UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995 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 33-27399
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
_____________________________________________________________________________
(Exact name of registrant as specified in its charter)
New Jersey 22-2469174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Indiana Avenue & the Boardwalk, Atlantic City, New Jersey 08401
_____________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(609) 340-3400
_____________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 [ ]
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Introductory Note to Financial Statements 2
Balance Sheets As of September 30, 1995 and
December 31, 1994 3
Statements of Operations For the Three-Month
and Nine-Month Periods Ended September 30, 1995
and 1994 4
Statements of Changes in Partners' Capital
Accounts (Deficit) For the Nine Months Ended
September 30, 1995 and the Year Ended
December 31, 1994 5
Statements of Cash Flows For the Nine Months Ended
September 30, 1995 and 1994 6
Notes to Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 -10
PART II OTHER INFORMATION
Items 1-5 No information is provided as the answers
to Items 1 through 5 are inapplicable.
Item 6 Exhibits and reports on Form 8-K 10
PART I
Item 1. Financial Statements
Introductory Note to Financial Statements
The accompanying financial statements have been prepared by
Atlantic City Boardwalk Associates, L.P. ("Partnership") without
audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, these
financial statements contain all adjustments necessary to present
fairly the financial position of the Partnership as of September
30, 1995 and December 31, 1994, the results of operations for the
three and nine months ended September 30, 1995 and 1994, and the
cash flows for the nine months ended September 30, 1995 and 1994.
Although management believes that the disclosures included herein
are adequate to make the information contained herein not
misleading, certain information and footnote disclosure normally
included in financial statements prepared in accordance with
generally accepted accounting principles are omitted herein and
are incorporated by reference to the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1994 filed with the
Securities and Exchange Commission.
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
Balance Sheets
As of September 30, 1995 and December 31, 1994
(Unaudited)
Assets 1995 1994
Current assets:
Cash and cash equivalents $1,466,000 1,664,000
Rent due from New Claridge 211,000 206,000
Interest receivable from partners 51,000 26,000
Prepaid expenses 457,000 248,000
Other assets 246,000 170,000
_________ _________
Total current assets 2,431,000 2,314,000
___________ ___________
Hotel Assets 179,830,000 177,682,000
Less: Accumulated depreciation and 92,420,000 87,541,000
amortization ___________ ___________
Net Hotel Assets 87,410,000 90,141,000
__________ __________
Note receivable from New Claridge,
including accrued interest of
$2,718,000 and $2,394,000 in 1995
and 1994, respectively 6,318,000 5,994,000
Deferred rent from New Claridge 40,433,000 41,454,000
Intangibles, net of accumulated
amortization of $3,494,000 and
$3,399,000 in 1995 and 1994,
respectively 311,000 406,000
___________ ___________
$136,903,000 140,309,000
============ ===========
Liabilities and Partners' Capital Accounts
Current liabilities:
Accounts payable $1,587,000 1,190,000
Accrued interest due New Claridge 1,296,000 1,384,000
Current portion of long-term debt due
principally to New Claridge 13,607,000 12,055,000
__________ __________
Total current liabilities 16,490,000 14,629,000
__________ __________
Long-term debt due principally to New
Claridge, including accrued interest of
$20,000,000 in 1995 and 1994 106,917,000 114,268,000
___________ ___________
Partners' capital accounts (deficit):
New general partners 51,000 30,000
Former general partners 140,000 127,000
Special limited partners (241,000) (261,000)
Investor limited partners 13,546,000 11,516,000
__________ __________
Total partners' capital accounts 13,496,000 11,412,000
Commitments and contingencies ___________ ___________
$136,903,000 140,309,000
=========== ===========
See accompanying notes to financial statements.
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Rent from New Claridge
for the lease of Hotel
Assets $ 9,543,000 9,345,000 28,829,000 27,613,000
Interest from New Claridge 108,000 108,000 324,000 324,000
Interest from Special
Limited Partners 9,000 9,000 27,000 27,000
Investment 32,000 21,000 98,000 57,000
Other - 10,000 - 10,000
_________ _________ __________ __________
9,692,000 9,493,000 29,278,000 28,031,000
_________ _________ __________ __________
Expenses:
Cost of maintaining and
repairing Hotel Assets,
paid to New Claridge 2,968,000 2,900,000 8,720,000 8,415,000
Interest, principally on
mortgages to New Claridge 4,167,000 4,536,000 12,918,000 13,446,000
General and administrative 104,000 97,000 462,000 590,000
General Partners' management
fee 33,000 33,000 98,000 98,000
Depreciation and amortization 1,671,000 1,599,000 4,996,000 4,526,000
_________ _________ __________ __________
8,943,000 9,165,000 27,194,000 27,075,000
_________ _________ __________ __________
Net income $ 749,000 328,000 2,084,000 956,000
========= ========= ========= ==========
Net income per limited
partnership unit (450 units
outstanding at the end of
each period) $ 1,636 718 4,556 2,091
========== ======== ======== =========
See accompanying notes to financial statements.
