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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
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COMMISSION FILE NUMBER: 333-643
TRUMP ATLANTIC CITY ASSOCIATES
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-3213714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
COMMISSION FILE NUMBER: 333-643
TRUMP ATLANTIC CITY FUNDING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3418939
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
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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 ATLANTIC CITY FUNDING, INC. AS OF MAY 9, 1997 WAS 100.
TRUMP ATLANTIC CITY FUNDING, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION (H)(1)(A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM
WITH THE REDUCED DISCLOSURE FORMAT.
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TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
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INDEX TO FORM 10-Q
PAGE NO.
--------
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Condensed Consolidated Balance Sheets of Trump Atlantic City
Associates and Subsidiaries as of March 31, 1997 (unaudited)
and December 31, 1996 ............................................... 1
Condensed Consolidated Statements of Operations of Trump
Atlantic City Associates and Subsidiaries for the Three
Months Ended March 31, 1997 and 1996 (unaudited) .................... 2
Condensed Consolidated Statement of Capital of Trump Atlantic
City Associates and Subsidiaries for the Three Months Ended
March 31, 1997 (unaudited) .......................................... 3
Condensed Consolidated Statements of Cash Flows of Trump
Atlantic City Associates and Subsidiaries for the Three Months
Ended March 31, 1997 and 1996 (unaudited) ........................... 4
Notes to Condensed Consolidated Financial Statements of Trump
Atlantic City Associates and Subsidiaries (unaudited) ............... 5-8
ITEM 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 9-12
ITEM 3-- Quantitative and Qualitative Disclosures About
Market Risk .................................................. 12
PART II -- OTHER INFORMATION
ITEM 1-- Legal Proceedings .............................................. 13
ITEM 2-- Changes in Securities .......................................... 13
ITEM 3-- Defaults Upon Senior Securities ................................ 13
ITEM 4-- Submission of Matters to a Vote of Security Holders ............ 13
ITEM 5-- Other Information .............................................. 13
ITEM 6-- Exhibits and Reports on Form 8-K ............................... 14
SIGNATURES
SIGNATURE-- Trump Atlantic City Associates .............................. 15
SIGNATURE-- Trump Atlantic City Funding, Inc. ........................... 16
i
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
March 31, December 31,
1997 1996
---------- -----------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents .................................................. $ 100,301 $ 71,320
Receivables, net ........................................................... 47,170 45,231
Inventories ................................................................ 9,384 9,393
Due from affiliates, net ................................................... 7,195 5,237
Other current assets ....................................................... 5,557 6,495
Total Current Assets ..................................................... 169,607 137,676
---------- ----------
PROPERTY AND EQUIPMENT, net .................................................. 1,466,622 1,456,267
DEFERRED LOAN COSTS, NET ..................................................... 37,457 39,153
OTHER ASSETS ................................................................. 26,914 25,910
---------- ----------
Total Assets ............................................................. $1,700,600 $1,659,006
========== ==========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt ....................................... $ 9,371 $ 9,410
Accounts payable and accrued expenses ...................................... 89,931 77,942
Accrued interest payable ................................................... 56,910 23,160
---------- ----------
Total Current Liabilities ................................................ 156,212 110,512
LONG-TERM DEBT, net of current maturities .................................... 1,206,910 1,207,795
OTHER LONG-TERM LIABILITIES .................................................. 4,059 4,569
DISTRIBUTION PAYABLE TO TRUMP PLAZA FUNDING, INC. ............................ 3,822 3,822
DEFERRED STATE INCOME TAXES .................................................. 450 450
---------- ----------
Total Liabilities ........................................................ 1,371,453 1,327,148
---------- ----------
CAPITAL:
Partners' Capital .......................................................... 373,790 363,646
Accumulated Deficit ........................................................ (44,643) (31,788)
---------- ----------
Total Capital .............................................................. 329,147 331,858
---------- ----------
Total Liabilities and Capital ............................................ $1,700,600 $1,659,006
========== ==========
1
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS
ENDED MARCH 31,
-------------------------
1997 1996
--------- ---------
REVENUES:
Gaming ........................................ $215,143 $ 74,270
Rooms ......................................... 17,688 5,798
Food and Beverage ............................. 26,346 11,383
Other ......................................... 7,139 2,100
-------- --------
Gross Revenues .............................. 266,316 93,551
Less--Promotional allowances .................... 29,963 10,683
-------- --------
Net Revenues ................................ 236,353 82,868
-------- --------
COSTS AND EXPENSES:
Gaming ........................................ 134,418 44,126
Rooms ......................................... 6,493 2,271
Food and Beverage ............................. 9,743 4,094
Pre-Opening ................................... -- 479
General and Administrative .................... 42,746 17,698
Depreciation and Amortization ................. 20,761 4,523
-------- --------
214,161 73,191
-------- --------
Income from operations ...................... 22,192 9,677
-------- --------
NON-OPERATING INCOME AND (EXPENSES):
Interest income ............................... 814 195
Interest expense .............................. (35,861) (9,751)
Other non-operating expense ................... -- (1,375)
-------- --------
(35,047) (10,931)
-------- --------
NET LOSS ........................................ $(12,855) $ (1,254)
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS)
RETAINED
EARNINGS
PARTNERS' (ACCUMULATED
CAPITAL DEFICIT) TOTAL
-------- ------------ ---------
Balance, December 31, 1996 ............. $363,646 $(31,788) $331,858
Net Loss .............................. -- (12,855) (12,855)
Contributed Capital-- Trump Hotels &
Casino Resorts Holdings, L.P. ......... 10,144 -- 10,144
-------- -------- --------
Balance, March 31, 1997 ................ $373,790 $(44,643) $329,147
======== ======== ========
The accompanying notes are an integral part of this condensed
consolidated financial statement.
