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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______ to _____
Commission file number: 1-13794
TRUMP HOTELS & CASINO RESORTS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3818402
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Huron Ave. & Brigantine Blvd. 08401
Atlantic City, New Jersey (Zip Code)
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (609) 441-8406
Commission file number 33-90786
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
--------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3818407
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Huron Ave. & Brigantine Blvd. 08401
Atlantic City, New Jersey (Zip Code)
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (609) 441-8406
Commission file number: 33-90786
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
-------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3818405
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Huron Ave. & Brigantine Blvd. 08401
Atlantic City, New Jersey (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code: (609) 441-8406
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock of Trump Hotels & Casino New York Stock Exchange
Resorts, Inc., par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
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) have been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock of Trump Hotels & Casino
Resorts, Inc. held by non-affiliates as of February 12, 2001 was approximately:
$63,282,244.
As of March 30, 2001, there were 22,010,027 shares of Trump Hotels & Casino
Resorts, Inc. Common Stock outstanding.
Documents Incorporated by Reference--None
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FORM 10-K
TABLE OF CONTENTS
PART I ................................................................... 1
ITEM 1. BUSINESS .................................................. 1
General ................................................. 1
Trump Plaza.............................................. 2
Taj Mahal ............................................... 5
Trump Marina ............................................ 8
Indiana Riverboat........................................ 10
Trademark/Licensing ..................................... 12
Certain Indebtedness of THCR ............................ 13
The Atlantic City Market ................................ 15
Competition.............................................. 17
Gaming and Other Laws and Regulations ................... 21
ITEM 2. PROPERTIES................................................. 30
THCR.................................................... 30
Trump Plaza............................................. 31
Taj Mahal .............................................. 32
Trump Marina............................................ 34
Indiana Riverboat....................................... 35
ITEM 3. LEGAL PROCEEDINGS ......................................... 35
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ....... 37
PART II................................................................. 38
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.................................... 38
ITEM 6. SELECTED FINANCIAL DATA .................................. 40
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 42
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .............. 49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................... 49
PART III.................................................................. 50
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ....... 50
Section 16(a) Beneficial Ownership Compliance .......... 54
ITEM 11. EXECUTIVE COMPENSATION.................................... 55
Compensation of Directors .............................. 60
Committees of the Board of Directors ................... 60
Compensation Committee Interlocks and Insider
Participation......................................... 61
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................. 63
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............ 64
PART IV................................................................... 66
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K ........................................... 66
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS ................. 70
SIGNATURES FOR TRUMP HOTELS & CASINO RESORTS, INC......................... 71
SIGNATURES FOR TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P................ 72
SIGNATURES FOR TRUMP HOTELS & CASINO RESORTS FUNDING, INC................. 73
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES .......... F-1
PART I
ITEM 1. BUSINESS.
General
Trump Hotels & Casino Resorts, Inc. ("THCR"), Trump Hotels & Casino
Resorts, L.P. ("THCR Holdings") and Trump Hotels & Casino Resorts Funding, Inc.,
("THCR Funding," and together with THCR and THCR Holdings, the "Registrants"),
were organized under the laws of the state of Delaware in March 1995. THCR is
the sole general partner of THCR Holdings. The common stock, par value $.01 per
share (the "Common Stock"), of THCR is listed on the New York Stock Exchange
("NYSE") under the symbol "DJT." THCR Holdings' partnership agreement, dated as
of June 12, 1995, as amended (the "THCR Holdings Partnership Agreement"),
requires that all business activities of THCR be conducted through THCR Holdings
or a subsidiary partnership or corporation of THCR Holdings. THCR Funding, a
wholly-owned subsidiary of THCR Holdings, together with THCR Holdings issued the
Senior Notes (as defined herein) concurrent with the initial public offering of
THCR in June 1995. As the sole general partner of THCR Holdings, THCR generally
has the exclusive rights, responsibilities and discretion as to the management
and control of THCR Holdings. THCR, through THCR Holdings and several
wholly-owned subsidiaries of THCR Holdings, owns and operates a total of four
casino properties, three of which are casino hotels located in Atlantic City,
New Jersey, and the fourth is a riverboat casino docked in Buffington Harbor on
Lake Michigan in the state of Indiana. The three properties located in Atlantic
City, New Jersey are: (i) the Trump Plaza Hotel and Casino (the "Trump Plaza"),
(ii) the Trump Taj Mahal Casino Resort (the "Taj Mahal") and (iii) the Trump
Marina Hotel Casino ("Trump Marina," and together with the Trump Plaza and Taj
Mahal, the "Trump Atlantic City Properties"). The Trump Plaza and the Taj Mahal
are located on the boardwalk in Atlantic City, New Jersey (the "Boardwalk"). The
Trump Marina is located in the marina district of Atlantic City, New Jersey (the
"Marina District"), approximately two miles from the Boardwalk and one-quarter
mile from the Huron Redevelopment Area, a 150-acre parcel of land designated by
the Atlantic City Council for future casino development commonly referred to as
the "H-Tract." The fourth gaming property owned and operated by THCR through
THCR Holdings is an approximately 280-foot luxury yacht docked in Buffington
Harbor on Lake Michigan in the state of Indiana, located approximately 25.0
miles from Chicago, Illinois (the "Indiana Riverboat"). The Trump Atlantic City
Properties and the Indiana Riverboat make THCR one of the largest casino
entertainment companies in the United States. THCR continues to be the exclusive
vehicle through which Mr. Donald J. Trump ("Mr. Trump" or "Trump") engages in
gaming activities in both emerging and established gaming jurisdictions.
The following table profiles THCR's casino and hotel capacity as of
December 31, 2000:
Trump Taj Trump Indiana
Plaza Mahal Marina Riverboat Total
----- ----- ------ --------- -----
Gaming square footage 85,253 154,871 82,100 37,000 359,224
Slot machines 2,812 4,611 2,500 1,250 11,173
Table games 97 210 76 50 433
Hotel rooms 904 1,250 728 300 3,182
Casino Services Agreement. Trump Casino Services, L.L.C., a New Jersey
limited liability company ("TCS"), was formed in June 1996 for the purpose of
realizing cost savings and operational synergies by consolidating certain
administrative functions of, and services to, each of (i) Trump Plaza
Associates, a New Jersey general partnership and owner and operator of the Trump
Plaza ("Plaza Associates"), and (ii) Trump Taj Mahal Associates, a New Jersey
general partnership and owner and operator of the Taj Mahal ("Taj Associates").
In June 1996, the New Jersey Casino Control Commission (the "CCC") granted TCS
an initial casino license through July 1997 which had been renewed through July
2003.
In July 1996, TCS, Plaza Associates and Taj Associates entered into a
services agreement pursuant to which TCS provided managerial, financial and
other services related to running a casino hotel to Plaza Associates, for Trump
Plaza, and Taj Associates, for Taj Mahal (the "Casino Services Agreement"). In
October 1996, the parties amended and restated the Casino Services Agreement to
include Trump's Castle Associates, L.P., a New Jersey limited partnership and a
wholly-owned subsidiary of THCR Holdings ("Castle Associates"), for the Trump
Marina. In 1998, the parties amended and restated the Casino Services Agreement
to include Trump Indiana, Inc., a Delaware corporation and wholly-owned
subsidiary of THCR Holdings ("Trump Indiana"), for the Indiana Riverboat.
1
Effective December 31, 2000, TCS was merged into Taj Associates, and the
obligations and administrative duties and responsibilities of TCS, including the
Casino Services Agreement, were assumed by Trump Administration, a division of
Taj Associates ("Trump Administration"). Management believes that Trump
Administration's services will continue to result in substantial cost savings
and operational synergies for the Trump Atlantic City Properties.
Twenty-Nine Palms Band. On January 4, 2000, Trump Hotels & Casino Resorts
Development Company, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of THCR Holdings ("THCR Development Company"), entered
into a letter of intent with the Twenty-Nine Palms Band of Mission Indians, a
federally recognized Native American tribe (the "Twenty-Nine Palms Band"), for
the development and management of a casino and hotel on the Twenty-Nine Palms
Band's federally recognized tribal land located in Southern California. On April
27, 2000, THCR Development Company and the Twenty-Nine Palms Band signed a
definitive agreement pursuant to which THCR Development Company has undertaken
to arrange a financing of up to $60.0 million to expand the Twenty-Nine Palms
Band's already existing casino to be operated under the name "Trump Spotlight 29
Casino" to include additional gaming attractions as well as building restaurants
and other casino and resort amenities as to be determined by THCR Development
Company and the Twenty-Nine Palms Band. On the same date, THCR Management
Services, LLC, a Delaware limited liability company and subsidiary of THCR
Holdings ("THCR Management"), and Twenty-Nine Palms Band entered into a
five-year management agreement pursuant to which THCR Management is to conduct
and direct all business and affairs in connection with the day-to-day operation,
management and maintenance of the Trump Spotlight 29 Casino. The Twenty-Nine
Palms Band's tribal land and existing casino are located directly off interstate
I-10 in the Coachella Valley, 20 minutes from Palm Springs, California.
Consummation of the transaction is subject to various conditions, including
obtaining certain approvals and licenses from, among others, the National Indian
Gaming Commission.
THCR operates in only one industry segment. See "Financial Statements
and Supplementary Data." For ease of discussion, the Trump Atlantic City
Properties and the Indiana Riverboat are discussed individually. Unless
otherwise indicated, references to "Trump Plaza" include the Trump Plaza's main
tower (the "Trump Plaza Main Tower") and east tower (the "Trump Plaza East
Tower"). Also, unless otherwise indicated, references to "management" or
"Management" include the officers and managers of THCR as well as the officers
and managers of the relevant subsidiary of THCR whose property is being
discussed at the time.
Trump Plaza
General. Management believes that Trump Plaza's International Star
Diamond Award from the American Academy of Hospitality Sciences reflects the
high quality amenities and services that Trump Plaza provides to its casino
patrons and hotel guests. Located in the center of the Boardwalk, featuring high
quality amenities and the public's association of Trump Plaza with Mr. Trump,
management believes that Trump Plaza remains one of the premier host properties
in Atlantic City. Also, management believes that the construction of the new
Atlantic City Convention Center, completed in May 1997, and the tourist corridor
linking the new convention center to the Boardwalk directly enhances the
attractiveness of Atlantic City as a convention and destination center, and, due
to Trump Plaza's location at the center of the Boardwalk and at the end of the
main highway into Atlantic City, indirectly augments Trump Plaza's appeal to
patrons who drive to Atlantic City (commonly referred to as "drive-in" patrons)
as well as those who take buses and other modes of transportation to Atlantic
City and those who stroll the Boardwalk ("walk-in" or "bus" patrons).
Facilities and Amenities
General. The Trump Plaza property is comprised of two buildings, the Trump
Plaza Main Tower which has 555 hotel rooms, including 73 suites, and the Trump
Plaza East Tower which has 349 hotel rooms, including 67 suites. The property
has 85,253 square feet of casino space, with 2,812 slot machines and 97 table
games. Amenities and services include 18,157 square feet of convention space, an
800-seat cabaret theater, four cocktail lounges, eight restaurants, two player
clubs, a health spa, an indoor pool, tennis courts and three retail outlets.
The Trump Plaza East Tower was fully integrated into Trump Plaza in 1996
and, together, the Trump Plaza Main Tower and Trump Plaza East Tower are
operated as a single casino hotel facility. Management believes that the
additional hotel rooms and gaming facilities in the Trump Plaza East Tower,
which has 13,933 square feet of gaming space and 597 slot machines, better
enable Trump Plaza to accommodate the more profitable weekend drive-in patron
who tends to wager more per play and per visit than the typical walk-in or bus
patron. Trump Plaza's management team intends to continue the marketing
strategies it has historically found to be successful in targeting and
attracting lucrative high-end drive-in slot customers.
2
The entry level of Trump Plaza's Main Tower includes a cocktail lounge,
deli, coffee shop, pastry stop, buffet and three gift shops. The casino level
houses the casino, an exclusive slot lounge for high-end patrons and a high-end
slot area and a private gaming area themed with various elements of Asian decor
and offering an ocean view. An enclosed walkway connects the Trump Plaza Main
Tower at the casino level with the Atlantic City Convention Center. The Trump
Plaza East Tower has a casino with windows overlooking the Boardwalk.
Most of Trump Plaza's guest rooms have a view of the ocean. While rooms are
of varying size, a typical guest room consists of approximately 400 square feet.
Trump Plaza's main tower also features 16 one-bedroom suites, 28 two-bedroom
suites and 18 "Super Suites." The Super Suites are located on the top two floors
of Trump Plaza's main tower and offer luxurious accommodations and 24-hour
butler and maid service. The Super Suites and certain other suites are located
on the "Club Level" which require guests to use a special elevator key for
access, and contain a separate lounge area offering food and spirits.
Trump Plaza's Main Tower is connected by an enclosed pedestrian walkway to
a ten-story parking garage, which contains 14 bus bays and can accommodate 2,778
cars. The parking garage also provides patrons with safe and immediate access to
the casino, and is located directly off the Atlantic City Expressway, the main
highway into Atlantic City (the "Trump Plaza Transportation Facility").
In January 2000, Trump Plaza completed an approximately $425,000 renovation
and expansion of its salon. The new 2,720 square-foot salon offers state of the
art equipment and a full range of services geared towards Trump Plaza's high-end
clientele.
In 2000, Trump Plaza opened a new table gaming area named "Shangri-La" to
attract and cater specifically to Asian gaming customers. Shangri-La features an
aggregate of 15 Asian-style games (e.g., pai gow poker, etc.) in a separate
gaming area themed with various elements of Asian decor. Adjacent to the
Shangri-La gaming area is a cafe named the Shangri-La Cafe which is also themed
with Asian decor and offers special amenities targeted to attract and appeal to
Asian customers, including a karaoke stage area, sushi bar and more. Renovation
was completed in January 2000, and the aggregate cost to renovate the Shangri-La
gaming area and Shangri-La Cafe was $1.5 million.
In September 1993, Time Warner Entertainment Company, L.P. ("Warner
Brothers") entered into a ten year lease (the "Time Warner Plaza Lease")
pursuant to which Warner Brothers leased approximately 17,000 square feet of
retail space with Boardwalk frontage in Trump Plaza's East Tower for the
operation of a Warner Brothers Studio Store (the "Plaza Warner Brothers Store").
Pursuant to the Time Warner Plaza Lease, Time Warner is obligated to pay to
Trump Plaza an amount equal to (i) 7.5 percent (7.5%) of gross annual sales up
to and including $15.0 million and (ii) 10 percent (10.0%) of gross sales in
excess of $15.0 million. The Time Warner Plaza Lease also grants Time Warner the
option to renew the Time Warner Plaza Lease for two additional five years terms.
Recent public reports, confirmed with Time Warner officials, indicate that
Time Warner intends to close the Warner Brothers retail chain in the third
quarter of calendar 2001, including the Plaza Warner Brothers Store, as a cost
savings measure related to Time Warner's January 2001 merger with America
Online, Inc. ("AOL"). Management currently intends to utilize this space to
expand its existing casino floor with additional slot machines.
Trump World's Fair. In 1996, Trump Plaza opened the Trump World's Fair (the
"Trump World's Fair"). However, because of operational inefficiencies, including
the lack of a parking garage, management decided to close the Trump World's Fair
in October 1999, and the facility is currently in the process of being
dismantled. The estimated cost of closing the Trump World's Fair is
approximately $124.8 million, including approximately $97.2 million for the
writedown of the net book value of the assets and approximately $27.6 million of
costs incurred and to be incurred in connection with the closing and demolition
of the building. For the fiscal year ended December 31, 2000, an additional
$814,000 was charged to operations. Management anticipates the dismantling of
the Trump World's Fair to be completed in the summer of 2001, although the
schedule is subject to change due to weather and/or market conditions, and no
assurances can be given that the Trump World's Fair will be dismantled on time
or within budget.
