
Gaming ................................................ 198,774 44,126
Rooms ................................................. 7,101 2,271
Food and Beverage ..................................... 12,578 4,094
General and Administrative ............................ 67,501 18,857
Depreciation and Amortization ......................... 27,072 4,527
Pre-Opening ........................................... -- 2,110
--------- --------
313,026 75,985
--------- --------
Income from operations ............................... 30,354 6,883
--------- --------
NON-OPERATING INCOME AND (EXPENSES):
Interest income ....................................... 1,964 771
Interest expense ...................................... (52,599) (16,026)
Other non-operating expense ........................... -- (1,375)
--------- --------
(50,635) (16,630)
--------- --------
Loss before equity in loss of Buffington Harbor, L.L.C.,
and income taxes ....................................... (20,281) (9,747)
Equity in loss of Buffington Harbor, L.L.C .............. (638) --
Provision for income taxes .............................. (883) --
--------- --------
NET LOSS ................................................ $ (21,802) $ (9,747)
========= ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS)
PARTNERS' ACCUMULATED
CAPITAL DEFICIT TOTAL
-------- --------- --------
Balance, December 31, 1996 $652,503 $ (91,808) $560,695
Purchase of 1,250,000 shares
of THCR Common Stock (12,896) -- (12,896)
Net Loss -- (21,802) (21,802)
-------- --------- --------
Balance, March 31, 1997 $639,607 $(113,610) $525,997
======== ========= ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ..................................................................... $ (21,802) $ (9,747)
Adjustments to reconcile net loss to net cash flows from operating activities:
Equity in loss of Buffington Harbor, L.L.C ................................. 638 --
Depreciation and amortization .............................................. 27,072 4,527
Payment-In-Kind interest in Castle PIK Notes ............................... (2,128) --
Accretion of discounts on mortgage notes ................................... 755 112
Amortization of deferred loan costs ........................................ 2,002 718
Provision for losses on receivables ........................................ 2,295 317
Valuation allowance of CRDA investments and amortization of
Indiana gaming costs ...................................................... 2,712 86
--------- --------
11,544 (3,987)
Change in assets and liabilities:
Increase in receivables .................................................... (5,075) (903)
Increase in inventories .................................................... (400) (31)
Decrease in other current assets ........................................... 1,361 72
Increase (decrease) in advances due to affiliates .......................... (1,014) 225
Increase in other assets ................................................... (4,326) (725)
Increase in accounts payable & accrued expenses ............................ 12,894 4,031
Increase in accrued interest payable ....................................... 47,218 14,976
Increase in other long-term liabilities .................................... 2,777 --
--------- --------
Net cash flows provided by operating activities .......................... 64,979 13,658
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net .................................... (30,897) (35,689)
Cash restricted for future construction .................................... -- 22,480
Investment in Buffington Harbor, L.L.C ..................................... (1,021) (505)
CRDA Investments ........................................................... (3,238) (926)
--------- --------
Net cash flows used in investing activities .............................. (35,156) (14,640)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of THCR Common Stock .............................................. (12,896) --
Issuance of long-term debt-other ........................................... -- 4,168
Payment of long-term debt-other ............................................ (4,858) (777)
--------- --------
Net cash flows provided by (used in) financing activities ................ (17,754) 3,391
--------- --------
Net increase in cash and cash equivalents ................................ 12,069 2,409
--------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................. $ 175,745 $ 19,199
========= ========
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................... $ 187,814 $ 21,608
========= ========
CASH INTEREST PAID ........................................................... $ 1,904 $ 203
========= ========
Supplemental Disclosure of Non-Cash Activities:
Purchase of property and equipment under capital lease obligations ......... $ 1,400 $ 9,987
========= ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND OPERATIONS
The accompanying condensed consolidated financial statements include those
of Trump Hotels & Casino Resorts Holdings, L.P., a Delaware limited partnership
("THCR Holdings"), and subsidiaries, an entity which is currently owned
approximately 62.2% by Trump Hotels & Casino Resorts, Inc. ("THCR"), as a
general partner, and approximately 37.8% by Donald J. Trump ("Trump"), as a
limited partner, and those of Trump Hotels & Casino Resorts Funding, Inc. ("THCR
Funding"). Trump's limited partnership interest in THCR Holdings represents his
economic interests in the assets and operations of THCR Holdings. Accordingly,
such limited partnership interest is convertible at Trump's option into
13,918,723 shares of THCR's common stock, par value $.01 per share (the "THCR
Common Stock"). The accompanying consolidated financial statements include those
of the following wholly owned subsidiaries of THCR Holdings:
o Trump Atlantic City Associates ("Trump AC") and its subsidiaries,
Trump Plaza Associates ("Plaza Associates") and Trump Taj Mahal
Associates ("Taj Associates"). Plaza Associates owns and operates
the Trump Plaza Hotel and Casino ("Trump Plaza") located in Atlantic
City, New Jersey. Taj Associates owns and operates the Trump Taj
Mahal Casino Resort (the "Taj Mahal") located in Atlantic City, New
Jersey.
o Trump Indiana, Inc. ("Trump Indiana"). Trump Indiana, which
commenced operations on June 8, 1996, owns and operates a riverboat
gaming facility at Buffington Harbor, on Lake Michigan, Indiana (the
"Indiana Riverboat").
o Trump's Castle Associates, L.P. ("Castle Associates"). Castle
Associates owns and operates Trump's Castle Casino Resort ("Trump's
Castle") located in Atlantic City, New Jersey.
All significant intercompany balances and transactions have been
eliminated in the accompanying condensed consolidated financial statements.
The accompanying condensed consolidated financial statements have been
prepared without audit. In the opinion of management, all adjustments,
consisting of only normal recurring adjustments necessary to present fairly the
financial position, the results of operations and cash flows for the periods
presented, have been made.
The accompanying condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and note disclosures normally
included in financial statements prepared in conformity with generally accepted
accounting principles have been condensed or omitted.
The casino industry in Atlantic City is seasonal in nature; accordingly,
results of operations for the period ended March 31, 1997 are not necessarily
indicative of the operating results for a full year.
THCR and THCR Holdings commenced operations on June 12, 1995. THCR and
THCR Holdings have no operations and their ability to service their debt is
dependent on the successful operations of Trump AC, Trump Indiana and Castle
Associates. THCR, through THCR Holdings and its subsidiaries, is the exclusive
vehicle through which Trump engages in new gaming activities in emerging or
established gaming jurisdictions.