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
Statements of Changes in Partners' Capital Accounts (Deficit)
For the Nine Months Ended September 30, 1995
and the Year Ended December 31, 1994
Special Special Investor Investor Totals
New Former Limited Limited Limited Limited Partners'
General General Partners Partners Partners Partners Capital
Partners Partners Class A Class B Class A Class B Accounts
Partners' Capital
Accounts (Deficit)
December 31, 1993 $12,000 116,000 (18,000) (260,000) 2,380,000 7,400,000 9,630,000
Net income 18,000 11,000 1,000 16,000 426,000 1,310,000 1,782,000
______ _______ _______ ________ ________ _________ _________
Partners' Capital
Accounts (Deficit)
December 31, 1994 30,000 127,000 (17,000) (244,000) 2,806,000 8,710,000 11,412,000
Net income
(unaudited) 21,000 13,000 1,000 19,000 498,000 1,532,000 2,084,000
______ _______ ______ _______ _________ _________ __________
Partners' Capital
Accounts (Deficit),
September 30, 1995
(unaudited) $51,000 140,000 (16,000) (225,000) 3,304,000 10,242,000 13,496,000
====== ======= ======== ========= ========= ========== ==========
See accompanying notes to financial statements.
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
Statements of Cash Flows
(Unaudited)
For the Nine Months Ended September 30, 1995 and 1994
1995 1994
Cash flows from operating activities:
Net income $2,084,000 956,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,996,000 4,526,000
Accretion of discount on mortgage note 863,000 850,000
Loss on disposal of assets 47,000 172,000
Deferred rent 1,021,000 1,424,000
Deferred interest on receivable from
New Claridge (324,000) (324,000)
Change in current assets andliabilities:
(Increase) in rent due from New Claridge,
interest receivable from partners,
prepaid expenses and other assets (315,000) (213,000)
Increase in accounts payable and
accrued interest due New Claridge 309,000 129,000
________ _________
Net cash provided by operating activities 8,681,000 7,520,000
_________ _________
Cash flows from investing activities:
Purchase of Hotel Assets (1,682,000) (9,118,000)
Proceeds from sale of Hotel Assets 22,000 10,000
__________ ___________
Net cash used in investing activities (1,660,000) (9,108,000)
___________ ___________
Cash flows from financing activities:
Proceeds of borrowings from New Claridge 1,983,000 9,240,000
Principal payments of debt, principally to
New Claridge (9,202,000) (7,784,000)
___________ ___________
Net cash (used in) provided by
financing activities (7,219,000) 1,456,000
___________ _________
Net decrease in cash and cash equivalents (198,000) (132,000)
Cash and cash equivalents, beginning of period 1,664,000 1,481,000
_________ _________
Cash and cash equivalents, end of period $1,466,000 1,349,000
========= =========
Supplemental cash flow information:
Interest paid $12,466,000 12,775,000
========== ==========
Supplemental noncash investing and financing
activities:
Capital lease obligation incurred to
acquire Hotel Asset $ 557,000 -
========== =========
Trade-in value on purchase of Hotel Assets $ - 68,000
========== =========
See accompanying notes to financial statements.
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) The Partnership
Atlantic City Boardwalk Associates, L.P. ("Partnership") was
formed on October 31, 1983 to acquire the buildings, parking
facility and non-gaming depreciable, tangible property
(collectively, "Hotel Assets") of The Claridge Hotel and
Casino ("Claridge") located in Atlantic City, New Jersey; to
hold a leasehold interest in the land on which the Claridge
is located ("Land"), which Land was subsequently acquired by
the Partnership as part of a financial restructuring
("Restructuring Agreement"); and to engage in activities
related or incidental thereto. The Partnership leases the
Land and Hotel Assets to The Claridge at Park Place,
Incorporated ("New Claridge"), a wholly-owned subsidiary of
The Claridge Hotel and Casino Corporation ("Corporation"),
under operating leases.
(2) Financial Condition of the Partnership and New Claridge
The ability of the Partnership to fulfill its obligations is
dependent upon the ability of New Claridge to pay rental
payments when due. Accordingly, the financial stability of
the Partnership is dependent upon the financial condition of
New Claridge.