3
The original Atlantic City Convention Center, which is immediately adjacent
to Trump Plaza, is undergoing a $90.0 million renovation funded by the New
Jersey Casino Reinvestment Development Authority (the "CRDA"). These
improvements are expected to be completed by the summer of 2001, and will
convert the Convention Center's East Hall into a modern, special events venue.
Management believes these improvements to the Atlantic City Convention Center
will benefit both Atlantic City and Trump Plaza.
Business and Marketing Strategy
General. A primary element of Trump Plaza's business strategy is to attract
patrons who tend to wager more frequently and in larger denominations than the
typical Atlantic City gaming customer. Trump Plaza's management team has
launched a variety of initiatives designed to increase the level of casino
gaming activity at Trump Plaza and to attract quality casino patrons who tend to
wager more frequently than the typical Atlantic City patron. These initiatives
include targeted marketing and advertising campaigns directed to select groups
of customers in the Boston-New York-Philadelphia-Washington, D.C. corridor and
the introduction of new updated gaming products.
Trump Plaza also caters to the mid to high-level segment. Trump Plaza's
concentration of special events, entertainment, suites and a variety of gourmet
restaurants define its presence and highly perceived image. Trump Plaza's suite
product, high-end slot clubs and fine dining restaurants reflect Plaza
Associates' continuing commitment to this segment of the market. While Trump
Plaza strives to accommodate the more lucrative drive-in patron, it also offers
a fun, relaxing experience which management believes is appealing to patrons. In
2000, management added a wide variety of new slot machines to both the Trump
Plaza Main Tower and the Trump Plaza East Tower. Additionally, increased focus
has been placed on providing excellent customer service to patrons while playing
the slot machines.
"Comping" Strategy. In order to compete effectively with other Atlantic
City casino hotels, Trump Plaza offers complimentary drinks, meals, room
accommodations and/or travel arrangements (commonly referred to as
"complimentaries" or "comps") to select patrons. Management strives to monitor
and update Trump Plaza's policy so as to provide complimentaries primarily to
patrons who have a demonstrated propensity to wager at Trump Plaza by
systematically reviewing patrons' prior gaming history at Trump Plaza. Each
patron's gaming history is carefully analyzed to determine whether such patron's
gaming activity at the Trump Plaza, less the value of any comps, is potentially
profitable to Trump Plaza. Additionally, as a result of increased regulatory
flexibility, Trump Plaza has implemented a cash comping policy to high-end
players in order to compete with similar practices in Las Vegas and to attract
international business.
Entertainment. Trump Plaza offers headline entertainment as part of its
strategy to attract high-end gamblers and cash-paying patrons. Trump Plaza
offers a variety of headline entertainment throughout the year. During the
fiscal year ended December 31, 2000, there were 17 headline entertainment acts
featured at Trump Plaza, including performances by Michael Bolton, k.d. Lang,
Tom Jones, Damon Wayans, David Brenner, Jeffrey Osborn, Bad Company's Paul
Rodgers and Richard Lewis.
Player Development. Plaza Associates currently employs gaming
representatives (commonly called "Casino Hosts" or "Player Development
Executives") to promote Trump Plaza and its amenities to existing and
prospective mid-level and high-end Trump Plaza patrons. These gaming
representatives promote special events, incentive giveaways and slot or table
games tournaments by directly contacting patrons by telephone or in person.
Trump Plaza's Casino Hosts also assist patrons on the casino floor, arrange room
and dinner reservations and provide general assistance. To increase Trump
Plaza's marketing base, Casino Hosts also solicit patrons to enroll in Trump
Plaza's frequent player card program to receive their own individual Trump card
(the "Trump Card"). The Trump Card program is described in the following
paragraph.
Promotional Activities. The Trump Card program constitutes a key element in
Trump Plaza's direct marketing program. Both table and slot machine players are
encouraged to register for, and utilize, their personalized Trump Card to earn
various complimentaries and incentives based upon their level of play. Before
the commencement of play, the cardholder inserts his or her Trump Card into a
card reader attached to the slot machine or, in the case of a table game, gives
his or her Trump Card to the floor person. Cardholders can switch machines or
tables as often as they like without losing any credit. Computer systems record
data about the cardholder, including playing preferences, frequency and
denomination of play and the actual or projected amount of gaming revenues
produced or to be produced. Player Development Executives and management
personnel are then able to identify and monitor the location of the cardholder
and the frequency and denomination of such cardholder's play. They can also use
this information to provide attentive service to the cardholder while the patron
is on the casino floor.
4
Trump Plaza also designs promotional offers, through the deployment of
direct mailing and telemarketing strategies, to attract and retain gaming
patrons who are reasonably expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Trump Card and on table game wagering by the casino game supervisors.
Historically, promotional activities have included selective mailings of coin
vouchers, for special event parties, sweepstakes and gaming tournaments.
Management continuously reviews its promotional programs to attract and retain
Trump Plaza patrons.
Credit Policy. Historically, Trump Plaza has extended credit on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1998, 1999 and 2000, credit play as a percentage of total dollars wagered
was approximately 22.4%, 22.8% and 23.2%, respectively. Trump Plaza establishes
credit limits based upon the particular patron's creditworthiness, as determined
by an examination of the following criteria: (i) checking the patron's personal
checking account balance, (ii) performing a credit check on each domestic patron
and (iii) checking the patron's credit limits and indebtedness at all casinos in
the United States, as well as many island casinos. The determination of a
patron's creditworthiness is performed for continuing patrons on a yearly basis
or more frequently if Plaza Associates deems a re-determination of
creditworthiness is warranted. In addition, depositing of markers is regulated
by the state of New Jersey. Markers in increments of amounts up to and including
$1,000 are deposited in a maximum of seven days; markers in increments of $1,001
to $5,000 are deposited in a maximum of 14 days; and markers in increments of
$5,001 and over are deposited in a maximum of 45 days. Markers may be deposited
sooner at the request of patrons or at Trump Plaza's discretion.
Bus Program. Trump Plaza also has a bus program which transports an average
of 1,500 gaming patrons per day during the weekdays and an average of 2,800
gaming patrons per day on the weekends. Trump Plaza's bus program offers
incentives and discounts to certain scheduled and chartered bus customers. The
Trump Plaza Transportation Facility is connected to Trump Plaza by an enclosed
pedestrian walkway and provides patrons with immediate and secure access to the
casino hotel from the bus and a comfortable lounge area for patrons waiting for
return buses.
Employees and Labor Relations
As of December 31, 2000, Plaza Associates had approximately 2,800 full-time
equivalent employees, of whom approximately 1,100 were covered by collective
bargaining agreements. The collective bargaining agreement with Local No. 54
expires on September 15, 2004. Management believes that its relationships with
its employees are satisfactory.
Certain employees of Plaza Associates must be licensed by or registered
with the CCC under the New Jersey Casino Control Act (the "Casino Control Act"),
depending on the nature of the position held. Casino employees are subject to
more stringent licensing requirements than non-casino employees, and must meet
applicable standards pertaining to such matters as financial responsibility,
good character, ability, casino training, experience and New Jersey residency.
Such regulations have resulted in significant competition for employees who meet
these requirements.
Taj Mahal
General. The Taj Mahal continues to rank first among all Atlantic City
casinos in terms of total gaming revenues for the year ended December 31, 2000,
as well as in each previous year since opening in 1990. Located on the northern
end of the Boardwalk, the Taj Mahal capitalizes on the widespread recognition
and marquee status of the "Trump" name and its association with high quality
amenities and first-class service as evidenced by its International Star Diamond
Award from the American Academy of Hospitality Sciences. Management believes
that the breadth and diversity of the Taj Mahal's casino, entertainment and
convention facilities and its status as a "must see" attraction will enable the
Taj Mahal to benefit from the potential growth of the Atlantic City market.
In November 1998, the Taj Mahal entered into a development agreement with
the CRDA for the redevelopment of the road corridors and surrounding
neighborhoods leading from Route 30, one of its major access routes, and the Taj
Mahal. The project, which cost approximately $20.8 million and used, in part,
funds deposited by the Taj Mahal with the CRDA, was substantially completed in
the summer of 2000, and management believes it has greatly enhanced the Taj
Mahal's customer's experience by making the Taj Mahal more accessible.
Management believes that the completed project has greatly improved the road's
infrastructure and lighting, provided extensive landscaping, improved the
neighborhood through the acquisition and demolition of certain deteriorated
buildings and the construction of a new housing development.
In June 2000, the Taj Mahal opened the Casbah entertainment complex which
management believes has become one of Atlantic City's most unique entertainment
venues. The Casbah entertainment complex is adjacent to the Xanadu Theater on
the
5
Boardwalk. The complex features a Boardwalk level bar, a seasonal
outdoor dining area with live bands and a centerpiece high-energy nightclub.
Facilities and Amenities
General. The Taj Mahal consists of a 42-story hotel tower and contiguous
low-rise structure sited on approximately 30.0 acres of land. The Taj Mahal
offers 1,250 guest rooms, including 242 suites, 19 dining and 12 beverage
locations, parking for approximately 6,950 cars, a 14-bay bus terminal and
approximately 65,000 square feet of ballroom, meeting room and pre-function area
space. The Taj Mahal features approximately 154,871 square feet of gaming space,
210 table games and 4,611 slot machines, which includes an approximately 12,000
square-foot poker, keno and race simulcasting room with 66 poker tables. The
casino offers blackjack, craps, roulette, baccarat, mini baccarat, Caribbean
stud poker, big six, Spanish 21, let it ride poker and three card poker. In
addition, the Taj Mahal offers an Asian-themed table game area which offers 15
popular Asian table games, including sic-bo and pai gow poker, targeted to
attract and retain Taj Mahal's growing Asian clientele. As a special bonus to
high-end players, the Taj Mahal offers three clubs for the exclusive use of
selected customers: (i) the Maharajah Club, for high-end table game players,
(ii) the President's Club, for high-end slot players, and (iii) the Bengal Club,
for other preferred slot players. In addition, the Taj Mahal features a 20,000
square-foot multi-purpose entertainment complex known as the "Xanadu Theater,"
with seating capacity for up to approximately 1,200 persons which can be used as
a theater, concert hall, boxing arena or exhibition hall (the "Taj Entertainment
Complex"), and the Mark Etess Arena, which comprises an approximately 63,000
square-foot exhibition hall and entertainment facility.
From 1994 to mid-1997, the Taj Mahal refurbished substantially all of its
hotel guest rooms and corridors, and replaced all of its existing slot machines
with new, more efficient machines with bill acceptors. Also, in May 1997, the
Taj Mahal finished construction on a 2,400 space expansion of the existing
self-parking facilities, and in July 1997, finished construction of an
approximately 7,000 square-foot casino expansion accommodating approximately 260
slot machines with frontage on the Boardwalk. In 1999, Taj Associates again
expanded Taj Mahal's casino floor frontage on the Boardwalk by approximately
4,600 square feet, accommodating the addition of approximately 200 slot
machines. Also, in 2000, Taj Associates expanded the Taj Mahal's casino floor by
approximately 2,500 square feet, accommodating the addition of approximately 160
slot machines in the former Princess Lounge area whose entertainment program was
moved to the bar located in Taj Mahal's hotel lobby. See "Properties; Taj Mahal,
Themed Restaurants and Retail Shopping" for further discussion of these outlets.
In October 1999, the Taj Mahal completed its expansion of the retail
shopping area along the length of its parking garage promenade walkway
immediately adjoining the Taj Mahal's main retail shopping area. The first
tenant, a Starbucks coffeeshop, operated by Host International, Inc., opened in
September 1996. Sbarro's, an Italian fast food eatery, operated by Sbarro
America Properties, Inc., opened in October 1998. Boardwalk Treats, Beka's
Pastries and a Harley Davidson retail merchandise outlet opened at various times
during 1999. A Sunglass Hut, a retail store of fashionable sunglasses operated
by Sunglass Hut International, opened in August 1998 in a separate location also
adjoining the Taj Mahal's main retail shopping area. See "Properties; Taj
Mahal."
To increase dining opportunities for customers, the Hard Rock Cafe, the All
Star Cafe and the Stage Deli of New York were opened at the Taj Mahal in
November 1996, April 1997 and September 1997, respectively. A Warner Brothers
Studio Store opened in May 1997. In September 1999, Taj Associates assumed
operations of the All Star Cafe, which Taj Mahal continued to operate, and
eventually remodeled and incorporated into the Casbah entertainment complex,
which opened in June 2000. Management believes that the Casbah entertainment
complex has since become one of Atlantic City's most unique entertainment
venues. The Casbah entertainment complex features a centerpiece high-energy
nightclub, seasonal outdoor dining with live bands and a Boardwalk lobby bar,
all adjacent to the Xanadu Theater on the Boardwalk. See "Properties; Taj
Mahal."
Time Warner officials also intend to close the Warner Brothers Studio Store
located at the Taj Mahal during the third quarter of calendar 2001. Management
currently intends to find a comparable retailer or other merchant to lease such
space. See "Properties; Taj Mahal."
Business and Marketing Strategy
Gaming Environment. Taj Mahal's management continues to capitalize on the
Taj Mahal being one of the largest facilities in Atlantic City and what
management believes is Taj Mahal's reputable status as a "must see" attraction,
while maintaining the attractiveness of the property and providing a comfortable
and secure gaming experience. For the year ended December 31, 2000, the Taj
Mahal captured approximately 55.9% of the total Atlantic City poker revenues, an
increase from 55.3% for the fiscal year
6
ended December 31, 1999. In 1997, the Taj Mahal expanded its casino floor by
approximately 8,600 square feet. The 1997 expansion accommodated casino space
with Boardwalk frontage and a second horserace simulcasting location. In 1999,
the Taj Mahal again expanded its casino floor Boardwalk frontage by
approximately 4,600 square feet, accommodating the addition of approximately 200
additional slot machines. In 2000, the Taj Mahal again expanded its casino floor
by approximately 2,500 square feet, accommodating the addition of approximately
160 slot machines.
The Taj Mahal currently intends to reconfigure its casino floor, subject to
approval by the CCC on an ongoing basis, to accommodate perceived changes in
patron demand. Management systematically monitors the configuration of the
casino floor and the types of games offered to patrons with a focus towards
appealing to patrons' tastes and correcting inefficiencies. For example, the Taj
Mahal's casino floor has clear, large signs for the convenience and ease of
patrons. Additionally, as new games are approved by the CCC, management
determines whether to integrate them into the casino floor. In 1999, a game
called "Spanish 21" was added, and in January 2001, "three card poker" was
added.
"Comping" Strategy. In order to compete effectively with other Atlantic
City casino hotels, the Taj Mahal offers complimentaries to select patrons.
Management strives to monitor and update the Taj Mahal's policy so as to provide
complimentaries primarily to patrons who have a demonstrated propensity to wager
at the Taj Mahal by systematically reviewing patrons' prior gaming history at
the Taj Mahal. Each patron's gaming history is carefully analyzed to determine
whether such patron's gaming activity at the Taj Mahal, less the value of any
comps, is potentially profitable to the Taj Mahal. Additionally, as a result of
increased regulatory flexibility, the Taj Mahal has implemented a cash comping
policy to high-end players in order to compete with similar practices in Las
Vegas and to attract international business.
Entertainment. Management believes headline entertainment, as well as other
sporting and entertainment events, is an effective means of attracting and
retaining gaming patrons. The Xanadu Theater, together with the Mark Etess Arena
(an approximately 63,000 square-foot exhibition hall facility), afford the Taj
Mahal more flexibility in the use of its larger entertainment arena for sporting
and other headline attractions. The Taj Mahal regularly engages popular
musicians and entertainment personalities, and will continue to emphasize
weekend marquee events, such as high visibility sporting events, festivals and
contemporary concerts to maintain the highest level of glamour and excitement at
the Taj Mahal. Mid-week uses for the facilities have included convention events
and casino marketing sweepstakes. In 2000, Taj Mahal was the site of many major
entertainment events, including performances by Andrea Boccelli, Britney Spears,
Luciano Pavarotti and Brooks and Dunn.
