================================================================================
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: September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--- ---
Commission file number: 1-13794
TRUMP HOTELS & CASINO RESORTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3818402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huron Ave. & Brigantine Blvd.
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 441-8406
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
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.)
Huron Ave. & Brigantine Blvd.
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 441-8406
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
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) dentification No.)
Huron Ave. & Brigantine Blvd.
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 441-8406
(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, Inc. as of November 14, 2001 was
22,010,027.
The number of outstanding shares of Class B Common Stock, par value $.01
per share, of Trump Hotels & Casino Resorts, Inc. as of November 14, 2001 was
1,000.
The number of outstanding shares of Common Stock, par value $.01 per
share, of Trump Hotels & Casino Resorts Funding, Inc. as of November 14, 2001
was 100.
================================================================================
TRUMP HOTELS & CASINO RESORTS, INC.,
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
INDEX TO FORM 10-Q
PART I--FINANCIAL INFORMATION
ITEM 1 -- Financial Statements Page No.
--------
Condensed Consolidated Balance Sheets of Trump Hotels & Casino Resorts, Inc.
as of December 31, 2000 and September 30, 2001 (unaudited)................................................ 1
Condensed Consolidated Statements of Operations of Trump Hotels & Casino Resorts, Inc.
for the Three and Nine Months Ended September 30, 2000 and 2001 (unaudited)............................... 2
Condensed Consolidated Statement of Stockholders' Equity of Trump Hotels & Casino Resorts, Inc.
for the Nine Months Ended September 30, 2001 (unaudited)................................................. 3
Condensed Consolidated Statements of Cash Flows of Trump Hotels & Casino Resorts, Inc.
for the Nine Months Ended September 30, 2000 and 2001 (unaudited)......................................... 4
Condensed Consolidated Balance Sheets of Trump Hotels & Casino Resorts Holdings, L.P.
as of December 31, 2000 and September 30, 2001 (unaudited)................................................ 5
Condensed Consolidated Statements of Operations of Trump Hotels & Casino Resorts Holdings, L.P.
for the Three and Nine Months Ended September 30, 2000 and 2001 (unaudited)............................... 6
Condensed Consolidated Statement of Partners' Capital of Trump Hotels & Casino Resorts
Holdings, L.P. for the Nine Months Ended September 30, 2001 (unaudited)................................. 7
Condensed Consolidated Statements of Cash Flows of Trump Hotels & Casino Resorts Holdings, L.P.
for the Nine Months Ended September 30, 2000 and 2001 (unaudited)........................................ 8
Notes to Condensed Consolidated Financial Statements of Trump Hotels & Casino Resorts, Inc.,
Trump Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc. (unaudited)................................................................................ 9
ITEM 2 -- Management's Discussion and Analysis of Financial Condition and Results
of Operations ............................................................................................ 14
ITEM 3 -- Quantitative and Qualitative Disclosures About Market Risk................................................ 20
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
INDEX TO FORM 10-Q CONT'D
Page No.
--------
PART II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings............................................................. 21
ITEM 2 -- Changes in Securities and Use of Proceeds..................................... 22
ITEM 3 -- Defaults Upon Senior Securities............................................... 22
ITEM 4 -- Submission of Matters to a Vote of Security Holders........................... 22
ITEM 5 -- Other Information............................................................. 22
ITEM 6 -- Exhibits and Reports on Form 8-K.............................................. 23
SIGNATURES
Signature -- Trump Hotels & Casino Resorts, Inc......................................... 24
Signature -- Trump Hotels & Casino Resorts Holdings, L.P................................ 25
Signature -- Trump Hotels & Casino Resorts Funding, Inc................................. 26
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
ASSETS
December 31, September 30,
2000 2001
----------- -------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents .................................................. $ 95,429 $ 164,697
Receivables, net ........................................................... 52,715 49,686
Inventories ................................................................ 12,324 12,062
Due from affiliates, net ................................................... 2,525 553
Prepaid expenses and other current assets .................................. 9,941 12,208
----------- -----------
Total Current Assets ................................................. 172,934 239,206
INVESTMENT IN BUFFINGTON HARBOR, L.L.C. ....................................... 36,585 34,468
INVESTMENT IN TRUMP'S CASTLE PIK NOTES ........................................ 90,101 101,778
PROPERTY AND EQUIPMENT, NET ................................................... 1,815,068 1,809,171
DEFERRED BOND AND LOAN ISSUANCE COSTS, NET .................................... 23,273 20,758
OTHER ASSETS (Note 3) ......................................................... 61,190 69,553
----------- -----------
Total Assets .................................................................. $ 2,199,151 $ 2,274,934
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 6) .............................. $ 27,021 $ 17,491
Accounts payable and accrued expenses ...................................... 147,639 150,398
Accrued interest payable ................................................... 29,967 79,817
----------- -----------
Total Current Liabilities ............................................ 204,627 247,706
LONG-TERM DEBT, net of current maturities (Notes 6 & 8) ....................... 1,827,023 1,865,967
OTHER LONG-TERM LIABILITIES ................................................... 25,455 43,567
----------- -----------
Total Liabilities ............................................................. 2,057,105 2,157,240
----------- -----------
MINORITY INTEREST ............................................................. 26,897 18,196
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value, 75,000,000 shares authorized,
24,206,756 issued; 22,010,027 outstanding .................................. 242 242
Class B Common Stock, $.01 par value, 1,000 shares
authorized, issued and outstanding ....................................... -- --
Additional Paid in Capital ................................................. 455,645 455,645
Accumulated Deficit ........................................................ (320,538) (335,630)
Accumulated Other Comprehensive Loss ....................................... -- (559)
Less treasury stock at cost, 2,196,729 shares .............................. (20,200) (20,200)
----------- -----------
Total Stockholders' Equity .................................................... 115,149 99,498
----------- -----------
Total Liabilities and Stockholders' Equity .................................... $ 2,199,151 $ 2,274,934
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
balance sheets
1
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(unaudited)
(dollars in thousands, except share data)
Three Months Ended Nine Months Ended
September 30 September 30
--------------- -------------
2000 2001 2000 2001
---- ---- ---- ----
REVENUES:
Gaming ....................................... $ 357,752 $ 343,237 $ 965,318 $ 945,383
Rooms ........................................ 23,771 23,025 61,802 61,962
Food and Beverage ............................ 39,765 36,461 103,856 99,849
Other ........................................ 12,691 12,103 30,949 29,094
------------ ------------ ------------ ------------
Gross Revenues ............................... 433,979 414,826 1,161,925 1,136,288
Less -- Promotional allowances (Note 5) ...... 54,730 47,917 137,022 128,047
------------ ------------ ------------ ------------
Net Revenues ................................. 379,249 366,909 1,024,903 1,008,241
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Gaming (Note 5) .............................. 201,810 192,665 567,692 558,601
Rooms ........................................ 7,853 7,643 23,496 23,001
Food and Beverage ............................ 12,770 12,755 34,809 33,919
General and Administrative ................... 70,622 66,300 210,540 198,099
Depreciation and Amortization ................ 19,586 17,367 57,941 54,887
Trump World's Fair Closing (Note 4) .......... 29 -- 765 --
------------ ------------ ------------ ------------
312,670 296,730 895,243 868,507
------------ ------------ ------------ ------------
Income from operations ....................... 66,579 70,179 129,660 139,734
------------ ------------ ------------ ------------
NON-OPERATING INCOME AND (EXPENSES):
Interest income .............................. 1,451 720 4,710 2,820
Interest expense ............................. (54,865) (55,242) (165,885) (164,529)
Other non-operating income (expense) ......... (86) (59) (594) 367
------------ ------------ ------------ ------------
(53,500) (54,581) (161,769) (161,342)
------------ ------------ ------------ ------------
Income (Loss) before equity in loss of Buffington
Harbor, L.L.C., minority interest and
extraordinary item .............................. 13,079 15,598 (32,109) (21,608)
Equity in loss of Buffington Harbor, L.L.C. .. (796) (586) (2,328) (2,185)
Minority Interest ............................ (4,492) (5,490) 12,594 8,701
------------ ------------ ------------ ------------
Income (Loss) before extraordinary item ......... 7,791 9,522 (21,843) (15,092)
Extraordinary gain ($14,903) net of
minority interest ($5,450) (Note 2) ......... 1,165 -- 9,453 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) ............................... $ 8,956 $ 9,522 $ (12,390) $ (15,092)
============ ============ ============ ============
Basic and diluted earnings(loss) per share before
extraordinary item ........................... $ .35 $ .43 $ (.99) $ (.69)
Extraordinary item .............................. .06 -- .43 --
------------ ------------ ------------ ------------
Basic and diluted loss per share ................ $ .41 $ .43 $ (.56) $ (.69)
============ ============ ============ ============
Average number of shares outstanding ............ 22,010,027 22,010,027 22,051,463 22,010,027
============ ============ ============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(unaudited)
(dollars in thousands)
Accumulated
Common Additional Other Total
Stock Paid in Accumulated Comprehensive Treasury Stockholders'
Amount Capital Deficit Loss Stock Equity
------ ------- ------- ---- ----- ------
Balance, December 31, 2000 ...... $ 242 $ 455,645 $ (320,538) $ -- $(20,200) $ 115,149
Comprehensive Loss
Net Loss .................. -- -- (15,092) -- -- (15,092)
Change in value of interest
rate swap (Note 6) ... -- -- -- (559) -- (559)
------- ---------- ---------- ------- -------- ----------
Balance, September 30, 2001 ..... $ 242 $ 455,645 $ (335,630) $ (559) $(20,200) $ 99,498
======= ========== ========== ======= ======== ==========
At December 31, 2000 and September 30, 2001 there were 24,206,756 shares of
Common Stock issued and 1,000 shares of Class B Common Stock issued.