3
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................ $(12,855) $(1,254)
Adjustments to reconcile net loss to net cash
flows from operating activities --
Noncash charges --
Depreciation and amortization .................... 20,761 4,523
Accretion of discounts on indebtedness ........... -- 112
Provisions for losses on receivables ............. 1,832 317
Amortization of deferred loan offering costs ..... 1,696 448
Utilization of CRDA credits and donations ........ -- --
Valuation allowance of CRDA investments .......... 1,217 86
-------- -------
12,651 4,232
Changes in assets and liabilities:
Increase in receivables .......................... (3,771) (798)
Decrease (increase) in inventories ............... 9 (31)
Increase in advances from affiliates ............. (1,958) (770)
Decrease in other current assets ................. 1,121 570
(Increase) decrease in other assets .............. (879) 512
Increase in accounts payable and accrued
expenses ....................................... 12,671 4,187
Increase in accrued interest payable ............. 33,750 8,970
Decrease in other long-term liabilities .......... (510) --
-------- -------
Net cash provided by operating activities ........... 53,084 16,872
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net ............. (29,412) 28,053)
Purchase of CRDA investments ........................ (2,429) (926)
-------- -------
Net cash used in Investing Activities ............... (31,841) 28,979)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional borrowings .............................. -- 1,152
Payments and current maturities of
long-term debt ................................... (2,406) (777)
Capital contributed from Trump Hotels & Casino
Resorts Holdings, L.P. ........................... 10,144 16,000
-------- -------
Net cash provided by financing activities ..... 7,738 16,375
-------- -------
Net increase in cash & cash equivalents ....... 28,981 4,268
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ...... 71,320 15,937
-------- -------
CASH AND CASH EQUIVALENTS AT MARCH 31 ............... $100,301 $20,205
======== =======
CASH INTEREST PAID .................................. 398 $ 205
======== =======
Supplemental Disclosure of noncash activities:
Purchase of property and equipment ................. $ 1,400 --
======== =======
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) CONDENSED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include those
of Trump Atlantic City Associates, a New Jersey general partnership formerly
known as Trump Plaza Holding Associates ("Trump AC"), and its 99% owned
subsidiaries, Trump Plaza Associates, a New Jersey general partnership ("Plaza
Associates"), which owns and operates the Trump Plaza Hotel and Casino located
in Atlantic City, New Jersey ("Trump Plaza"), Trump Taj Mahal Associates, a New
Jersey general partnership ("Taj Associates"), which owns and operates the Trump
Taj Mahal Casino Resort located in Atlantic City, New Jersey (the "Taj Mahal"),
Trump Atlantic City Funding, Inc., a Delaware corporation ("Trump AC Funding"),
Trump Atlantic City Corporation, a Delaware Corporation ("TACC"), Trump Casino
Services, L.L.C., a New Jersey limited liability company ("Trump Services"), and
Trump Communications, L.L.C., a New Jersey limited liability company. Trump AC's
sole sources of liquidity are distributions in respect of its interests in Plaza
Associates and Taj Associates. Trump AC is owned by Trump Hotels & Casino
Resorts Holdings, L.P., a Delaware limited partnership ("THCR Holdings") (See
Note 2). Trump AC and Trump AC Funding have no independent operations and,
therefore, their ability to service debt is dependent upon the successful
operations of Plaza Associates and Taj Associates. There are no restrictions on
the ability of the guarantors (the "Subsidiary Guarantors") of the Trump AC
Mortgage Notes (as defined in Note 2) to distribute funds to Trump AC.