Player Development. Taj Associates employs marketing representatives as a
means of attracting high-end slot and table gaming patrons to the property and
to host special events, offer incentives and contact patrons directly in the
United States, Canada and South America. In addition, marketing campaigns
targeted to international clientele will be continued in Latin America, Mexico,
Europe, the Far East and the Middle East. Casino hosts assist patrons on the
casino floor, arrange room and dinner reservations and provide general
assistance. To increase Taj Mahal's marketing base, casino hosts also solicit
patrons to enroll in Taj Mahal's frequent player card program to receive their
own individual Taj card (the "Taj Card"). The Taj Card program is discussed
below.
The Taj Mahal also plans to continue the development of its slot and coin
programs through direct mail and targeted marketing campaigns focusing on the
high-end and mid-level player. The Taj Mahal's customer bus-in program, has been
an important component of player development, and will continue to focus on
tailoring its player base and maintaining a low-cost package.
Promotional Activities. The Taj Card program constitutes a key element in
the Taj Mahal's direct marketing program. Both table and slot machine players
are encouraged to register for, and utilize, their personalized Taj Card to earn
various complimentaries and incentives based upon their level of play. Before
the commencement of play, the cardholder inserts his or her Taj Card into a card
reader attached to the slot machine or, in the case of a table game, gives his
or her Taj Card to the floor person. Cardholders can switch machines or tables
as often as they like without losing any credit. Computer systems record data
about the cardholder, including playing preferences, frequency and denomination
of play and the amount of gaming revenues produced. Sales and management
personnel are then able to identify and monitor the location of the cardholder
and the frequency and denomination of such cardholder's play. They can also use
this information to provide attentive service to the cardholder while the patron
is on the casino floor.
The Taj Mahal also designs promotional offers, through the deployment of
direct mailing and telemarketing strategies, to attract and retain gaming
patrons who are reasonably expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Taj Card and on table game wagering by the casino game supervisors.
7
Historically, promotional activities have included selective mailings of
vouchers for complimentary slot machine play and special events programs,
gift-giveaways, sweepstakes and special competitions. Management continuously
reviews its promotional programs to attract and retain Taj Mahal patrons.
The Taj Mahal also routinely hosts slot machine and table game tournaments
in which cash prizes are offered to a select group of players invited to
participate in the tournament based upon their tendency to play. Special events
such as "Slot Sweepstakes" and "bingo" are designed to increase mid-week
business. Players at these tournaments also tend to play on the casino floor at
their own expense during "off-hours" of the tournament. At times, tournament
players are also offered special dining and entertainment privileges that
encourage them to remain at the Taj Mahal. Tiered gift programs tailored to
various levels of players are utilized to enhance volumes on certain days of the
month. During 2000, the Taj Mahal hosted a variety of special table game
tournaments, including baccarat, blackjack and pai gow poker, among others, as
well as hosted the U.S. Poker Championship.
Credit Policy. Historically, the Taj Mahal has extended credit on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1998, 1999 and 2000, the Taj Mahal's credit play as a percentage of total
dollars wagered was approximately 26.6%, 23.7% and 22.6%, respectively. The Taj
Mahal establishes credit limits based upon the particular patron's
creditworthiness, as determined by an examination of the following criteria: (i)
checking the patron's personal checking account balance, (ii) performing a
credit check on each domestic patron and (iii) checking the patron's credit
limits and indebtedness at all casinos in the United States, as well as many
island casinos. The determination of a patron's creditworthiness is performed
for continuing patrons on a yearly basis or more frequently if Taj Associates
deems a re-determination of creditworthiness is warranted. In addition,
depositing of markers is regulated by the state of New Jersey. Markers in
increments of amounts up to and including $1,000 are deposited in a maximum of
seven days; markers in increments of $1,001 to $5,000 are deposited in a maximum
of 14 days; and markers in increments of $5,001 and over are deposited in a
maximum of 45 days. Markers may be deposited sooner at the request of patrons or
at the Taj Mahal's discretion.
Employees and Labor Relations
As of December 31, 2000, Taj Associates had approximately 4,500 full-time
equivalent employees for the operation of the Taj Mahal, approximately 1,875 of
whom were covered by collective bargaining agreements. The collective bargaining
agreement with Local No. 54 expires on September 15, 2004. Management believes
that its relationships with its employees are satisfactory.
Certain employees of Taj Associates must be licensed by or registered with
the CCC under the Casino Control Act, depending on the nature of the position
held. Casino employees are subject to more stringent licensing requirements than
non-casino employees, and must meet applicable standards pertaining to such
matters as financial responsibility, good character, ability, casino training,
experience and New Jersey residency. Such regulations have resulted in
significant competition for employees who meet these requirements.
Trump Marina
General. THCR and THCR Holdings, through Castle Associates, own and operate
Trump Marina, a casino hotel situated on 14.7 acres in the Marina District
approximately two miles from the Boardwalk and one-quarter mile from the
H-Tract. By providing and maintaining a first-class facility and exceptional
service, Trump Marina has earned the International Star Diamond Award from the
American Academy of Hospitality Sciences. Trump Marina continuously strives to
provide a broadly-diversified gaming and entertainment experience consistent
with the "Trump" name and reputation for high-quality amenities and first-class
service.
Facilities and Amenities
Trump Marina consists of a 27-story hotel tower with 728 rooms, including
153 suites, 97 of which are "Crystal Tower" luxury suites, and contains
approximately 82,100 square feet of gaming space. Trump Marina offers
approximately 2,500 slot machines, 76 table games, a simulcast racetrack
facility, and has 58,000 square feet of convention, ballroom and meeting space,
a 540-seat cabaret theater ("The Shell"), two clubs for the exclusive use of
select patrons, three retail outlets, seven restaurants, two cocktail lounges
and a pool snack bar. The Trump Marina also offers an outdoor basketball court,
jogging track, swimming pool, four tennis courts and an indoor fitness center
and salon. In addition, Trump Marina features a roof-top helipad, operates a
645-slip marina adjacent to the casino hotel, has eleven bus bays and a
nine-story parking garage that can accommodate approximately 3,000 cars. An
elevated enclosed walkway connects Trump Marina to a two-story building which
contains offices,
8
a nautically themed retail store, a cocktail lounge and a 240-seat gourmet
restaurant overlooking the marina and the Atlantic City skyline. As a result of
its high-quality amenities, its exceptional customer service and its
geographical location, Trump Marina distinguishes itself as a desirable
alternative to the Atlantic City casinos located on the Boardwalk.
Business and Marketing Strategy
"Wild Side." In 1997, Trump Marina completed a project to re-theme the
casino hotel with a nautical emphasis, targeting younger affluent customers by
offering contemporary entertainment attractions and emphasizing Trump Marina's
energetic, lively "club-like" atmosphere, while maintaining its appeal to its
established customer base. In keeping with this initiative, management developed
and implemented the Trump Marina's "Wild Side" marketing and advertising
campaigns containing a vivacious, youthful appeal geared towards a younger,
affluent demographic. The Trump Marina offers varied and contemporary
entertainment in "The Grand Cayman Ballroom" (82,100 square feet of convention
space), "The Shell" (a 540-seat cabaret theater used to feature acts by bands
and musical artists popular with a younger crowd), "The Wave" (a dance club),
"The Deck" (for outdoor summertime entertainment) and large outdoor performances
billed as "Rock the Dock" concerts. Also, a "Hooters" restaurant, a
burger-and-beer style franchise popular among Trump Marina's targeted younger
demographic, opened in February 2001 on the fourth floor of the Trump Marina,
overlooking Trump Marina's general greeting area and bar located on the third
floor and which is easily accessible by either elevator or escalator adjacent to
the restaurant entrance.
Gaming Environment. To stay abreast of current gaming trends in Atlantic
City, Trump Marina's management systematically monitors the configuration of the
casino floor and the games it offers to patrons with a view towards making
changes and improvements. A computerized slot tracking and marketing system is
employed to perform this analysis. This monitoring has confirmed a recent trend
in the Atlantic City market towards fewer table games and more slot machines.
For example, slot machine revenue for the Atlantic City market increased from
58.4% of the industry table games and slot revenue in 1990 to 72.5% in 2000.
Trump Marina experienced a similar increase, with slot revenue increasing from
57.9% of table games and slot revenue in 1990 to 73.1% in 2000. In response to
this trend, management has devoted more of its casino floor space to slot
machines and has replaced substantially all of its slot machines with newer
machines. Also, management has increased the number of slot machines offering
patrons stools on which to sit while gaming, which has proven to be effective in
increasing patrons' comfort and gaming entertainment experience.
"Comping" Strategy. In order to compete effectively with other Atlantic
City casino hotels, Trump Marina offers complimentaries to select patrons.
Management strives to monitor and update Trump Marina's policy so as to provide
complimentaries primarily to patrons who have a demonstrated propensity to wager
at Trump Marina by systematically reviewing patrons' prior gaming history at
Trump Marina. Each patron's gaming history is carefully analyzed to determine
whether such patron's gaming activity at the Trump Marina, less the value of any
comps, is potentially profitable to the property.
Entertainment and Special Events. Trump Marina pursues a coordinated
program of headline entertainment and special events geared towards a younger
crowd. Trump Marina offers headline entertainment approximately 20 times a year
in its main ballroom called "The Grand Cayman Ballroom," complemented by
contemporary acts each weekend in its 540-seat cabaret theater called "The
Shell." As a part of its marketing plan, Trump Marina offers special events
aimed at its core, middle and upper-middle market segments. Trump Marina also
hosts special events on an invitation-only basis in an effort to attract
targeted gaming patrons and build loyalty among these patrons. These special
events have included theme parties and gaming tournaments. Headline
entertainment has also been featured to complement these special events. In
addition, as part of its "Wild Side" marketing campaign, Trump Marina has
featured outdoor bands by the marina nightly (in season), as well as outdoor
concerts promoted under the "Rock the Dock" theme. Recent performances have
included Stone Temple Pilots, Foreigner, Alice Cooper, Brian Setzer, The
Wallflowers and Sammy Hagar.
Player Development. Castle Associates has contracts with sales
representatives located in various states to promote the casino hotel. Trump
Marina has historically sought to attract more middle market slot patrons, as
well as premium players through its "junket" marketing operations, which involve
attracting groups of patrons by providing airfare, gifts, and room
accommodations. Player development personnel at Trump Marina coordinate special
events, offer incentives and directly contact patrons in an effort to attract
high-limit table game and slot patrons. Trump Marina's casino hosts also assist
patrons on the casino floor, arrange room and dinner reservations and provide
general assistance. To increase Trump Marina's marketing base, player
development personnel also encourage patrons to enroll in Trump Marina's
frequent player card program to receive their own individual Trump Marina Wild
Card (the "Marina Wild Card"). The Marina Wild Card program is discussed in the
next paragraph.
9
Promotional Activities. The Marina Wild Card constitutes a key element in
the direct marketing program of Trump Marina. Patrons are encouraged to register
for, and utilize, their personalized Marina Wild Cards to earn various
complimentaries based upon their level of play. Before the commencement of play,
the cardholder inserts his or her Marina Wild Card into a card reader attached
to the slot machine or, in the case of a table game, gives his or her Marina
Wild Card to the floor person. Cardholders can switch machines or tables as
often as they like without losing any credit. Computer systems record data about
the cardholder, including playing preferences, frequency and denomination of
play and the amount of gaming revenues produced. Sales and management personnel
are then able to identify and monitor the location of the cardholder and the
frequency and denomination of such cardholder's play. They can also use this
information to provide attentive service to the cardholder while the patron is
on the casino floor. Also, the Marina Wild Card may also enable cardholders to
receive a 20.0% discount, minimum purchase required, in certain retail stores
located in Trump Marina.
Trump Marina also designs promotional offers, through the deployment of
direct mailing and telemarketing strategies, to attract and retain gaming
patrons who are reasonably expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Marina Wild Card and on table game wagering by the casino game supervisors.
Historically, promotional activities have included selective mailings of
vouchers for complimentary slot machine play and hosting birthday parties,
sweepstakes and special competitions. Management continuously reviews its
promotional programs to attract and retain Trump Marina patrons.
Credit Policy. Historically, Trump Marina has extended credit on a
discretionary basis to certain qualified patrons. Table games credit play, as a
percentage of total dollars wagered, was approximately 30.1%, 32.6% and 30.0%
for the fiscal years ended December 31, 1998, 1999 and 2000, respectively. Trump
Marina establishes credit limits based upon the particular patron's
creditworthiness, as determined by an examination of the following criteria: (i)
checking the patron's personal checking account balance, (ii) performing a
credit check on each domestic patron and (iii) checking the patron's credit
limits and indebtedness at all casinos in the United States, as well as many
island casinos. The determination of a patron's creditworthiness is performed
for continuing patrons on a yearly basis or more frequently if Castle Associates
deems a re-determination of creditworthiness is warranted. In addition,
depositing of markers is regulated by the state of New Jersey. Markers in
increments of amounts up to and including $1,000 are deposited in a maximum of
seven days; markers in increments of $1,001 to $5,000 are deposited in a maximum
of 14 days; and markers in increments of $5,001 and over are deposited in a
maximum of 45 days. Markers may be deposited sooner at the request of patrons or
at Trump Marina's discretion.
Bus Program. Trump Marina has a bus program which transports approximately
550 gaming patrons per day during the weekdays and approximately 650 per day on
the weekends. Castle Associates' bus program offers incentives and discounts to
certain scheduled and chartered bus customers. Based on historical surveys,
management has determined that gaming patrons who arrive by special charters, as
opposed to patrons traveling by scheduled bus lines or who travel distances
greater than 60.0 miles, are more likely to create higher gaming revenue.
Accordingly, Trump Marina's marketing efforts are focused on attracting such bus
patrons.
Employees and Labor Relations
As of December 31, 2000, Castle Associates had approximately 3,300 full and
part-time employees, 1,200 of whom were subject to collective bargaining
agreements. Castle Associates' collective bargaining agreement with Local No. 54
expires on September 15, 2004. Such agreement extends to approximately 900
employees. In addition, four other collective bargaining agreements cover
approximately 300 maintenance employees. Castle Associates believes that its
relationships with its employees are satisfactory. Funding and TCHI have no
employees.
Certain employees of Castle Associates must be licensed by or registered
with the CCC under the Casino Control Act, depending on the nature of the
position held. Casino employees are subject to more stringent licensing
requirements than non-casino employees, and must meet applicable standards
pertaining to such matters as financial responsibility, good character, ability,
casino training, experience and New Jersey residency. Such regulations have
resulted in significant competition for employees who meet these requirements.
Indiana Riverboat
General. The Indiana Riverboat operates out of Buffington Harbor in Gary,
Indiana. Buffington Harbor is approximately 25.0 miles from downtown Chicago,
Illinois. In addition, the cities of Indianapolis, Fort Wayne, Toledo, Grand
Rapids and Milwaukee are each within a 175-mile radius of Buffington Harbor.
Management believes the Indiana Riverboat benefits from (i) its location and
size, (ii) its strategy of developing, together with Majestic Star Casino,
L.L.C. ("Barden") (as described herein),
10
an array of entertainment, retail and restaurant attractions, and coordinated
cruise schedules and (iii) the widespread recognition of the "Trump" name and
what management believes to be its reputation for quality. Gaming facilities in
Illinois are presently limited to 1,200 gaming positions under current
regulations in Illinois, which management believes puts Illinois properties at a
competitive disadvantage to larger facilities such as the Indiana Riverboat.