The accompanying notes are an integral part of this condensed consolidated
financial statement.
3
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(unaudited)
(dollars in thousands)
2000 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ........................................................................... $ (12,390) $ (15,092)
Adjustments to reconcile net loss to net cash flows from operating activities:
Extraordinary gain, net of minority interest .................................. (9,453) --
Issuance of debt in exchange for accrued interest ............................. 7,339 8,392
Non-cash increase in Trump's Castle PIK Notes ................................. (10,211) (11,677)
Equity in loss of Buffington Harbor, L.L.C. ................................... 2,328 2,185
Depreciation and amortization ................................................. 57,941 54,887
Minority interest in net loss ................................................. (12,594) (8,701)
Accretion of discounts on mortgage notes ...................................... 4,228 4,809
Amortization of deferred loan costs ........................................... 4,814 4,409
Provision for losses on receivables ........................................... 4,519 5,803
Valuation allowance of CRDA investments and amortization of Indiana
gaming costs ................................................................ 7,697 4,943
Loss (gain) on disposition of property ........................................ 459 (448)
Increase in receivables ....................................................... (13,345) (2,774)
Decrease in inventories ....................................................... 915 262
Increase in other current assets .............................................. (4,719) (1,697)
Decrease in due from affiliates ............................................... 25,515 2,012
Increase in other assets ..................................................... (1,495) (3,614)
Increase (decrease) in accounts payable and accrued expenses .................. 14,774 (3,291)
Increase in accrued interest payable .......................................... 49,662 49,850
Increase in other long-term liabilities ....................................... 3,923 5,530
--------- ---------
Net cash flows provided by operating activities ............................. 119,907 95,788
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net ....................................... (25,358) (10,860)
Investment in Buffington Harbor, L.L.C. ....................................... (1,285) (68)
CRDA Investments .............................................................. (10,251) (10,222)
--------- ---------
Net cash flows used in investing activities ................................. (36,894) (21,150)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from additional borrowings ........................................... 7,978 27,500
Payment of long-term debt ..................................................... (30,380) (30,976)
Loan costs from additional borrowing .......................................... (93) (1,894)
--------- ---------
Net cash flows used in financing activities ................................. (22,495) (5,370)
--------- ---------
Net increase in cash and cash equivalents ................................... 60,518 69,268
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................................... 104,026 95,429
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......................................... $ 164,544 $ 164,697
========= =========
CASH INTEREST PAID ................................................................. $ 106,350 $ 104,437
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Purchase of property and equipment under capital lease obligations ................. $ 10,861 $ 19,128
========= =========
Exchange of THCR Common Stock to treasury stock .................................... $ 203 $ --
========= =========
Accumulated Other Comprehensive Loss ............................................... $ -- $ 559
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
December 31, September 30,
2000 2001
----------- -----------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents ................................................. $ 95,425 $ 164,693
Receivables, net .......................................................... 52,715 49,686
Inventories ............................................................... 12,324 12,062
Due from affiliates, net .................................................. 2,525 553
Prepaid expenses and other current assets ................................. 9,941 12,208
----------- -----------
Total Current Assets ................................................ 172,930 239,202
INVESTMENT IN BUFFINGTON HARBOR, L.L.C. ...................................... 36,585 34,468
INVESTMENT IN TRUMP'S CASTLE PIK NOTES ....................................... 90,101 101,778
PROPERTY AND EQUIPMENT, NET .................................................. 1,815,068 1,809,171
DEFERRED BOND AND LOAN ISSUANCE COSTS, NET ................................... 23,273 20,758
OTHER ASSETS (Note 3) ........................................................ 61,190 69,553
----------- -----------
Total Assets ................................................................. $ 2,199,147 $ 2,274,930
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 6) ............................. $ 27,021 $ 17,491
Accounts payable and accrued expenses ..................................... 147,639 150,398
Accrued interest payable .................................................. 29,967 79,817
----------- -----------
Total Current Liabilities ........................................... 204,627 247,706
LONG-TERM DEBT, net of current maturities (Notes 6 & 8) ...................... 1,827,023 1,865,967
OTHER LONG-TERM LIABILITIES .................................................. 25,455 43,567
----------- -----------
Total Liabilities ............................................................ 2,057,105 2,157,240
----------- -----------
PARTNERS' CAPITAL:
Partners' capital ............................................................ 652,503 652,503
Accumulated deficit .......................................................... (490,261) (514,054)
Accumulated Other Comprehensive Loss ........................................ -- (559)
Less stock of THCR ........................................................... (20,200) (20,200)
----------- -----------
Total Partners' Capital ...................................................... 142,042 117,690
----------- -----------
Total Liabilities and Partners' Capital ...................................... $ 2,199,147 $ 2,274,930
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
5
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(unaudited)
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2000 2001 2000 2001
---- ---- ---- ----
REVENUES:
Gaming ....................................... $ 357,752 $ 343,237 $ 965,318 $ 945,383
Rooms ........................................ 23,771 23,025 61,802 61,962
Food and Beverage ............................ 39,765 36,461 103,856 99,849
Other ........................................ 12,691 12,103 30,949 29,094
----------- ----------- ----------- -----------
Gross Revenues ............................... 433,979 414,826 1,161,925 1,136,288
Less -- Promotional allowances (Note 5) ...... 54,730 47,917 137,022 128,047
----------- ----------- ----------- -----------
Net Revenues ................................. 379,249 366,909 1,024,903 1,008,241
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Gaming (Note 5) .............................. 201,810 192,665 567,692 558,601
Rooms ........................................ 7,853 7,643 23,496 23,001
Food and Beverage ............................ 12,770 12,755 34,809 33,919
General and Administrative ................... 70,622 66,300 210,540 198,099
Depreciation and Amortization ................ 19,586 17,367 57,941 54,887
Trump World's Fair Closing (Note 4) .......... 29 -- 765 --
----------- ----------- ----------- -----------
312,670 296,730 895,243 868,507
----------- ----------- ----------- -----------
Income from operations ....................... 66,579 70,179 129,660 139,734
----------- ----------- ----------- -----------
NON-OPERATING INCOME AND (EXPENSES):
Interest income .............................. 1,451 720 4,710 2,820
Interest expense ............................. (54,865) (55,242) (165,885) (164,529)
Other non-operating income (expense) ......... (86) (59) (594) 367
----------- ----------- ----------- -----------
(53,500) (54,581) (161,769) (161,342)
----------- ----------- ----------- -----------
Income (Loss) before equity in loss of Buffington
Harbor, L.L.C. and extraordinary item ........ 13,079 15,598 (32,109) (21,608)
Equity in loss of Buffington Harbor, L.L.C. ..... (796) (586) (2,328) (2,185)
----------- ----------- ----------- -----------
Income (Loss) before extraordinary item ......... 12,283 15,012 (34,437) (23,793)
Extraordinary gain (Note 2) ..................... 1,836 -- 14,903 --
----------- ----------- ----------- -----------
NET INCOME (LOSS) ............................... $ 14,119 $ 15,012 $ (19,534) $ (23,793)
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(unaudited)
(dollars in thousands)
Accumulated
Other
Partners' Accumulated Comprehensive THCR
Capital Deficit Loss Common Stock Total
------- ------- ---- ------------ -----
Balance, December 31, 2000 ................. $ 652,503 $(490,261) $ -- $ (20,200) $ 142,042
Comprehensive Loss
Net Loss ................................. -- (23,793) -- -- (23,793)
Change in value of interest rate
swap (Note 6) ........................ -- -- (559) -- (559)
--------- --------- --------- --------- ---------
Balance, September 30, 2001 ................ $ 652,503 $(514,054) $ (559) $ (20,200) $ 117,690
========= ========= ========= ========= =========
The accompanying notes are an integral part of this condensed consolidated
financial statement.