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 by Trump AC without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and note
disclosures normally included in financial statements prepared in conformity
with generally accepted accounting principles have been condensed or omitted. In
the opinion of Trump AC, all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial position, results of
operations and cash flows for the periods presented, have been made.
The casino industry in Atlantic City is seasonal in nature; therefore,
results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the operating results for a full year.
The separate financial statements of the Subsidiary Guarantors have not
been included because (i) the Subsidiary Guarantors constitute all of Trump AC's
direct and indirect subsidiaries; (ii) the Subsidiary Guarantors have fully and
unconditionally guaranteed the Trump AC Mortgage Notes on a joint and several
basis; (iii) the aggregate assets, liabilities, earnings and equity of the
Subsidiary Guarantors are substantially equivalent to the assets, liabilities,
earnings and equity of Trump AC on a consolidated basis; and (iv) the separate
financial and other disclosures concerning the Subsidiary Guarantors are not
deemed material to investors.
Certain reclassifications have been made to prior year financial
statements to conform to the current year presentation.
(2) PUBLIC OFFERINGS AND MERGER
On June 12, 1995, Trump Hotels & Casino Resorts, Inc. ("THCR") completed a
public offering of 10,000,000 shares of its common stock, par value $.01 per
share (the "THCR Common Stock"), at $14.00 per share (the "1995 Stock Offering")
for gross proceeds of $140,000,000. Concurrent with the 1995 Stock Offering,
THCR Holdings, a then 60% subsidiary of THCR, and its subsidiary Trump Hotels &
Casino Resorts Funding, Inc. issued 15 1/2% Senior Secured Notes due 2005 for
gross proceeds of $155,000,000 (together with the 1995 Stock Offering, the "1995
Offerings"). From the proceeds of the 1995 Stock Offering, THCR contributed
$126,848,000 to THCR Holdings. THCR Holdings subsequently contributed
$172,859,000 to Trump AC.
5
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(UNAUDITED)
On April 17, 1996, pursuant to the Agreement and Plan of Merger, as
amended (the "Taj Merger Agreement"), pursuant to which a wholly owned
subsidiary of THCR was merged (the "Taj Merger") with and into Taj Mahal Holding
Corp., a Delaware corporation now known as THCR Holding Corp. ("Taj Holding"),
each outstanding share of Class A Common Stock of Taj Holding, par value $.01
per share (the "Taj Holding Class A Common Stock"), which in the aggregate
represented 50% of the economic interest in Taj Associates, was converted into
the right to receive, at each holder's election, either (a) $30 in cash or (b)
that number of shares of THCR Common Stock having a market value equal to $30.
Donald J. Trump ("Trump") held the remaining 50% interest in Taj Associates and
contributed such interest in Taj Associates to Trump AC in exchange for limited
partnership interests in THCR Holdings. In addition, the outstanding shares of
Taj Holding's Class C Common Stock, par value $.01 per share, all of which were
held by Trump, were canceled in connection with the Taj Merger. The following
transactions occurred in connection with the Taj Merger (collectively referred
to as the "Taj Merger Transaction"):
(a) the payment of an aggregate of $31,181,000 in cash and the
issuance of 323,423 shares of THCR Common Stock to the holders of Taj
Holding Class A Common Stock pursuant to the Taj Merger Agreement;
(b) the contribution by Trump to Trump AC of all of his direct and
indirect ownership interests in Taj Associates, and the contribution by
THCR to Trump AC of all of its indirect ownership interests in Taj
Associates acquired in the Taj Merger Transaction;
(c) the public offerings by (i) THCR of 12,500,000 shares of THCR
Common Stock (plus 750,000 shares of THCR Common Stock issued in
connection with the partial exercise of the underwriters' over-allotment
opinion) (the "1996 Stock Offering") for net proceeds of $386,062,000 and
(ii) Trump AC and Trump AC Funding, Trump AC's wholly owned finance
subsidiary, of $1,200,000,000 aggregate principal amount of 11 1/4% First
Mortgage Notes due 2006 (the "Trump AC Mortgage Notes") (together with the