However, recent statutory changes now enable Illinois riverboats to remain
dockside, allowing patrons to freely enter and exit, whereas Indiana casino
riverboats are required to cruise.
Features and Amenities
The Indiana Riverboat features an approximately 280-foot luxury yacht
containing approximately 37,000 square feet of gaming space with approximately
1,250 slot machines, 50 table games and capacity for approximately 2,690
passengers and 300 employees. The site adjacent to the Indiana Riverboat
includes surface parking for approximately 3,000 automobiles and certain other
infrastructure improvements, including a 300-room hotel. The cost to THCR for
the development of the Indiana Riverboat, which includes the land, the vessel,
gaming equipment, a pavilion for staging and ticketing and restaurant
facilities, berthing and support facilities and parking facilities, was $156.0
million through December 31, 2000. An additional amount of $17.0 million is
required to be spent in connection with municipal commitments. The $17.0 million
will be spent over the next 18 to 24 months with cash from operations or other
available financings. See " -- Business and Marketing Strategy; Buffington
Harbor."
Business and Marketing Strategy
THCR and Trump Indiana focus their marketing efforts for the Indiana
Riverboat on the middle market, which makes up the majority of the gaming
population in the 200-mile radius of Buffington Harbor, encompassing portions of
the states of Indiana, Illinois, Michigan, Ohio and Wisconsin (the "Great Lakes
Market.") The middle market constitutes a broad segment of casino patrons who
come to a casino for exciting recreation and entertainment and who typically
wager less, on an individual basis, than high-end patrons. Through the use of
the "Trump" name and systematic marketing programs, THCR has been attracting
this middle market customer.
Gaming Regulation. The operation of a gaming riverboat in Indiana is
subject to Indiana's Riverboat Gambling Act (the "Riverboat Gambling Act") and
the administrative rules promulgated thereunder. Under the Riverboat Gambling
Act, all games typically available in Atlantic City casinos are permitted on the
Indiana Riverboat. The riverboat casinos in Indiana are permitted to stay open
21 hours per day, 365 days per year and to extend credit and accept credit cards
with no loss or wagering limits.
In June 1996, the Indiana Gaming Commission (the "IGC") granted Trump
Indiana a riverboat owner's license for the ownership and operation of a gaming
vessel at Buffington Harbor, which must be renewed by June 2001.
Buffington Harbor. On June 30, 1995, Trump Indiana acquired, pursuant to an
Agreement of Sale, dated May 10, 1995 (the "Site Sale Agreement"), with Lehigh
Portland Cement Company ("Lehigh") approximately 88.0 acres of land at
Buffington Harbor (the "Buffington Harbor Site") for an aggregate purchase price
of $13.5 million. Pursuant to an agreement between Lehigh and Trump Indiana,
Lehigh granted Trump Indiana a lease for a term of up to 10 years for the use of
the harbor and certain of Lehigh's property adjacent to the Buffington Harbor
Site for the docking of the Indiana Riverboat vessel (the "Harbor Lease
Agreement"). No lease payments were due to Lehigh during the first 30 months of
the lease. Pursuant to the Harbor Lease Agreement, Lehigh is entitled to receive
lease payments in the amount of $125,000 per month for the use of the property
during the remaining term of the lease, if the use continues beyond the initial
30-month period. The initial period has expired and the lease payments are
currently being paid to Lehigh. Trump Indiana contributed the Buffington Harbor
Site and its rights under the Harbor Lease Agreement to Buffington Harbor
Riverboats, LLC, a 50.0% joint venture between Trump Indiana and Barden ("BHR"),
in connection with the formation of BHR. Pursuant to a joint venture agreement
between Trump Indiana and Barden (the "BHR Agreement"), BHR will own, develop
and operate all common land-based and waterside operations in support of Trump
Indiana's and Barden's separate riverboat casinos at Buffington Harbor. Trump
Indiana and Barden are each equally responsible for the development and the
operating expenses of BHR. In September 2000, BHPA (as defined herein) acquired
approximately 14.0 additional acres of land (not including the Buffington Harbor
Site) previously leased from Lehigh for the construction of a parking garage for
an aggregate purchase price of $15.0 million. The Harbor Lease Agreement (and
the payments thereunder) was terminated starting 2001. It is expected that the
construction of the parking garage will commence during the second quarter of
2001 with completion of the parking garage approximately 10 months thereafter.
The car parking garage and elevated roadway over certain railroad tracks are
expected to cost approximately $25.0 million following the acquisition of this
land.
Trump Indiana entered into a development agreement with the City of Gary,
Indiana, dated as of May 1, 1996 (the "Development Agreement"), which
memorialized the commitments made by Trump Indiana to the City of Gary during
the licensing
11
process. The Development Agreement sets forth (i) the scope and timing of the
capital expenditures committed to be made by Trump Indiana during the initial
five-year term of its riverboat owner's license; (ii) Trump Indiana's agreement
to pay to the City of Gary four percent (4.0%) of Trump Indiana's annual
adjusted gross receipts and (iii) Trump Indiana's commitment regarding the
employment of women and racial minorities and the utilization of union labor and
local vendors. The Development Agreement also provides for certain monetary
penalties in the event Trump Indiana had elected to abandon the Buffington
Harbor Site within the first four years of gaming operations. In addition, the
Development Agreement includes provisions regarding the "Trump Indiana
Foundation," a private foundation established by Trump Indiana for charitable
purposes primarily within the City of Gary and Lake County, Indiana. In 1996,
Trump Indiana funded an initial amount of $1.0 million to the Trump Indiana
Foundation. Trump Indiana is also required to make annual contributions of
$100,000 to the Trump Indiana Foundation. The required payments were made for
each year from 1997 through 2000. The Development Agreement was amended
effective February 28, 2001, which amendment confirmed Trump Indiana had
satisfied its commitments to the City of Gary, other than a remaining $17.0
million of economic development commitments to the City of Gary. Such amendment
was approved by the IGC on March 2, 2001.
Competition. Management believes that competition in the gaming industry,
particularly the riverboat and dockside gaming industry, is based on a
combination of quality and location of gaming facilities as well as the
implementation of effective marketing strategies. In June 1999, the Illinois
State Legislature authorized additional gaming facilities to be constructed in
Illinois and permitted the state's riverboat properties to begin operating
dockside, allowing patrons to freely enter and exit at any time. Since such
restrictions were lifted in June 1999, Illinois' casino revenues increased 34.0%
year over year. In addition to dockside gaming, Illinois gaming regulators
relaxed ownership hurdles, allowing operators to own more than one casino in the
state. Although management believes that the location of the Indiana Riverboat
allows Trump Indiana to compete effectively with other casinos in the
surrounding geographic area, management expects competition in the casino gaming
industry to become intense as more casinos are opened and new entrants into the
gaming industry become operational. See "-Competition."
Employees and Labor Relations
As of December 31, 2000, Trump Indiana had approximately 1,048 full-time
equivalent employees, of whom approximately 160 employees were covered by
collective bargaining agreements. The collective bargaining agreement with the
Hotel Employees and Restaurant Employees International Union ("H.E.R.E.")
expires in June 2001. Management believes that its relationships with its
employees are satisfactory.
Trademark/Licensing
Subject to certain restrictions, THCR has the exclusive world-wide right to
use the "Trump" name and Mr. Trump's likeness in connection with gaming and
related activities pursuant to a trademark license agreement, dated June 12,
1995, and the amendments thereto (the "Trump License Agreement"), between Mr.
Trump, as licensor, and THCR, as licensee. Pursuant to the Trump License
Agreement, THCR is permitted to use the names "Trump," "Donald Trump," "Donald
J. Trump" and variations thereof (collectively referred to as the "Trump
Names"), and related intellectual property rights (together with the Trump
Names, the "Marks") in connection with casino and gaming activities and related
services and products. The Trump License Agreement, however, does not restrict
or restrain Mr. Trump's right to use or further license the Trump Names in
connection with services and products other than casino services and related
products.
The term of the Trump License Agreement is until the later of: (i) June
2015, (ii) such time as Mr. Trump and his affiliates no longer own at least a
15.0% voting interest in THCR or (iii) such time as Mr. Trump ceases to be
employed or retained by THCR pursuant to an employment, management, consulting
or similar services agreement. Upon expiration of the Trump License Agreement,
Mr. Trump is required to grant to THCR a non-exclusive license to use the Marks
for a reasonable period of transition on terms to be mutually agreed upon
between Mr. Trump and THCR. Mr. Trump's obligations to THCR under the Trump
License Agreement are secured by a security agreement, pursuant to which Mr.
Trump has granted to THCR a first priority, security interest in the Marks for
use in connection with casino services, as well as related hotel, bar and
restaurant services.
12
Certain Indebtedness of THCR
Senior Notes. Concurrent with the initial public offering of THCR in June
1995 (the "June 1995 Offering"), THCR Holdings and THCR Funding (collectively,
the "THCR Obligors") issued senior promissory notes in the principal aggregate
amount of $155.0 million, bearing interest at the rate of 15-1/2% per annum,
payable semiannually in arrears on June 15th and December 15th of each year
commencing December 15, 1995, and maturing on June 15, 2005 (the notes are
collectively referred to as the "Senior Notes").
Commencing on June 15, 2000, the THCR Obligors may redeem, in whole or in
part, the Senior Notes pursuant to the terms and conditions in that certain
Senior Note Indenture, dated June 12, 1995 (the "Senior Note Indenture"), by and
among THCR Holdings, THCR Funding and U.S. Bank National Association, as trustee
(the "Trustee"). If redeemed at any time during the twelve-month period
commencing on June 15, 2000, the redemption price of the Senior Notes shall be
equal to 107.75% of the outstanding principal amount of the Senior Notes
redeemed, plus any accrued and unpaid interest as of the redemption date. For
the twelve-month period commencing on June 15, 2001, the redemption price
decreases to 105.167% of the outstanding principal amount, plus accrued and
unpaid interest as of the redemption date. For the twelve-month period
commencing on June 15, 2002, the redemption price further decreases to 102.583%
of the outstanding principal amount, plus accrued and unpaid interest as of the
redemption date. If any of the Senior Notes are redeemed on or after June 15,
2003, the redemption price shall be equal to 100.0% of the principal amount of
the Senior Notes redeemed, plus accrued and unpaid interest as of the redemption
date.
The obligations of the THCR Obligors under the Senior Note Indenture are
secured by an assignment and pledge by the THCR Obligors to the Trustee of (A)
all of the capital stock, general partnership interests or membership interests,
as the case may be, of: (i) Plaza Associates, (ii) Taj Associates, (iii) Trump
Plaza Funding, Inc., a New Jersey corporation ("Plaza Funding"), (iv) Trump
Atlantic City Corporation, a Delaware corporation and a wholly-owned subsidiary
of Trump AC ("TACC"), (v) Trump Atlantic City Funding, Inc., a Delaware
corporation and a wholly-owned subsidiary of Trump AC ("Trump AC Funding"), (vi)
Trump Atlantic City Associates, a New Jersey general partnership ("Trump AC"),
(vii) Trump Atlantic City Holding, Inc., a Delaware corporation and a
wholly-owned subsidiary of THCR Holdings which owns a 1.0% general partnership
interest in Trump AC ("Trump AC Holding"), (viii) Trump Indiana, (ix) THCR
Funding, (x) Castle Associates, (xi) Trump's Castle Hotel & Casino, Inc., a New
Jersey Corporation and the general partner of Castle Associates ("TCHI") and
(xii) other equity interests issued from time to time by THCR Holdings or any of
its Subsidiaries (as defined in the Senior Note Indenture), (B) the Castle PIK
Notes held by THCR Holdings and (C) promissory notes issued by THCR Holdings or
any of its Subsidiaries, excluding Unrestricted Subsidiaries (as defined in the
Senior Note Indenture), from time to time directly owned or acquired by THCR
Holdings; and (D) certain proceeds from time to time received, receivable or
otherwise distributed in respect of the assets described in clause (A) above
(collectively, the "Senior Note Collateral"). The security interests in the
Senior Note Collateral are first priority security interests and are exclusive.
Any equity interests in the subsidiaries of THCR Holdings which are acquired by
THCR Holdings will be assigned and pledged to the Trustee, and the security
interests granted in such equity interests are, and are to remain, exclusive,
first priority security interests.
During the fiscal year ended December 31, 2000, THCR Enterprises, LLC, a
New Jersey limited liability company ("THCR Enterprises, LLC"), repurchased
outstanding Senior Notes in an aggregate principal amount of $35.5 million in
consideration for an aggregate of $19.03 million, plus accrued and unpaid
interests.
TAC I Notes. In connection with THCR's acquisition of the Taj Mahal in
April 1996 (the "Taj Acquisition"), Trump AC and Trump AC Funding issued, in an
underwritten offering, mortgage notes in the principal amount of $1.2 billion,
bearing interest at the rate of 11-1/4% per annum, payable in cash semiannually
in arrears on May 1st and November 1st of each year, and maturing on May 1, 2006
(the "TAC I Notes"). The obligations evidenced by the TAC I Notes are jointly
and severally guaranteed by Taj Associates, Plaza Associates and Trump AC and
all future subsidiaries of Trump AC (other than Trump AC Funding). The TAC I
Notes were issued pursuant to an indenture agreement, dated as of April 17, 1996
(the "TAC I Note Indenture"), by and among Trump AC and Trump AC Funding, as
issuers, Plaza Associates, Taj Associates and The Trump Taj Mahal Corporation, a
Delaware corporation, as guarantors, and the Trustee. The TAC I Notes include
restrictive covenants prohibiting or limiting, among other things, the sale of
assets, the making of acquisitions and other investments, certain capital
expenditures, the incurrence of additional debt and liens and the payment of
dividends and distributions. Non-compliance could result in the acceleration of
such indebtedness.
Except pursuant to a Required Regulatory Redemption (as that term is
defined in the TAC I Note Indenture), the TAC I Notes may not be redeemed prior
to May 1, 2001. Thereafter, they may be redeemed, in whole or in part, at any
time upon not less than 30 but not more than 60 days notice. If redeemed at any
time during the twelve-month period commencing on May 1, 2001, the redemption
price of the TAC I Notes shall be 105.625% of the outstanding principal amount
of the TAC I Notes
13
redeemed, plus any accrued and unpaid interest as of the redemption date. For
the twelve-month period commencing on May 1, 2002, the redemption price
decreases to 103.75% of the outstanding principal amount, plus accrued and
unpaid interest as of the redemption date. For the twelve-month period
commencing on May 1, 2003, the redemption price further decreases to 101.875% of
the outstanding principal amount, plus accrued and unpaid interest as of the
redemption date. If any of the TAC I Notes are redeemed on or after May 1, 2004,
the redemption price shall be equal to 100.0% of the outstanding principal
amount of the TAC I Notes redeemed, plus accrued and unpaid interest as of the
redemption date.
The TAC I Notes are secured on a senior basis by substantially all of
the real and personal property owned or leased by Plaza Associates and Taj
Associates. The liens securing the TAC I Notes are subordinate to liens securing
approximately $3.0 million of senior indebtedness and are pari passu to the
liens securing the TAC II Notes and TAC III Notes (as defined in the next two
paragraphs).
TAC II Notes. In December 1997, Trump AC and Trump Atlantic City
Funding II, Inc., a Delaware corporation and a wholly-owned subsidiary of Trump
AC ("Funding II"), issued, in an underwritten offering, mortgage notes in an
aggregate principal amount of $75.0 million, bearing interest at the rate of
11-1/4% per annum, payable in cash semiannually in arrears on May 1st and
November 1st of each year, and maturing on May 1, 2006 (the "TAC II Notes"). The
TAC II Notes were issued pursuant to an indenture agreement, dated as of
December 10, 1997 (the "TAC II Note Indenture"), by and among Trump AC and
Funding II, as issuers, TACC, Plaza Associates and Taj Associates, as
guarantors, and the Trustee. The TAC II Notes include restrictive covenants
prohibiting or limiting, among other things, the sale of assets, the making of
acquisitions and other investments, certain capital expenditures, the incurrence
of additional debt and liens and the payment of dividends and distributions.
