UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
[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 000-32987
COLONY RIH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4849060
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
---------------------------------------
COLONY RIH ACQUISITIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4828297
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
---------------------------------------
1133 Boardwalk
Atlantic City, NJ 08401
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code:
(609) 344-6000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares outstanding of Colony RIH Holdings, Inc.'s Class A Common
Stock, $0.01 par value, was 21,000 and the number of shares outstanding of
Colony RIH Holdings, Inc.'s Class B Common Stock, $0.01 par value, was 424,990,
as of November 13, 2001.
The number of shares outstanding of Colony RIH Acquisitions, Inc.'s Common
Stock, $0.01 par value, was 100 as of November 13, 2001.
EXPLANATORY NOTE
The registrants hereby file this report on Form 10-Q/A to amend their
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 to revise
Part I, Item I, "Financial Statements - Condensed Consolidated Statements of
Operations for the three and nine months ended September 30, 2001 and September
30, 2000" solely to revise a typographical error in Casino Revenue for the three
months ended September 30, 2000.
COLONY RIH HOLDINGS, INC.
AND
COLONY RIH ACQUISITIONS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Unaudited Financial Statements
Condensed Consolidated Balance Sheets of Colony RIH 2
Holdings, Inc. at September 30, 2001 and December 31,
2000
Condensed Consolidated Statements of Operations of 3
Colony RIH Holdings, Inc. for the three and nine months
ended September 30, 2001 and September 30, 2000
Condensed Consolidated Statements of Cash Flows of 4
Colony RIH Holdings, Inc. for the nine months ended
September 30, 2001 and September 30, 2000
Notes to Condensed Consolidated Financial Statements of 5
Colony RIH Holdings, Inc.
Condensed Consolidated Balance Sheets of Colony RIH 9
Acquisitions, Inc. at September 30, 2001 and December
31, 2000
Condensed Consolidated Statements of Operations of 10
Colony RIH Acquisitions, Inc. for the three and nine
months ended September 30, 2001 and September 30, 2000
Condensed Consolidated Statements of Cash Flows of 11
Colony RIH Acquisitions, Inc. for the nine months ended
September 30, 2001 and September 30, 2000
Notes to Condensed Consolidated Financial Statements of 12
Colony RIH Acquisitions, Inc.
Item 2. Management's Discussion and Analysis of Financial 16
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market 20
Risk
PART II. OTHER INFORMATION
21
Item 1. Legal Proceedings
21
Item 2. Changes in Securities
21
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COLONY RIH HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
September 30, December 31,
2001 2000
--------------- ---------------
ASSETS Successor Predecessor
------ (Unaudited)
Current assets
Cash and cash equivalents $ 19,334 $ 21,453
Receivables, net 7,656 9,142
Inventories 1,524 2,006
Prepaid expenses 4,127 1,934
--------------- ---------------
Total current assets 32,641 34,535
Property and equipment, net 119,812 257,778
Deferred charges and other assets 27,436 23,567
Goodwill, net of amortization - 95,091
--------------- ---------------
Total assets $ 179,889 $ 410,971
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Current maturities of long-term debt $ 6,563 $ 581
Accounts payable 5,573 5,405
Accrued interest payable 1,364 1,648
Accrued interest payable to affiliates - 5,300
Accrued expenses and other current liabilities 26,280 26,748
--------------- ---------------
Total current liabilities 39,780 39,682
--------------- ---------------
Notes payable to affiliates, net of unamortized discounts - 199,337
Long-term debt 89,681 79,000
Deferred income taxes - 35,457
Redeemable common stock 2,125 -
--------------- ---------------
Total liabilities 131,586 353,476
Shareholders' equity
Common stock:
Class A - $0.01 par value, 21,000 shares issued and - -
outstanding
Class B - $0.01 par value, 424,990 shares issued and 4 -
outstanding
RIH - $1 par value, 1,000,000 shares issued and outstanding - 1,000
Stock options outstanding 346 -
Capital in excess of par 40,371 123,660
Retained earnings (accumulated deficit) 7,582 (67,165)
--------------- ---------------
Total shareholders' equity 48,303 57,495
--------------- ---------------
Total liabilities and shareholders' equity $ 179,889 $ 410,971
=============== ===============
The accompanying notes are an integral part of these financial statements.
-2-
COLONY RIH HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the three and nine months ended September 30, 2001 and September 30, 2000
(Dollars in thousands)
Three months ended Nine months ended
September 30, September 30,
------------------------- -----------------------------------------------------
January 1, April 25,
2001 to 2001 to
2001 2000 April 24, 2001 September 30, 2001 2000
----------- ----------- -------------- ------------------ -----------
Successor Predecessor Predecessor Successor Predecessor
Revenues
Casino $ 63,887 $ 65,340 $ 68,220 $ 105,221 $ 174,096
Lodging 4,103 4,720 3,996 6,763 12,835
Food and beverage 7,081 7,192 6,977 11,864 20,090
Other 1,447 1,389 1,523 2,756 3,576
Less: promotional allowances (7,665) (7,135) (7,510) (12,304) (19,344)
----------- ----------- ----------- ----------- -----------
Total net revenue 68,853 71,506 73,206 114,300 191,253
Costs and expenses
Casino 37,134 39,419 42,234 62,476 111,666
Lodging 718 1,118 913 1,392 3,104
Food and beverage 3,456 3,823 3,639 6,152 11,573
Other operating 6,384 6,480 8,293 10,758 19,400
Selling, general and administrative 7,930 11,340 10,532 13,785 30,625
Depreciation and amortization 1,821 4,159 5,325 3,041 13,157
----------- ----------- ----------- ----------- -----------
Total costs and expenses 57,443 66,339 70,936 97,604 189,525
Income (loss) from operations 11,410 5,167 2,270 16,696 1,728
Interest income 234 269 510 429 1,147
Interest expense (2,524) (6,216) (7,673) (4,443) (18,400)
Other income (expense) (71) (716) - (157) (716)
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 9,049 (1,496) (4,893) 12,525 (16,241)
Provision for income taxes (3,606) - - (4,943) -
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 5,443 $ (1,496) $ (4,893) $ 7,582 $ (16,241)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-3-
COLONY RIH HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the nine months
ended September 30, 2001 and 2000
(Dollars in thousands)
Nine months ended
September 30, 2001
------------------------------------------ Nine months
January 1, 2001 April 25, 2001 to ended
to April 24, 2001 September 30, 2001 September 30, 2000
----------------- ------------------ -------------------
Predecessor Successor Predecessor
CASH FLOWS FROM OPERATING ACTIVITIES:
Reconciliation of net income (loss) to net cash provided by
(used in) operating activities-
Net income (loss) $ (4,893) $ 7,582 $ (16,241)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities-
Depreciation and amortization 5,038 2,576 12,406
Amortization of debt premiums, discounts
and issuance costs 203 532 448
Provision for doubtful receivables 517 (12) 1,007
Provision for discount on CRDA obligations,
net of amortization 280 455 738
Stock option costs - 55 -
Net loss on dispositions of property and equipment - - 716
Net (increase) decrease in receivables 684 (1,617) (4,274)
Net increase in inventories and prepaid expenses (1,600) (717) (171)
Net (increase) decrease in deferred charges and
other assets 72 (338) (190)
Net increase (decrease) in accounts payable and
accrued expenses (572) 3,872 1,057
Net increase (decrease) in interest payable to
affiliates 9,109 - (4,479)
----------- ------------- -------------
Net cash provided by (used in) operating
activities 8,838 12,388 (8,983)
----------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,229) (8,745) (8,056)
Purchase of RIH, net of cash acquired - (97,004) -
CRDA deposits and bond purchases (1,332) (770) (2,071)
----------- ------------- -------------
Net cash used in investing activities (2,561) (106,519) (10,127)
----------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 87,084 6,000
Payments to secure borrowings - (7,133) -
Proceeds from the issuance of common stock - 40,375 -
Proceeds from the issuance of redeemable common stock - 2,125 -
Advances from affiliates - - 20,842
Debt repayments (234) (8,986) (1,545)
------------ ------------- -------------
Net cash provided by (used in) financing
activities (234) 113,465 25,297
------------ ------------- -------------
Net increase (decrease) in cash and cash equivalents 6,043 19,334 6,187
Cash and cash equivalents at beginning of period 21,453 - 14,541
----------- ------------- -------------
Cash and cash equivalents at end of period $ 27,496 $ 19,334 $ 20,728
=========== ============= =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Purchase of RIH financed by issuance of note payable to SINA $ - $ 17,500 $ -
=========== ============= =============
The accompanying notes are an integral part of these financial statements.