1996 Stock Offering, the "1996 Offerings");
(d) the redemption of the outstanding shares of Taj Holding's Class
B Common Stock, par value $.01 per share, immediately prior to the Taj
Merger Transaction for $.50 per share in accordance with its terms;
(e) the redemption of the outstanding 11.35% Mortgage Bonds, Series
A, due 1999 of Trump Taj Mahal Funding, Inc. (the "Taj Bonds");
(f) the retirement of the outstanding 10 7/8 Mortgage Notes due
2001 (the "Plaza Notes") of Trump Plaza Funding, Inc.;
(g) the satisfaction of the indebtedness of Taj Associates under its
loan agreement with National Westminster Bank USA ("Nat West");
(h) the purchase of certain real property used in the operation of
the Taj Mahal that was leased from a corporation wholly owned by Trump
(the "Specified Parcels");
(i) the purchase of certain real property used in the operation of
Trump Plaza that was leased from an unaffiliated third party;
(j) the payment to Bankers Trust Company ("Bankers Trust") to obtain
releases of liens and guarantees that Bankers Trust had in connection with
indebtedness owed by Trump to Bankers Trust; and
(k) the issuance to Trump of warrants to purchase an aggregate of
1.8 million shares of THCR Common Stock, (i) 600,000 shares of which may
be purchased on or prior to April 17, 1999 at $30 per share, (ii) 600,000
shares of which may be purchased on or prior to April 17, 2000 at $35 per
share and (iii) 600,000 shares of which may be purchased on or prior to
April 17, 2001 at $40 per share.
The Taj Merger Transaction has been accounted for as a "purchase" for
accounting and reporting purposes and the results of Taj Associates have been
included in the accompanying financial statements since the date of acquisition.
Accordingly, the excess of the purchase price over the fair value of the net
assets acquired
6
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(UNAUDITED)
($200,782,000), which was allocated to land ($7,979,000) and building
($192,803,000) based on an appraisal on a pro rata basis, consists of the
following:
a) $40,500,000, representing the payment of $30.00 for each of the
1,350,000 outstanding shares of Taj Holding Class A Common Stock. Holders
of 298,739 shares of Taj Holding Class A Common Stock elected to receive
323,423 shares of THCR Common Stock and holders of 1,051,261 shares of Taj
Holding Class A Common Stock elected to receive $31,181,000 in cash;
b) $40,500,000, representing the contribution by Trump to Trump AC
(on behalf, and at the direction, of THCR Holdings) of all of his direct
and indirect ownership interest in 50% of Taj Associates;
c) $9,900,000 of fees and expenses associated with the Taj Merger
Transaction;
d) $108,574,000, representing the negative book value of Taj
Associates at the date of the Taj Merger Transaction; and
e) $1,308,000 of closing costs associated with the purchase of the
Specified Parcels.
In connection with the Taj Merger Transaction, THCR purchased the
Specified Parcels from Trump Taj Mahal Realty Corp., a corporation owned by
Trump, and Taj Associates was released from its guarantee to First Union
National Bank (the "Guarantee"). The aggregate cost of acquiring the Specified
Parcels was $50,600,000 in cash and 500,000 shares of THCR Common Stock valued
at $10,500,000 (an average value of $21.00 per share based on the price of the
THCR Common Stock several days before and after the date of the amended Taj
Merger Agreement). The obligation of Taj Associates which had been accrued with
respect to the Guarantee ($17,923,000) was eliminated. In addition, THCR
exercised the option to purchase a tower adjacent to Trump Plaza's main tower
("Trump Plaza East") for $28,084,000, which amount has been included in land and
building.
Unaudited pro forma information, assuming that the Taj Merger Transaction
had occurred on January 1, 1996,is as follows:
THREE MONTHS ENDED
MARCH 31, 1996
------------------
Net Revenues ................................ $208,238,000
Income from operations ...................... 20,507,000
Net loss .................................... $(14,705,000)
The pro forma information is presented for informational purposes only and
does not purport to present what the results of operations would have been had
the Taj Merger Transaction, in fact, occurred on January 1, 1996 or to project
the results of operations for any future period.