7
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(unaudited)
(dollars in thousands)
2000 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ..................................................................... $ (19,534) $ (23,793)
Adjustments to reconcile net loss to net cash flows from operating activities:
Extraordinary gain, net of minority interest .......................... (14,903) --
Issuance of debt in exchange for accrued interest ..................... 7,339 8,392
Non-cash increase in Trump's Castle PIK Notes ......................... (10,211) (11,677)
Equity in loss of Buffington Harbor, L.L.C. ........................... 2,328 2,185
Depreciation and amortization ......................................... 57,941 54,887
Accretion of discounts on mortgage notes .............................. 4,228 4,809
Amortization of deferred loan costs ................................... 4,814 4,409
Provision for losses on receivables ................................... 4,519 5,803
Valuation allowance of CRDA investments and amortization of Indiana
gaming costs ...................................................... 7,697 4,943
Loss(gain) on disposition of property ................................. 459 (448)
Increase in receivables ............................................... (13,345) (2,774)
Decrease in inventories ............................................... 915 262
Increase in other current assets ...................................... (4,719) (1,697)
Decrease in due from affiliates ....................................... 25,515 2,012
Increase in other assets .............................................. (1,495) (3,614)
Increase (decrease) in accounts payable and accrued expenses .......... 14,774 (3,291)
Increase in accrued interest payable .................................. 49,662 49,850
Increase in other long-term liabilities ............................... 3,923 5,530
--------- ---------
Net cash flows provided by operating activities ................... 119,907 95,788
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net ............................... (25,358) (10,860)
Investment in Buffington Harbor, L.L.C. ............................... (1,285) (68)
CRDA Investments ...................................................... (10,251) (10,222)
--------- ---------
Net cash flows used in investing activities ....................... (36,894) (21,150)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from additional borrowings ................................... 7,978 27,500
Payment of long-term debt ............................................. (30,380) (30,976)
Loan costs from additional borrowing .................................. (93) (1,894)
--------- ---------
Net cash flows used in financing activities ....................... (22,495) (5,370)
--------- ---------
Net increase in cash and cash equivalents .................................... 60,518 69,268
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................. 104,022 95,425
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................... $ 164,540 $ 164,693
========= =========
CASH INTEREST PAID ........................................................... $ 106,350 $ 104,437
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Purchase of property and equipment under capital lease obligations ........... $ 10,861 $ 19,128
========= =========
Exchange of THCR Common Stock to treasury stock .............................. $ 203 $ --
========= =========
Accumulated Other Comprehensive Loss ......................................... $ -- $ 559
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
TRUMP HOTELS & CASINO RESORTS, INC.,
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, Inc., a Delaware corporation ("THCR"),
Trump Hotels & Casino Resorts Holdings, L.P., a Delaware limited partnership
("THCR Holdings"), and Subsidiaries (as defined). THCR Holdings is currently
owned approximately 63.4% by THCR, as both a general and limited partner, and
approximately 36.6% by Donald J. Trump ("Trump"), as a limited partner. Trump's
limited partnership interest in THCR Holdings represents his economic interests
in the assets and operations of THCR Holdings. 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") (subject to certain
adjustments), and if converted, would give Trump ownership of 42.9% of the THCR
Common Stock (including his current personal share ownership) or 44.4% (assuming
currently exercisable options held by Trump were exercised). Accordingly, the
accompanying condensed consolidated financial statements include those of (i)
THCR and its 63.4% owned subsidiary, THCR Holdings, and (ii) THCR Holdings and
its wholly owned subsidiaries.
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 ("SEC"). Accordingly, certain information and note disclosures
normally included in financial statements prepared in conformity with accounting
principles generally accepted in the United States have been condensed or
omitted.
These condensed consolidated 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, 2000
filed with the SEC.
The casino industry in Atlantic City and Indiana is seasonal in nature.
Accordingly, results of operations for the period ended September 30, 2001 are
not necessarily indicative of the operating results for a full year.
THCR, THCR Holdings and Trump Hotels & Casino Resorts Funding, Inc., a
Delaware corporation ("THCR Funding"), have no operations and their ability to
service their debt is dependent on the successful operations of the following
subsidiaries of THCR Holdings (the "Subsidiaries"): (i) Trump Atlantic City
Associates, a New Jersey general partnership ("Trump AC"), which is comprised of
Trump Taj Mahal Associates, a New Jersey general partnership ("Taj Associates"),
and Trump Plaza Associates, a New Jersey general partnership ("Plaza
Associates"); (ii) Trump Indiana, Inc., a Delaware corporation ("Trump
Indiana"); and (iii) Trump's Castle Associates, L.P. , a New Jersey limited
partnership ("Castle Associates") d/b/a Trump Marina Hotel Casino ("Trump
Marina"). THCR, through THCR Holdings and its subsidiaries, is the exclusive
vehicle through which Trump engages in new gaming activities in emerging and
established gaming jurisdictions.
The economic consequences of the September 11, 2001 terrorist attacks
on the World Trade Center and New York State's subsequent approval of the
largest gambling package in the State's history are still unknown at this time.
Although management anticipates such events to negatively affect THCR's Atlantic
City operations, management cannot predict with any certainty the full impact of
such events.
9
TRUMP HOTELS & CASINO RESORTS, INC.,
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Basic and Diluted Loss Per Share
Basic loss per share is based on the weighted average number of shares
of THCR Common Stock outstanding. Diluted earnings per share are the same as
basic earnings per share as common stock equivalents have not been included as
they would be anti-dilutive. The shares of THCR's Class B common stock, par
value $.01 per share (the "THCR Class B Common Stock"), owned by Trump have no
economic interest and therefore are not considered in the calculation of
weighted average shares outstanding.
Reclassifications
Certain reclassifications have been made to prior year financial
statements to conform to the current year presentation.
(2) Financial Information
Financial information relating to THCR Funding is as follows:
December 31, September 30,
2000 2001
---- ----
(unaudited)
Total Assets (including THCR Holdings' 15 1/2% Senior Secured
Notes due 2005 ("the Senior Notes") receivable of
$145,000,000 at December 31, 2000 and
September 30, 2001)(a).............................................. $145,936,000 $151,555,000
============ ============
Total Liabilities and Capital (including $145,000,000 of
Senior Notes payable) .............................................. $145,936,000 $151,555,000
============ ============
Nine Months Ended September 30,
2000 2001
---- ----
Interest Income from THCR Holdings .......................................... $ 16,856,000 $ 16,856,000
Interest Expense ............................................................ $ 16,856,000 $ 16,856,000
------------ ------------
Net Income .................................................................. $ -- $ --
============ ============
(a) During 2000, THCR Enterprises, L.L.C., a New Jersey limited
liability company ("THCR Enterprises") and wholly-owned subsidiary of
THCR Holdings, repurchased $35,500,000 of these Senior Notes for
$19,030,000 plus accrued interest. For the nine months ended September
30, 2000, an extraordinary gain of $14,903,000 was recorded, net of a
writedown of deferred loan costs of $1,567,000,which was adjusted to
$9,453,000 after minority interest of $5,450,000.
(3) Other Assets
Plaza Associates is appealing a real estate tax assessment by the City
of Atlantic City. At December 31, 2000 and September 30, 2001, other assets
include $8,014,000, which Plaza Associates believes will be recoverable on the
settlement of the appeal.
10
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(4) Trump World's Fair Closing
On October 4, 1999, THCR closed Trump World's Fair. In addition to
closing costs recorded at December 31, 1999, costs of $765,000 were recorded
during the nine months ended September 30, 2000.
(5) Volume Based Cash Rebates
In January 2001, the Emerging Issues Task Force (EITF) reached a
consensus on certain issues within Issue No. 00-22, "Accounting for `Points' and
Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for
Free Products or Services to Be Delivered in the Future," (EITF 00-22).
Application of EITF 00-22 is required for interim and annual periods ending
after February 15, 2001. EITF 00-22 requires volume-based cash rebates to be
classified as a reduction of revenue. Accordingly, such rebates have been
classified as promotional allowances. THCR previously classified these
expenditures as a gaming expense. Prior period amounts have been reclassified to
conform with the current presentation.
(6) Trump Indiana Note Payable
On April 27, 2001, Trump Indiana entered into a loan agreement with a
bank group for $27,500,000. Proceeds from the loan were used to pay off maturing
debt for the vessel, the hotel, a $5,000,000 bridge loan and provide working
capital. As a result of an interest rate swap arrangement entered into
contemporaneously with the bank loan, the new debt bears a fixed rate of
interest of 8.85% on $10,000,000 of principal, and a floating rate applies to
the balance of the loan. At September 30, 2001, the rate on the floating portion
was a blended 7.86%. The loan amortizes based upon an assumed 84 month term and
matures with a balloon payment payable at the end of 60 months.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
by SFAS No. 137 and No. 138, which specifies the accounting and disclosure
requirements for such instruments. At September 30, 2001, Trump Indiana's
derivative financial instruments consisted of an interest rate swap with a
notional amount of $10,000,000 that effectively converts an equal portion of its
debt from a floating rate to a fixed rate. An unrealized loss of $559,000
attributable to the change in the fair value of the interest rate swap has been
recorded as "Accumulated other comprehensive loss" in the equity sections of the
respective balance sheets.