-4-
COLONY RIH HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation - Colony RIH Holdings, Inc., a
Delaware corporation ("CRH"), owns 100% of the outstanding common stock of
Colony RIH Acquisitions, Inc., a Delaware corporation ("CRA"). CRA, through its
wholly owned subsidiary Resorts International Hotel, Inc., a New Jersey
corporation ("RIH", or the "Predecessor"), owns and operates Resorts Atlantic
City, a casino/hotel located in Atlantic City, NJ.
CRH was formed at the direction of Colony Investors IV, L.P. ("Colony IV"),
a Delaware limited partnership, under the laws of the State of Delaware on March
7, 2001. CRA was formed at the direction of Colony IV on October 24, 2000.
CRA, Sun International North America, Inc., a Delaware corporation
("SINA"), and GGRI, Inc., a Delaware corporation ("GGRI"), entered into a
purchase agreement, dated as of October 30, 2000, as amended (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, CRA acquired all of the capital
stock of RIH, the Warehouse Assets (as defined in the Purchase Agreement) and
all of the capital stock of New Pier Operating Company, Inc., a New Jersey
corporation (collectively, the "Acquisition") on April 25, 2001 for
approximately $144.8 million.
The Acquisition has been accounted for using the purchase method, and
accordingly, the aggregate purchase price, including transaction fees and
expenses, has been allocated based on the preliminary estimated fair value of
the assets acquired and liabilities assumed. As a result, the condensed
consolidated financial statements for the period subsequent to the Acquisition
are presented on a different basis of accounting than those for the periods
prior to the Acquisition and, therefore, are not directly comparable.
The condensed consolidated financial statements include the accounts of CRH
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The Predecessor's financial statements
include the accounts of RIH.
As a result of SINA entering into the agreement to sell RIH, which owns and
operates Resorts Atlantic City Casino Hotel, at a purchase price less than the
carrying value of RIH's net assets, SINA recorded a loss of $229.2 million in
the fourth quarter of 2000 to reflect the write down of net assets held for
sale. RIH did not record an impairment charge because RIH evaluated the
recoverability of its long-lived assets on a standalone, held for use basis and
RIH's estimate of future undiscounted cash flows was in excess of its carrying
value for long-lived assets.
In the first quarter of 2001, the Emerging Issues Task Force ("EITF")
reached a consensus on certain issues in EITF 00-22 "Accounting for "Points" and
Certain Other Time-Based Sales Incentive Offers, and Offers for Free Products or
Services to Be Delivered in the
-5-
Future." EITF 00-22 requires that volume based cash rebates or refunds be shown
as a reduction of revenues effective for quarters ending after February 15,
2001. RIH adopted the consensus provisions of EITF 00-22 in the first quarter of
2001. To be consistent with the 2001 presentation, approximately $3.7 million
and $8.5 million of cash rebates and refunds, previously shown as casino
expenses, were reclassified as a reduction of casino revenues in the three and
nine months ended September 30, 2000 respectively. This did not have any effect
on previously reported operating income or net income.
In August 2001, Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144") was issued. Among other things, SFAS No. 144 significantly changes the
criteria that would have to be met to classify an asset as held-for-sale. This
statement supersedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", and the provisions of Accounting Principles Board Opinion 30,
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" that relate to reporting the effects of a disposal of a
segment of a business. CRH is currently assessing the impact of adopting SFAS
No. 144 on its consolidated financial statements, however, management does not
believe it will have a material impact on the results of operations.
Implementation of this standard is required no later than January 1, 2002.
Certain reclassifications have been made to RIH's historical information
for the three and nine months ended September 30, 2000 to conform to the current
year presentation.
The accompanying condensed consolidated financial statements are unaudited.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of financial condition,
results of operations and cash flows have been included. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto in CRH's Form 10, General Form for
Registration of Securities, filed with the Securities and Exchange Commission
(the "SEC").
The accompanying condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the SEC. 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 three and nine months ended September 30, 2001 are
not necessarily indicative of the operating results for a full year.
2. EFFECTS OF ACQUISITION FINANCING
CRH financed the Acquisition and paid related fees and expenses with: (i)
proceeds of $42.5 million from the issuance of common stock, (ii) a $17.5
million note issued by CRH to SINA (the "Seller Note"), (iii) borrowings by CRA,
guaranteed by CRH under a $90 million credit agreement (the "Credit Facility")
and (iv) RIH's available cash.
-6-
Prior to the Acquisition, CRH conducted no business other than in
connection with the Purchase Agreement and the Credit Facility.
In connection with the Acquisition for approximately $144.8 million, CRH
acquired assets with a fair value of $173.9 million and assumed liabilities of
$29.1 million.