7
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(UNAUDITED)
(3) LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
Trump AC Mortgage Notes (A) ... $1,200,000,000 $1,200,000,000
Mortgage notes payable ........ 3,291,000 3,407,000
Other notes payable ........... 12,990,000 13,798,000
-------------- --------------
1,216,281,000 1,217,205,000
Less--Current maturities ..... 9,371,000 9,410,000
-------------- --------------
$1,206,910,000 $1,207,795,000
============== ==============
(A) In connection with the Taj Merger Transaction, $1,200,000,000 of Trump
AC Mortgage Notes were issued by Trump AC and Trump AC Funding. The proceeds of
the offering of Trump AC Mortgage Notes were used to complete the Taj Merger
Transaction, as discussed in Note 2. Costs associated with the issuance of the
Trump AC Mortgage Notes, totalling approximately $44,200,000, are being
amortized using the effective interest method over the term of the Trump AC
Mortgage Notes.
(4) TRUMP WORLD'S FAIR
Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) Trump World's Fair (including the land, improvements and
personal property used in the operation of the hotel) (the "Trump World's Fair
Purchase Option") and (ii) certain promissory notes made by Trump and/or certain
of his affiliates and payable to Chemical which are secured by certain real
estate assets located in New York, unrelated to Plaza Associates or Trump AC. In
connection with such Option Agreement, Trump assigned his rights to Plaza
Associates. On June 12, 1995, the Trump World's Fair Purchase Option was
exercised. The option price of $60,000,000 was funded with $58,150,000 from the
capital contributed by THCR Holdings (see Note 2) and $1,850,000 of option
payments made by Plaza Associates. In May 1996, Trump World's Fair was opened
and integrated into Trump Plaza.
(5) CASINO LICENSES
The operation of an Atlantic City casino hotel is subject to significant
regulatory controls which affect virtually all of its operations. Under the New
Jersey Casino Control Act (the "Casino Control Act"), Plaza Associates, Taj
Associates and Trump Services are required to maintain certain licenses.
In June 1995, the New Jersey Casino Control Commission (the "CCC") renewed
Plaza Associates' license to operate Trump Plaza through June 1999. In June
1995, the CCC renewed Taj Associates' license to operate the Taj Mahal through
March 1999. In June 1996, the CCC also granted Trump Services a license through
July 1997. All of these licenses are not transferable and their renewal will
include a financial review of the relevant operating entities. Upon revocation,
suspension for more than 120 days, or failure to renew the casino license, the
Casino Control Act provides for the appointment of a conservator to take
possession of the hotel and casino's business and property, subject to all valid
liens, claims and encumbrances.
8
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
Cash flows from operating activities are Trump AC's principal source of
liquidity. With the proceeds from the 1996 Offerings, Trump AC, among other
things, redeemed the outstanding Taj Bonds, retired the outstanding Plaza Notes,
satisfied the indebtedness of Taj Associates under its loan agreement with Nat
West, purchased certain real property used in the operation of Trump Plaza and
the Taj Mahal and paid Bankers Trust to release certain liens and guarantees.
The indenture under which the Trump AC Mortgage Notes were issued
restricts the ability of Trump AC and its subsidiaries to make distributions or
pay dividends, as the case may be, unless certain financial ratios are achieved.
In addition, the ability of Plaza Associates and Taj Associates to make payments
of dividends or distributions (except for payment of interest) through Trump AC
to THCR Holdings may be restricted by the CCC.
With proceeds from the 1995 Offerings, THCR Holdings made a capital
contribution of $172,859,000 in Trump AC and Plaza Associates. This contribution
was used to repurchase and redeem the 12 1/2% Pay-In-Kind Notes due 2003 (the
"Plaza PIK Notes") and related warrants (together with related accrued
interest), exercise the Trump World's Fair Purchase Option and purchase Trump
World's Fair and to fund construction costs incurred in the renovation and
integration of Trump Plaza East. The renovation of Trump Plaza East was
completed in February 1996, and Trump World's Fair in May 1996.
Capital expenditures for Trump AC were $29,412,000 for the three months
ended March 31, 1997, an increase of approximately $1,359,000 or 4.8% from the
comparable period in 1996. Capital expenditures for improvements to Trump
Plaza's existing facilities were $4,253,000 and $2,378,000 for the three months
ended March 31, 1997 and 1996, respectively. Capital expenditures attributable
to Trump Plaza East were approximately $4,611,000 for the three months ended
March 31, 1996. Capital expenditures attributable to Trump World's Fair were
approximately $22,428,000 for the three months ended March 31, 1996.
On January 2, 1997, Plaza Associates exercised its option to purchase from
Seashore Four Associates, an entity beneficially owned by Trump, one of the
parcels of land underlying Trump Plaza's main tower, pursuant to the terms of a
lease, the payments under which were terminated upon the exercise of such
option. The exercise price and associated closing costs of $10,144,000 were paid
and contributed by THCR.