Non-compliance could result in the acceleration of such indebtedness.
TAC III Notes. In December 1997, Trump AC and Trump Atlantic City
Funding III, Inc., a Delaware corporation and wholly-owned subsidiary of Trump
AC ("Funding III"), issued, in an underwritten offering, mortgage notes in an
aggregate principal amount of $25.0 million, bearing interest at the rate of
11-1/4% per annum, payable in cash semiannually in arrears on May 1st and
November 1st of each year, and maturing on May 1, 2006 (the "TAC III Notes").
The TAC III Notes were issued pursuant to an indenture agreement, dated as of
December 10, 1997 (the "TAC III Note Indenture"), by and among Trump AC and
Funding III, as issuers, TACC, Plaza Associates and Taj Associates, as
guarantors, and the Trustee. The TAC III Notes include restrictive covenants
prohibiting or limiting, among other things, the sale of assets, the making of
acquisitions and other investments, certain capital expenditures, the incurrence
of additional debt and liens and the payment of dividends and distributions.
Non-compliance could result in the acceleration of such indebtedness.
The TAC II Notes and TAC III Notes are redeemable and secured on the
same basis as the TAC I Notes.
Other Indebtedness. In addition to the foregoing, Trump AC's long-term
indebtedness includes approximately $9.8 million of indebtedness, including, as
of December 31, 2000, approximately $1.2 million due under outstanding mortgage
notes described above.
Castle Notes. In November 1993, Castle Associates refinanced the
outstanding 9-1/2% Mortgage Bonds due 1998 ("Castle Bonds") of Trump's Castle
Funding, Inc., a New Jersey corporation and a wholly-owned subsidiary of Castle
Associates ("Castle Funding"), by exchanging all of the then outstanding Castle
Bonds for Castle Funding's (i) 11-3/4% Mortgage Notes due November 15, 2003 in
an aggregate principal amount of approximately $242.1 million (the "Castle
Mortgage Notes") and (ii) 13-7/8% Subordinated Pay-in-Kind Notes due November
15, 2005 in an aggregate principal amount of approximately $60.0 million (the
"Castle PIK Notes," and together with the Castle Mortgage Notes, the "Castle
Notes"). The Castle Notes may be redeemed at Castle Funding's option at any time
after December 15, 1998, in whole or in part, at the redemption prices set forth
in the indenture agreements under which they were issued, together with accrued
and unpaid interests as of the redemption date. No Castle Notes were redeemed in
2000.
The Castle Mortgage Notes are secured by a promissory note of Castle
Associates to Castle Funding (the "Castle Partnership Note") in an amount and
with payment terms necessary to service the Castle Mortgage Notes. The Castle
Partnership Note is secured by a mortgage on Trump Marina and substantially all
of the other assets of Castle Associates. The Castle Partnership Note has been
assigned by Castle Funding to the trustee of the indenture under which the
Castle Mortgage Notes were issued to secure the repayment of the Castle Mortgage
Notes. In addition, Castle Associates has guaranteed the payment of the Castle
Mortgage Notes (the "Castle Guaranty"), which is secured by a mortgage on Trump
Marina and substantially all of the assets of Castle Associates. The Castle
Partnership Note and the Castle Guaranty are expressly subordinated to the
indebtedness of the New Castle Senior Notes and the Castle Working Capital Loan
(collectively, the "Senior Indebtedness") and the liens of
14
the mortgages securing the Castle Partnership Note and the Castle Guaranty are
subordinate to the liens securing the Senior Indebtedness. During each of the
fiscal years ended December 31, 1998, 1999 and 2000, aggregate payments of $28.5
million were paid to the holders of the Castle Mortgage Notes.
The Castle PIK Notes bear interest payable, at Castle Funding's option,
in whole or in part in cash and through the issuance of additional Castle PIK
Notes, semi-annually at the annual rate of 13-7/8% through November 15, 2003.
After November 15, 2003, interest on the Castle PIK Notes is payable only in
cash at the annual rate of 13-7/8%. The Castle PIK Notes mature on November 15,
2005. The Castle PIK Notes may be redeemed at Castle Funding's option at 100.0%
of the principal amount under certain conditions, as described in the indenture
governing the Castle PIK Notes, and are required to be redeemed from a specified
percentage of any equity offering which includes Castle Associates. Interest has
been accrued using the effective interest method. On May 15, 2000 and November
15, 2000, the semi-annual interest payments of $7.3 million and $7.8 million,
respectively, were paid satisfied by the issuance of additional Castle PIK Notes
in such principal amounts.
The Castle PIK Notes are secured by a subordinated promissory note of
Castle Associates to Castle Funding (the "Castle Subordinated Partnership
Note"), which has been assigned to the trustee for the Castle PIK Notes, and
Castle Associates has issued a subordinated guaranty (the "Castle Subordinated
Guaranty") of the Castle PIK Notes. The Castle Subordinated Partnership Note and
the Castle Subordinated Guaranty are expressly subordinated to the Senior
Indebtedness, the Castle Partnership Note and the Castle Guaranty. On May 21,
1996, THCR Holdings exercised an option and acquired approximately 90.0% of the
then outstanding Castle PIK Notes for an aggregate exercise price of
approximately $38.7 million, in exchange for which THCR Holdings received an
aggregate principal amount of approximately $59.3 million of Castle PIK Notes.
April 1998 Castle Refinancing; New Castle Senior Notes and Castle
Working Capital Loan. In April 1998, Castle Funding refinanced a portion of its
outstanding debt, on a consolidated basis, consisting of (i) a term loan from a
bank for an outstanding principal amount of $38.0 million (the "Castle Term
Loan"), and (ii) its 11-1/2% Senior Secured Notes due 2000 (the "Old Castle
Senior Notes") by issuing 10-1/4% Senior Secured Notes due April 30, 2003 (the
"New Castle Senior Notes"). The proceeds from the issuance of the New Castle
Senior Notes were used to redeem all of the issued and outstanding Old Castle
Senior Notes at 100.0% of their outstanding principal balance plus accrued and
unpaid interest and to repay the Castle Term Loan in full. In conjunction with
this refinancing, TCHI obtained a working capital credit facility (the "Castle
Working Capital Loan"). The New Castle Senior Notes have an outstanding
principal amount of $62.0 million, bear interest at the rate of 10-1/4% per
annum, payable semi-annually on April 30th and October 30th of each year, and
mature on April 30, 2003. The Castle Working Capital Loan has an outstanding
principal amount of $5.0 million, bears interest at the rate of 10-1/4% per
annum, payable semi-annually each April and October, and matures on April 30,
2003. Both the New Castle Senior Notes and the Castle Working Capital Loan are
guaranteed by Castle Associates. During the fiscal years ended December 31,
1998, 1999, and 2000, aggregate payments of $3.4 million, $6.4 million, and $6.4
million, respectively, were paid by Castle Associates to the holders of the
Senior Notes. During the fiscal year ended December 31, 1998, 1999, and 2000,
aggregate payments of $0.3 million, $0.5 million, and $0.5 million,
respectively, were paid by Castle Associates in satisfaction of the Castle
Working Capital Loan. As of December 31, 2000, there was an aggregate principal
amount of $62.0 million outstanding under the New Castle Senior Notes and $5.0
million outstanding under the Castle Working Capital Loan.
The terms of the Castle Working Capital Loan, the Castle Notes and the
New Castle Senior Notes include limitations on the amount of additional
indebtedness Castle Associates may incur, distributions of Castle Associates
capital, investments and other business activities.
Other Indebtedness. In addition to the foregoing, THCR's consolidated
long-term indebtedness includes approximately $40.8 million of additional
indebtedness as of the fiscal year ended December 31, 2000.
The Atlantic City Market
Atlantic City is located along the New York-Philadelphia-Baltimore-
Washington, D.C. corridor, with nearly 30.0 million people living within a
three-hour driving distance of Atlantic City. Average household income within
the 50-mile radius of Atlantic City is 10.0% above the national average, and
23.0% to 32.0% in the outer 200-mile radius. Management believes that the
foregoing statistics, coupled with the many community improvements either
recently completed or currently underway in Atlantic City, bode well for
Atlantic City's potential as a destination town since gambling was legalized in
Atlantic City by voter referendum in 1976. Construction projects recently
completed or currently in progress in Atlantic City include the following: (i)
the $268.0 million new Atlantic City Convention Center, the second largest
convention center in the Northeast, completed in May 1997, (ii) the $84.0
million Grand Boulevard project completely revamping the entrance to the city
from the Atlantic City
15
Expressway which was completed in 1998, (iii) the $330.0 million Atlantic City
tunnel project currently underway and which is expected to be completed in the
summer of 2001, and will, when completed, connect the Atlantic City Expressway
to the Marina District and H-Tract (the "Tunnel Project"), (iv) $200.0 million
in new, publicly subsidized housing replacing dilapidated housing, (v) a $14.5
million minor league baseball stadium home to the Atlantic City Surf, an
Atlantic League team, which was completed in June 1999, and (vi) the $90.0
million refurbishment of the Boardwalk Convention Center Hall into a 12,000 to
15,000-seat special events venue, which is expected to be completed in the
summer of 2001, with the potential to attract major entertainers and strong
regional boxing matches.
The Atlantic City market has demonstrated continued, though modest,
growth despite the recent proliferation of new gaming venues across the country.
The 12 casino hotels located in Atlantic City generated approximately $4.31
billion in gaming revenues in 2000, an increase of approximately 3.2% over 1999
gaming revenues of approximately $4.18 billion. From 1996 to 2000, total gaming
revenues in Atlantic City have increased approximately 12.7%, while hotel rooms
increased by 21.9% during the same period. Although total visitor volume to
Atlantic City remained relatively constant in 2000, the volume of bus customers
decreased to 9.1 million in 2000 from 9.5 million in 1999, also representing a
decline from 10.2 million in 1996. The volume of customers traveling by other
means to Atlantic City has grown from 23.5 million in 1996 to 24.3 million in
2000.
During the last five years, however, overall casino revenue growth in
Atlantic City has lagged behind that of other traditional gaming markets,
principally Las Vegas, Nevada. Management believes that this relatively slower
growth is primarily attributable to three key factors, Atlantic City's (i)
shortage of hotel rooms, (ii) more stringent regulatory environment and (iii)
infrastructure problems. First, there are currently only 12 casinos in Atlantic
City, as compared to 27 casinos located on the Las Vegas Strip. Until 1996,
there had been no significant additions to hotel capacity in Atlantic City, and
the last totally new property constructed in Atlantic City was the Taj Mahal in
1990, whereas Las Vegas has experienced a boom in recent hotel constructions,
including the Venetian, Paris and Mandalay Bay in 1999 and the Aladdin in August
2000, and the addition of rooms to existing hotels. Both markets have exhibited
a strong correlation between hotel room inventory and total casino revenues.
Second, the regulatory environment and infrastructure problems in Atlantic City
have made it more difficult and costly to operate a casino in Atlantic City as
compared to Las Vegas. Overall regulatory costs and tax levies in New Jersey
have exceeded those in Nevada since gambling was legalized in Atlantic City in
1976, and there is generally a higher level of regulatory oversight in New
Jersey than in Nevada. Third, management believes that the infrastructure
problems of Atlantic City, manifested by impaired accessibility to the casinos,
downtown Atlantic City congestion and the structural decay of the areas
immediately surrounding the casinos, have impacted the public's perception of
Atlantic City as a desirable recreational location. Management believes,
however, that the development projects recently completed or currently underway
in Atlantic City, particularly the construction of the new $268.0 million
Atlantic City Convention Center completed in May 1997 and the current Tunnel
Project, when completed, will enhance Atlantic City's public perception as a
favorable convention and destination location, although no assurances can be
given. Moreover, no assurances can be given that the Tunnel Project, when
completed, will alleviate the traffic congestion as originally proposed. See
"-Gaming and Other Laws and Regulations."
Total Atlantic City slot revenues increased 4.5% in 2000 from 1999,
continuing a trend of increases over the past eight years. From 1996 through
2000, slot revenue growth in Atlantic City has averaged 3.7% per year. Total
table game revenue increased by 0.5% in 2000 from 1999, while table game revenue
from 1996 to 2000 has increased on average approximately 0.8% per year.
Management believes the slow growth in table game revenue is primarily
attributable to two factors. First, the slot product has been significantly
improved over the last eight years. Bill and coupon acceptors, new slot
machines, video poker, themed slot machines and other improvements have been
effective in increasing the popularity in slot play to guests who tend to gamble
more for entertainment value, as compared to guests who are more interested in
playing table games. During the past couple of years, casino operators in
Atlantic City have opted to increase their number of slot machines in favor of
table games due to increased popularity of slot play to the Atlantic City patron
and to slot machines' comparatively higher profitability margin resulting from
lower labor and support costs. Since 1996, the number of slot machines in
Atlantic City has increased by 10.7%, while the number of table games has
decreased by 5.9%. Slot revenues increased from 68.6% of total casino revenues
in 1996 to 71.6% in 2000. The second reason for the historical slow growth in
table game revenue is that table game players tend to typically be higher-end
players who are more likely to be interested in overnight stays and other
amenities. During the peak spring and summer seasons and weekends, room
availability in Atlantic City has typically proven to be inadequate in meeting
demand, indirectly making it difficult for casino operators and hosts to
aggressively promote table play to potential higher-end table game customers.
Atlantic City's new $268.0 million Convention Center, completed in May
1997, with approximately 500,000 square feet of exhibition and pre-function
space, 45 meeting rooms, food-service facilities and an underground parking
garage accommodating up to 1,600 cars, is located at the base of the Atlantic
City Expressway, and is currently the second largest convention center in
16
the Northeast. Atlantic City's original convention center is located on the
Boardwalk, physically connected to the Trump Plaza, and is owned by the New
Jersey Sports and Exposition Authority (the "NJSEA"). Its East Hall, which was
completed in 1929 and is listed on the National Register of Historic Places, is
currently undergoing, with funding approved by the CRDA in February 1999, a
$90.0 million renovation to be completed by the summer of 2001. These
improvements, while preserving the historic features of this landmark, will
convert the East Hall into a modern special events venue and will include new
seating for 10,000 to 14,000 people in its main auditorium, new lighting, sound
and television-ready wiring systems. Management believes that the East Hall,
when completed, will have the potential to attract major entertainers and
showcase popular boxing events, although no assurances can be given.
In the fall of 1998, the South Jersey Transportation Authority (the
"SJTA") commenced the Tunnel Project consisting of the construction of an
approximate 2.2 mile roadway and tunnel system in Atlantic City which, when
completed, will connect the Atlantic City Expressway to (i) the Marina District,
where the Trump Marina is located, (ii) the H-Tract, which has been Atlantic
City's focal point for new casino construction, and (iii) and the nearby
residential city of Brigantine. The Tunnel Project is scheduled to be completed
in the summer of 2001. The projected cost of the Tunnel Project is currently
estimated to be $330.0 million.
In addition to the planned casino expansions, major infrastructure
improvements have been completed in the past several years. In 1998, an $88.0
million "Grand Boulevard" corridor linking the new Atlantic City Convention
Center with the Boardwalk was completed. Also in 1998, the CRDA undertook a
$20.8 million beautification project for the five-block Virginia and Maryland
Avenue corridor which connects the 30-acre Boardwalk site of the Taj Mahal to
Absecon Boulevard (Route 30), one of Atlantic City's principal access roadways.