On January 31, 1994, the Corporation completed an offering
of $85 million of First Mortgage Notes due in 2002, bearing
interest at 11 3/4%. A portion of the net proceeds of $82.2
million, after deducting fees and expenses, was used to
repay in full the Corporation's outstanding debt under the
loan agreement with its bank lenders ("Loan Agreement"),
including the outstanding balance of the Corporation's
revolving credit line. The Notes come due on February 1,
2002. Interest on the Notes is payable semiannually on
February 1 and August 1 of each year, commencing August 1,
1994. In conjunction with the full satisfaction of the Loan
Agreement, the Corporation's revolving credit line
arrangement was terminated.
The Corporation had a net loss of $166,000 for the nine
months ended September 30, 1995 compared to a net loss of
$4,456,000 for the same period in 1994. The net loss in
1995 is due primarily to increased interest expense with
regard to the $85 million of Notes discussed above. The net
loss incurred in 1994 is due to many factors. During 1994,
revenues were adversely affected by severe snow and ice
storms experienced throughout the Northeastern United
States. New Claridge's dependency on customers arriving by
bus, its focus on the New York and Northern New Jersey
markets as well as its lack of a covered self-parking
facility contributed to the reduced revenues. New Claridge
also experienced a decline in slot revenues as well as an
increase in operating expenses. The decline in slot
revenues was due in part to a reduction in the number of
slot machines available to patrons during June 1994, as a
result of the movement of these machines into the newly-
constructed expansion of the casino floor space. New
Claridge incurred additional operating costs associated with
the direct marketing programs related to the new casino
expansion. Additional interest expense was also incurred as
a result of the offering of the $85 million of Notes
discussed above.
The ownership and operation of casino-hotel facilities in
Atlantic City are subject to extensive state regulation
under the Casino Control Act under the direction of the New
Jersey Casino Control Commission ("Commission"). The Casino
Control Act provides that various categories of entities
must hold appropriate casino licenses. The Partnership
currently operates under a three-year casino service
industry license effective October 31, 1992, while New
Claridge operates under a four-year casino operator's
license effective September 30, 1995. As of September 30,
1995 the Partnership had applied with the Commission for
license renewal. The general partners do not anticipate any
problems renewing the Partnership's license.
(3) Contingencies
The Restructuring Agreement provides for Del Webb
Corporation ("Webb") to retain an interest equal to $20
million plus interest from December 1, 1988 at the rate of
15% per annum compounded quarterly ("Contingent Payment") in
any proceeds ultimately recovered from the operations and/or
the sale or refinancing of the Claridge facility in excess
of the First Mortgage loan and other liabilities. To give
effect to this Contingent Payment, the Corporation and the
Partnership agreed not to make any distributions to the
holders of their equity securities, whether derived from
operations or from sale or refinancing proceeds, until Webb
had received the Contingent Payment.
On April 2, 1990, Webb transferred its interest in the
Contingent Payment to an irrevocable trust for the benefit
of the United Way of Arizona. The Corporation is currently
negotiating to purchase the Contingent Payment, for less
than face value, from the trustee for the United Way of
Arizona. As of September 30, 1995 accrued interest amounts
to approximately $34.7 million.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations for the Three-Month and Nine-Month Periods Ended
September 30, 1995 as Compared to the Three-Month and Nine-Month Periods
Ended September 30, 1994
Rental income for the three months ended September 30, 1995 increased
$198,000 as compared to the three months ended September 30, 1994, and
$1,216,000 for the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994. New Claridge pays as
additional rent, certain expenses and debt service relating to
furniture, fixture and equipment replacements and building
improvements ("FF&E"). As a result of the 1994 casino expansion at
the Claridge, the Partnership's debt service relating to FF&E was
higher in 1995 than in 1994, resulting in increased rents in 1995.
The Partnership has an agreement with New Claridge whereby New
Claridge provides facility and maintenance and engineering services
for the Claridge. The agreement calls for the reimbursement of the
actual facilities and maintenance costs incurred on the Partnership's
behalf. The cost of maintaining and repairing Hotel Assets increased
$68,000 and $305,000, respectively, during the three- and nine-month
periods ended September 30, 1995 as compared to the same periods in
1994. These increases are due to an increase in New Claridge's
maintenance and engineering salaries and wages and payroll related
expenses as well as a general increase in the cost of maintaining the
building due to the 1994 expansion.