(2) PUBLIC OFFERINGS AND MERGER
On June 12, 1995, THCR completed a public offering of 10,000,000 shares of
THCR Common Stock at $14.00 per share (the "1995 Stock Offering") for gross
proceeds of $140,000,000. Concurrent with the 1995 Stock Offering, THCR
Holdings, together with its subsidiary, THCR Funding, issued 15 1/2% Senior
Secured Notes due 2005 (the "Senior Notes") for gross proceeds of $155,000,000
(the "1995 Note Offering" and, together with the 1995 Stock Offering, the "1995
Offerings"). From the proceeds of the 1995 Stock Offering, THCR contributed
$126,848,000 to THCR Holdings, in exchange for an approximately 60% general
partnership interest in THCR Holdings.
5
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Prior to the 1995 Offerings, Trump was the sole stockholder of THCR and
the sole beneficial owner of THCR Holdings. Concurrent with the 1995 Offerings,
Trump contributed to THCR Holdings his 100% beneficial interest in Plaza
Associates. Trump also contributed to THCR Holdings all of his existing
interests and rights to new gaming activities in both emerging and established
gaming jurisdictions, including Trump Indiana but excluding his interests in Taj
Associates and Castle Associates. In exchange for his contributions to THCR
Holdings, Trump received an approximately 40% limited partnership interest in
THCR Holdings.
On April 17, 1996, pursuant to the Agreement and Plan of Merger, as
amended (the "Taj Merger Agreement"), pursuant to which a wholly owned
subsidiary of THCR was merged (the "Taj Merger") with and into Taj Mahal Holding
Corp., a Delaware corporation now known as THCR Holding Corp. ("Taj Holding"),
each outstanding share of Class A Common Stock of Taj Holding (the "Taj Holding
Class A Common Stock"), which in the aggregate represented 50% of the economic
interest in Taj Associates, was converted into the right to receive, at each
holder's election, either (a) $30 in cash or (b) that number of shares of THCR
Common Stock having a market value equal to $30. Trump held the remaining 50%
interest in Taj Associates and contributed such interest in Taj Associates to
Trump AC in exchange for limited partnership interests in THCR Holdings. In
addition, the outstanding shares ofTaj Holding's Class C Common Stock, all of
which were held by Trump, were canceled in connection with the Taj Merger. The
following transactions occurred in connection with the Taj Merger (collectively
referred to as the"Taj Merger Transaction"):
(a) the payment of an aggregate of $31,181,000 in cash and the
issuance of 323,423 shares of THCR Common Stock to the holders of Taj
Holding Class A Common Stock pursuant to the Taj Merger Agreement;
(b) the contribution by Trump to Trump AC of all of his direct and
indirect ownership interests in Taj Associates, and the contribution by
THCR to Trump AC of all of its indirect ownership interests in Taj
Associates acquired in the Taj Merger;
(c) the public offerings by (i) THCR of 12,500,000 shares of THCR
Common Stock (plus 750,000 shares of THCR Common Stock issued in
connection with the partial exercise of the underwriters' over-allotment
option) (the "1996 Stock Offering") for net proceeds of $386,062,000 and
(ii) Trump AC and Trump Atlantic City Funding, Inc. ("Trump AC Funding")
of $1,200,000,000 aggregate principal amount of 11 1/4% First Mortgage
Notes due 2006 (the "Trump AC Mortgage Notes") (together with the 1996
Stock Offering, the "1996 Offerings");
(d) the redemption of the outstanding shares of Taj Holding's Class
B Common Stock immediately prior to the Taj Merger for $.50 per share in
accordance with its terms;
(e) the redemption of the outstanding 11.35% Mortgage Bonds, Series
A, due 1999 of Trump Taj Mahal Funding, Inc. (the "Taj Bonds ");
(f) the retirement of the outstanding 10 7/8% Mortgage Notes due
2001 (the "Plaza Notes ") of Trump Plaza Funding, Inc.;
(g) the satisfaction of the indebtedness of Taj Associates under its
loan agreement with National Westminster Bank USA ("Nat West");
(h) the purchase of certain real property used in the operation of
the Taj Mahal that was leased from a corporation wholly owned by Trump
(the "Specified Parcels");
(i) the purchase of certain real property used in the operation of
Trump Plaza that was leased from an unaffiliated third party;
(j) the payment to Bankers Trust Company ("Bankers Trust") to obtain
releases of liens and guarantees that Bankers Trust had in connection with
indebtedness owed by Trump to Bankers Trust; and
6
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(k) the issuance to Trump of warrants (the "Trump Warrants") to
purchase an aggregate of 1,800,000 shares of THCR Common Stock, (i)
600,000 shares of which may be purchased on or prior to April 17, 1999 at
$30 per share, (ii) 600,000 shares of which may be purchased on or prior
to April 17, 2000 at $35 per share and (iii) 600,000 shares of which may
be purchased on or prior to April 17, 2001 at $40 per share.
As a result of the contribution by Trump to Trump AC of his ownership
interests in Taj Associates and the contribution by THCR to Trump AC of its
indirect ownership interests in Taj Associates acquired in the Taj Merger,
together with THCR's contribution to THCR Holdings of the proceeds from the 1996
Stock Offering, Trump's aggregate beneficial equity interest in THCR Holdings
decreased from approximately 40% to approximately 25%, and THCR's aggregate
beneficial equity interest in THCR Holdings increased from approximately 60% to
approximately 75%.
The Taj Merger Transaction has been accounted for as a "purchase" for
accounting and reporting purposes and the results of Taj Associates have been
included in the accompanying financial statements since the date of the Taj
Merger. Accordingly, the excess of the purchase price over the fair value of the
net assets acquired ($200,782,000), which was allocated to land ($7,979,000) and
building ($192,803,000) based on an appraisal on a pro rata basis, consists of
the following:
(a) $40,500,000, representing the payment of $30.00 for each of the
1,350,000 shares of Taj Holding Class A Common Stock. Holders of 298,739
shares of Taj Holding Class A Common Stock elected to receive 323,423
shares of THCR Common Stock and holders of 1,051,261 shares of Taj Holding
Class A Common Stock elected to receive $31,181,000 in cash;
(b) $40,500,000, representing the contribution by Trump to Trump AC
of his ownership interest in 50% of Taj Associates;
(c) $9,900,000 of fees and expenses associated with the Taj Merger
Transaction;
(d) $108,574,000, representing the negative book value of Taj
Associates at the date of the Taj Merger Transaction; and
(e) $1,308,000 of closing costs associated with the purchase of the
Specified Parcels.