The pro forma unaudited results of operations for the nine months ended
September 30, 2001 and September 30, 2000, assuming consummation of the
Acquisition and issuance of CRH's common stock, Seller Note and Credit Facility
as of the beginning of the periods presented are as follows:
Nine months ended September 30,
-------------------------------
2001 2000
------------ ------------
Revenues $ 187,506 $ 191,253
Net income 8,461 3,697
3. LONG TERM DEBT
Notes Payable to Banks - In conjunction with the Acquisition, CRA borrowed
$82 million under an Amended and Restated Credit Agreement, dated April 25,
2001, from the lenders named therein (the "Credit Facility"). The Credit
Facility is comprised of $80 million in term loans (Term Loan A for $25 million
and Term Loan B for $55 million) and a $10 million revolving credit facility.
The loans under the Credit Facility are secured by substantially all of CRH's,
CRA's and, directly or indirectly, RIH's assets, including a pledge of all of
the capital stock of CRA and RIH, mortgages on all material real property owned
or leased by CRA or RIH and the accounts receivable, inventory, equipment and
intangibles of CRA and RIH. The revolving credit facility will mature on April
25, 2006, Term Loan A will mature on the last business day of December 2005, and
Term Loan B will mature on the last business day of March 2007. The principal
payments of the term loans are being paid on a quarterly basis, which commenced
on June 29, 2001. Interest on borrowings outstanding shall be either at LIBOR or
an alternative base rate, plus an applicable margin in each case. In the future
the applicable margins may be changed, based on CRA's leverage ratio, as defined
in the credit agreement. As of September 30, 2001, CRA had $21.7 million
outstanding on Term Loan A, and $54.8 million outstanding on Term Loan B, with
no outstanding balance on the Revolving Credit Facility.
Seller Note - In conjunction with the Acquisition, CRH issued a $17.5
million note to SINA (the "Seller Note"). The Seller Note is subordinated to the
term loans under the Credit Facility and has a 7-year term. This loan bears
interest at 12.5% per annum of which 6.25% is payable in cash and 6.25% is paid
in kind. There is no amortization of principal on this loan. Principal is due in
full on April 25, 2008.
The Credit Facility and Seller Note contain a number of covenants that,
among other things, restrict the ability of CRH, CRA, and their subsidiaries, to
incur additional indebtedness, create liens on assets, dispose of assets, make
investments, loans, or advances, engage in mergers or consolidations, pay
dividends, engage in certain transactions with affiliates, change their
respective line of business and otherwise restrict certain corporate activities.
In addition, under the Credit Facility, CRA, and its subsidiaries, are required
to maintain specified financial ratios,
-7-
satisfy specified financial tests, including interest coverage and leverage
tests, and are limited on capital expenditures. The Credit Facility contains
events of default customary for facilities of this nature.
On August 17, 2001, CRH financed the purchase of $2.1 million of gaming
equipment. The agreement is for three years with monthly payments of principal
and interest with an annual interest rate equal to LIBOR plus 3.5%. As of
September 30, 2001, the outstanding balance was $2.0 million.
4. REDEEMABLE COMMON STOCK
The proceeds from the sale of 1,050 shares of Class A Common and 21,250
shares of Class B Common have been classified separately from shareholders'
equity as "Redeemable Common Stock" in the balance sheet to reflect the rights
granted to a shareholder to require CRH to repurchase his shares under certain
circumstances.
-8-
COLONY RIH ACQUISITIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
September 30, December 31,
2001 2000
--------------- ---------------
ASSETS Successor Predecessor
------ (Unaudited)
Current assets
Cash and cash equivalents $ 19,334 $ 21,453
Receivables, net 7,656 9,142
Inventories 1,524 2,006
Prepaid expenses 4,127 1,934
--------------- ---------------
Total current assets 32,641 34,535
Property and equipment, net 119,812 257,778
Deferred charges and other assets 27,436 23,567
Goodwill, net of amortization - 95,091
--------------- ---------------
Total assets $ 179,889 $ 410,971
=============== ===============
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Current liabilities
Current maturities of long-term debt $ 6,563 $ 581
Accounts payable 5,573 5,405
Accrued interest payable 411 1,648
Accrued interest payable to affiliates 953 5,300
Accrued expenses and other current liabilities 26,280 26,748
--------------- ---------------
Total current liabilities 39,780 39,682
--------------- ---------------
Notes payable to affiliates, net of unamortized discounts 17,500 199,337
Long-term debt 72,181 79,000
Deferred income taxes - 35,457
--------------- ---------------
Total liabilities 129,461 353,476
Shareholder's equity
Common stock (At September 30, 2001, $0.01 par value,
100 shares issued and outstanding; at
December 31, 2000, $1 par value,
1,000,000 shares issued and outstanding - 1,000
Stock options outstanding 346 -
Capital in excess of par 42,500 123,660
Retained earnings (accumulated deficit) 7,582 (67,165)
--------------- ---------------
Total shareholder's equity 50,428 57,495
--------------- ---------------
Total liabilities and shareholder's equity $ 179,889 $ 410,971
=============== ===============
The accompanying notes are an integral part of these financial statements.