This comprehensive project included the repair, resurfacing and resignalizing of
these roads and the installation of new roadside lighting, the acquisition and
demolition of deteriorated structures on Virginia Avenue and, to a lesser
extent, Maryland Avenue, and the installation and maintenance of roadside
landscaping on those sites, the construction of a 26-unit subdivision of
two-story, single unit and duplex residences which will front on opposing sides
of Virginia Avenue, and the improvement of the exterior facades of selected
Virginia Avenue and other structures, with consents of the owners, to achieve a
harmony and continuity of design among closely proximate properties.
Construction of the roadway and housing elements of this project was completed
in the summer of 2000. See "-Competition."
Competition
Atlantic City. Competition in the Atlantic City market remains intense.
The Trump Atlantic City Properties compete with other casino hotels located in
Atlantic City as well as with each other. At the present time, there are 12
casino hotels located in Atlantic City, including the Trump Atlantic City
Properties, all of which compete for patrons. Substantial new expansion and
development activity has recently been completed or has been announced in
Atlantic City, including the expansion at Harrah's, Hilton, Caesar's, Sands,
Tropicana and Bally's Wild West Casino, which intensifies competitive pressures
in the Atlantic City market. In addition, in September 2000, Boyd Gaming and MGM
Grand, Inc. ("MGM") commenced their joint development of a 25-acre site located
in the Marina District for the construction of a Tuscan-style casino resort to
be named the "Borgata." The Borgata is supposed to feature a 40-story tower with
2,010 rooms and suites, as well as a 143,500 square-foot casino, restaurants,
retail shops, a spa and pool, and entertainment venues. Construction of the
Borgata is scheduled to be completed by mid-2003 and is estimated to cost
approximately $1.0 billion. In addition, management also believes that there are
several other sites on the Boardwalk and in the Marina District on which casino
hotels could be built in the future, and various applications for casino
licenses have been filed and announcements with respect thereto have been made
from time to time. While management believes that the addition of hotel capacity
would be generally beneficial to the Atlantic City market overall, especially in
peak spring and summer months when there has historically been an inadequate
supply of available hotel rooms, there can be no assurances that the proposed
and future expansions would not have a material adverse effect on the business
and operations of the Trump Atlantic City Properties. There also can be no
assurance that the Atlantic City development projects which are planned or are
underway will be completed.
In 1999, Park Place Entertainment, Inc. ("Park Place") completed the
acquisition of Caesar's Casino Hotels from Starwoods Hotel & Resorts Worldwide,
Inc. This acquisition included the Caesar's Atlantic City property, which is
adjacent to Bally's Park Place and Wild West Casino hotel ("Bally's") owned by
Park Place. In 2000, Park Place completed plans to connect the Caesar's and
Bally's properties with a $24.0 million connector, which included additional
gaming space.
In March 2000, MGM consummated its acquisition of Mirage Resorts, Inc.
to become MGM Mirage Inc. ("MGM Mirage"). MGM Mirage owns and/or operates 18
casino properties on three continents, and together with Boyd, commenced the
development of the 25-acre site located in the Marina District for the
construction of the Borgata in September 2000. The Borgata is intended to be
17
completed by mid-2003. MGM Mirage also owns the 55-acre lot adjacent to the site
committed to the Borgata, and in the first quarter of 2001, announced its
intention to build an additional casino hotel on such site. At this time, it is
not possible to determine the impact that this acquisition and announcement will
have on any planned development in the H-Tract, on the Boardwalk or elsewhere in
Atlantic City.
During the first quarter of 2001, Aztar Corp. announced its plan to
build a $225.0 million expansion of its Atlantic City Tropicana, including an
additional 502 hotel rooms and a 200,000 square-foot retail, dining and
entertainment complex. Park Place announced its intention to acquire the
Claridge Casino Hotel. Harrah's Entertainment Inc. commenced building a $110.0
million hotel tower at Harrah's Atlantic City. Sands Casino Hotel announced its
plan to convert a recently acquired structure into
additional 132 to 135 suites. MGM Mirage announced its intention to build an
additional casino hotel in the Marina District. Management does not know if or
when any of these projects will be completed and cannot ascertain the effect
they might have, if or when they are completed, on the business and operations
of the Trump Atlantic City Properties.
Total Atlantic City gaming revenues have increased over the past five
years, although at varying rates. During 1996, six casinos (including Trump
Plaza and the Taj Mahal) experienced increased gaming revenues compared to 1995,
while six casinos experienced decreased revenues. In 1997, eight casinos
(including Trump Plaza, Trump Marina and the Taj Mahal) experienced increased
gaming revenues compared to 1996, while four casinos experienced decreased
revenues. In 1998, seven casinos experienced increased gaming revenues compared
to 1997 (including Trump Plaza), while five casinos experienced decreased
revenues (including the Taj Mahal and Trump Marina). In 1999, 10 casinos
experienced increased gaming revenues compared to 1998 (including the Taj Mahal
and Trump Marina), while two casinos experienced decreased revenues (including
Trump Plaza). In 2000, eight casinos experienced increased gaming revenues
(including the Taj Mahal), while four casinos experienced decreased revenues
(including Trump Plaza).
During 1996, a total of approximately 65,870 square feet of casino
floor space was added, an increase of 47.2%, including Trump World's Fair's
49,211 square feet. Slot machines increased by approximately 1,911 units during
1996 and table games increased by approximately 44 units during 1996, of which
Trump World's Fair accounted for 1,518 units and 16 units, respectively. During
1997, a total of approximately 51,870 square feet of casino floor space was
added. Slot machines increased by approximately 2,153 units, and table games
increased by approximately 82 units during 1997. During 1998, a total of
approximately 38,350 square feet of casino floor space was added. Slot machines
increased by approximately 822 units and table games decreased by approximately
71 units during 1998. During 1999, casino floor space decreased by approximately
41,071 square feet, of which approximately 49,211 was due to the closing of
Trump World's Fair in October 1999. Slot machines decreased by approximately
1,191 units, 1,636 of which were attributable to the closing of Trump World's
Fair in October 1999, and table games decreased by approximately 47 units during
1999. During 2000, a total of approximately 27,430 square feet of casino floor
space was added, the number of slot machines increased by approximately 1,590
units and table games decreased by 15 units.
The Trump Atlantic City Properties also compete, or will compete, with
facilities in the northeastern and mid-Atlantic regions of the United States at
which casino gaming or other forms of wagering are currently, or in the future
may be, authorized. To a minimal extent, the Trump Atlantic City Properties
and/or Indiana Riverboat face competition from gaming facilities nationwide,
including land-based, cruise line, riverboat and dockside casinos located in
Colorado, Illinois, Indiana, Iowa, Louisiana, Michigan, Mississippi, Missouri,
Nevada, South Dakota, Ontario (Windsor and Niagara Falls), the Bahamas, Puerto
Rico and other locations inside and outside the United States, and from other
forms of legalized gaming in New Jersey and in its surrounding states such as
lotteries, horse racing (including off-track betting), jai alai, bingo and dog
racing, and from illegal wagering of various types. New or expanded operations
by other persons can be expected to increase competition and could result in the
saturation of certain gaming markets. For example, at the end of 2000, there
were a total of approximately 5,151 slot machines installed and operational in
Delaware. West Virginia also permits slot machines at racetracks, and track
owners in several other states, including Maryland and Pennsylvania, are seeking
to do the same. In December 1996, the Casino Niagara opened in Niagara Falls,
Ontario. In February 1998, the Ontario Casino Commission designated a consortium
whose principal investor is Hyatt Hotels Corporation as the preferred developer
of the permanent Casino Niagara. Moreover, the Trump Atlantic City Properties
may also face competition from various forms of internet gambling.
In addition to competing with other casino hotels in Atlantic City and
elsewhere, by virtue of their proximity to each other and the common aspects of
certain of their respective marketing efforts, including the common use of the
"Trump" name, the Trump Atlantic City Properties compete directly with each
other for gaming patrons.
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Indiana. The Indiana Riverboat competes primarily with riverboats and
other casinos in the northern Indiana and Chicago metropolitan area and
throughout the Great Lakes Market. Although northern Indiana is part of the
greater Chicago metropolitan market, which is one of the most successful new
gaming markets in the United States, the Indiana Riverboat may be more dependent
on patrons from northern Indiana than its Illinois competitors, and the
propensity of these patrons to wager cannot be predicted with any degree of
certainty. In addition to competing with Barden's riverboat at the Buffington
Harbor Site, the Indiana Riverboat competes with three other riverboats in the
northwest Indiana market. To a lesser degree, the Indiana Riverboat competes
with five operating riverboats located in southern Indiana. At present, there
are four other riverboats in the Chicago, Illinois area, with each operator
limited to 1,200 gaming positions. Statutory changes now enable Illinois
riverboats to remain dockside, allowing patrons to freely enter and exit,
whereas Indiana casino riverboats are required to cruise.
Management believes that competition in the gaming industry,
particularly the riverboat and dockside gaming industry, is based principally on
the quality and location of gaming facilities, the effectiveness of marketing
efforts, and customer service and satisfaction. Although THCR believes that the
location of the Indiana Riverboat will allow THCR to compete effectively with
other casinos in the geographic area surrounding its casino, management expects
competition in the casino gaming industry to continue to be intense in the
Northwest Indiana marketplace.
The Indiana Riverboat is seeking a competitive advantage primarily
based upon its superior location, including its proximity to, and direct access
from, Chicago, extensive parking facilities, name recognition, a superior gaming
vessel and gaming experience, and targeted marketing strategies. In addition, a
casino opened during 1994 in Windsor, Ontario, across the river from Detroit. In
1997, Detroit approved land-based casino gaming with a limit of three licenses
for the metropolitan area, and selected the operators for the licenses. Two of
these land-based casinos opened for operation in 1999, and the third opened in
2000. Although management believes that there is sufficient demand in the market
to sustain the Indiana Riverboat, there can be no assurance of that effect.
Legislation has also been approved during 1999 to expand riverboat gaming in
Illinois, including authorizing new sites in the Chicago area with which the
Indiana Riverboat would compete. Illinois legislation now permits dockside
gaming and allows operators to own more than one casino in the state. There can
be no assurance that Indiana will not authorize additional gaming licenses nor
can there be any assurances that Indiana will follow suit in allowing dockside
gaming. See "-Indiana Riverboat."
Native American Casinos. In addition, the Trump Atlantic City
Properties and the Indiana Riverboat also face competition from casino
facilities in a number of states operated by federally recognized Native
American tribes. Pursuant to the Indian Gaming Regulatory Act (the "IGRA"),
which was passed by Congress in 1988, any state which permits casino-style
gaming (even if only for limited charity purposes) is required to negotiate
gaming compacts with federally recognized Native American tribes. Under the
IGRA, Native American tribes enjoy comparative freedom from regulation and
taxation of gaming operations, which provides them with an advantage over their
competitors, including the Trump Atlantic City Properties and the Indiana
Riverboat. In March 1996, the United States Supreme Court struck down a
provision of the IGRA which had allowed Native American tribes to sue states in
federal court for failing to negotiate gaming compacts in good faith. Management
cannot predict the impact of this decision on the ability of Native American
tribes to negotiate compacts with states.
In February 1992, the Mashantucket Pequot Nation opened Foxwoods
Resorts Casino ("Foxwoods"), a casino hotel facility in Ledyard, Connecticut
(located in the far eastern portion of such state), an approximately three-hour
drive from New York City and an approximately two and one-half hour drive from
Boston, Massachusetts, which currently offers 24-hour gaming and contains
approximately 5,900 slot machines, 350 tables and over 1,400 rooms and suites,
24 restaurants, 17 retails stores, entertainment and a year-round golf course.
Also, a high-speed ferry operates seasonally between New York City and Foxwoods.
The Mashantucket Pequot Nation has also announced plans for a high-speed train
linking Foxwoods to the interstate highway and an airport outside Providence,
Rhode Island.
In October 1996, the Mohegan Nation opened the Mohegan Sun Resort in
Uncasville, Connecticut, located 10 miles from Foxwoods. Developed by Sun
International Hotels, Ltd., the Mohegan Sun Resort has approximately 3,000 slot
machines and 192 tables, off-track horse betting, bingo, 20 food and beverage
outlets, and retail stores. The Mohegan Sun is in the midst of a $960.0 million,
4.0 million square-foot expansion entailing the construction of a 115,000
square-foot casino, a 10,000-seat arena, a 34-story tower with 1,200 rooms, nine
new restaurants and two parking garages accommodating up to 5,000 cars. The
project is expected to be completed in the spring of 2002. The foregoing
expansion of the Mohegan Sun could have a material adverse impact on the revenue
growth of the Trump Atlantic City Properties.
The Eastern Pequot Tribe, along with the Paucatuck Eastern Pequot
Tribe, are seeking federal recognition as Tribal Nations. Both tribes received
findings of preliminary recognition in 2000. There can be no assurance that any
continued expansion
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of gaming operations of the Mashantucket Pequot Nation, the gaming operations of
the Mohegan Nation or the commencement of gaming operations by the Eastern
Pequots or Paucatuck Eastern Pequots would not have a materially adverse impact
on the operations of the Trump Atlantic City Properties and Indiana Riverboat. A
subsidiary of THCR has agreed to support the efforts of the Paucatuck Eastern
Pequot Tribal Nation for federal recognition as a tribal nation. In
consideration of this agreement, the Paucatuck Eastern Pequot Tribal Nation has
agreed to negotiate exclusively with THCR during the term of the agreement for
the development and management of a Native American casino to be located on
Paucatuck Eastern Pequot Tribal Nation land.
A group in Cumberland County, New Jersey, calling itself the "Nanticoke
Lenni Lenape" tribe, has filed a notice of intent with the Bureau of Indian
Affairs seeking formal federal recognition as a Native American tribe. In March
1998, the Oklahoma-based Lenape/Delaware Indian Nation, which originated in New
Jersey and already has federal recognition, filed a lawsuit against the city of
Wildwood, New Jersey, claiming that the city is built on ancestral land. The
city of Wildwood, which supported the plan to build a casino, had entered into
settlement negotiations, offering to deed municipal land to the tribe. The plan,
which was opposed by the state of New Jersey, required state and federal
approval. In early 1999, however, the Delaware Indian Nation's lawsuit was
dismissed.
In July 1993, the Oneida Nation opened "Turning Stone," a casino
featuring 24-hour table gaming and electronic gaming machines near Syracuse, New
York. In October 1997, the Oneida Nation opened a hotel which included expanded
gaming facilities, and constructed a golf course and convention center.
Construction of a new 24,000 square-foot clubhouse for the Oneida Nation's golf
course is expected to commence in the summer of 2001 and to be completed in
2002. There are also preliminary plans for a casino expansion consisting of 300
additional hotel rooms and a water park.
In April 1999, the St. Regis Mohawk Nation opened the Akwesasne Casino,
featuring electronic gaming machines, in the northern portion of New York State,
close to the Canadian border. In April 1999, the St. Regis Mohawks also
announced their intentions of opening a casino with Catskill Development Company
at the Monticello Race Track in the Catskill Mountains region of New York, which
was approved by the Assistant Secretary-Indian Affairs (Interior) but is also
subject to the approval of the Governor of New York pursuant to IGRA. In April
2000, the St. Regis Mohawks terminated their contract with Catskill Development
Company and announced that Park Place would build and manage a tribal casino in
the Catskill Mountains. In May 2000, Park Place agreed to purchase Kutshers
Resort for the new St. Regis Mohawks' casino site. There is ongoing litigation
between Park Place and the Catskill Development Company.
The Seneca Nation plans to negotiate with New York State to open a
casino in Western New York. Approval of the proposed casino would be contingent
upon the purchase of additional property that is declared reservation property
by the federal government. However, a recent ruling by the federal Interior
Department may allow the Seneca Nation to transform its bingo halls into
casino-type operations without having to negotiate with New York State.