In connection with the Taj Merger Transaction, THCR purchased the
Specified Parcels from Trump Taj Mahal Realty Corp., a corporation owned by
Trump, and Taj Associates was released from its guarantee to First Union
National Bank (the "Guarantee"). The aggregate cost of acquiring the Specified
Parcels was $50,600,000 in cash and 500,000 shares of THCR Common Stock valued
at $10,500,000 (an average value of $21.00 per share based on the price of the
THCR Common Stock several days before and after the date of the amended Taj
Merger Agreement). The obligation of Taj Associates which had been accrued with
respect to the Guarantee ($17,923,000) was eliminated. In addition, THCR
exercised the option to purchase a tower adjacent to Trump Plaza's main tower
("Trump Plaza East") for $28,084,000, which amount has been included in land and
building.
On October 7, 1996, THCR Holdings acquired from Trump all of his
outstanding equity interest in Castle Associates (the "Castle Acquisition")
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.
On October 7, 1996, the closing date of the Castle Acquisition, the
following transactions were effected:
(a) Trump contributed to THCR Holdings his 61.5% equity interest in
Castle Associates, in consideration for which he received a 9.52854%
limited partnership interest in THCR Holdings, exchangeable into 3,626,450
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 "THCR Stock Contribution Value"));
7
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(b) TCI-II contributed to THCR Holdings its 37.5% equity interest in
Castle Associates, in consideration for which it received a 5.81009%
limited partnership interest in THCR Holdings, exchangeable into 2,211,250
shares of THCR Common Stock (valuing each share at the THCR Stock
Contribution Value); and
(c) THCR-TCHI Merger Corp., a Delaware corporation and a wholly
owned subsidiary of THCR Holdings, merged with and into TCHI (holder of a
1% equity interest in Castle Associates) whereupon (i) each holder of
common stock of TCHI and (ii) each holder of the outstanding warrants (the
"Castle Warrants") received an aggregate of $1,769,000 in cash.
In the aggregate, Trump received a limited partnership interest in THCR
Holdings convertible into 5,837,700 shares of THCR Common Stock. The
contribution by Trump of his equity interests was valued at $168,126,000
(valuing each share at the THCR Stock Contribution Value).
The Castle Acquisition has been accounted for as a "purchase" for
accounting and reporting purposes and the results of Castle Associates have been
included in the accompanying financial statements since the date of acquisition.
Accordingly, the excess of the purchase price over the fair value of the net
assets acquired ($196,109,000) was allocated to land ($38,438,000) and building
($157,671,000) based on an appraisal on a pro rata basis, and consisted of the
following:
(a) $168,126,000, representing the value assigned to the 5,837,700
shares of THCR Common Stock received by Trump for the contribution of his
equity interests;
(b) $1,769,000 in cash, representing the amounts paid for the shares
of TCHI's Common Stock and outstanding Castle Warrants;
(c) $20,714,000, representing the negative book value of Castle
Associates at the date of the Castle Acquisition; and
(d) 5,500,000 of fees and expenses associated with the Castle
Acquisition.
As a result of the contribution by Trump to THCR Holdings of his ownership
interests in Castle Associates, Trump's aggregate beneficial equity interest in
THCR Holdings increased from approximately 25% to 36.6% and THCR's aggregate
beneficial equity interest in THCR Holdings decreased from approximately 75% to
approximately 63.4%.
Unaudited pro forma information, excluding extraordinary loss, assuming
that the Taj Merger and the Castle Acquisition had occurred on January 1, 1996,
is as follows:
THREE MONTHS ENDED
MARCH 31, 1996
------------------
Net Revenues ................................ $276,129,000
Income from operations ...................... 20,053,000
Loss before extraordinary loss .............. $(30,349,000)
The pro forma information is presented for informational purposes only and
does not purport to present what the results of operations would have been had
the Taj Merger Transaction and the Castle Acquisition, in fact, occurred on
January 1, 1996 or to project the results of operations for any future period.
8
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Reclassifications
Certain reclassifications have been made to prior year financial
statements to conform to the current year presentation.
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Trump AC Mortgage Notes(a) ................................... $1,200,000,000 $1,200,000,000
Senior Notes(b) .............................................. 145,000,000 145,000,000
Castle Associates' 11 3/4% Mortgage Notes due 2003 (the
"Castle Mortgage Notes"), net of unamortized discount of
$32,385,000 and $33,071,000, respectively(c) ................ 209,756,000 209,070,000
Castle Associates' Increasing Rate Subordinated Pay-In-Kind
Notes (the "Castle PIK Notes") due 2005, net of
unamortized discount of $7,440,000 and $7,509,000,
respectively(d) ............................................. 63,300,000 63,231,000
Castle Associates Term Loan(e) ............................... 34,358,000 34,833,000
Castle Associates' 11 1/2% Senior Secured Notes due 2000 (the
"Castle Senior Notes ")(f) ................................. 27,000,000 27,000,000
Mortgage notes payable ....................................... 3,407,000 3,407,000
Other notes payable .......................................... 47,147,000 50,240,000
-------------- --------------
1,729,968,000 1,732,781,000
-------------- --------------
Less--current maturities ..................................... 19,575,000 19,356,000
$1,710,393,000 $1,713,425,000
============== ==============
</TABLE>
- ----------
(a) In connection with the Taj Merger Transaction, $1,200,000,000 of Trump AC
Mortgage Notes were issued by Trump AC and Trump AC Funding. The proceeds
of the offering of Trump AC Mortgage Notes were used to complete the Taj
Merger Transaction, as discussed in Note 2. Costs associated with the
issuance of the Trump AC Mortgage Notes, totalling approximately
$44,200,000 have been deferred and are being amortized over the life of
the Trump AC Mortgage Notes.
(b) On June 12, 1995, THCR Holdings and THCR Funding issued $155,000,000
principal amount of Senior Notes. The Senior Notes are redeemable in cash
at the option of THCR Holdings and THCR Funding, in whole or in part, at
any time on or after June 15, 2000 at redemption prices as defined and
mature in 2005. During 1996, THCR Holdings redeemed $10,000,000 of the
Senior Notes. Interest on these notes is payable semiannually in arrears
on June 15 and December 15 of each year, commencing on December 15,1995,
and is secured by substantially all of the assets of THCR Holdings. Costs
associated with the issuance of the Senior Notes totaling approximately
$10,742,000 were deferred and are being amortized using the effective
interest method over the life of the Senior Notes.
(c) The Castle Mortgage Notes bear interest, payable in cash, semiannually, at
11 3/4% and mature on November 15, 2003. In the event the Castle PIK
Notes, discussed below, are redeemed prior to November 15, 1998, the
interest rate on the Castle Mortgage Notes will be reduced to 11 1/2%.
The Castle Mortgage Notes may be redeemed at the option of Trump's Castle
Funding, Inc. ("Castle Funding") at a specified percentage of the
principal amount commencing in 1998. The Castle Mortgage Notes are secured
by a mortgage on Trump's Castle and substantially all of the other assets
of Castle Associates.