-9-
COLONY RIH ACQUISITIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the three and
nine months ended September 30, 2001 and September 30, 2000
(Dollars in thousands)
Three months ended September 30, Nine months ended September 30,
-------------------------------- ----------------------------------------------------
January 1, 2001 to April 25, 2001 to
2001 2000 April 24, 2001 September 30, 2001 2000
---------- ---------- ---------- ---------- ----------
Successor Predecessor Predecessor Successor Predecessor
Revenues
Casino $ 63,887 $ 65,340 $ 68,220 $ 105,221 $ 174,096
Lodging 4,103 4,720 3,996 6,763 12,835
Food and beverage 7,081 7,192 6,977 11,864 20,090
Other 1,447 1,389 1,523 2,756 3,576
Less: promotional (7,665) (7,135) (7,510) (12,304) (19,344)
allowances ---------- ---------- ---------- ---------- ----------
Total net revenue 68,853 71,506 73,206 114,300 191,253
Costs and expenses
Casino 37,134 39,419 42,234 62,476 111,666
Lodging 718 1,118 913 1,392 3,104
Food and beverage 3,456 3,823 3,639 6,152 11,573
Other operating 6,384 6,480 8,293 10,758 19,400
Selling, general and
administrative 7,930 11,340 10,532 13,785 30,625
Depreciation and
amortization 1,821 4,159 5,325 3,041 13,157
Total costs and ---------- ---------- ---------- ---------- ----------
expenses 57,443 66,339 70,936 97,604 189,525
Income (loss) from
operations 11,410 5,167 2,270 16,696 1,728
Interest income 234 269 510 429 1,147
Interest expense (2,524) (6,216) (7,673) (4,443) (18,400)
Other income (expense) (71) (716) - (157) (716)
---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes 9,049 (1,496) (4,893) 12,525 (16,241)
Provision for income taxes (3,606) - - (4,943) -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 5,443 $ (1,496) $ (4,893) $ 7,582 $ (16,241)
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
-10-
COLONY RIH ACQUISITIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the nine months ended September 30, 2001 and 2000
(Dollars in thousands)
Nine months ended
September 30, 2001
------------------------------------------ Nine months
January 1, 2001 April 25, 2001 to ended
to April 24, 2001 September 30, 2001 September 30, 2000
----------------- ------------------ -------------------
Predecessor Successor Predecessor
CASH FLOWS FROM OPERATING ACTIVITIES:
Reconciliation of net income (loss) to
net cash provided by (used in)
operating activities-
Net income (loss) $ (4,893) $ 7,582 $ (16,241)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities-
Depreciation and amortization 5,038 2,576 12,406
Amortization of debt premiums,
discounts and insurance costs 203 532 448
Provision for doubtful
receivables 517 (12) 1,007
Provision for discount on CRDA
obligations, net of
amortization 280 455 738
Stock option costs - 55 -
Net loss on dispositions of
property and equipment - - 716
Net (increase) decrease in
receivables 684 (1,617) (4,274)
Net increase in inventories and
prepaid expenses (1,600) (717) (171)
Net (increase) decrease in
deferred charges and other
assets 72 (338) (190)
Net increase (decrease) in
accounts payable and accrued
expenses (572) 2,919 1,057
Net increase (decrease) in
interest payable to
affiliates 9,109 953 (4,479)
----------- ----------- -----------
Net cash provided by (used
in) operating activities 8,838 12,388 (8,983)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,229) (8,745) (8,056)
Purchase of RIH, net of cash acquired - (97,004) -
CRDA deposits and bond purchases (1,332) (770) (2,071)
----------- ----------- -----------
Net cash used in investing
activities (2,561) (106,519 (10,127)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 87,084 6,000
Payments to secure borrowings - (7,133) -
Paid in capital received from Parent - 42,500 -
Advances from affiliates - - 20,842
Debt repayments (234) (8,986) (1,545)
----------- ----------- -----------
-11
Net cash provided by (used
in) financing activities (234) 113,465 25,297
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 6,043 19,334 6,187
Cash and cash equivalents at beginning of
period 21,453 - 14,541
----------- ----------- -----------
Cash and cash equivalents at end of period $ 27,496 $ 19,334 $ 20,728
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES:
Purchase of RIH financed by issuance of
note payable to SINA $ - $ 17,500 $ -
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-12-
COLONY RIH ACQUISITIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation - Colony RIH Holdings, Inc., a
Delaware corporation ("CRH"), owns 100% of the outstanding common stock of
Colony RIH Acquisitions, Inc., a Delaware corporation ("CRA"). CRA, through its
wholly owned subsidiary Resorts International Hotel, Inc., a New Jersey
corporation ("RIH", or the "Predecessor"), owns and operates Resorts Atlantic
City, a casino/hotel located in Atlantic City, NJ.
CRH was formed at the direction of Colony Investors IV, L.P. ("Colony IV"),
a Delaware limited partnership, under the laws of the State of Delaware on March
7, 2001. CRA was formed at the direction of Colony IV on October 24, 2000.
CRA, Sun International North America, Inc., a Delaware corporation
("SINA"), and GGRI, Inc., a Delaware corporation ("GGRI"), entered into a
purchase agreement, dated as of October 30, 2000, as amended (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, CRA acquired all of the capital
stock of RIH, the Warehouse Assets (as defined in the Purchase Agreement) and
all of the capital stock of New Pier Operating Company, Inc., a New Jersey
corporation (collectively, the "Acquisition") on April 25, 2001 for
approximately $144.8 million.
The Acquisition has been accounted for using the purchase method, and
accordingly, the aggregate purchase price, including transaction fees and
expenses, has been allocated based on the preliminary estimated fair value of
the assets acquired and liabilities assumed. As a result, the condensed
consolidated financial statements for the period subsequent to the Acquisition
are presented on a different basis of accounting than those for the periods
prior to the Acquisition and, therefore, are not directly comparable.
The condensed consolidated financial statements include the accounts of CRA
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The Predecessor's financial statements
include the accounts of RIH.
As a result of SINA entering into the agreement to sell RIH, which owns and
operates Resorts Atlantic City Casino Hotel, at a purchase price less than the
carrying value of RIH's net assets, SINA recorded a loss of $229.2 million in
the fourth quarter of 2000 to reflect the write down of net assets held for
sale. RIH did not record an impairment charge because RIH evaluated the
recoverability of its long-lived assets on a standalone, held for use basis and
RIH's estimate of future undiscounted cash flows was in excess of its carrying
value for long-lived assets.
In the first quarter of 2001, the Emerging Issues Task Force ("EITF")
reached a consensus on certain issues in EITF 00-22 "Accounting for "Points" and
Certain Other Time-Based Sales Incentive Offers, and Offers for Free Products or
Services to Be Delivered in the Future." EITF 00-22 requires that volume based
cash rebates or refunds be shown as a reduction of revenues effective for
quarters ending after February 15, 2001. RIH adopted the consensus
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provisions of EITF 00-22 in the first quarter of 2001. To be consistent with the
2001 presentation, approximately $3.7 million and $8.5 million of cash rebates
and refunds, previously shown as casino expenses, were reclassified as a
reduction of casino revenues in the three and nine months ended September 30,
2000 respectively. This did not have any effect on previously reported operating
income or net income.
In August 2001, Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144") was issued. Among other things, SFAS No. 144 significantly changes the
criteria that would have to be met to classify an asset as held-for-sale. This
statement supersedes Statement of Financial Accounting Standards No.
121,"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", and the provisions of Accounting Principles Board
Opinion 30,"Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" that relate to reporting the effects of a
disposal of a segment of a business. CRA is currently assessing the impact of
adopting SFAS No. 144 on its consolidated financial statements, however,
management does not believe it will have a material impact on the results of
operations. Implementation of this standard is required no later than January 1,
2002.
Certain reclassifications have been made to RIH's historical information
for the three and nine months ended September 30, 2000 to conform to the current
year presentation.
The accompanying condensed consolidated financial statements are unaudited.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of financial condition,
results of operations and cash flows have been included. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto in CRA's Form 10, General Form for
Registration of Securities, filed with the Securities and Exchange Commission
(the "SEC").
The accompanying condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the SEC. 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 three and nine months ended September 30, 2001 are
not necessarily indicative of the operating results for a full year.
2. EFFECTS OF ACQUISITION FINANCING
CRH financed the Acquisition and paid related fees and expenses with; (i)
proceeds of $42.5 million from the issuance of common stock, (ii) a $17.5
million note issued by CRH to SINA (the "Seller Note"), (iii) borrowings by CRA,
guaranteed by CRH under a $90 million credit agreement (the "Credit Facility")
and (iv) RIH's available cash.