The Narragansett Nation of Rhode Island, which has federal recognition,
is seeking to open a casino in Rhode Island State.
The Aquinnah Wampanoag Tribe is seeking to open a casino in the state
of Massachusetts. Other Native American nations are seeking federal recognition,
land and negotiation of gaming compacts in New York, Pennsylvania, Connecticut
and other states near Atlantic City. If successful, there can be no assurance
that additional casinos built in or near this portion of the United States would
not have a material adverse effect on the business and operations of the Trump
Atlantic City Properties and Indiana Riverboat.
The Pokagon Band of Potawatomi Indians of southern Michigan and
northern Indiana has been federally recognized as an Indian tribe (the "Pokagon
Band"). In September 1995, the Pokagon Band signed a gaming compact with the
Governor of the state of Michigan to build a land-based casino in southwestern
Michigan (the "Pokagon Michigan Gaming Compact"). In early 2000, a state judge
ruled that the Pokagon Michigan Gaming Compact was invalid. The Pokagon Band has
expressed an intention to appeal the judge's verdict. If successful, there can
be no assurances that the gaming facility built by the Pokagon Band, or any
other gaming facility built by another entity, would not have a material adverse
effect on the business and operations of the Indiana Riverboat.
State Legislation. Legislation permitting other forms of casino gaming
has been proposed, from time to time, in various states, including those
bordering the state of New Jersey. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York State and
the Commonwealth of Pennsylvania. Several states are considering or have
approved large scale land-based casinos. The business and operations of the
Trump Atlantic City Properties could be materially adversely affected by such
competition, particularly if casino gaming were permitted in jurisdictions near
or elsewhere in New Jersey or in other states in the Northeast. Currently,
casino gaming, other than Native American gaming, is not allowed in other areas
of New Jersey or in Connecticut, New York or Pennsylvania. In June 1998, the New
York State Senate and General
20
Assembly failed to enact a constitutional amendment to legalize casino gambling
in certain areas of New York State, effectively postponing any referendum to
authorize such a constitutional amendment until not earlier than November 2001.
To the extent that legalized gaming becomes more prevalent in New Jersey or
other jurisdictions near Atlantic City, competition would intensify. In
particular, proposals have been introduced to legalize gaming in other
locations, including Philadelphia, Pennsylvania. In addition, legislation has
from time to time been introduced in the New Jersey State Legislature relating
to types of statewide legalized gaming, such as video games with small wagers.
To date, no such legislation, which may require a state constitutional
amendment, has been enacted. Management is unable to predict whether any such
legislation, in New Jersey, Indiana, Illinois or elsewhere, will be enacted or
whether, if passed, it would have a material adverse impact on the Trump
Atlantic City Properties and/or the Indiana Riverboat.
Seasonality
The gaming industry in Atlantic City and Indiana is seasonal, with the
heaviest activity occurring during the period from May through September.
Consequently, the Registrants' operating results during the two quarters ending
in March and December would not likely be as profitable as the two quarters
ending in June and September.
Gaming and Other Laws and Regulations
The following is only a summary of the applicable provisions of the
Casino Control Act, the Riverboat Gambling Act and certain other laws and
regulations. It does not purport to be a full description thereof, and is
qualified in its entirety by reference to the Casino Control Act, the Riverboat
Gambling Act and such other laws and regulations.
New Jersey Gaming Regulations
In general, the Casino Control Act and the regulations promulgated
thereunder contain detailed provisions concerning, among other things: the
granting and renewal of casino licenses; the suitability of the approved hotel
facility, and the amount of authorized casino space and gaming units permitted
therein; the qualification of natural persons and entities related to the casino
licensee; the licensing of certain employees and vendors of casino licensees;
the rules of the games; the selling and redeeming of gaming chips; the granting
and duration of credit and the enforceability of gaming debts; management
control procedures, accounting and cash control methods and reports to gaming
agencies; the security standards; the manufacture and distribution of gaming
equipment; the simulcasting of horse races by casino licensees, advertising,
entertainment and alcoholic beverages.
Casino Control Commission. The ownership and operation of casino/hotel
facilities in Atlantic City are the subject of strict state regulation under the
Casino Control Act. The CCC is empowered to regulate a wide spectrum of gaming
and non-gaming related activities and to approve the form of ownership and
financial structure of not only a casino licensee, but also its entity
qualifiers and intermediary and holding companies and any other related entity
required to be qualified ("CCC Regulations").
Operating Licenses. In June 1999, the CCC renewed Taj Associates'
license to operate the Taj Mahal through June 2003, renewed Castle Associates'
license to operate the Trump Marina through June 2003, and renewed Plaza
Associates' license to operate Trump Plaza through June 2003.
Casino License. No casino hotel facility may operate unless the
appropriate license and approvals are obtained from the CCC, which has broad
discretion with regard to the issuance, renewal, revocation and suspension of
such licenses and approvals, which are non-transferable. The qualification
criteria with respect to the holder of a casino license include its financial
stability, integrity and responsibility; the integrity and adequacy of its
financial resources which bear any relation to the casino project; its good
character, honesty and integrity; and the sufficiency of its business ability
and casino experience to establish the likelihood of a successful, efficient
casino operation. The casino licenses currently held by Plaza Associates, Taj
Associates and Castle Associates are renewable for periods of up to four years.
The CCC may reopen licensing hearings at any time, and must reopen a licensing
hearing at the request of the Division of Gaming Enforcement (the "Division").
To be considered financially stable, a licensee must demonstrate the
following abilities: to pay winning wagers when due; to achieve an annual gross
operating profit; to pay all local, state and federal taxes when due; to make
necessary capital and maintenance expenditures to insure that it has a superior
first-class facility; and to pay, exchange, refinance or extend debts which will
mature or become due and payable during the license term.
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In the event a licensee fails to demonstrate financial stability, the
CCC may take such action as it deems necessary to fulfill the purposes of the
Casino Control Act and protect the public interest, including: issuing
conditional licenses, approvals or determinations; establishing an appropriate
cure period; imposing reporting requirements; placing restrictions on the
transfer of cash or the assumption of liabilities; requiring reasonable reserves
or trust accounts; denying licensure; or appointing a conservator. See
"--Conservatorship."
Management believes that it has adequate financial resources to meet
the financial stability requirements of the Casino Control Act for the
foreseeable future.
Pursuant to the Casino Control Act, CCC Regulations and precedent, no
entity may hold a casino license unless each officer, director, principal
employee, person who directly or indirectly holds any beneficial interest or
ownership in the licensee, each person who in the opinion of the CCC has the
ability to control or elect a majority of the board of directors of the licensee
(other than a banking or other licensed lending institution which makes a loan
or holds a mortgage or other lien acquired in the ordinary course of business)
and any lender, underwriter, agent or employee of the licensee or other person
whom the CCC may consider appropriate, obtains and maintains qualification
approval from the CCC. Qualification approval means that such person must, but
for residence, individually meet the qualification requirements as a casino key
employee. Pursuant to a condition of its casino license, payments by Plaza
Associates, Taj Associates or Castle Associates to, or for the benefit of, any
related entity or partner, with certain exceptions, are subject to prior CCC
approval; and, if Plaza Associates', Taj Associates' or Castle Associates' cash
position falls below $5.0 million for three consecutive business days, such
entity must present to the CCC and the Division evidence as to why it should not
obtain a working capital facility in an appropriate amount.
Control Persons. An entity qualifier or intermediary or holding
company, such as Trump AC, Trump AC Holding, TACC, TCHI, THCR Holdings, THCR
Funding or THCR, is required to register with the CCC and meet the same basic
standards for approval as a casino licensee; provided, however, that the CCC,
with the concurrence of the Director of the Division, may waive compliance by a
publicly-traded corporate holding company with the requirement that an officer,
director, lender, underwriter, agent or employee thereof, or person directly or
indirectly holding a beneficial interest or ownership of the securities thereof,
individually qualify for approval under casino key employee standards so long as
the CCC and the Director of the Division are, and remain, satisfied that such
officer, director, lender, underwriter, agent or employee is not significantly
involved in the activities of the casino licensee, or that such security holder
does not have the ability to control the publicly-traded corporate holding
company or elect one or more of its directors. Persons holding five percent
(5.0%) or more of the equity securities of such holding company are presumed to
have the ability to control the company or elect one or more of its directors
and will, unless this presumption is rebutted, be required to individually
qualify. Equity securities are defined as any voting stock or any security
similar to or convertible into or carrying a right to acquire any security
having a direct or indirect participation in the profits of the issuer.
Financial Sources. The CCC may require all financial backers,
investors, mortgagees, bond holders and holders of notes or other evidence of
indebtedness, either in effect or proposed, which bear any relation to any
casino project, including holders of publicly-traded securities of an entity
which holds a casino license or is an entity qualifier, subsidiary or holding
company of a casino licensee (a "Regulated Company"), to qualify as financial
sources. In the past, the CCC has waived the qualification requirement for
holders of less than fifteen percent (15.0%) of a series of publicly-traded
mortgage bonds so long as the bonds remained widely distributed and freely
traded in the public market and the holder had no ability to control the casino
licensee. The CCC may require holders of less than fifteen percent (15.0%) of a
series of debt to qualify as financial sources even if not active in the
management of the issuer or casino licensee.
Institutional Investors. An institutional investor ("Institutional
Investor") is defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of federal, state or
local public employees; any investment company registered under the Investment
Company Act of 1940, as amended; any collective investment trust organized by
banks under Part Nine of the Rules of the Comptroller of the Currency; any
closed end investment trust; any chartered or licensed life insurance company or
property and casualty insurance company; any banking and other chartered or
licensed lending institution; any investment advisor registered under the
Investment Advisers Act of 1940, as amended; and such other persons as the CCC
may determine for reasons consistent with the policies of the Casino Control
Act.
An Institutional Investor may be granted a waiver by the CCC from
financial source or other qualification requirements applicable to a holder of
publicly-traded securities, in the absence of a prima facie showing by the
Division that there is any cause to believe that the holder may be found
unqualified, on the basis of CCC findings that: (i) its holdings were purchased
for investment purposes only and, upon request by the CCC, it files a certified
statement to the effect that it has no intention of
22
influencing or affecting the affairs of the issuer, the casino licensee or its
holding or intermediary companies; provided, however, that the Institutional
Investor will be permitted to vote on matters put to the vote of the outstanding
security holders; and (ii) if (x) the securities are debt securities of a casino
licensee's holding or intermediary companies or another subsidiary company of
the casino licensee's holding or intermediary companies which is related in any
way to the financing of the casino licensee and represent either (A) 20.0% or
less of the total outstanding debt of the company or (B) 50.0% or less of any
issue of outstanding debt of the company, (y) the securities are equity
securities and represent less than 10.0% of the equity securities of a casino
licensee's holding or intermediary companies or (z) the securities so held
exceed such percentages, upon a showing of good cause. There can be no
assurance, however, that the CCC will make such findings or grant such waiver
and, in any event, an Institutional Investor may be required to produce for the
CCC or the Antitrust Division of the Department of Justice upon request, any
document or information which bears any relation to such debt or equity
securities.
Generally, the CCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed the definition of Institutional Investor under the Casino Control Act
and believes that it meets the definition of Institutional Investor; (ii) the
holder purchased the securities for investment purposes only and holds them in
the ordinary course of business; (iii) the holder has no involvement in the
business activities of and no intention of influencing or affecting, the affairs
of the issuer, the casino licensee or any affiliate; and (iv) if the holder
subsequently determines to influence or affect the affairs of the issuer, the
casino licensee or any affiliate, it shall provide not less than 30 days' prior
notice of such intent and shall file with the CCC an application for
qualification before taking any such action. If an Institutional Investor
changes its investment intent, or if the CCC finds reasonable cause to believe
that it may be found unqualified, the Institutional Investor may take no action
with respect to the security holdings, other than to divest itself of such
holdings, until it has applied for interim casino authorization and has executed
a trust agreement pursuant to such an application. See "--Interim Casino
Authorization."
Ownership and Transfer of Securities. The Casino Control Act imposes
certain restrictions upon the issuance, ownership and transfer of securities of
a Regulated Company and defines the term "security" to include instruments which
evidence a direct or indirect beneficial ownership or creditor interest in a
Regulated Company including, but not limited to, mortgages, debentures, security
agreements, notes and warrants. Currently, each of Trump AC, Trump AC Holding,
Plaza Associates, Taj Associates, Castle Associates, TCHI, THCR Holdings, THCR
Funding and THCR is deemed to be a Regulated Company, and instruments evidencing
a beneficial ownership or creditor interest therein, including a partnership
interest, are deemed to be the securities of a Regulated Company.
If the CCC finds that a holder of such securities is not qualified
under the Casino Control Act, it has the right to take any remedial action it
may deem appropriate, including the right to force divestiture by such
disqualified holder of such securities. In the event that certain disqualified
holders fail to divest themselves of such securities, the CCC has the power to
revoke or suspend the casino license affiliated with the Regulated Company which
issued the securities. If a holder is found unqualified, it is unlawful for the
holder (i) to exercise, directly or through any trustee or nominee, any right
conferred by such securities or (ii) to receive any dividends or interest upon
such securities or any remuneration, in any form, from its affiliated casino
licensee for services rendered or otherwise.
With respect to non-publicly-traded securities, the Casino Control Act
and CCC Regulations require that the corporate charter or partnership agreement
of a Regulated Company establish a right in the CCC of prior approval with
regard to transfers of securities, shares and other interests and an absolute
right in the Regulated Company to repurchase at the market price or the purchase
price, whichever is the lesser, any such security, share or other interest in
the event that the CCC disapproves a transfer. With respect to publicly-traded
securities, such corporate charter or partnership agreement is required to
establish that any such securities of the entity are held subject to the
condition that, if a holder thereof is found to be disqualified by the CCC, such
holder shall dispose of such securities.
Under the terms of the Senior Note Indenture, TAC I Note Indenture, TAC
II Note Indenture, TAC III Note Indenture and the indentures pursuant to which
the New Castle Senior Notes, the Castle Mortgage Notes, and the Castle PIK Notes
were issued, and the terms of the Castle Working Capital Loan, if a holder of
securities of THCR or its subsidiaries, does not qualify under the Casino
Control Act when required to do so, such holder must dispose of its interest in
such securities, and the respective issuer or issuers of such securities may
redeem the securities at the lesser of the outstanding amount or fair market
value. Similar provisions are set forth in THCR's Certificate of Incorporation,
as amended, with respect to the Common Stock of THCR.
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Interim Casino Authorization. Interim casino authorization is a process
which permits a person who enters into a contract to obtain property relating to
a casino operation or who obtains publicly-traded securities relating to a
casino licensee to close on the contract or own the securities until plenary
licensure or qualification. During the period of interim casino authorization,
the property relating to the casino operation or the securities is held in
trust.
Whenever any person enters into a contract to transfer any property
which relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already licensed
or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, except as set forth below with respect to
publicly-traded securities, the closing or settlement date in the contract at
issue may not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed trust
agreement in a form approved by the CCC. If, after the report of the Division
and a hearing by the CCC, the CCC grants interim authorization, the property
will be subject to a trust. If the CCC denies interim authorization, the
contract may not close or settle until the CCC makes a determination on the
qualifications of the applicant. If the CCC denies qualification, the contract
will be terminated for all purposes and there will be no liability on the part
of the transferor.
If, as the result of a transfer of publicly-traded securities of a
licensee, a holding or intermediary company or entity qualifier of a licensee,
or a financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for licensure
or qualification within 30 days after the CCC determines that qualification is
required or declines to waive qualification. The application must include a
fully executed trust agreement in a form approved by the CCC or, in the
alternative, within 120 days after the CCC determines that qualification is
required, the person whose qualification is required must divest such securities
as the CCC may require in order to remove the need to qualify.