9
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(d) The Castle PIK Notes bear interest, payable at Castle Funding's option, in
whole or in part in cash and through the issuance of additional Castle PIK
Notes, semiannually at the rate of 13 7/8% through November 15, 2003.
After November 15, 2003, interest on the Castle PIK Notes is payable in
cash at the rate of 13 7/8%. The Castle PIK Notes mature on November 15,
2005 and may be redeemed at Castle Funding's option at 100% of the
principal amount under certain conditions.
On June 23, 1995, Castle Associates entered into an option agreement with
Hamilton Partners, L.P. ( "Hamilton ") which granted Castle Associates an
option (the "Option ") to acquire the Castle PIK Notes owned by Hamilton.
The Option was granted to Castle Associates in consideration of $1,900,000
of aggregate payments to Hamilton. The Option was exercisable at a price
equal to 60% of the aggregate principal amount of the Castle PIK Notes
delivered by Hamilton, with accrued but unpaid interest, plus 100% of the
Castle PIK Notes issued to Hamilton as interest subsequent to June 23,
1995. On May 21, 1996, Castle Associates assigned the Option to THCR
Holdings, which, on that same date, exercised the Option and acquired
approximately 90% of the Castle PIK Notes outstanding for approximately
$38,700,000, in exchange for which THCR Holdings received an aggregate of
approximately $59,300,000 of Castle PIK Notes.
THCR Holdings has recorded its investment in the Castle PIK Notes at cost,
plus accrued interest, in the accompanying balance sheet, as THCR
Holdings' investment in the Castle PIK Notes has been pledged as
collateral to the Senior Notes.
(e) Castle Associates has a term loan with a bank (the "Term Loan") with a
maturity date of May 28, 2000, and bearing interest at a rate of 3% above
the bank's prime rate, but in no event less than 9% per annum.
(f) On December 28, 1993, Castle Funding issued $27,000,000 of Castle Senior
Notes. Interest on the Castle Senior Notes is payable semiannually at the
rate of 11 1/2%; however, in the event that the Castle PIK Notes are
redeemed prior to November 15, 1998, the interest rate will be reduced to
11 1/4%. The Castle Senior Notes mature on November 15, 2000, and are
subject to a sinking fund, which requires the retirement of 15% of the
Castle Senior Notes on each November 15, 1998 and 1999.
(4) COMMITMENTS AND CONTINGENCIES
New Jersey Casino License Renewal
The operation of an Atlantic City hotel and casino is subject to
significant regulatory controls which affect virtually all of its operations.
Under the New Jersey Casino Control Act (the "Casino Control Act"), Plaza
Associates, Taj Associates and Castle Associates are required to maintain
certain licenses. Casino licenses must be renewed periodically, are not
transferable, are dependent on the financial stability of the licensee and can
be revoked at any time.
In June 1995, the New Jersey Casino Control Commission (the "CCC") renewed
Plaza Associates', Taj Associates' and Castle Associates' licenses to operate
Trump Plaza, the Taj Mahal and Trump's Castle. The CCC renewed each casino
license for a period of four years through 1999. Upon revocation, suspension for
more than 120 days, or failure to renew a casino license, the Casino Control Act
provides for the mandatory appointment of a conservator to take possession of
the hotel and casino's business and property, subject to all valid liens, claims
and encumbrances.
Indiana Gaming Regulations
The ownership and operation of riverboat gaming operations in Indiana are
subject to strict state regulation under the Riverboat Gambling Act (the
"Riverboat Act") and the administrative rules promulgated thereunder. In June
1996, the Indiana Gaming Commission (the "IGC") granted Trump Indiana a
riverboat owner's license, which must be renewed by 2001. The IGC may place
restrictions, conditions or requirements on the permanent riverboat
10
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
owner's license. An owner's initial license expires five years after the
effective date of the license, and unless the owner's license is terminated,
expires or is revoked, the owner's license may be renewed annually by the IGC
upon satisfaction of certain conditions contained in the Riverboat Act. Indiana
is a new gaming jurisdiction and the emerging regulatory framework is not yet
complete. The IGC has adopted certain rules and has published others in proposed
or draft form which are proceeding through the review and final adoption
process. The IGC has broad rulemaking power, and it is impossible to predict
what effect, if any, the amendment of existing rules or the finalization of
currently new rules might have on the operations of Trump Indiana.
Trump Indiana Certificate of Suitability
As a condition to the Certificate of Suitability, Trump Indiana has
committed to invest approximately $153,000,000 in the Indiana Riverboat,
including certain related projects of the City of Gary, Indiana. Failure to
comply with the foregoing conditions and/or failure to commence riverboat
excursions as required by the IGC may result in revocation of the Certificate of
Suitability. There can be no assurance that Trump Indiana will be able to comply
with the terms of the Certificate of Suitability. As part of the $153,000,000
commitment discussed above, Trump Indiana is obligated to fund $18,500,000 of
specified economic development and infrastructure projects of the City of Gary.
This obligation is being accrued over the five-year license period. To date, no
payments for the City of Gary projects have been made. As of March 31, 1997,
Trump Indiana had paid $10,000,000 for a surety bond which guarantees the
mandated municipal infrastructure improvements. This amount is included in other
assets in the accompanying March 31, 1997 condensed consolidated balance sheet.
City of Gary Development Agreement
Trump Indiana has entered into a Development Agreement with the City of
Gary to promote the economic development, urban development and employment of
citizens of the City of Gary. As part of the $153,000,000 Certificate of
Suitability investment described above and in addition to the $18,500,000
off-site development infrastructure projects described above, Trump Indiana
contributed $5,205,000 to the City of Gary.
(5) TRUMP WORLD'S FAIR
Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) Trump World's Fair (including the land, improvements and
personal property used in the operation of the hotel (the "Trump World's Fair
Purchase Option") and (ii) certain promissory notes made by Trump and/or certain
of his affiliates and payable to Chemical which are secured by certain real
estate assets located in New York, unrelated to Plaza Associates. In connection
with such Option Agreement, Trump assigned his rights to Plaza Associates.
On June 12, 1995, the Trump World's Fair Purchase Option was exercised.
The option price of $60,000,000 was funded with $58,150,000 from the capital
contributed by THCR Holdings (See Note 1), and $1,850,000 of option payments
made by Plaza Associates.
In connection with the Taj Merger Transaction described in Note 1, Plaza
Associates exercised its option to purchase Trump Plaza East. The purchase price
of $28,084,000 has been included in land and building in the accompanying
consolidated financial statements.