Prior to the Acquisition, CRA conducted no business other than in
connection with the Purchase Agreement and the Credit Facility.
-14-
In connection with the Acquisition for $144.8 million, CRA acquired assets
with a fair value of $173.9 million and assumed liabilities of $29.1 million.
The pro forma unaudited results of operations for the nine months ended
September 30, 2001 and September 30, 2000, assuming consummation of the
Acquisition and issuance of the Seller Note and Credit Facility as of the
beginning of the periods presented are as follows:
Nine months ended September 30,
-------------------------------
2001 2000
------------ ------------
Revenues $ 187,506 $ 191,253
Net income 8,461 3,697
3. LONG TERM DEBT
Notes Payable to Banks - In conjunction with the Acquisition, CRA borrowed
$82 million under an Amended and Restated Credit Agreement, dated April 25,
2001, from the lenders named therein (the "Credit Facility"). The Credit
Facility is comprised of $80 million in term loans (Term Loan A for $25 million
and Term Loan B for $55 million) and a $10 million revolving credit facility.
The loans under the Credit Facility are secured by substantially all of CRH's,
CRA's and, directly or indirectly, RIH's assets, including a pledge of all of
the capital stock of CRA and RIH, mortgages on all material real property owned
or leased by CRA or RIH and the accounts receivable, inventory, equipment and
intangibles of CRA and RIH. The revolving credit facility will mature on April
25, 2006, Term Loan A will mature on the last business day of December 2005, and
Term Loan B will mature on the last business day of March 2007. The principal
payments of the term loans are being paid on a quarterly basis, which commenced
June 29, 2001. Interest on borrowings outstanding shall be either at LIBOR or an
alternative base rate, plus an applicable margin in each case. In the future the
applicable margins may be changed, based on CRA's leverage ratio, as defined in
the credit agreement. As of September 30, 2001, CRA had $21.7 million
outstanding on Term Loan A, and $54.8 million outstanding on Term Loan B, with
no outstanding balance on the Revolving Credit Facility.
Note Payable to Affiliates - In conjunction with the Acquisition, issued a
$17.5 million note to SINA (the "Seller Note"). The Seller Note is subordinated
to the term loans and has a 7-year term. This loan bears interest at 12.5% per
annum of which 6.25% is payable in cash and 6.25% is paid in kind. There is no
amortization of principal on this loan. Principal is due in full on April 25,
2008. In conjunction with the Acquisition, CRA issued a note to CRH with terms
that mirror the Seller Note.
On August 17, 2001, CRH entered into an agreement to finance the purchase
of approximately $2.1 million of gaming equipment. The agreement is for three
years with monthly payments of principal and interest with an annual interest
rate equal to LIBOR plus 3.5%. As of September 30, 2001, the outstanding balance
was $2.0 million.
The Credit Facility and Seller Note contain a number of covenants that,
among other things, restricts the ability of CRH, CRA, and their subsidiaries,
to incur additional indebtedness, create liens on assets, dispose of assets,
make investments, loans, or advances, engage in mergers or consolidations, pay
dividends, engage in certain transactions with affiliates, change their
-15-
respective line of business and otherwise restrict certain corporate activities.
In addition, under the Credit Facility, CRA, and its subsidiaries, are required
to maintain specified financial ratios, satisfy specified financial tests,
including interest coverage and leverage tests, and are limited on capital
expenditures. The Credit Facility contains events of default customary for
facilities of this nature.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Colony RIH Holdings, Inc., a Delaware corporation ("CRH"), owns 100% of the
outstanding common stock of Colony RIH Acquisitions, Inc., a Delaware
corporation ("CRA"). CRA, through its wholly owned subsidiary Resorts
International Hotel, Inc., a New Jersey Corporation ("RIH", or the
"Predecessor"), owns and operates Resorts Atlantic City, a casino/hotel located
in Atlantic City, NJ.
CRA, Sun International North America, Inc., a Delaware corporation
("SINA"), and GGRI, Inc., a Delaware corporation ("GGRI"), entered into a
purchase agreement, dated as of October 30, 2000, as amended (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, CRA acquired all of the capital
stock of RIH, the Warehouse Assets (as defined in the Purchase Agreement) and
all of the capital stock of New Pier Operating Company, Inc., a New Jersey
corporation (collectively, the "Acquisition") on April 25, 2001 for
approximately $144.8 million. In conjunction with the Acquisition, CRA borrowed
$82 million under an Amended and Restated Credit Agreement, dated April 25,
2001, from the lenders named therein (the "Credit Facility") and CRH issued a
$17.5 million note to SINA (the "Seller Note").
Prior to the completion of the Acquisition on April 25, 2001, neither CRH
nor CRA had conducted business other than in connection with the Purchase
Agreement and the new Credit Facility.
The financial information contained in "Results of Operations" and
"Liquidity and Capital Resources" provides a comparison of the combination of
CRH, CRA and RIH in the current year to that of RIH in the prior year.
Results of Operations - Comparison of Three Months Ended September 30, 2001
and 2000
Revenues
Gaming revenues were $63.9 million for the three months ended September 30,
2001, a decrease of $1.4 million (2.1%) from $65.3 million for the comparable
2000 period.
Slot revenues were $44.6 million for the three months ended September 30,
2001, an increase of $1.4 million (3.2%) from $43.2 million for the comparable
2000 period. The increase is primarily due to an increase in slot handle, or
dollar amounts wagered, of $62.4 million (11.2%) to $619.2 million, partially
offset by a decrease in the net slot hold percentage to 7.2% for the three
months ended September 30, 2001 from 7.8% for the comparable 2000 period.
-16-
Table game revenues were $18.5 million for the three months ended September
30, 2001, a decrease of $2.8 million (13.1%) from $21.3 million for the
comparable 2000 period. Net table games hold percentage decreased to 15.1% for
the three months ended September 30, 2001 from 15.9% for the comparable 2000
period. In addition, there was a decrease in table games drop, or the dollar
amount of chips purchased, of $11.7 million (8.7%) to $122.3 million for the
three months ended September 30, 2001 from $134.0 million for the comparable
2000 period.
Simulcast revenues were $0.8 million for the three months ended September
30, 2001 and 2000.
Lodging revenues were $4.1 million for the three months ended September 30,
2001, a decrease of $0.6 million (12.8%) from $4.7 million for the comparable
2000 period. The decrease is primarily due to a lower average room rate. The
average room rate was $75.71 for the three months ended September 30, 2001, a
decrease of $11.07 (12.8%) from $86.78 for the comparable 2000 period. The
decline in average room rate is primarily due to a reduction in the
complimentary room rate of $8.63 (10.9%) to $70.32 for the three months ended
September 30, 2001 from $78.95 for the comparable 2000 period. For the three
months ended September 30, 2001, the average cash room rate decreased $3.78
(3.5%) to $103.74 from $107.52 for the comparable 2000 period. The occupancy
rate was 92.3% for the three months ended September 30, 2001 versus 93.5% for
the comparable period in 2000.