(7) Recent Accounting Pronouncement
In July 2001, the FASB issued Statement No. 141 "Business Combinations"
("SFAS 141") and Statement No. 142 "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 is effective as follows: a) use of the pooling-of-interest
method is prohibited for business combinations initiated after June 30, 2001;
and b) the provisions of SFAS 141 also apply to all business combinations
accounted for by the purchase method that are complete after June 30, 2001.
There are also transition provisions that apply to business combinations
completed before July 1, 2001 that were accounted for by the purchase method.
SFAS 142 is effective for fiscal years beginning after December 15, 2001 and
applies to all goodwill and other intangible assets recognized in an entity's
statement of financial position at that date, regardless of when those assets
were initially recognized. THCR does not believe that the provisions of SFAS 141
and SFAS 142 will have a material effect on its financial position or results of
operations.
11
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(8) Subsequent Events
On October 31, 2001, THCR announced that it is seeking to negotiate the
terms of the public debt and is withholding interest payments thereon until such
time as discussions between THCR and the bondholders have been finalized. The
following debt issues of THCR and/or its subsidiaries are affected: (i) THCR
Holdings and THCR Funding 15-1/2% Senior Secured Notes due 2005, having a
semi-annual interest payment due on December 15, 2001; (ii) each of Trump AC and
(A) Trump Atlantic City Funding, Inc., (B) Trump Atlantic City Funding II, Inc.
and (C) Trump Atlantic City Funding III, Inc. 11-1/4% Mortgage Notes due 2006,
having an aggregate semi-annual interest payment of $73,125,000 which was due on
November 1, 2001; (iii) Castle Associates and Trump's Castle Funding, Inc.
("Castle Funding") 10-1/4% Senior Notes due 2003, having a semi-annual interest
payment of approximately $3,178,000 which was due on October 31, 2001; (iv)
Castle Associates and Castle Funding 11-3/4% Mortgage Notes due 2003, having a
semi-annual interest payment of approximately $14,226,000 due on November 15,
2001 and (v) Castle Associates and Trump's Castle Hotel & Casino, Inc. ("TCHI")
10-1/4% Senior Notes due 2003 (referred to as the "Working Capital Loan"),
having a semi-annual interest payment of approximately $256,000 which was due on
October 31, 2001. These interest amounts have been included in current
liabilities at September 30, 2001. THCR is seeking to negotiate the terms of the
public debt in light of the economic consequences of the September 11th
terrorist attacks on the World Trade Center which have led New York State to
approve the largest gambling package in its history, which includes six casinos,
three of which will be ninety minutes away from Manhattan in the Catskills, and
video slot machines at numerous racetracks, including Aqueduct in New York City
and Yonkers. THCR intends to pay interest upon the completion of a successful
negotiation.
Pursuant to each of the indentures governing the aforementioned debt
issues, a default in the payment of interest when due and payable and which
continues for 30 calendar days (the "Cure Period") constitutes an "Event of
Default" under which the trustee or the holders of 25% of the aggregate
principal amount of the respective debt issue then outstanding, by notice in
writing to the respective issuers, may, and the trustee at the request of such
holders shall, declare all principal and accrued interest of such debt issue to
be due and payable immediately. Notwithstanding, the issuers may prevent the
aforementioned Event of Default by paying the defaulted interest before the
expiration of the Cure Period.
The ability of THCR to repay its current and long-term debt when due
will depend on the ability of Plaza Associates, Taj Associates, Castle
Associates and Trump Indiana to generate cash from operations sufficient for
such purposes or on the ability of THCR to refinance such indebtedness. Cash
flow from operations may not be sufficient to repay a substantial portion of the
principal amount of the indebtedness upon maturity, especially in light of New
York State's recent approval of the largest gambling package in the State's
history as a consequence of the September 11, 2001 terrorist attacks on the
World Trade Center and the subsequent effects on New York's then already
softening economy. The future operating performance and the ability to refinance
such indebtedness will be subject to the then prevailing economic conditions,
industry conditions and numerous other financial, business and other factors,
many of which are unforseeable and/or beyond the control of THCR. There can be
no assurance that the future operating performance of Plaza Associates, Taj
Associates, Castle Associates or Trump Indiana 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 or other attempts to raise
capital on favorable terms, or at all.
12
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
AND
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(8) Subsequent Events (continued)
THCR Management Services, LLC, ("THCR Management") an unrestricted
subsidiary of THCR Holdings, has entered into a management agreement with the
Twenty-Nine Palms Band of Mission Indians, a federally recognized Native
American tribe (the "Tribe"), which, subject to the approval of the National
Indian Gaming Commission, provides that THCR Management will manage and direct
all business and affairs in connection with the day-to-day operation, management
and maintenance of the Tribe's expanded and renovated casino located in the Palm
Springs, California resort area. The construction and renovation of the Tribe's
casino is currently in progress and is anticipated to be completed in the second
quarter of 2002. To enable the Tribe to complete the construction, THCR
Management agreed to act as a participant in the Tribe's construction loan and
to provide to the Tribe a portion of the financing for the project. THCR
Management has entered into a loan agreement with various lenders, whereby the
lenders have agreed to loan up to $18,800,000 to THCR Management which will, in
turn, use the net proceeds to fund its participation in the Tribe's construction
loan. THCR Management's financing from the lenders bears interest at the rate of
9% per annum and matures in November 2006. The financing is secured by (i) a
pledge of the promissory note from the Tribe, (ii) a pledge of management fees
and (iii) a limited guaranty of Trump. The Tribe's construction financing bears
interest at the prime rate plus 1%, and matures in August 2007. THCR Holdings,
through its subsidiary THCR Enterprises, has agreed to indemnify Trump against
any losses incurred by Trump in connection with such guaranty. The indemnity
obligation of THCR Enterprises is secured by a pledge of certain securities held
by THCR Enterprises. In November 2001, $11,000,000 of the $18,800,000 was drawn
down by THCR Management.
13
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital Resources and Liquidity
Cash flows from operating activities are THCR's principal source of
liquidity. Although THCR and its subsidiaries anticipate having sufficient
liquidity to meet their obligations during 2001, management cannot make any
assurances regarding THCR's and its subsidiaries' ability to make future
payments in light of the economic consequences of the September 11th terrorist
attacks on the World Trade Center which have led New York State to approve the
largest gambling package in its history, which includes six casinos, three of
which will be ninety minutes away from Manhattan in the Catskills, and video
slot machines at numerous racetracks, including Aqueduct in New York City and
Yonkers. Cash flow is managed based upon the seasonality of the operations. Any
excess cash flow achieved from operations during peak periods is utilized to
subsidize non-peak periods when necessary.
On October 31, 2001, THCR announced that it is seeking to negotiate the
terms of the public debt and is withholding interest payments thereon until such
time as discussions between THCR and the bondholders have been finalized. The
following debt issues of THCR and/or its subsidiaries are affected: (i) THCR
Holdings and THCR Funding 15-1/2% Senior Secured Notes due 2005, having a
semi-annual interest payment due on December 15, 2001; (ii) each of Trump AC and
(A) Trump Atlantic City Funding, Inc., (B) Trump Atlantic City Funding II, Inc.
and (C) Trump Atlantic City Funding III, Inc. 11-1/4% Mortgage Notes due 2006,
having an aggregate semi-annual interest payment of $73,125,000 which was due on
November 1, 2001; (iii) Castle Associates and Castle Funding 10-1/4% Senior
Notes due 2003, having a semi-annual interest payment of approximately
$3,178,000 which was due on October 31, 2001; (iv) Castle Associates and Castle
Funding 11-3/4% Mortgage Notes due 2003, having a semi-annual interest payment
of approximately $14,226,000 due on November 15, 2001 and (v) Castle Associates
and TCHI 10-1/4% Senior Notes due 2003 (referred to as the "Working Capital
Loan"), having a semi-annual interest payment of approximately $256,000 which
was due on October 31, 2001. These interest amounts have been included in
current liabilities at September 30, 2001. THCR is seeking to negotiate the
terms of the public debt in light of the economic consequences of the September
11th terrorist attacks on the World Trade Center which have led New York State
to approve the largest gambling package in its history. THCR intends to pay
interest upon the completion of a successful negotiation.