(6) INVESTMENT IN BUFFINGTON HARBOR
Trump Indiana and The Majestic Star Casino, LLC ("Barden") have an
agreement relating to the joint ownership, development and operation of all
common land-based and waterside operations in support of each of their separate
riverboat casinos at Buffington Harbor. Each of Trump Indiana and Barden is
equally responsible for the development and operating expenses at Buffington
Harbor.
11
<PAGE>
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(7) PURCHASE OF THCR COMMON STOCK
On January 6, 1997, the Board of Directors of THCR (the "Board of
Directors") authorized the repurchase by THCR Holdings of up to 1,250,000 shares
of THCR Common Stock from time to time in the open market or privately
negotiated transactions. On March 10, 1997, the Board of Directors authorized
the repurchase of up to an additional 1,250,000 shares of THCR Common Stock. The
repurchase program is effective until the end of 1997. As of March 31, 1997,
THCR Holdings had repurchased 1,250,000 shares of THCR Common Stock.
(8) THCR FUNDING FINANCIAL INFORMATION
Financial information relating to THCR Funding is as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
-------- --------
<S> <C> <C>
Total Assets (including the Senior Notes Receivable of
$145,000 and related interest receivable) as of
March 31, 1997 and December 31, 1996, respectively ..... $151,555 $145,936
======== ========
Total Liabilities and Capital (including the Senior Notes
payable of $145,000 and related interest payable)
as of March 31, 1997 and December 31, 1996,respectively $151,555 $145,936
======== ========
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Interest Income ......................................... $ 5,619 $ 6,006
======== ========
Interest Expense ........................................ $(5,619) $(6,006)
======== ========
Net Income .............................................. -- --
======== ========
</TABLE>
12
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
On June 12, 1995, THCR consummated the 1995 Stock Offering, resulting in
aggregate gross proceeds of $140,000,000. Concurrent with the 1995 Stock
Offering, THCR Holdings and THCR Funding completed the 1995 Note Offering,
resulting in aggregate gross proceeds of $155,000,000. The proceeds to THCR from
the 1995 Stock Offering were contributed by THCR to THCR Holdings for an
approximately 60% general partnership interest in THCR Holdings. THCR Holdings,
in turn, used the net proceeds from the 1995 Offerings, through June 30, 1996,
for the following purposes: (a) repurchase and redemption of the 12 1/2%
Pay-in-Kind Notes due 2003 of Plaza Associates (the "Plaza PIK Notes")
(including accrued interest payable) for $86,209,000, (b) exercise of the Trump
World's Fair Purchase Option for $58,150,000, (c) construction costs for Trump
World's Fair of $43,850,000, (d) construction costs for Trump Plaza East of
$15,150,000, (e) construction and land acquisition costs of $34,762,000 for the
Indiana Riverboat, (f) $5,688,000 for pre-opening costs at Trump Indiana and (g)
payment of $24,225,000 for the first year of interest payments on the Senior
Notes. The balance of the proceeds was used for general corporate purposes.
The indenture governing the Senior Notes (the "Senior Note Indenture")
restricts the ability of THCR Holdings and its subsidiaries, as the case may be,
to make distributions to partners or pay dividends, as the case may be, unless
certain financial ratios are achieved. Further, given the rapidly changing
competitive environment and the risks associated with THCR's proposed expansion
plan, THCR's future operating results are highly conditional and could fluctuate
significantly. Moreover, as a condition to the 1995 Note Offering, THCR Holdings
and THCR Funding entered into the Cash Collateral Agreement, which called for
initial deposits to custodial accounts which were restricted in use for (a)
Trump Indiana for the ship and land projects, (b) Trump Plaza for construction
projects, including the exercise of the Trump World's Fair Purchase Option and
construction projects at Trump Plaza East and the Trump World's Fair, and (c)
the first two interest payments on the Senior Notes. As of June 30, 1996, all
funds were disbursed in accordance with the Cash Collateral Agreement.
In addition, the ability of (i) Plaza Associates and Taj Associates
(through Trump AC) and (ii) Castle Associates to make payments of dividends or
distributions to THCR Holdings may be restricted by the CCC. Similarly, the
ability of Trump Indiana to make payments of dividends or distributions to THCR
Holdings may be restricted by the IGC.
Cash flows from operating activities are THCR Holdings' principal source
of liquidity. With the proceeds from the 1996 Offerings, THCR Holdings, among
other things, retired the outstanding Taj Bonds, redeemed the outstanding Plaza
Notes, satisfied the indebtedness of Taj Associates under its loan agreement
with Nat West, purchased certain real property used in the operation of Trump
Plaza and the Taj Mahal and paid Bankers Trust to release certain liens and
guarantees.
With proceeds from the 1995 Offerings, THCR Holdings made a capital
contribution of $172,859,000 in Trump AC and Plaza Associates. This contribution
was used to repurchase and redeem the Plaza PIK Notes and related warrants
(together with related accrued interest), exercise the Trump World's Fair
Purchase Option and purchase Trump World's Fair and to fund construction costs
incurred in the renovation and integration of Trump Plaza East. The renovation
of Trump Plaza East was completed in February 1996, and Trump World's Fair in
May 1996.
Capital expenditures for Trump AC were $29,412,000 for the three months
ended March 31, 1997, an increase of approximately $1,359,000 or 4.8% from the
comparable period in 1996. Capital expenditures for improvements to Trump
Plaza's existing facilities were $4,253,000 and $2,378,000 for the three months
ended March 31, 1997 and 1996, respectively. Capital expenditures attributable
to Trump Plaza East were approximately $4,611,000 for the three months ended
March 31, 1996. Capital expenditures attributable to Trump World's Fair were
approximately $22,428,000 for the three months ended March 31, 1996.
On January 2, 1997, Plaza Associates exercised its option to purchase from
Seashore Four Associates, an entity beneficially owned by Trump, one of the
parcels of land underlying Trump Plaza's main tower, pursuant to the terms of a
lease, the payments under which were terminated upon the exercise of such
option. The exercise price and associated closing costs of $10,144,000 were paid
and contributed by THCR.
13
<PAGE>
Capital expenditures attributable to the Taj Mahal were $15,015,000 for
the three months ended March 31, 1997. Capital expenditures for improvements to
existing facilities were approximately $2,340,000 for the three months ended
March 31, 1997. Capital expenditures attributable to the expansion of the
facility were approximately $12,675,000 for the three months ended March 31,
1997.
The expansion at the Taj Mahal (the "Taj Mahal Expansion") consists of the
construction of a new 15-bay bus terminal which was completed in December 1996,
a 2,400 space expansion of the existing self parking facilities, which is
expected to be completed in May 1997, and an approximate 7,000 square-foot
casino expansion with 250 slot machines expected to be completed in June 1997.