Food and beverage revenues were $7.1 million for the three months ended
September 30, 2001, a decrease of $0.1 million (1.4%) from $7.2 million for the
comparable 2000 period. The decrease is primarily due to the closure of a
nightclub and decreased days of operation at certain restaurants.
Other revenues, which include revenues from entertainment and other
miscellaneous items, were $1.4 million for the three months ended September 30,
2001 and 2000. Entertainment revenues were $0.6 million for the three months
ended September 30, 2001, an increase of $0.3 million (100.0%) from the
comparable 2000 period. The increase is primarily due to an increase in the
number of headliner acts from the comparable 2000 period.
Costs and Expenses
Gaming costs and expenses were $37.1 million for the three months ended
September 30, 2001, a decrease of $2.3 million (5.8%) from the comparable 2000
period. The decrease is primarily due to reduced promotional and marketing
expenses as RIH adjusted its marketing strategy to target more profitable
segments of the gaming market.
Lodging expenses were $0.7 million for the three months ended September 30,
2001, a decrease of $0.4 million (36.4%), from $1.1 million for the comparable
2000 period. The decrease is primarily due to decreased promotional expenses.
Food and beverage expenses were $3.5 million for the three months ended
September 30, 2001, a decrease of $0.3 million (7.9%) from $3.8 million for the
comparable 2000 period. The decrease is primarily due to reduced cost of sales
and operating efficiencies obtained.
-17-
Selling, general and administrative costs were $7.9 million for the three
months ended September 30, 2001, a decrease of $3.4 million (30.1%) from $11.3
million for the comparable 2000 period. The decrease is primarily due to the
elimination of SINA's management fees as of October 1, 2000 and a reduction in
real estate taxes based on the revaluation of RIH's taxable assets as a result
of the Acquisition. These reductions were $2.5 million and $1.0 million,
respectively, from prior year.
Depreciation and amortization expenses were $1.8 million for the three
months ended September 30, 2001, a decrease of $2.4 million (57.1%) from $4.2
million for the comparable 2000 period. The decrease is primarily due to the
revaluation of assets and write off of goodwill at the time of the Acquisition.
Interest expense was $2.5 million for the three months ended September 30,
2001, a decrease of $3.7 million (59.7%) from the comparable 2000 period. The
decrease is primarily due to the reduction in RIH's debt due to the Acquisition
whereupon all of RIH's outstanding debt was replaced by the Credit Facility and
Seller Note. At September 30, 2001, RIH's long term debt was $89.7 million
compared to $278.3 million as of September 30, 2000.
Results of Operations - Comparison of Nine Months Ended September 30, 2001
and 2000
Revenues
Gaming revenues were $173.4 million for the nine months ended September 30,
2001, a decrease of $0.7 million (0.4%) from $174.1 million for the comparable
2000 period.
Slot revenues were $121.4 million for the nine months ended September 30,
2001, an increase of $4.1 million (3.5%) from $117.3 million for the comparable
2000 period. The increase is primarily due to an increase in slot handle, or
dollar amounts wagered, of $166.8 million (11.4%) to $1,634.6 million, partially
offset by a decline in the net slot hold percentage to 7.4% for the nine months
ended September 30, 2001 from 8.0% for the comparable 2000 period.
Table game revenues were $49.7 million for the nine months ended September
30, 2001, a decrease of $5.0 million (9.1%) from $54.7 million for the
comparable 2000 period. Net table games hold percentage decreased to 14.4% for
the nine months ended September 30, 2001 from 15.2% for the comparable 2000
period. Table games drop, or the dollar amount of chips purchased, decreased
$14.6 million (4.1%) to $345.0 million for the nine months ended September 30,
2001 from $359.6 million for the comparable 2000 period.
Simulcast revenues were $2.3 million for the nine months ended September
30, 2001, an increase of $0.2 million (9.5%) from $2.1 million for the
comparable 2000 period.
Lodging revenues were $10.8 million for the nine months ended September 30,
2001, a decrease of $2.0 million (15.6%) from $12.8 million for the comparable
2000 period. The decrease is primarily due to a lower average room rate. The
average room rate was $69.79 for the nine months ended September 30, 2001, a
decrease of $13.40 (16.1%) from $83.19 for the comparable 2000 period. The
decline in average room rate is primarily due to a reduction in the
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complimentary room rate of $16.00 (19.5%) to $66.23 for the nine months ended
September 30, 2001 from $82.23 for the comparable 2000 period. The occupancy
rate was 90.0% for the nine months ended September 30, 2001 versus 87.8% for the
comparable period in 2000.
Food and beverage revenues were $18.8 million for the nine months ended
September 30, 2001, a decrease of $1.3 million (6.5%) from $20.1 million for the
comparable 2000 period. The decrease is mainly due to the closure of a nightclub
and decreased days of operation at certain restaurants.
Other revenues, which include revenues from entertainment and other
miscellaneous items, were $4.3 million for the nine months ended September 30,
2001, an increase of $0.7 million (19.4%) from the comparable 2000 period.
Entertainment revenues were $1.7 million for the nine months ended September 30,
2001, an increase of $0.8 million (88.9%) from the comparable 2000 period. The
increase is primarily due to an increase in the number of headliner acts from
the comparable 2000 period.
Costs and Expenses
Gaming costs and expenses were $104.7 million for the nine months ended
September 30, 2001, a decrease of $7.0 million (6.3%) from the comparable 2000
period. The decrease is primarily due to reduced promotional and marketing
expenses as RIH adjusted its marketing strategy to target more profitable
segments of the gaming market.
Lodging costs and expenses were $2.3 million for the nine months ended
September 30, 2001, a decrease of $0.8 million (25.8%) from $3.1 million for the
comparable 2000 period. The decrease is primarily due to reduced promotional
expenses and operational efficiencies.
Food and beverage expenses were $9.8 million for the nine months ended
September 30, 2001, a decrease of $1.8 million (15.5%) from $11.6 million for
the comparable 2000 period. The decrease is primarily due to reduced cost of
sales and operating efficiencies obtained.
Selling, general and administrative costs were $24.3 million for the nine
months ended September 30, 2001, a decrease of $6.3 million (20.6%) from $30.6
million for the comparable 2000 period. The decrease is primarily due to the
elimination of SINA's management fees as of October 1, 2000 resulting in a $6.6
million reduction from prior year.
Depreciation and amortization expenses were $8.4 million for the nine
months ended September 30, 2001, a decrease of $4.8 million (36.4%) from $13.2
million for the comparable 2000 period. The decrease is primarily due to the
revaluation of assets and write off of goodwill at the time of the Acquisition.