Capital expenditures attributable to the Taj Mahal were $15,015,000 for
the three months ended March 31, 1997. Capital expenditures for improvements to
existing facilities were approximately $2,340,000 for the three months ended
March 31, 1997. Capital expenditures attributable to the expansion of the
facility were approximately $12,675,000 for the three months ended March 31,
1997
The expansion at the Taj Mahal (the "Taj Mahal Expansion") consists of the
construction of a new 15-bay bus terminal which was completed in December 1996,
a 2,400 space expansion of the existing self parking facilities, which is
expected to be completed in May 1997 and an approximate 7,000 square-foot casino
expansion with 250 slot machines expected to be completed in June 1997. It is
expected that the budget for the Taj Mahal Expansion of approximately $41.7
million will be funded principally out of cash from operations of Taj Associates
and Plaza Associates.
At March 31, 1997, Trump AC had combined working capital of $13,395,000
which included a receivable from the New Jersey Casino Reinvestment Development
Authority (the "CRDA") of approximately $2,836,000 for reimbursable improvements
made to Trump Plaza East.
9
RESULTS OF OPERATIONS: OPERATING REVENUES AND EXPENSES
The financial information presented below reflects the results of
operations of Trump AC. Because Trump AC has no business operations other than
its interest in Plaza Associates and Taj Associates at March 31, 1997, its
results of operations are not discussed below. Taj Associates was acquired on
April 17, 1996.
Comparison of Three-Month Periods Ended March 31, 1997 and 1996. The
following table includes selected data of Plaza Associates and Taj Associates
for the three months ended March 31, 1997 and for Plaza Associates for the three
months ended March 31, 1996:
THREE MONTHS ENDED MARCH 31,
----------------------------------------------
1996 1997 1997 1997
PLAZA PLAZA TAJ TOTAL
ASSOCIATES ASSOCIATES ASSOCIATES TRUMP AC
---------- ---------- ---------- --------
(IN THOUSANDS)
Revenues:
Gaming ........................ $ 74,270 $ 86,870 $128,273 $215,143
Other ......................... 19,281 24,510 26,663 51,173
-------- -------- -------- --------
Gross Revenues ................ 93,551 111,380 154,936 266,316
Less: Promotional Allowances .... 10,683 13,423 16,540 29,963
-------- -------- -------- --------
Net Revenues .................. 82,868 97,957 138,396 236,353
-------- -------- -------- --------
Costs and Expenses:
Gaming ........................ 44,126 55,222 79,196 134,418
Pre-opening ................... 479 -- -- --
General & Administrative ...... 17,698 20,514 22,240 42,746
Depreciation & Amortization ... 4,523 6,539 14,200 20,761
Other ......................... 6,365 8,632 7,604 16,236
-------- -------- -------- --------
Total Costs and Expenses ...... 73,191 90,907 123,240 214,161
-------- -------- -------- --------
Income from Operations .......... 9,677 7,050 15,156 22,192
-------- -------- -------- --------
Non-Operating Income (Expense) . (1,180) 160 390 814
Interest Expense ............... (9,751) (12,193) (23,668) (35,861)
-------- -------- -------- --------
Total Non-Operating Expense .... (10,931) (12,033) (23,278) (35,047)
-------- -------- -------- --------
Net Loss ........................ $ (1,254) $ (4,983) $ (8,122) $(12,855)
======== ======== ======== ========
Gaming revenues were $215,143,000 for the three months ended March 31,
1997, an increase of $140,873,000 or 189.7% from gaming revenues of $74,270,000
for the comparable period in 1996. This increase in gaming revenues consists of
$128,273,000 from Taj Associates in addition to a $12,600,000 or 17.0% increase
in Plaza Associates' table games and slot revenues. Management believes that
Plaza Associates' increase in gaming revenues is primarily due to the May 1996
opening of Trump World's Fair, the February 1996 opening of Trump Plaza East,
the availability of additional hotel rooms at both Trump World's Fair and Trump
Plaza East, as well as marketing initiatives.
Slot revenues were $131,281,000 for the three months ended March 31, 1997,
an increase of $81,449,000 or 163.4% from slot revenues of $49,832,000 for the
comparable period in 1996. This increase is directly attributable to the
acquisition of Taj Associates which contributed $66,392,000 in slot revenues.