It is expected that the budget for the Taj Mahal Expansion of approximately
$41.7 million will be funded principally out of cash from operations of Taj
Associates and Plaza Associates.
In addition to the approximately $96 million spent prior to commencing the
operation of the Indiana Riverboat on June 8, 1996, during its initial five-year
license term, an additional $57 million of funds (consisting of approximately
$40 million for the construction of a hotel and other amenities and $17 million
for infrastructure improvements and other municipal uses) will be required to be
spent by Trump Indiana in connection with the Indiana Riverboat facility and
related commitments, including commitments required in connection with the
licensure process. The sources of the initial $96 million included: $62 million
from the proceeds of the 1995 Offerings and the 1996 Offerings, $17.5 million
from vessel financing, $14.2 million from equipment financing (including
approximately $9 million for slot machines) and $1.9 million from operating
leases. The remaining $57 million required to be spent over the initial
five-year license term is expected to be funded with cash from operations and/or
proceeds from the 1996 Offerings.
Trump Indiana is a party to a loan and security agreement, as amended,
with debis Financial Services, Inc. ("dFS") pursuant to which dFS provided,
subject to the terms and conditions thereof, $17.5 million in financing for the
gaming vessel.
Castle Associates' capital expenditures for 1997 are anticipated to be
approximately $7.0 million and principally consist of hotel room renovations, as
well as ongoing casino floor improvements, parking garage upgrades and Marina
leasehold improvements. In addition, during 1997, Castle Associates commenced a
$5.0 million project to retheme the property with a nautical emphasis and rename
it Trump Marina. Capital expenditures of $584,000 were incurred during the three
months ended March 31, 1997, primarily for the previously mentioned projects.
At March 31, 1997, THCR Holdings had combined working capital of
$42,284,000. The combined working capital included a receivable from the New
Jersey Casino Reinvestment Development Authority (the "CRDA") of approximately
$2,836,000 for reimbursable improvements made to Trump Plaza East.
As a result of the Castle Acquisition and Castle Associates' designation
as an unrestricted subsidiary under the Senior Note Indenture, THCR Holdings has
the ability to advance certain funds to Castle Associates for working capital,
debt service and other purposes.
RESULTS OF OPERATIONS: OPERATING REVENUES AND EXPENSES
THCR Holdings' partnership agreement provides that all business activities
of THCR must be conducted by THCR Holdings or subsidiary partnerships or
corporations. As a result of the 1995 Offerings, the Taj Merger Transaction and
the acquisition of Plaza Associates and Taj Associates by THCR Holdings in
connection therewith and the Castle Acquisition, THCR Holdings' results of
operations included in the Statement of Operations are primarily those of Plaza
Associates, Taj Associates, Castle Associates and Trump Indiana for the three
month period ended March 31, 1997.
The results of operations for the quarter ended March 31, 1996 are
primarily those of Plaza Associates; however, THCR Holdings had incurred certain
expenses including interest on the Senior Notes, and Trump Indiana had incurred
significant expenses relating to the development of the Indiana Riverboat prior
to its commencement of operations on June 8, 1996. In addition, THCR Holdings
acquired Taj Associates on April 17, 1996 and Castle Associates on October 7,
1996.
14
<PAGE>
Comparison of Three-Month Periods Ended March 31, 1997 and 1996. The
following table includes selected data of Plaza Associates, Taj Associates,
Castle Associates and Trump Indiana for the three months ended March 31, 1997
and of Plaza Associates for the three months ended March 31, 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------------------------
1997
1996 1997 1997 1997 1997 1997 THCR
PLAZA PLAZA TAJ TRUMP AC TRUMP TRUMP'S HOLDINGS
ASSOCIATES ASSOCIATES ASSOCIATES CONSOLIDATED* INDIANA CASTLE CONSOLIDATED*
---------- ---------- ---------- ------------- ------- ------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Table Games $24,438 $ 21,981 $ 57,328 $ 79,309 $11,236 $18,544 $109,089
Slots 49,832 64,889 66,392 131,281 26,536 45,143 202,960
Other Gaming -- -- 4,553 4,553 -- 287 4,840
------- -------- -------- -------- ------- ------- --------
Sub-Total Gaming 74,270 86,870 128,273 215,143 37,772 63,974 316,889
Other 19,281 24,510 26,663 51,173 1,040 14,096 66,309
------- -------- -------- -------- ------- ------- --------
Gross Revenue 93,551 111,380 154,936 266,316 38,812 78,070 383,198
Less: Promotional Allowances 10,683 13,423 16,540 29,963 209 9,646 39,818
------- -------- -------- -------- ------- ------- --------
Net Revenue 82,868 97,957 138,396 236,353 38,603 68,424 343,380
------- -------- -------- -------- ------- ------- --------
Costs and Expenses:
Gaming 44,126 55,222 79,196 134,418 23,322 41,034 198,774
Pre-opening 479 -- -- -- -- -- --
General & Admin. 17,698 20,514 22,240 42,746 6,905 16,173 67,501
Depreciation & Amortization 4,523 6,539 14,200 20,761 1,260 5,041 27,072
Other 6,365 8,632 7,604 16,236 712 2,731 19,679
------- -------- -------- -------- ------- ------- --------
Total Costs and Expenses 73,191 90,907 123,240 214,161 32,199 64,979 313,026
------- -------- -------- -------- ------- ------- --------
Income from Operations 9,677 7,050 15,156 22,192 6,404 3,445 30,354
------- -------- -------- -------- ------- ------- --------
Non-operating Income (Exp.) (1,180) 160 390 814 394 69 1,964
Interest Expense (9,751) (12,193) (23,668) (35,861) (2,949) (12,198) (52,599)
------- -------- -------- -------- ------- ------- --------
Total Non-operating Income (10,931) (12,033) (23,278) (35,047) (2,555) (12,129) (50,635)
------- -------- -------- -------- ------- ------- --------
Loss in Joint Venture -- -- -- -- (638) -- (638)
Income Tax -- -- -- -- (883) -- (883)
------- -------- -------- -------- ------- ------- --------
Net Income (Loss) $ (1,254) $ (4,983) $ (8,122) $ (12,855) $ 2,328 $ (8,684) $ (21,802)
======= ======== ======== ======== ======= ======= ========
</TABLE>
- ----------
* Intercompany eliminations and expenses of THCR Holdings are not separately
shown.