Pursuant to each of the indentures governing the aforementioned debt
issues, a default in the payment of interest when due and payable and which
continues for 30 calendar days (the "Cure Period") constitutes an "Event of
Default" under which the trustee or the holders of 25% of the aggregate
principal amount of the respective debt issue then outstanding, by notice in
writing to the respective issuers, may, and the trustee at the request of such
holders shall, declare all principal and accrued interest of such debt issue to
be due and payable immediately. Notwithstanding, the issuers may prevent the
aforementioned Event of Default by paying the defaulted interest before the
expiration of the Cure Period.
Capital expenditures for THCR were $25,358,000 and $10,860,000 for the
nine months ended September 30, 2000 and 2001, respectively.
THCR Management has entered into a management agreement with the
Twenty-Nine Palms Band of Mission Indians Tribe, which, subject to the approval
of the National Indian Gaming Commission, provides that THCR Management will
manage and direct all business and affairs in connection with the day-to-day
operation, management and maintenance of the Tribe's expanded and renovated
casino located in the Palm Springs, California resort area. The construction and
renovation of the Tribe's casino is currently in progress and is anticipated to
be completed in the second quarter of 2002. To enable the Tribe to complete the
construction, THCR Management agreed to act as a participant in the Tribe's
construction loan and to provide to the Tribe a portion of the financing for the
project. THCR Management has entered into a loan agreement with various lenders,
whereby the lenders have agreed to loan up to $18,800,000 to THCR Management
which will, in turn, use the net proceeds to fund its participation in the
Tribe's construction loan. THCR Management's financing from the lenders bears
interest at the rate of 9% per annum and matures in November 2006. The financing
is secured by (i) a pledge of the promissory note from the Tribe, (ii) a pledge
of management fees and (iii) a limited guaranty of Trump. The Tribe's
construction financing bears interest at the prime rate plus 1%, and matures in
August 2007. THCR Holdings, through its subsidiary THCR Enterprises, has agreed
to indemnify Trump against any losses incurred by Trump in connection with such
guaranty. The indemnity obligation of THCR Enterprises is secured by a pledge of
certain securities held by THCR Enterprises. In November 2001, $11,000,000 of
the $18,800,000 was drawn down by THCR Management.
14
The indenture governing the Senior Notes (the "Senior Note Indenture")
restricts the ability of THCR Holdings and its subsidiaries 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, THCR's future operating results are uncertain and could fluctuate
significantly.
The indentures of Trump AC and Castle Associates restrict their ability
to make distributions to THCR Holdings. The loan agreement with Trump Indiana's
bank group limits its ability to make distribution to THCR Holdings. Therefore,
the ability of THCR Holdings to service its debt is dependent on other future
operations and the permitted distributions from Trump AC, Castle Associates and
Trump Indiana.
The ability of THCR to repay its current and long-term debt when due
will depend on the ability of Plaza Associates, Taj Associates, Castle
Associates and Trump Indiana to generate cash from operations sufficient for
such purposes or on the ability of THCR to refinance such indebtedness. Cash
flow from operations may not be sufficient to repay a substantial portion of the
principal amount of the indebtedness upon maturity, especially in light of New
York State's recent approval of the largest gambling package in the State's
history as a consequence of the September 11, 2001 terrorist attacks on the
World Trade Center and the subsequent effects on New York's then already
softening economy. The future operating performance and the ability to refinance
such indebtedness will be subject to the then prevailing economic conditions,
industry conditions and numerous other financial, business and other factors,
many of which are unforseeable and/or beyond the control of THCR. There can be
no assurance that the future operating performance of Plaza Associates, Taj
Associates, Castle Associates or Trump Indiana 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 or other attempts to raise
capital on favorable terms, or at all.
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 rules and regulations
promulgated by the New Jersey Casino Control Commission. Similarly, the ability
of Trump Indiana to make payments of dividends or distributions to THCR Holdings
may be restricted by the rules and regulations promulgated by the Indiana Gaming
Commission.
15
Results of Operations: Operating Revenues and Expenses
All business activities of THCR and THCR Holdings are conducted by
Plaza Associates, Taj Associates, Castle Associates (d/b/a Trump Marina) and
Trump Indiana.
Comparison of Three-Month Periods Ended September 30, 2000 and 2001.
The following tables include selected data of Plaza Associates, Taj Associates,
Trump Indiana and Trump Marina.
Three Months Ended September 30, 2000
------------------------------------------------------
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated*
---------- ---------- ------- ------ -------------
Revenues: (dollars in millions)
Gaming ............................... $ 90.4 $155.6 $ 29.6 $ 82.1 $357.8
Other ................................ 21.4 33.0 2.4 19.5 76.2
------ ------ ------ ------ ------
Gross Revenues ....................... 111.8 188.6 32.0 101.6 434.0
Less: Promotional Allowances ......... 15.8 24.4 0.7 13.8 54.8
------ ------ ------ ------ ------
Net Revenues ......................... 96.0 164.2 31.3 87.8 379.2
------ ------ ------ ------ ------
Costs and Expenses:
Gaming ............................... 55.5 82.0 18.5 45.8 201.8
Other ................................ 5.4 9.5 1.7 4.1 20.6
General & Administrative ............. 17.8 25.5 8.1 17.5 70.6
Depreciation & Amortization .......... 4.3 8.8 2.0 4.4 19.6
------ ------ ------ ------ ------
Total Costs and Expenses ............. 83.0 125.8 30.3 71.8 312.6
------ ------ ------ ------ ------
Income from Operations ............... 13.0 38.4 1.0 16.0 66.6
------ ------ ------ ------ ------
Non-operating Income ................. 0.1 0.4 0.1 0.3 1.4
Interest Expense ..................... (12.1) (23.3) (1.4) (14.3) (54.9)
------ ------ ------ ------ ------
Total Non-operating Expense, Net ..... (12.0) (22.9) (1.3) (14.0) (53.5)
------ ------ ------ ------ ------
Loss in Joint Venture ................ -- -- (0.8) -- (0.8)
Extraordinary Gain, net .............. -- -- -- -- 1.2
------ ------ ------ ------ ------
Income (Loss) before Minority Interest $ 1.0 $ 15.5 $ (1.1) $ 2.0 13.5
====== ====== ====== ======
Minority Interest .................... (4.5)
------
Net Income ........................... $ 9.0
======
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
Three Months Ended September 30, 2001
-----------------------------------------------------
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated*
---------- ---------- ------- ------ -------------
Revenues: (dollars in millions)
Gaming ............................... $ 88.5 $148.8 $ 31.0 $ 74.9 $343.2
Other ................................ 19.5 31.1 2.5 18.5 71.6
------ ------ ------ ------ ------
Gross Revenues ....................... 108.0 179.9 33.5 93.4 414.8
Less: Promotional Allowances ......... 13.9 20.8 0.9 12.3 47.9
------ ------ ------ ------ ------
Net Revenues ......................... 94.1 159.1 32.6 81.1 366.9
------ ------ ------ ------ ------
Costs and Expenses:
Gaming ............................... 51.8 80.4 18.7 41.8 192.7
Other ................................ 4.9 9.5 1.7 4.3 20.3
General & Administrative ............. 15.8 25.2 6.9 17.3 66.3
Depreciation & Amortization .......... 3.1 8.4 1.3 4.6 17.4
------ ------ ------ ------ ------
Total Costs and Expenses ............. 75.6 123.5 28.6 68.0 296.7
------ ------ ------ ------ ------
Income from Operations ............... 18.5 35.6 4.0 13.1 70.2
------ ------ ------ ------ ------
Non-operating Income ................. 0.1 0.1 0.1 0.1 0.7
Interest Expense ..................... (12.1) (23.4) (1.5) (15.1) (55.3)
------ ------ ------ ------ ------
Total Non-operating Expense, Net ..... (12.0) (23.3) (1.4) (15.0) (54.6)
------ ------ ------ ------ ------
Loss in Joint Venture ................ -- -- (0.6) -- (0.6)
------ ------ ------ ------ ------
Income(Loss) before Minority Interest $ 6.5 $ 12.3 $ 2.0 $ (1.9) 15.0
====== ====== ====== ======
Minority Interest .................... (5.5)
------
Net Income ........................... $ 9.5
======
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
16
Three Months Ended September 30, 2000
----------------------------------------------------------------------
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated
---------- ---------- ------- ------ ------------
(dollars in millions)
Table Game Revenues .................... $ 26.0 $ 53.7 $ 6.3 $ 25.2 $ 111.3
Table Game Drop ........................ $ 185.1 $ 301.9 $ 39.8 $ 140.2 $ 667.0
Table Win Percentage ................... 14.1% 17.8% 16.0% 17.9% 16.7%
Number of Table Games .................. 97 143 50 76 366
Slot Revenues .......................... $ 64.4 $ 95.9 $ 23.3 $ 56.3 $ 239.9
Slot Handle ............................ $ 833.5 $ 1,219.6 $ 348.1 $ 724.1 $3,125.3
Slot Win Percentage .................... 7.7% 7.9% 6.7% 7.8% 7.7%
Number of Slot Machines ................ 2,867 4,552 1,237 2,515 11,171
Other Gaming Revenues .................. - $ 6.0 - $ 0.6 $ 6.6
Total Gaming Revenues .................. $ 90.4 $ 155.6 $ 29.6 $ 82.1 $ 357.8
Three Months Ended September 30, 2001
----------------------------------------------------------------------
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated
---------- ---------- ------- ------ ------------
(dollars in millions)
Table Game Revenues .................... $ 25.5 $ 48.5 $ 5.9 $ 18.9 $ 98.8
Incr (Decr) over prior period ....... $ (0.5) $ (5.2) $ (0.4) $ (6.3) $ (12.5)
Table Game Drop ........................ $ 154.5 $ 269.9 $ 34.4 $ 113.2 $ 572.0
Incr (Decr) over prior period ....... $ (30.6) $ (32.0) $ (5.4) $ (27.0) $ (95.0)
Table Win Percentage ................... 16.5% 18.0% 17.3% 16.7% 17.3%
Incr (Decr) over prior period ....... 2.4 pts. 0.2 pts. 1.3 pts. (1.2) pts. 0.6 pts.