Interest expense was $12.1 million for the nine months ended September 30,
2001, a decrease of $6.3 million (34.2%) from the comparable 2000 period. The
decrease is primarily due to the reduction in RIH's debt due to the Acquisition.
At September 30, 2001, RIH's long term debt was $89.7 million compared to $278.3
million as of September 30, 2000.
-19-
Liquidity and Capital Resources
CRH's principal source of liquidity is cash flow from operations. For the
nine months ended September 30, 2001, cash flow from operations was
approximately $21.2 million, compared to cash used by operations of
approximately $9.0 million in the same period for the prior year. CRH also has
available for its use a revolving credit facility of $10.0 million, expiring
April 24, 2006.
CRH expended approximately $10.0 on capital improvements and replacements
for the nine months ended September 30, 2001 and 2000. CRH plans to expend
approximately $11.5 million in the aggregate for the year ended December 31,
2001, such expenditures include $5.7 million to convert a closed nightclub into
a slot parlor with 258 slot machines, which was completed June 30, 2001, the
purchase of additional slot machines and the remainder being used for ordinary
maintenance and other improvements.
At September 30, 2001, CRH's cash and cash equivalents were $19.3 million
as compared to $20.7 million at September 30, 2000. A portion of the
unrestricted cash and cash equivalents is required for the day-to-day operations
of Resorts Atlantic City, which includes approximately $10.0 million of currency
and coin on-hand for casino and hotel operations. This amount varies by days of
the week, holidays, and seasons. Due to the change in debt following the
Acquisition, whereupon all of RIH's outstanding debt was replaced by the new
Credit Facility and the Seller Note, CRH's long-term debt decreased from $278.3
million at September 30, 2000 to $89.7 million at September 30, 2001. CRH's
total debt at September 30, 2001 consisted of $76.5 million in senior notes,
$17.5 million in subordinate notes issued to SINA, the Seller Note, $2.0 million
in notes issued to finance a gaming equipment purchase, and a $0.3 million
capital lease obligation.
Management believes that its existing cash and projected operating cash
flows, combined with its borrowing capacity under the revolving credit facility,
will be sufficient to meet the cash requirements of its existing operations,
including capital improvements and debt service requirements, for at least the
next twelve months. Management currently believes that the cash requirements of
its existing operations beyond the next twelve months will consist of debt
service requirements and capital improvements and replacements in the ordinary
course of business, which management expects to be met by then-existing cash,
cash flows from operations, and borrowing capacity under the revolving credit
facility.
CRH's planned construction of a new hotel tower on the site of its existing
166-room Atlantic City tower that was constructed in 1961 has been indefinitely
delayed. CRH is still in the process of completing the architectural design of
the tower. The expansion is expected to add additional gaming space. This
project is subject to many variables including financing, regulatory and
governmental approvals and typical delays associated with construction. CRH can
give no assurances when this expansion project will commence or if the project
will be completed.
-20-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk
CRH's exposure to interest rate risk arises principally from the variable
rates associated with its credit facilities. The new Credit Facility is
comprised of $80 million in term loans (Term Loan A for $25 million and Term
Loan B for $55 million) and a $10 million revolving credit facility. The
interest on borrowings are based, at CRH's option, at LIBOR plus 3.5% per annum
or at an alternative base rate, or ABR plus 2.5% per annum for Term Loan A and
the revolving credit facility, and LIBOR plus 4.5% per annum or ABR plus 3.5%
per annum for Term Loan B. As of September 30, 2001, CRH had borrowings of $76.5
million under its new Credit Facility that was subject to variable rates, with a
blended rate of 8.4%. An adverse change of 1.0% in the interest rate of all such
borrowings outstanding would cause CRH to incur an increase in interest expense
of approximately $0.8 million on an annual basis. Pursuant to the new Credit
Facility, by October 22, 2001, CRH must hedge its exposure to interest rate
fluctuations by having not less than 50% of its aggregate principal amount of
Indebtedness (as defined in the Credit Facility) be either, or any combination
thereof, fixed rate debt or debt subject to an interest rate swap, cap or collar
agreement or similar arrangement between CRH and one or more approved financial
institutions providing for the transfer or mitigation of interest risks either
generally or under specific contingencies. As of September 30, 2001, CRH had not
yet hedged its exposure to interest rate fluctuations.
-21-
CAUTIONARY STATEMENT FOR PURPOSES OF THE `SAFE HARBOR' PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
This document includes various `forward-looking statements' within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Sections 21E of
the Securities Exchange Act of 1934, as amended, which represent CRH's
expectations or beliefs concerning future events. Statements containing
expressions such as `believes,' `anticipates,' or `expects' used in CRH's press
releases and periodic reports on Forms 10-K and 10-Q filed with the Securities
and Exchange Commission are intended to identify forward-looking statements. All
forward-looking statements involve risks and uncertainties. Although CRH
believes its expectations are based upon reasonable assumptions within the
bounds of its knowledge of its business and operations, there can be no
assurances that actual results will not materially differ from expected results.
CRH cautions that these and similar statements included in this report and in
previously filed periodic reports, including reports filed on Forms 10-K and
10-Q, are further qualified by important factors that could cause actual results
to differ materially from those in the forward-looking statements. Such factors
include, without limitation, the following: increased competition in existing
markets or the opening of new gaming jurisdictions; a decline in the public
acceptance of gaming; the limitation, conditioning or suspension of any of CRH's
gaming licenses; increases in or new taxes imposed on gaming revenues or gaming
devices; a finding of unsuitability by regulatory authorities with respect to
CRH's officers, directors or key employees; loss or retirement of key
executives; significant increases in fuel or transportation prices; adverse
economic conditions in CRH's key markets; severe and unusual weather in CRH's
key markets; and adverse results of significant litigation matters. Readers are
cautioned not to place undue reliance on forward-looking statements, which speak
only as of the date thereof. CRH undertakes no obligation to publicly release
any revision to such forward-looking statements to reflect events or
circumstances after the date thereof.
PART II-OTHER INFORMATION
ITEM 1. Legal Proceedings
From time to time, RIH is subject to legal proceedings and claims in the
ordinary course of business. RIH is not currently aware of any legal proceedings
or claims that the Company believes will have, individually or in the aggregate,
a material adverse effect on the Company's financial position or results of
operation.
From time to time, RIH may be involved in routine administrative
proceedings involving alleged violations of certain provisions of the New Jersey
Casino Control Act (the "NJCCA"). However, management believes that the final
outcome of these proceedings will not, either individually or in the aggregate,
have a material adverse effect on CRH, CRA or RIH, or on their ability to
otherwise retain or renew any casino or other licenses required under the NJCCA,
although no assurances can be given.
ITEM 2. Changes in Securities
None.
-22-
ITEM 3. Defaults Upon Senior Securities
Not applicable.