Gaming revenues were $316,889,000 for the three months ended March 31,
1997, an increase of $242,619,000 or 326.7% from gaming revenues of $74,270,000
for the comparable period in 1996. The increase in gaming revenues consists of
$128,273,000 from Taj Associates, $63,974,000 from Castle Associates and
$37,772,000 from Trump Indiana, in addition to a $12,600,000 or 17.0% increase
in Plaza Associates' table games and slot revenues. Management believes that
Plaza Associates' increase in gaming revenues is primarily due to the May 1996
opening of Trump World's Fair, the February 1996 opening of Trump Plaza East and
the availability of additional hotel rooms at both Trump World's Fair and Trump
Plaza East, as well as marketing initiatives.
Slot revenues were $202,960,000 for the three months ended March 31, 1997,
an increase of $153,128,000 or 307.3% from slot revenues of $49,832,000 for the
comparable period in 1996. This increase is directly attributable to the
acquisition of Taj Associates, which contributed $66,392,000 in slot revenues,
the acquisition of Castle Associates, which contributed $45,143,000 in slot
revenues, and the opening of the Indiana Riverboat, which contributed
$26,536,000 in slot revenues. Plaza Associates' slot revenues were $64,889,000
for the three months ended March 31, 1997, an increase of $15,057,000 or 30.2%
from slot revenues of $49,832,000 for the three months ended March 31, 1996.
Plaza Associates' increase is due to the addition of 1,924 slot machines at
Trump World's Fair and Trump Plaza East, as well as management's marketing
programs.
Table games revenues were $109,089,000 for the three months ended March
31, 1997, an increase of $84,651,000 or 346.4% from $24,438,000 for the
comparable period in 1996. This increase is attributable to the
15
<PAGE>
acquisition of Taj Associates, which contributed $57,328,000 in table games
revenues. The acquisition of Castle Associates contributed $18,544,000 and the
opening of the Indiana Riverboat contributed $11,236,000 to the increase in
table games revenues. Plaza Associates' table games revenues of $21,981,000 for
the three months ended March 31, 1997 decreased by $2,457,000 or 10.1% from the
comparable period in 1996. Plaza Associates' decrease is primarily due to a
decrease in the hold percentage from 16.9% to 13.8% offset by an increase in
table games drop (dollar value of chips purchased) by 10.1% for the three months
ended March 31, 1997.
In addition to table games and slot revenues, Taj Associates' poker/race
simulcasting/keno operations generated approximately $3,999,000 in poker
revenue, $323,000 in race simulcasting revenue and $231,000 in keno revenue for
the three months ended March 31, 1997. Castle Associates generated $287,000 in
other gaming revenues for the three months ended March 31, 1997.
Other revenues were $66,309,000 for the three months ended March 31, 1997,
an increase of $47,028,000 or 243.9% from other revenues of $19,281,000 for the
comparable period in 1996. Other revenues include revenues from rooms, food and
beverage, entertainment and miscellaneous items. The increase is directly
attributable to the acquisition of Taj Associates and Castle Associates, which
generated $26,663,000 and $14,096,000, respectively, in other revenue for the
three months ended March 31, 1997 and $1,040,000 from Trump Indiana, which has
no rooms revenue. Plaza Associates' other revenue was $24,510,000 for the three
months ended March 31, 1997, an increase of $5,229,000 or 27.1% from the
comparable period in 1996. Plaza Associates' increase reflects the additional
rooms at Trump Plaza East and Trump World's Fair as well as increases in rooms
and food and beverage revenues attendant to increased levels of gaming activity
due in part to increased promotional activities.
Promotional allowances were $39,818,000 for the three months ended March
31, 1997, an increase of $29,135,000 or 272.7% from promotional allowances of
$10,683,000 for the three months ended March 31, 1996. Taj Associates generated
$16,540,000 in promotional allowances for the three months ended March 31, 1997.
Castle Associates generated $9,646,000 and Trump Indiana generated $209,000 in
promotional allowances for the three months ended March 31, 1997. Plaza
Associates experienced an increase in promotional allowances to $13,423,000 or
25.6% from promotional allowances of $10,683,000 in the comparable period in
1996. Plaza Associates' increase is primarily attributable to the additional
rooms at Trump World's Fair and Trump Plaza East as well as increases in
marketing initiatives during the three months ended March 31, 1997.
Gaming costs and expenses were $198,774,000 for the three months ended
March 31, 1997, an increase of $154,648,000 or 350.4% from $44,126,000 for the
comparable period in 1996. This increase was primarily attributable to Taj
Associates' gaming costs and expenses of $79,196,000 for the three months ended
March 31, 1997 as well as $41,034,000 and $23,322,000 from Castle Associates and
Trump Indiana, respectively. Gaming costs and expenses for Plaza Associates were
$55,222,000, an increase of $11,096,000 or 25.1% from $44,126,000 for the
comparable period in 1996. Plaza Associates' increase is primarily due to
increased promotional and operational expenses resulting from operating Trump
World's Fair and Trump Plaza East, both with opening dates in 1996, as well as
taxes associated with increased levels of gaming during the comparable period in
1996.
General and administrative expenses were $67,501,000 for the three months
ended March 31, 1997, an increase of $48,644,000 or 258.0% from general and
administrative expenses of $18,857,000 for the comparable period in 1996. This
increase is primarily due to the acquisition of Taj Associates and Castle
Associates, which incurred $22,240,000 and $16,173,000, respectively, in general
and administrative expenses and $6,905,000 from Trump Indiana, which includes a
$500,000 management fee payable to THCR Holdings. Plaza Associates' increase of
$2,816,000 over the comparable period is due in part to expenses associated with
Trump Plaza East and Trump World's Fair. General and administrative expenses for
THCR Holdings (unconsolidated) were $2,177,000 for the three months ended March
31, 1997, an increase of $1,018,000 from the comparable period in 1996. This
increase is primarily attributable to allocated salaries and wages and legal
costs.
Pre-opening expenses of $479,000 were incurred by Plaza Associates for the
three months ended March 31, 1996 and reflect the costs associated with opening
Trump World's Fair in May 1996. Trump Indiana incurred $1,631,000 in pre-opening
expenses for the three months ended March 31, 1996.
Other expenses were $19,679,000 for the three months ended March 31, 1997,
an increase of $13,314,000 or 209.2% from the comparable period in 1996. Other
expenses include costs associated with operating Trump Plaza's,
16
<PAGE>
Trump's Castle's and the Taj Mahal's hotels. The increase over the comparable
period reflects Taj Associates' $7,604,000 and Castle Associates' $2,731,000 of
other expenses and $712,000 from Trump Indiana. Plaza Associates' other expenses
increased by $2,267,000 or 35.6% from the comparable period. This increase is
due to operating Trump World's Fair and Trump Plaza East, both having opening
dates in 1996.