Number of Table Games .................. 100 139 52 79 370
Incr (Decr) over prior period ....... 3 (4) 2 3 4
Slot Revenues .......................... $ 63.0 $ 94.2 $ 25.1 $ 55.7 $ 238.0
Incr (Decr) over prior period ....... $ (1.4) $ (1.7) $ 1.8 $ (0.6) $ (1.9)
Slot Handle ............................ $ 794.0 $ 1,235.1 $ 348.5 $ 717.4 $3,095.0
Incr (Decr) over prior period ....... $ (39.5) $ 15.5 $ 0.4 $ ( 6.7) $ ( 30.3)
Slot Win Percentage .................... 7.9% 7.6% 7.2% 7.8% 7.7%
Incr (Decr) over prior period ....... 0.2 pts. (0.3) pts. 0.5 pts. 0.0 pts. 0.0 pts.
Number of Slot Machines ................ 2,868 4,827 1,360 2,523 11,578
Incr (Decr) over prior period ....... 1 275 123 8 407
Other Gaming Revenues .................. - $ 6.1 - $ 0.3 $ 6.4
Incr (Decr) over prior period ....... - $ 0.1 - $ (0.3) $ (0.2)
Total Gaming Revenues .................. $ 88.5 $ 148.8 $ 31.0 $ 74.9 $ 343.2
Incr (Decr) over prior period ....... $ (1.9) $ (6.8) $ 1.4 $ ( 7.2) $ (14.6)
Gaming revenues are the primary source of THCR's revenues. Table games
revenues represent the amount retained by THCR from amounts wagered at table
games (table game drop). The table win percentage tends to be fairly constant
over the long term, but may vary significantly in the short term, due to large
wagers by "high rollers". The Atlantic City industry table win percentages were
15.1% and 16.1% for the three months ended September 30, 2000 and 2001,
respectively.
Table games revenues decreased $12.5 million or 11.2% to $98.8 million
for the three months ended September 30, 2001 from $111.3 million in the
comparable period in 2000. Decreased table drop at all four properties primarily
contributed to the decrease in revenues. Trump Taj Mahal Casino Resort (the "Taj
Mahal"), the Trump Plaza Hotel and Casino ("Trump Plaza") and Trump Indiana had
increased win percentages in 2001 which primarily offset their respective
decreases in table drop. Trump Marina's decrease is due to declines in both
table drop and win percentage. Slot revenue decreased $1.9 million or 0.8% to
$238.0 million for the three months ended September 30, 2001 from $239.9 million
in the comparable period in 2000.
Promotional allowances decreased $6.9 million or 12.6% to $47.9 million
and gaming expenses decreased $9.1 million or 4.5% to $192.7 million for the
three months ended September 30, 2001 from the comparable period in 2000,
primarily due to reduced gaming revenues at the Atlantic City properties.
General and administrative expenses were $66.3 million for the three
months ended September 30, 2001, a $4.3 million or 6.1% decrease from $70.6
million in the comparable period in 2000. The decrease is primarily attributed
to reductions in entertainment and regulatory expenses at the Taj Mahal,
insurance and advertising expenses at Trump Plaza and approximately $0.9 million
in corporate overhead.
17
Results of Operations: Operating Revenues and Expenses
All business activities of THCR and THCR Holdings are conducted by
Plaza Associates, Taj Associates, Castle Associates (d/b/a Trump Marina) and
Trump Indiana.
Comparison of Nine-Month Periods Ended September 30, 2000 and 2001. The
following tables include selected data of Plaza Associates, Taj Associates,
Trump Indiana and Trump Marina.
Nine Months Ended September 30, 2000
-------------------------------------------------------
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated*
---------- ---------- ------- ------ -------------
Revenues: (dollars in millions)
Gaming ......................... $ 249.5 $ 414.9 $ 92.4 $ 208.5 $ 965.3
Other .......................... 57.5 85.1 6.7 47.4 196.6
-------- -------- -------- -------- --------
Gross Revenues ................. 307.0 500.0 99.1 255.9 1,161.9
Less: Promotional Allowances ... 41.7 60.9 2.7 31.7 137.0
-------- -------- -------- -------- --------
Net Revenues ................... 265.3 439.1 96.4 224.2 1,024.9
-------- -------- -------- -------- --------
Costs and Expenses:
Gaming ......................... 158.2 229.0 59.9 120.6 567.7
Other .......................... 15.4 26.5 4.8 11.6 58.3
General & Administrative ....... 53.7 75.7 24.1 50.7 211.3
Depreciation & Amortization .... 12.1 27.0 5.7 13.0 57.9
-------- -------- -------- -------- --------
Total Costs and Expenses ....... 239.4 358.2 94.5 195.9 895.2
-------- -------- -------- -------- --------
Income from Operations ......... 25.9 80.9 1.9 28.3 129.7
-------- -------- -------- -------- --------
Non-operating Income ........... 0.4 0.9 0.2 0.8 4.1
Interest Expense ............... (35.8) (70.1) (4.3) (42.3) (165.9)
-------- -------- -------- -------- --------
Total Non-operating Expense, Net (35.4) (69.2) (4.1) (41.5) (161.8)
-------- -------- -------- -------- --------
Loss in Joint Venture .......... -- -- (2.3) -- (2.3)
Extraordinary Gain, net ........ -- -- -- -- 9.4
-------- -------- -------- -------- --------
Loss before Minority Interest .. $ (9.5) $ 11.7 $ (4.5) $ (13.2) (25.0)
======== ======== ======== ========
Minority Interest .............. 12.6
--------
Net Loss ....................... $ (12.4)
========
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
Nine Months Ended September 30, 2001
------------------------------------------------------
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated*
---------- ---------- ------- ------ ------------
Revenues: (dollars in millions)
Gaming ............................... $ 249.6 $ 400.7 $ 93.7 $ 201.4 $ 945.4
Other ................................ 55.3 82.4 7.0 46.3 190.9
-------- -------- -------- -------- --------
Gross Revenues ....................... 304.9 483.1 100.7 247.7 1,136.3
Less: Promotional Allowances ......... 39.9 54.4 2.6 31.2 128.1
-------- -------- -------- -------- --------
Net Revenues ......................... 265.0 428.7 98.1 216.5 1,008.2
-------- -------- -------- -------- --------
Costs and Expenses:
Gaming ............................... 155.9 227.1 55.9 119.8 558.6
Other ................................ 14.4 27.2 5.0 10.3 56.9
General & Administrative ............. 49.5 74.4 21.6 50.4 198.1
Depreciation & Amortization .......... 11.4 25.3 5.0 13.0 54.9
-------- -------- -------- -------- --------
Total Costs and Expenses ............. 231.2 354.0 87.5 193.5 868.5
-------- -------- -------- -------- --------
Income from Operations ............... 33.8 74.7 10.6 23.0 139.7
-------- -------- -------- -------- --------
Non-operating Income ................. 0.7 0.6 0.5 0.5 3.2
Interest Expense ..................... (36.1) (69.9) (4.0) (44.6) (164.5)
-------- -------- -------- -------- --------
Total Non-operating Expense, Net ..... (35.4) (69.3) (3.5) (44.1) (161.3)
-------- -------- -------- -------- --------
Loss in Joint Venture ................ -- -- (2.2) -- (2.2)
-------- -------- -------- -------- --------
Income(Loss) before Minority Interest $ (1.6) $ 5.4 $ 4.9 $ (21.1) (23.8)
======== ======== ======== ========
Minority Interest .................... 8.7
--------
Net Loss ............................. $ (15.1)
========
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
18
Nine Months Ended September 30, 2000
----------------------------------------------------------------------
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated
---------- ---------- ------- ------ ------------
(dollars in millions)
Table Game Revenues....................... $ 73.7 $ 142.0 $ 20.7 $ 57.0 $ 293.3
Table Game Drop........................... $ 498.4 $ 823.3 $ 123.7 $ 339.8 $1,785.2
Table Win Percentage...................... 14.8% 17.2% 16.7% 16.8% 16.4%
Number of Table Games..................... 96 143 50 76 365
Slot Revenues............................. $ 175.8 $ 256.3 $ 71.7 $ 150.3 $ 654.2
Slot Handle............................... $ 2,250.2 $ 3,297.8 $ 1,107.9 $ 1,918.9 $8,574.8
Slot Win Percentage....................... 7.8% 7.8% 6.5% 7.8% 7.6%
Number of Slot Machines................... 2,831 4,548 1,250 2,373 11,002
Other Gaming Revenues..................... - $ 16.6 - $ 1.2 $ 17.8
Total Gaming Revenues..................... $ 249.5 $ 414.9 $ 92.4 $ 208.5 $ 965.3
Nine Months Ended September 30, 2001
-----------------------------------------------------------------------
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated
---------- ---------- ------- ------ ------------
(dollars in millions)
Table Game Revenues....................... $ 73.9 $ 126.0 $ 18.8 $ 48.0 $ 266.7
Incr (Decr) over prior period.......... $ 0.2 $ (16.0) $ (1.9) $ (9.0) $ (26.6)
Table Game Drop .......................... $ 436.8 $ 755.0 $ 109.5 $ 297.8 $ 1,599.1
Incr (Decr) over prior period.......... $ (61.6) $ (68.3) $ (14.2) $ (42.0) $ (186.1)
Table Win Percentage ..................... 16.9% 16.7% 17.2% 16.1% 16.7%
Incr (Decr) over prior period ........ 2.1 pts. (0.5) pts. 0.5 pts. (0.7) pts. 0.3 pts.