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
Exhibit
Numbers Exhibit
- ------- -------
3.1 Amended and Restated Certificate of Incorporation of Colony RIH
Holdings, Inc.*
3.2 By-Laws of Colony RIH Holdings, Inc.*
3.3 Certificate of Incorporation of Colony RIH Acquisitions, Inc.*
3.4 Certificate of Amendment of Certificate of Incorporation of
Colony RIH Acquisitions, Inc.*
3.5 By-Laws of Colony RIH Acquisitions, Inc.*
4.1 Form of Colony RIH Holdings, Inc. Stock Certificate.*
4.2 Form of Colony RIH Acquisitions, Inc. Stock Certificate.*
10.1 Purchase Agreement, dated October 30, 2000, by and among Colony
RIH Acquisitions, Inc., Sun International North America, Inc. and
GGRI, Inc.*
10.2 First Amendment to the Purchase Agreement, dated February 28,
2001, among Colony RIH Acquisitions, Inc., Sun International
North America, Inc. and GGRI, Inc.*
10.3 Second Amendment to the Purchase Agreement, dated April 5, 2001,
among Colony RIH Acquisitions, Inc., Sun International North
America, Inc. and GGRI, Inc.*
10.4 Third Amendment to the Purchase Agreement, dated April 24, 2001,
among Colony RIH Acquisitions, Inc., Sun International North
America, Inc. and GGRI, Inc.*
-23-
10.5 Second Amended and Restated Credit Agreement, dated May 18, 2001,
among Colony RIH Acquisitions, Inc., the guarantors named
therein, the lenders named therein, Merrill Lynch & Company,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Bankers
Trust Company.*
10.6 Amendment No. 1 to the Second Amended and Restated Credit
Agreement, dated June 27, 2001, among Colony RIH Acquisitions,
Inc., the guarantors named therein, the lenders named therein,
Merrill Lynch & Company, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Bankers Trust Company.*
10.7 Security Agreement, dated April 25, 2001, by Colony RIH
Acquisitions, Inc., Colony RIH Holdings, Inc. Resorts
International Hotel, Inc., New Pier Operating Company, Inc., the
guarantors named therein and Bankers Trust Company.*
10.8 Option Agreement, dated April 25, 2001, by and between Colony RIH
Acquisitions, Inc. and Sun International North America, Inc.*
10.9 Lease Agreement, dated April 25, 2001, by and between Sun
International North America, Inc. and Colony RIH Acquisitions,
Inc.*
10.10 Form of Note.*
10.11 Form of Indemnification Agreement.*
10.12 Securities Purchase Agreement, dated April 25, 2001, between
Nicholas L. Ribis and Colony RIH Holdings, Inc.*
10.13 Securities Purchase Agreement, dated April 25, 2001, between
Colony RIH Voteco, LLC and Colony RIH Holdings, Inc.*
10.14 Securities Purchase Agreement, dated April 25, 2001, between
Colony Investors IV, L.P. and Colony RIH Holdings, Inc.*
10.15 Stockholders Agreement, dated April 25, 2001, by and among Colony
RIH Holdings, Inc., Colony RIH Voteco, LLC, Colony Investors IV,
L.P. and Nicholas L. Ribis.*
10.16 Vice Chairman Agreement, dated April 25, 2001, by and among
Nicholas L. Ribis and Colony RIH Acquisitions, Inc.*
10.17 2001 Omnibus Stock Incentive Plan, dated April 25, 2001, by and
between Colony RIH Holdings, Inc. and Nicholas L. Ribis. ***
10.18 Employment Agreement, dated October 1, 2001, by and between
Resorts International Hotel, Inc. and Audrey S. Oswell. ***
10.19 Employment Agreement, dated October 1, 2001, by and between
Resorts
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International Hotel, Inc. and Joseph A. D'Amato. ***
10.20 Employment Agreement, dated October 1, 2001, by and between
Resorts International Hotel, Inc. and Nicholas Amato. ***
10.21 Employment Agreement, dated October 1, 2001, by and between
Resorts International Hotel, Inc. and Rosalind Krause. ***
10.22 Employment Agreement, dated October 1, 2001, by and between
Resorts International Hotel, Inc. and John A. Pasqualoni. ***
10.23 Employment Agreement, dated October 1, 2001, by and between
Resorts International Hotel, Inc. and Alan J. Rivin. ***
10.24 Employment Agreement, dated June 5, 2000, by and between Resorts
International Hotel, Inc. and Joseph Weis.
10.25 2001 Omnibus Stock Incentive Plan.***
10.26 2001 Omnibus Stock Incentive Plan, dated October 1, 2001, by and
between Colony RIH Holdings, Inc. and Audrey S. Oswell. ***
10.27 2001 Omnibus Stock Incentive Plan, dated October 1, 2001, by and
between Colony RIH Holdings, Inc. and Joseph A. D'Amato. ***
10.28 2001 Omnibus Stock Incentive Plan, dated October 1, 2001, by and
between Colony RIH Holdings, Inc. and Nicholas Amato. ***
10.29 2001 Omnibus Stock Incentive Plan, dated October 1, 2001, by and
between Colony RIH Holdings, Inc. and Rosalind Krause. ***
10.30 2001 Omnibus Stock Incentive Plan, dated October 1, 2001, by and
between Colony RIH Holdings, Inc. and John A. Pasqualoni. ***
10.31 2001 Omnibus Stock Incentive Plan, dated October 1, 2001, by and
between Colony RIH Holdings, Inc. and Alan J. Rivin. ***
16.1 Acknowledgment of Arthur Andersen, LLP.*
21.1 Subsidiaries of the registrant.*
23.1 Consent of Arthur Andersen, LLP. **
23.2 Consent of Ernst & Young, LLP, Colony RIH Holdings, Inc. **
23.3 Consent of Ernst & Young, LLP, Colony RIH Acquisitions, Inc. **
- ----------------
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* Incorporated by reference to the Registrants' Form 10 filed July 13, 2001
(File No. 0-32987), as amended by Amendment No. 1, filed August 24, 2001.
** Incorporated by reference to the Registrants' Form 10 filed November 1, 2001
(File No. 000-32987).
*** Incorporated by reference to the Registrants' Form 10Q filed December 14,
2001 (File No. 000-32987).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLONY RIH HOLDINGS, INC.
Dated: February 20, 2002 /s/ Joseph A. D'Amato
------------------------------
Name: Joseph A. D'Amato
Title: Vice President
(Duly Authorized Officer and
Principal Financial Officer)
COLONY RIH ACQUISITIONS, INC.
Dated: February 20, 2002 /s/ Joseph A. D'Amato
------------------------------
Name: Joseph A. D'Amato
Title: Vice President
(Duly Authorized Officer and
Principal Financial Officer)
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