Plaza Associates' slot revenues were $64,889,000 for the three months ended
March 31, 1997, an increase of $15,057,000 or 30.2% from slot revenues of
$49,832,000 for the three months ended March 31, 1996. Plaza Associates'
increase is due to the addition of 1,519 slot machines at Trump World's Fair as
well as management's marketing programs.
Table games revenues were $79,309,000 for the three months ended March 31,
1997, an increase of $54,871,000 or 224.5% from $24,438,000 for the comparable
period in 1996. This increase is attributable to the acquisition of Taj
Associates which contributed $57,328,000 in table games revenues with a
corresponding $317,956,000 of table games drop (i.e., the dollar value of chips
purchased). Plaza Associates' table games revenues of $21,981,000 for the three
months ended March 31, 1997 decreased by $2,456,000 or 10.1% from the comparable
period in 1996. Plaza
10
Associates' decrease is primarily due to an decrease in the hold percentage from
16.9% to 13.8% offset by an increase in table games drop of 10.0% for the three
months ended March 31, 1997.
In addition to table games and slot revenues, Taj Associates' poker/race
simulcasting/keno operations generated approximately $3,999,000 in poker
revenue, $323,000 in simulcasting revenue, and $231,000 in keno revenues for the
three months ended March 31, 1997.
Other revenues were $51,173,000 for the three months ended March 31, 1997,
an increase of $31,892,000 or 165.4% from other revenues of $19,281,000 for the
comparable period in 1996. Other revenues include revenues from rooms, food and
beverage and miscellaneous items. The increase is primarily attributable to the
acquisition of Taj Associates which generated $26,623,000 in other revenues for
the three months ended March 31, 1997. Plaza Associates' other revenue was
$24,510,000 for the three months ended March 31, 1997, an increase of $5,229,000
or 27.1% from the comparable period in 1996. Plaza Associates' increase reflects
the additional rooms at Trump Plaza East and Trump World's Fair as well as
increases in room and food and beverage revenues attendant to increased levels
of gaming activity due in part to increased promotional activities.
Promotional allowances were $29,963,000 for the three months ended March
31, 1997, an increase of $19,280,000 or 180.5% from promotional allowances of
$10,683,000 for the three months ended March 31, 1996. Taj Associates generated
$16,540,000 in promotional allowances for the three months ended March 31, 1997.
Plaza Associates experienced an increase in promotional allowances to
$13,423,000 or 25.6% from promotional allowances of $10,683,000 for the
comparable period in 1996. Plaza Associates' increase is attributable primarily
to the additional rooms at Trump World's Fair and Trump Plaza East as well as
the addition of three restaurants at Trump World's Fair, and increases in
marketing initiatives during the three months ended March 31, 1997.
Gaming costs and expenses were $134,418,000 for the three months ended
March 31, 1997, an increase of $90,292,000 or 204.6% from $44,126,000 for the
comparable period in 1996. This increase is primarily attributable to Taj
Associates' gaming costs and expenses of $79,196,000 for the three months ended
March 31, 1997. Gaming costs and expenses for Plaza Associates were $55,222,000,
an increase of $11,096,000 or 25.1% from $44,126,000 for the comparable period
in 1996. Plaza Associates' increase is primarily due to increased promotional
and operating expenses resulting from operating Trump World's Fair and Trump
Plaza East, both with opening dates in 1996, as well as taxes associated with
increased levels of gaming revenues from the comparable period in 1996.
General and administrative expenses were $42,746,000 for the three months
ended March 31, 1997, an increase of $25,048,000 or 141.5% from general and
administrative expenses of $17,698,000 for the comparable period in 1996. This
increase is primarily due to the acquisition of Taj Associates which incurred
$22,240,000 in general and administrative expenses since its acquisition. Plaza
Associates' increase of $2,816,000 over the comparable period is due in part to
expenses associated with Trump Plaza East and Trump World's Fair.
Pre-opening expenses of $479,000 were incurred by Plaza Associates for the
three months ended March 31, 1996 and reflect the costs associated with opening
Trump World's Fair in May 1996.
Other expenses were $16,236,000 for the three months ended March 31, 1997,
an increase of $9,871,000 or 155.1% from the comparable period in 1996. Other
expenses include costs associated with operating Trump Plaza's and the Taj
Mahal's hotels. The increase over the comparable period reflects Taj Associates'
$7,604,000 of other expenses. Plaza Associates' other expenses increased by
$2,267,000 or 35.6% from the comparable period. This increase is due to
operating Trump World's Fair and Trump Plaza East, both with opening dates in
1996.