Number of Table Games..................... 99 141 52 78 370
Incr (Decr) over prior period.......... 3 (2) 2 2 5
Slot Revenues............................. $ 175.7 $ 257.6 $ 74.9 $ 152.8 $ 661.0
Incr (Decr) over prior period.......... $ (0.1) $ 1.3 $ 3.2 $ 2.5 $ 6.8
Slot Handle............................... $ 2,269.9 $ 3,373.2 $ 1,041.2 $ 1,972.9 $ 8,657.2
Incr (Decr) over prior period ......... $ 19.7 $ 75.4 $ (66.7) $ 54.0 $ 82.4
Slot Win Percentage....................... 7.7% 7.6% 7.2% 7.7% 7.6%
Incr (Decr) over prior period.......... (0.1) pts. (0.2) pts. 0.7 pts. (0.1) pts. 0.0 pts.
Number of Slot Machines................... 2,850 4,696 1,308 2,526 11,380
Incr (Decr) over prior period.......... 19 148 58 153 378
Other Gaming Revenues..................... - $ 17.1 - $ 0.6 $ 17.7
Incr (Decr) over prior period.......... - $ 0.5 - $ (0.6) $ (0.1)
Total Gaming Revenues..................... $ 249.6 $ 400.7 $ 93.7 $ 201.4 $ 945.4
Incr (Decr) over prior period.......... $ 0.1 $ (14.2) $ 1.3 $ (7.1) $ (19.9)
Gaming revenues are the primary source of THCR's revenues. Table games
revenues represent the amount retained by THCR from amounts wagered at table
games (table game drop). The table win percentage tends to be fairly constant
over the long term, but may vary significantly in the short term, due to large
wagers by "high rollers". The Atlantic City industry table win percentages were
15.6% for both the nine months ended September 30, 2000 and 2001.
Table games revenues decreased $26.6 million or 9.1% to $266.7 million
for the nine months ended September 30, 2001 from $293.3 million in the
comparable period in 2000. Decreased table drop at all four properties primarily
contributed to the decrease in revenues. Trump Plaza had increased win
percentages in 2001 which primarily offset its decrease in table drop. The Taj
Mahal and Trump Marina's lower table win percentage also contributed to its
lower table win.
Slot revenues increased $6.8 million or 1.0% to $661.0 million for the
nine months ended September 30, 2001 from $654.2 million in the comparable
period in 2000. Increased slot handle of $149.1 million at the three Atlantic
City casinos, due to innovative marketing initiatives and sustained programs
designed specifically for the slot player, primarily contributed to the increase
in revenues. Trump Indiana's slot revenues in 2001 increased $3.2 million or
4.5% from the comparable period in 2000 due to a 0.7% increase in hold
percentage, which totally offset a $66.7 million or 6.0% decrease in slot handle
from the comparable period in 2000.
19
Promotional allowances decreased $8.9 million or 6.5% to $128.1 million
for the nine months ended September 30, 2001 from the comparable period in 2000,
primarily due to decreased cash complimentaries at the Taj Mahal associated with
decreased table game revenues.
General and administrative expenses were $198.1 million for the nine
months ended September 30, 2001, a $13.2 million or 6.2% decrease from $211.3
million in the comparable period in 2000. The decrease is primarily attributed
to reductions in insurance, litigation and entertainment expenses at the Taj
Mahal; entertainment, insurance and advertising costs at Trump Plaza and a $5.1
million decrease in corporate expenses. The decrease in corporate general and
administrative expenses is due to the downsizing of the New York corporate
office and an aircraft lease termination in 2000, as well as decreased legal and
lobbying costs in 2001.
During 2000, THCR Enterprises purchased an aggregate principal amount
of $35.5 million of the Senior Notes, in consideration for an aggregate purchase
price of $19.0 million, plus accrued and unpaid interest. The decrease in
interest expense is primarily due to the elimination of interest expense
associated with these notes.
Seasonality
The casino industry in Atlantic City and Indiana is seasonal in nature.
Accordingly, the results of operations for the period ending September 30, 2001
are not necessarily indicative of the operating results for a full year.
Important Factors Relating to Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. All statements, trend
analysis and other information contained in this Quarterly Report on Form 10-Q
relative to THCR's performance, trends in THCR's operations or financial
results, plans, expectations, estimates and beliefs, as well as other statements
including words such as "anticipate," "believe," "plan," "estimate," "expect,"
"intend" and other similar expressions, constitute forward-looking statements
under the Private Securities Litigation Reform Act of 1995. In connection with
certain forward-looking statements contained in this Quarterly Report on Form
10-Q and those that may be made in the future by or on behalf of the
Registrants, the Registrants note that there are various factors that could
cause actual results to differ materially from those set forth in any such
forward-looking statements. The forward-looking statements contained in this
Quarterly Report were prepared by management and are qualified by, and subject
to, significant business, economic, competitive, regulatory and other
uncertainties and contingencies, including the duration and severity of the
current economic turndown in the United States and the aftermath of the
September 11, 2001 terrorist attacks on New York, all of which are difficult or
impossible to predict and many of which are beyond the control of the
Registrants. Accordingly, there can be no assurance that the forward-looking
statements contained in this Quarterly Report will be realized or that actual
results will not be significantly higher or lower. Readers of this Quarterly
Report should consider these facts in evaluating the information contained
herein. In addition, the business and operations of the Registrants are subject
to substantial risks which increase the uncertainty inherent in the
forward-looking statements contained in this Quarterly Report. The inclusion of
the forward-looking statements contained in this Quarterly Report should not be
regarded as a representation by the Registrants or any other person that the
forward-looking statements contained in the Quarterly Report will be achieved.
In light of the foregoing, readers of this Quarterly Report are cautioned not to
place undue reliance on the forward-looking statements contained herein.
ITEM 3-- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management has reviewed the disclosure requirements for Item 3 and,
based upon THCR, THCR Funding and THCR Holdings' current capital structure,
scope of operations and financial statement structure, management believes that
such disclosure is not warranted at this time. Since conditions may change,
THCR, THCR Holdings and THCR Funding will periodically review their compliance
with this disclosure requirement to the extent applicable.
20
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
Metelman Action; Settlement Agreement Approved by the Court. As
previously reported, on or about March 20, 2000, Mark Metelman, a stockholder of
THCR, filed a class action suit in the Superior Court of New Jersey, Chancery
Division, Atlantic County (Civil Action No. Atl-C43-00) against THCR and each
member of the Board of Directors of THCR, claiming that a third party made an
offer to purchase THCR, and that one or more members of the Board of Directors
wrongly failed to consider the supposed offer. On October 12, 2000, after the
Court dismissed the complaint upon a motion by the defendants, the plaintiff
refiled the complaint as a stockholder derivative action.