General and administrative expenses for the three months ended
September 30, 1995 increased $7,000 as compared to the three months
ended September 30, 1994. This increase is due to an increase in
director's and officer's liability insurance premium. During the nine
months ended September 30, 1995 general and administrative expenses
decreased $135,000 as compared to the same period in 1994. During
both of these periods a loss on the disposal of assets was recorded
and included in general and administrative expenses. The Partnership
incurred a $172,000 loss on the disposal of assets during 1994 as
compared to a $47,000 loss during 1995, explaining the decreased
expense for the nine months ending September 30, 1995 as compared to
the same period in 1994.
Liquidity and Capital Resources
Current lease payments from New Claridge are sufficient to pay the
Partnership's debt service and operating expenses. As part of the
Restructuring Agreement, rental payments in excess of monthly cash
flow requirements are deferred or abated so that excess cash does not
accumulate in the Partnership. At the Closing of the restructuring
the Partnership loaned New Claridge $3.6 million. The note, including
interest, along with those rentals deferred under the amendment to the
operating leases, will be repaid to the Partnership upon (i) the sale
or refinancing of the Claridge; (ii) upon full or partial satisfaction
of the Expandable Wraparound Mortgage; and (iii) upon full
satisfaction of any first mortgage then in place.
Per the terms of an amendment to the Operating Lease Agreement
executed as of August 1, 1991, during the years 1991 to 1998
contractual rents in excess of debt service and Partnership expenses
can be abated up to $38,820,000 in the aggregate but not in excess of
$10,000,000 in any one calendar year. Prior to this amendment,
scheduled rents totaling $39,820,000 were to be abated beginning in
1992 through the end of 1999. Cumulative abated rents as of September
30, 1995 total approximately $26,950,000, leaving $11,870,000 still to
be abated in the future. The amount which will be abated in future
periods cannot be determined until the Partnership incurs expenses and
debt service in those periods.
The Partnership funds the purchase of additional Hotel Assets by
borrowing funds, at a 14% interest rate, from New Claridge. The
ensuing notes are secured under the Expandable Wraparound Mortgage up
to $25 million. Principal and interest on these notes are then
reimbursed to the Partnership through additional rentals from New
Claridge. Under the Operating Lease, New Claridge is required to
reimburse the Partnership for all taxes, assessments, insurance and
general and administrative costs of the Partnership.
The ability of the Partnership to continue to fulfill its obligations
is dependent upon the ability of New Claridge to continue to make
rental payments when due. On January 31, 1994, the Corporation
completed an offering of $85 million of First Mortgage Notes due in
2002, bearing interest at 11 3/4%. A portion of the net proceeds of
$82.2 million, after deducting fees and expenses, was used to repay in
full the Corporation's outstanding debt under the Loan Agreement,
including the outstanding balance of the Corporation's revolving
credit line. The Notes come due on February 1, 2002. Interest on the
Notes is payable semiannually on February 1 and August 1 of each year,
commencing August 1, 1994. In conjunction with the full satisfaction
of the Loan Agreement, the Corporation's revolving credit line
arrangement was terminated.
The ownership and operation of casino-hotel facilities in Atlantic
City are subject to extensive state regulation under the Casino
Control Act under the direction of the New Jersey Casino Control
Commission. The Casino Control Act provides that various categories
of entities must hold appropriate casino licenses. The Partnership
currently operates under a three-year casino service industry license
effective October 31, 1992, while New Claridge operates under a four-
year casino operator's license effective September 30, 1995. As of
September 30, 1995 the Partnership had applied with the Commission for
license renewal. The general partners do not anticipate any problems
renewing the Partnership's license.
The Partnership had a working capital deficiency of approximately
$14,059,000 as of September 30, 1995 and $12,315,000 as of December
31, 1994. The working capital deficiency primarily results from the
consummation of the Restructuring Agreement. As part of the
restructuring, the Partnership's cash flow was reduced to an amount no
greater than what the Partnership needs to pay Partnership expenses,
including debt service. Thus, so long as the Claridge is financially
viable and continues to make all payments under the operating leases,
the Partnership expects to be able to pay its current liabilities.
PART II
Item 6. Exhibits and reports on Form 8-K
(a) Not applicable.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1995.
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.
Atlantic City Boardwalk Associates, L.P.
Registrant
Date November 13, 1995
/s/ Anthony C. Atchley
by Anthony C. Atchley, General Partner
Date November 13, 1995
/s/ Gerald C. Heetland
by Gerald C. Heetland, General Partner
Date November 13, 1995 /s/ Anthony C. Atchley
by AC Boardwalk Partners Corporation,
General Partner
by Anthony C. Atchley, President