Income from operations was $30,354,000 for the three months ended March
31, 1997, an increase of $23,471,000 or 341.0% from income from operations of
$6,883,000 for the comparable period in 1996. Taj Associates contributed
$15,156,000 and Castle Associates contributed $3,445,000 of income from
operations which was partially offset by an increase in operating losses of
$524,000 for the three months ended March 31, 1997 from THCR Holdings
(unconsolidated). Plaza Associates contributed $7,050,000 during the three
months ended March 31, 1997, a decrease of $2,627,000 or 27.1% from the
comparable period in 1996. Trump Indiana contributed $6,404,000 during the three
months ended March 31, 1997, an increase of $8,035,000 from the comparable
period in 1996.
Interest expense was $52,599,000 for the three months ended March 31,
1997, an increase of $36,573,000 or 228.2% from interest expense of $16,026,000
for the comparable period in 1996. This increase is attributable to the
acquisition of Taj Associates, which incurred $23,668,000 of interest expense,
and Castle Associates, which incurred $10,070,000 of interest expense, excluding
$2,128,000 payable to THCR Holdings on the Castle PIK Notes, for the three
months ended March 31, 1997. Plaza Associates reflects an increase of $2,442,000
interest expense due in part to the issuance of the Trump AC Mortgage Notes.
Trump Indiana incurred an increase of $780,000 in interest expense for the three
months ended March 31, 1997 due to lease financing, which was offset by a
$386,000 decrease in interest expense due to the retirement of $10,000,000 of
Senior Notes by THCR Holdings.
Interest income was $1,964,000 for the three months ended March 31, 1997,
an increase of $1,193,000 or 154.7% from interest income of $771,000 for the
comparable period in 1996. Plaza Associates reflects a decrease in 1997 of
$1,375,000 in non-operating expenses associated with Trump Plaza East.
SEASONALITY
The casino industry in Atlantic City is seasonal in nature; accordingly,
the results of operations for the period ending March 31, 1997 are not
necessarily indicative of the operating results for a full year.
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to the General Instructions to Rule 305 of Regulation S-K, the
quantitative and qualitative disclosures called for by this Item 3 and by Rule
305 of Regulation S-K are inapplicable to the Registrants at this time.
17
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
THCR Holdings and certain of its employees have been involved in various
legal proceedings. In general, THCR Holdings has agreed to indemnify such
persons against any and all losses, claims, damages, expenses (including
reasonable costs, disbursements and counsel fees) and liabilities (including
amounts paid or incurred in satisfaction of settlements, judgments, fines and
penalties) incurred by them in said legal proceedings. Such persons and entities
are vigorously defending the allegations against them and intend to vigorously
contest any future proceedings.
On March 13, 1997, THCR filed a lawsuit in the United States District
Court, District of New Jersey, against Mirage Resorts Incorporated, the State of
New Jersey, the New Jersey Department of Transportation, the South Jersey
Transportation Authority, the CRDA, the New Jersey Transportation Trust Fund
Authority and others. THCR was seeking declaratory and injunctive relief to
recognize and prevent violations by the defendants of the casino clause of the
New Jersey State Constitution and various federal securities and environmental
laws relating to proposed infrastructure improvements in the Atlantic City
marina. The defendants then filed an action in the New Jersey State Court
seeking declaration of the claim relating to the casino clause of the New Jersey
State Constitution. On May 1, 1997, the United States District Court decided
that the matter should be heard in the New Jersey State Court. Oral arguments
were heard in the New Jersey State Court on May 9, 1997. A decision is expected
in the near future.
Various other legal proceedings are now pending against THCR Holdings.
Except as set forth herein and in THCR Holdings' and THCR Funding's Annual
Report on Form 10-K for the year ended December 31, 1996, THCR Holdings
considers all such proceedings to be ordinary litigation incident to the
character of its business and not material to its business or financial
condition. THCR Holdings believes that the resolution of these claims, to the
extent not covered by insurance, will not, individually or in the aggregate,
have a material adverse effect on its financial condition or results of
operations of THCR Holdings.
ITEM 2 -- CHANGES IN SECURITIES
None.
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES None.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None.
ITEM 5 -- OTHER INFORMATION None.
ITEM 6 --EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
27.1 Financial Data Schedule of Trump Hotels & Casino
Resorts Holdings, L.P.
27.2 Financial Data Schedule of Trump Hotels & Casino
Resorts Funding, Inc.
B. CURRENT REPORTS ON FORM 8-K:
The Registrants filed a Current Report on Form 8-K on January 13, 1997,
reporting under Item 5 thereto that the Board of Directors had authorized the
repurchase by THCR Holdings of up to 1,250,000 shares of THCR Common Stock, from
time to time in the open market or privately negotiated transactions. Under Item
7 to such Form 8-K, the
18
<PAGE>
Registrants filed as an exhibit a press release of THCR announcing the
repurchase program. No financial statements were filed in connection with such
Form 8-K. On March 10, 1997, the Board of Directors authorized the repurchase of
up to an additional 1,250,000 shares of THCR Common Stock. As of May 9, 1997,
THCR Holdings, through a wholly owned subsidiary, had repurchased 1,596,500
shares of THCR Common Stock.
The Registrants filed a Current Report on Form 8-K on January 22, 1997,
reporting under Item 5 thereto the execution on January 20, 1997 of a letter of
intent (the "Letter of Intent") among THCR, THCR Holdings and Colony Capital,
Inc. ("Colony"), which contemplated, among other things, that an institutional
fund (or an affiliate thereof) for which Colony would act as investment advisor
would purchase preferred securities and a 51% common equity interest in Castle
Associates and THCR Common Stock warrants. Under Item 7 to such Form 8-K, the
Registrants filed as exhibits the Letter of Intent and two press releases of
THCR announcing the execution thereof. No financial statements were filed in
connection with such Form 8-K. On March 27, 1997, THCR announced that
negotiations with respect to the transactions contemplated by the Letter of
Intent had been terminated.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
(Registrant)
By: Trump Hotels & Casino Resorts, Inc.,
its general partner
Date: May 14, 1997
By: /s/ NICHOLAS L. RIBIS
----------------------------------------
NICHOLAS L. RIBIS
PRESIDENT, CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER AND DIRECTOR
(DULY AUTHORIZED OFFICER AND
PRINCIPAL FINANCIAL OFFICER)
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
(Registrant)
Date: May 14, 1997
By: /s/ NICHOLAS L. RIBIS
----------------------------------------
NICHOLAS L. RIBIS
PRESIDENT, CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER AND DIRECTOR
(DULY AUTHORIZED OFFICER AND
PRINCIPAL FINANCIAL OFFICER)
21
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