On August 17, 2001, the Court approved a settlement agreement between
the parties. No stockholders objected to the terms of the proposed offer.
Pursuant to the settlement agreement, THCR has agreed that any future offers to
purchase THCR will be initially reviewed by a Special Committee consisting of
independent directors not affiliated with Trump. The Special Committee may
engage and/or consult with outside financial and legal advisors as it deems
necessary and will make recommendations to the THCR Board of Directors
concerning any such offers. Where either the Board of Directors or the Special
Committee deems an offer to be substantial, the settlement requires THCR to
advise THCR stockholders in a timely fashion. However, the Board of Directors
will have ultimate decision making authority as to the response of THCR to any
such offers.
Castle Acquisition; Proposed Settlement. As previously reported, on
October 16, 1996, stockholders of THCR filed derivative actions in the United
States District Court, Southern District of New York (96 Civ. 7820), which were
subsequently consolidated, against each member of the Board of Directors of
THCR; THCR Holdings; Castle Associates; Trump's Castle Hotel & Casino, Inc, a
New Jersey corporation and the general partner of Castle Associates ("TCHI");
Trump Casinos, Inc., a New Jersey corporation wholly-owned by Trump ("TCI");
Trump Casinos II, Inc., a Delaware corporation wholly owned by Trump ("TCI-II")
and Salomon Brothers, Inc. ("Salomon"). As set forth more fully in the
plaintiffs' Fourth Amended Shareholders' Derivative Complaint, the plaintiffs
claimed that certain of the defendants breached their fiduciary duties (or aided
or abetted such breaches) and engaged in wasteful and ultra vires acts in
connection with THCR's and THCR Holdings' acquisition of Castle Associates in
October 1996 (the "Castle Acquisition"), and that Salomon was negligent in the
issuance of its fairness opinion with respect to the Castle Acquisition. The
plaintiffs also alleged that various parties committed violations of the federal
securities laws for alleged omissions and misrepresentations in THCR's proxies,
and that Trump, TCI-II and TCHI breached the acquisition agreement by supplying
THCR with untrue information for inclusion in the proxy statement delivered to
THCR's stockholders in connection with the Castle Acquisition. The plaintiffs
sought removal of the directors of THCR, and an injunction, rescission and
damages.
In September 2001, without admitting any wrongdoing or liability, the
parties entered into a stipulation of settlement (the "Stipulation"), subject to
the Court's approval. The Court has scheduled a hearing for December 10, 2001 to
determine the fairness and adequacy of the proposed settlement. Pursuant to the
Stipulation, THCR sent to its stockholders on or about October 29, 2001, a
notice of pendency therein outlining the terms of the proposed settlement,
including such stockholders' right to object in writing to the proposed
settlement and to appear at the settlement hearing.
General. THCR and certain of its employees have been involved in
various legal proceedings. Such persons are vigorously defending the allegations
against them and intend to contest vigorously any future proceedings. In
general, THCR 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.
Various other legal proceedings are now pending against THCR. Except as
set forth herein and in THCR's Annual Report on Form 10-K for the year ended
December 31, 2000, THCR 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 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.
21
From time to time, Plaza Associates, Taj Associates, Castle Associates
and Trump Indiana may be involved in routine administrative proceedings
involving alleged violations of certain provisions of the New Jersey Casino
Control Act (the "Casino Control Act") and the Indiana Riverboat Gambling Act,
(the "Indiana Riverboat Act"), as the case may be. However, management believes
that the final outcome of these proceedings will not, either individually or in
the aggregate, have a material adverse effect on THCR or on the ability of Plaza
Associates, Taj Associates, Castle Associates or Trump Indiana to otherwise
retain or renew any casino or other licenses required under the Casino Control
Act or the Indiana Riverboat Act, as the case may be, for the operation of Trump
Plaza, the Taj Mahal, Trump Marina and the Trump Indiana Riverboat,
respectively.
ITEM 2 -- CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 -- OTHER INFORMATION
Subsequent Events. On October 31, 2001, THCR and THCR Holdings issued
a press release and filed a Current Report on Form 8-K with the SEC, attaching a
copy of the press release as an exhibit thereto, announcing therein that THCR is
seeking to negotiate the terms of the public debt and is withholding interest
payments thereon until such time as discussions between THCR and the bondholders
have been finalized. The following debt issues of THCR and/or its subsidiaries
are affected: (i) THCR Holdings and THCR Funding 15-1/2% Senior Secured Notes
due 2005, having a semi-annual interest payment due on December 15, 2001; (ii)
each of Trump AC and (A) Trump Atlantic City Funding, Inc., (B) Trump Atlantic
City Funding II, Inc. and (C) Trump Atlantic City Funding III, Inc. 11-1/4%
Mortgage Notes due 2006, having an aggregate semi-annual interest payment of
$73,125,000 which was due on November 1, 2001; (iii) Castle Associates and
Castle Funding 10-1/4% Senior Notes due 2003, having a semi-annual interest
payment of approximately $3,178,000 which was due on October 31, 2001; (iv)
Castle Associates and Castle Funding 11-3/4% Mortgage Notes due 2003, having a
semi-annual interest payment of approximately $14,226,000 due on November 15,
2001 and (v) Castle Associates and TCHI 10-1/4% Senior Notes due 2003 (referred
to as the "Working Capital Loan"), having a semi-annual interest payment of
approximately $256,000 which was due on October 31, 2001. These interest amounts
have been included in current liabilities at September 30, 2001. THCR is seeking
to negotiate the terms of the public debt in light of the economic consequences
of the September 11th terrorist attacks on the World Trade Center which have led
New York State to approve the largest gambling package in its history, which
includes six casinos, three of which will be ninety minutes away from Manhattan
in the Catskills, and video slot machines at numerous racetracks, including
Aqueduct in New York City and Yonkers. THCR intends to pay interest upon the
completion of a successful negotiation.
Pursuant to each of the indentures governing the aforementioned debt
issues, a default in the payment of interest when due and payable and which
continues for 30 calendar days (the "Cure Period") constitutes an "Event of
Default" under which the trustee or the holders of 25% of the aggregate
principal amount of the respective debt issue then outstanding, by notice in
writing to the respective issuers, may, and the trustee at the request of such
holders shall, declare all principal and accrued interest of such debt issue to
be due and payable immediately. Notwithstanding, the issuers may prevent the
aforementioned Event of Default by paying the defaulted interest before the
expiration of the Cure Period.
THCR Management has entered into a management agreement with the
Twenty-Nine Palms Band of Mission Indians Tribe, which, subject to the approval
of the National Indian Gaming Commission, provides that THCR Management will
manage and direct all business and affairs in connection with the day-to-day
operation, management and maintenance of the Tribe's expanded and renovated
casino located in the Palm Springs, California resort area. The construction and
renovation of the Tribe's casino is currently in progress and is anticipated to
be completed in the second quarter of 2002. To enable the Tribe to complete the
construction. THCR Management agreed to act as a participant in the Tribe's
construction loan and to provide to the Tribe a portion of the financing for the
project. THCR Management has entered into a loan agreement with various lenders,
whereby the lenders have agreed to loan up to $18,800,000 to THCR Management
which will, in turn, use the net proceeds to fund its participation in the
22
Tribe's construction loan. THCR Management's financing from the lenders bears
interest at the rate of 9% per annum and matures in November 2006. The financing
is secured by (i) a pledge of the promissory note from the Tribe, (ii) a pledge
of management fees and (iii) a limited guaranty of Trump. The Tribe's
construction financing bears interest at the prime rate plus 1%, and matures in
August 2007. THCR Holdings, through its subsidiary THCR Enterprises, has agreed
to indemnify Trump against any losses incurred by Trump in connection with such
guaranty. The indemnity obligation of THCR Enterprises is secured by a pledge of
certain securities held by THCR Enterprises. In November 2001, $11,000,000 of
the $18,800,000 was drawn down by THCR Management.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
None.
b. Current Reports on Form 8-K:
The Registrants did not file any Current Reports on Form 8-K during the
quarter ended September 30, 2001.
23
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, INC.
(Registrant)
Date: November 14, 2001
By: /s/ FRANCIS X. MCCARTHY, JR.
--------------------------------------
Francis X. McCarthy, Jr.
Executive Vice President of Finance and
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
24
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)
Date: November 14, 2001 By: TRUMP HOTELS & CASINO RESORTS, INC.,
its general partner
By: /s/ FRANCIS X. MCCARTHY, JR.
---------------------------------------
Francis X. McCarthy, Jr.
Executive Vice President of
Finance and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
25
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: November 14, 2001
By: /s/ FRANCIS X. MCCARTHY, JR.
---------------------------------------------
Francis X. McCarthy, Jr.
Executive Vice President of Finance
and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
26