Income from operations was $22,192,000 for the three months ended March
31, 1997, an increase of $12,515,000 or 129.3% from income from operations of
$9,677,000 for the comparable period in 1996. Taj Associates contributed
$15,156,000 of income from operations for the three months ended March 31, 1997.
Plaza Associates contributed $7,050,000 during the three months ended March 31,
1997, a decrease of $2,627,000 or 27.1% from the comparable period in 1996.
Interest expense was $35,861,000 for the three months ended March 31,
1997, an increase of $26,110,000 or 267.8% from interest expense of $9,751,000
for the comparable period in 1996. This increase is attributable to the
acquisition of Taj Associates, which has incurred $23,668,000 of interest
expense for the three months ended March 31, 1997. Plaza Associates reflects an
increase of $2,442,000 in interest expense due in part to the issuance of the
Trump AC Mortgage Notes.
11
SEASONALITY
The casino industry in Atlantic City is seasonal in nature; accordingly,
the results of operations for the period ending March 31, 1997 are not
necessarily indicative of the operating results for a full year.
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to the General Instructions to Rule 305 of Regulation S-K, the
quantitative and qualitative disclosures called for by this Item 3 and by Rule
305 of Regulation S-K are inapplicable to the Registrants at this time.
12
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
Plaza Associates and Taj Associates, their partners, certain members of
their former Executive Committee and certain of their employees, have been and
are involved in various legal proceedings. In general, Plaza Associates and Taj
Associates have agreed to indemnify such persons and entities, against any and
all losses, claims, damages, expenses (including reasonable costs, disbursements
and counsel fees) and liabilities (including amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties) incurred by them in
said legal proceedings. Such persons and entities are vigorously defending the
allegations against them and intend to vigorously contest any future
proceedings.
On March 13, 1997, THCR filed a lawsuit in the United States District
Court, District of New Jersey, against Mirage Resorts Incorporated, the State of
New Jersey, the New Jersey Department of Transportation, the South Jersey
Transportation Authority, the CRDA, the New Jersey Transportation Trust Fund
Authority and others. THCR was seeking declaratory and injunctive relief to
recognize and prevent violations by the defendants of the casino clause of the
New Jersey State Constitution and various federal securities and environmental
laws relating to proposed infrastructure improvements in the Atlantic City
marina. The defendants then filed an action in the New Jersey State Court
seeking declaration of the claim relating to the casino clause of the New Jersey
State Constitution. On May 1, 1997, the United States District Court decided
that the matter should be heard in the New Jersey State Court. Oral arguments
were heard in the New Jersey State Court on May 9, 1997. A decision is expected
in the near future.
Various other legal proceedings are now pending against Plaza Associates
and Taj Associates. Except as set forth on Trump AC's and Trump AC Funding's
Annual Report on Form 10-K for the year ended December 31, 1996, Trump AC
considers all such proceedings to be ordinary litigation incident to the
character of its business and not material to its business or financial
condition. The majority of such claims are covered by liability insurance
(subject to applicable deductibles), and Trump AC 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 Plaza Associates or Taj Associates.
ITEM 2 -- CHANGES IN SECURITIES
None.
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 -- OTHER INFORMATION
None.
13
ITEM 6 --EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
---------- ----------------------
27.1 Financial Data Schedule of Trump Atlantic City Associates.
27.2 Financial Data Schedule of Trump Atlantic City Funding, Inc.
B. CURRENT REPORTS ON FORM 8-K:
The Registrants did not file any Current Reports on Form 8-K during the
period beginning January 1, 1997 and ending March 31, 1997.
14
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 ATLANTIC CITY ASSOCIATES
(Registrant)
By: TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.,
its general partner
By: TRUMP HOTELS & CASINO RESORTS, INC.,
its general partner
Date: May 14, 1997
By: /s/ NICHOLAS L. RIBIS
----------------------------------------
NICHOLAS L. RIBIS
PRESIDENT, CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER AND DIRECTOR
(DULY AUTHORIZED OFFICER AND
PRINCIPAL FINANCIAL OFFICER)
15
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 ATLANTIC CITY FUNDING, INC.
(Registrant)
Date: May 14, 1997
By: /s/ NICHOLAS L. RIBIS
-----------------------------------------
NICHOLAS L. RIBIS
CHIEF EXECUTIVE OFFICER AND PRESIDENT
(DULY AUTHORIZED OFFICER AND
PRINCIPAL FINANCIAL OFFICER)
16