The CCC may grant interim casino authorization where it finds by clear
and convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for residency;
and (iv) interim operation will best serve the interests of the public.
When the CCC finds the applicant qualified, the trust will terminate.
If the CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to sell,
assign, convey or otherwise dispose of the property subject to the trust to such
persons who are licensed or qualified or shall themselves obtain interim casino
authorization.
Where a holder of publicly-traded securities is required, in applying
for qualification as a financial source or qualifier, to transfer such
securities to a trust in application for interim casino authorization and the
CCC thereafter orders that the trust become operative: (i) during the time the
trust is operative, the holder may not participate in the earnings of the casino
hotel or receive any return on its investment or debt security holdings; and
(ii) after disposition, if any, of the securities by the trustee, proceeds
distributed to the unqualified holder may not exceed the lower of their actual
cost to the unqualified holder or their value calculated as if the investment
had been made on the date the trust became operative.
Approved Hotel Facilities. The CCC may permit an existing licensee,
such as one of the Trump Atlantic City Properties, to increase its casino space
if the licensee agrees to add a prescribed number of qualifying sleeping units
within two years after the commencement of gaming operations in the additional
casino space. However, if the casino licensee does not fulfill such agreement
due to conditions within its control, the licensee will be required to close the
additional casino space, or any portion thereof that the CCC determines should
be closed.
Persons who are parties to the lease for an approved hotel building or
who have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the state of New
Jersey, determines that such persons do not have the ability to exercise
significant control over the building or the operation of the casino therein.
Unless otherwise determined by the CCC, agreements to lease an approved
hotel building or the land under the building must be for a term exceeding 30
years, must concern 100.0% of the entire approved hotel building or the land
upon which it is located and must include a buy-out provision conferring upon
the lessee the absolute right to purchase the lessor's entire interest for a
fixed sum in the event that the lessor is found by the CCC to be unsuitable.
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Agreement for Management of Casino. Each party to an agreement for the
management of a casino is required to hold a casino license, and the party who
is to manage the casino must own at least 10.0% of all the outstanding equity
securities of the casino licensee. Such an agreement shall: (i) provide for the
complete management of the casino; (ii) provide for the unrestricted power to
direct the casino operations; and (iii) provide for a term long enough to ensure
the reasonable continuity, stability, independence and management of the casino.
License Fees. The CCC is authorized to establish annual fees for the
renewal of casino licenses. The renewal fee is based upon the cost of
maintaining control and regulatory activities prescribed by the Casino Control
Act, and may not be less than $200,000 for a four-year casino license.
Additionally, casino licensees are subject to potential assessments to fund any
annual operating deficits incurred by the CCC or the Division. There is also an
annual license fee of $500 for each slot machine maintained for use or in use in
any casino.
Gross Revenue Tax. Each casino licensee is also required to pay an annual
tax of 8.0% on its gross casino revenues. For the years ended December 31, 1998,
1999 and 2000, Plaza Associates' gross revenue tax was approximately $30.2
million, $28.6 million and $25.8, respectively, and its license, investigation
and other fees and assessments totaled approximately $5.2 million, $4.1 million
and $5.1 million, respectively. For the years ended December 31, 1998, 1999 and
2000, Taj Associates' gross revenue tax was approximately $41.1 million, $40.3
million and $43.8 million, respectively, and its license, investigation and
other fees and assessments totaled approximately $4.4 million, $5.3 million and
$5.1 million, respectively. For the years ended December 31, 1998, 1999 and
2000, Castle Associates' gross revenue tax was approximately $21.1 million,
$21.8 million and $21.6 million, respectively, and its license, investigation
and other fees and assessments totaled approximately $3.7 million, $3.7 million
and $4.3 million, respectively.
Investment Alternative Tax Obligations. An investment alternative tax
imposed on the gross casino revenues of each licensee in the amount of 2.5% is
due and payable on the last day of April following the end of the calendar year.
A licensee is obligated to pay the investment alternative tax for a period of 30
years. Estimated payments of the investment alternative tax obligation must be
made quarterly in an amount equal to 1.25% of estimated gross revenues for the
preceding three-month period. Investment tax credits may be obtained by making
qualified investments or by the purchase of bonds issued by the CRDA ("CRDA
Bonds"). CRDA Bonds may have terms as long as 50 years and bear interest at
below market rates, resulting in a value lower than the face value of such CRDA
Bonds.
For the first 10 years of its tax obligation, the licensee is entitled to
an investment tax credit against the investment alternative tax in an amount
equal to twice the purchase price of the CRDA Bonds issued to the licensee.
Thereafter, the licensee (i) is entitled to an investment tax credit in an
amount equal to twice the purchase price of such CRDA Bonds or twice the amount
of its investments authorized in lieu of such bond investments or made in
projects designated as eligible by the CRDA and (ii) has the option of entering
into a contract with the CRDA to have its tax credit comprised of direct
investments in approved eligible projects which may not comprise more than 50.0%
of its eligible tax credit in any one year.
From the monies made available to the CRDA, the CRDA is required to set
aside $175.0 million for investment in hotel development projects in Atlantic
City undertaken by a licensee which result in the construction or rehabilitation
of at least 200 hotel rooms. These monies will be held to fund up to 27.0% of
the cost to casino licensees of expanding their hotel facilities to provide
additional hotel rooms, a portion of which has been required to be available
with respect to the new Atlantic City Convention Center.
Minimum Casino Parking Charges. As of July 1, 1993, each casino licensee is
required to pay the New Jersey State Treasurer a $1.50 charge for every use of a
parking space for the purpose of parking motor vehicles in a parking facility
owned or leased by a casino licensee or by any person on behalf of a casino
licensee. This amount is paid into a special fund established and held by the
New Jersey State Treasurer for the exclusive use of the CRDA. Plaza Associates,
Taj Associates and Castle Associates currently charge their parking patrons
$2.00 in order to make their required payments to the New Jersey State Treasurer
and cover related expenses. Amounts in the special fund will be expended by the
CRDA for eligible projects in the corridor region of Atlantic City related to
improving the highways, roads, infrastructure, traffic regulation and public
safety of Atlantic City or otherwise necessary or useful to the economic
development and redevelopment of Atlantic City in this regard.
Atlantic City Fund. On each October 31 during the years 1996 through 2003,
each casino licensee shall pay into an account established in the CRDA and known
as the Atlantic City Fund, its proportional share of an amount related to the
amount by which annual operating expenses of the CCC and the Division are less
than a certain fixed sum. Additionally, a portion of the investment alternative
tax obligation of each casino licensee for the years 1994 through 1998 allocated
for projects in northern
25
New Jersey shall be paid into and credited to the Atlantic City Fund. Amounts in
the Atlantic City Fund will be expended by the CRDA for economic development
projects of a revenue-producing nature that foster the redevelopment of Atlantic
City other than the construction and renovation of casino hotels.
Conservatorship. If, at any time, it is determined that Plaza
Associates, Trump AC Holding, Trump AC, Trump AC Funding, Funding II, Funding
III, Taj Associates, Castle Associates, TCHI, THCR, THCR Holdings, THCR Funding
or any other entity qualifier has violated the Casino Control Act or that any of
such entities cannot meet the qualification requirements of the Casino Control
Act, such entity could be subject to fines or the suspension or revocation of
its license or qualification. If a casino license is suspended for a period in
excess of 120 days or is revoked, or if the CCC fails or refuses to renew such
casino license, the CCC could appoint a conservator to operate and dispose of
such licensee's casino hotel facilities. A conservator would be vested with
title to all property of such licensee relating to the casino and the approved
hotel subject to valid liens and/or encumbrances. The conservator would be
required to act under the direct supervision of the CCC and would be charged
with the duty of conserving, preserving and, if permitted, continuing the
operation of the casino hotel. During the period of the conservatorship, a
former or suspended casino licensee is entitled to a fair rate of return out of
net earnings, if any, on the property retained by the conservator. The CCC may
also discontinue any conservatorship action and direct the conservator to take
such steps as are necessary to effect an orderly transfer of the property of a
former or suspended casino licensee. Such events could result in an event of
default under the terms of the Senior Note Indenture, TAC I Notes Indenture, TAC
II Note Indenture, TAC III Note Indenture and the indentures pursuant to which
the New Castle Senior Notes, the Castle Mortgage Notes, and the Castle PIK Notes
were issued, and the terms of the Castle Working Capital Loan.
Qualification of Employees. Certain employees of Plaza Associates, Taj
Associates and Castle Associates must be licensed by or registered with the CCC,
depending on the nature of the position held. Casino employees are subject to
more stringent requirements than non-casino employees and must meet applicable
standards pertaining to financial stability, integrity and responsibility, good
character, honesty and integrity, business ability and casino experience and New
Jersey residency. These requirements have resulted in significant competition
among Atlantic City casino operators for the services of qualified employees.
Gaming Credit. The casino games at the Trump Atlantic City Properties
are conducted on a credit as well as cash basis. Gaming debts arising in
Atlantic City in accordance with applicable regulations are enforceable in the
courts of the state of New Jersey. The extension of gaming credit is subject to
regulations that detail procedures which casinos must follow when granting
gaming credit and recording counter checks which have been exchanged, redeemed
or consolidated. Gaming credit may not be collectible in foreign countries.
Control Procedures. Gaming at the Trump Atlantic City Properties is
conducted by trained and supervised personnel. Plaza Associates, Taj Associates
and Castle Associates employ extensive security and internal controls. Security
checks are made to determine, among other matters, that job applicants for key
positions have had no criminal history or associations. Security controls
utilized by the surveillance department include closed circuit video cameras to
monitor the casino floor and money counting areas. The count of moneys from
gaming also is observed daily by representatives of the CCC.
Indiana Gaming Regulations
Indiana Gaming Commission. The ownership and operation of riverboat
gaming operations in Indiana are subject to strict state regulation under the
Riverboat Gambling Act and the administrative rules promulgated thereunder. The
IGC is empowered to administer, regulate and enforce the system of riverboat
gaming established under the Riverboat Gambling Act and has jurisdiction and
supervision over all riverboat gaming operations in Indiana, as well as all
persons on riverboats where gaming operations are conducted. The IGC is
empowered to regulate a wide variety of gaming and non-gaming related
activities, including the licensing of suppliers to, and employees at, riverboat
gaming operations and to approve the form of ownership and financial structure
of not only riverboat owner and supplier licensees, but also their entity
qualifiers and intermediary and holding companies. The IGC has adopted certain
final rules and has published others in proposed or draft form which have
proceeded through the review and final adoption process. The IGC also has
indicated its intent to publish additional proposed rules in the future. The IGC
has broad rulemaking power, and it is impossible to predict what effect, if any,
the amendment of existing rules or the finalization of currently new rules might
have on the operations of the Indiana Riverboat or THCR. The following reflects
both adopted and proposed regulations. Further, the Indiana General Assembly has
the power to promulgate new laws and implement amendments to the Riverboat
Gambling Act, which could materially affect the operation or economic viability
of the gaming industry in Indiana.
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Riverboat Owner's License. The operation of a gaming riverboat in
Indiana is subject to the Riverboat Gambling Act and the administrative rules
promulgated thereunder. In June 1996, the IGC granted Trump Indiana a riverboat
owner's license, which must be renewed by June 2001. Although management
anticipates successfully renewing the Indiana Riverboat License, the IGC has
broad rule making power, and it is generally impossible to predict what effect,
if any, any new amendments to the existing rules might have on the business and
operations of the Indiana Riverboat.
Interim Compliance Requirements. Interim compliance requires, among
other things: (i) obtaining a permit to develop the riverboat gaming operation
from the United States Army Corps of Engineers, which permit was obtained on
October 10, 1995; (ii) obtaining a valid certificate of inspection from the
United States Coast Guard for the vessel on which the riverboat gaming operation
is to be conducted; (iii) applying for and receiving the appropriate permits or
certificates from the Indiana Alcoholic Beverage Commission, Indiana Fire
Marshall, and other appropriate local, state and federal agencies which issue
permits including, but not limited to, health permits, building permits and
zoning permits; (iv) obtaining the financing necessary to complete the
development of the gaming operation; (v) posting a bond in compliance with the
applicable law; (vi) obtaining the insurance deemed necessary by the IGC; (vii)
receiving licensure for electronic gaming devices and other gaming equipment
under applicable law; (viii) submitting an emergency response plan in compliance
with applicable laws; and (ix) taking any other action that the IGC deems
necessary for compliance under Indiana gaming laws. Further, the IGC may place
restrictions, conditions or requirements on the permanent riverboat owner's
license. Trump Indiana satisfied all interim compliance requirements prior to
receiving its riverboat owner's license from the IGC. An owner's initial license
expires five years after the effective date of the license, and unless the
owner's license is terminated, expires or is revoked, the owner's license may be
renewed annually by the IGC upon satisfaction of certain conditions contained in
the Riverboat Gambling Act.
Transfer of Riverboat Owner's License. Pursuant to IGC proposed rules,
an ownership interest in a riverboat owner's license shall not be transferred
unless the transfer complies with applicable rules, and no riverboat gaming
operation may operate unless the appropriate licenses and approvals are obtained
from the IGC. Under current Indiana law, a maximum of 10 riverboat owner's
licenses may be in effect at any given time. No person or entity may
simultaneously own an interest in more than two riverboat owner's licenses. A
person or entity may simultaneously own up to 100.0% in one riverboat owner's
license and no more than 10.0% in a second riverboat owner's license.
A riverboat owner's licensee must possess a level of skill, experience,
or knowledge necessary to conduct a riverboat gaming operation that will have a
positive economic impact on the host site, as well as the entire state of
Indiana. Additional representative, but not exclusive, qualification criteria
with respect to the holder of a riverboat owner's license include character,
reputation, financial integrity, the facilities or proposed facilities for the
conduct of riverboat gaming including related non-gaming projects such as hotel
development, and the good faith affirmative action plan to recruit, train and
upgrade minorities and women in all employment classifications. The IGC shall
require persons holding riverboat owner's licenses to adopt policies concerning
the preferential hiring of residents of the city in which the riverboat docks
for riverboat jobs. The IGC has broad discretion in regard to the issuance,
renewal, revocation and suspension of licenses and approvals, and the IGC is
empowered to regulate a wide variety of gaming and non-gaming related
activities, including the licensing of suppliers to, and employees at, riverboat
gaming operations, and to approve the form of ownership and financial structure
of not only riverboat owner and supplier licensees, but also their subsidiaries
and affiliates.
A riverboat owner's licensee or any other person may not lease,
hypothecate, borrow money against or loan money against a riverboat owner's
license. An ownership interest in a riverboat owner's license may only be
transferred in accordance with the regulations promulgated under the Riverboat
Gambling Act. An applicant for the approval of a transfer of a riverboat owner's
license must comply with application procedures prescribed by the IGC, present
evidence that it meets or possesses the standards, qualifications and other
criteria under Indiana gaming laws, that it meets all requirements for a
riverboat owner's license, and that it pay an investigative fee in the amount of
$50,000 with the application. If the IGC denies the application to transfer an
ownership interest, it shall issue notice of denial to the applicant, and,
unless specifically stated to the contrary, a notice of denial of an application
for transfer shall not constitute a finding that the applicant is not suitable
for licensure. A person who is served with notice of denial under this rule may
request an administrative hearing.
Control Persons and Operational Matters. The IGC has implemented strict
regulations with respect to the suitability of riverboat owner's licensee, their
key personnel and their employees similar to the CCC Regulations and precedent.
The IGC utilizes a "class-based" licensing structure that subjects all
individuals associated with Trump Indiana to varying degrees of background
investigations. Likewise, comprehensive security measures, including video
surveillance by both random and fixed cameras, are required in the casino and
money counting areas. Additionally, the IGC has delineated procedures for the
reconciliation of the daily revenues and tax remittance to the state as further
detailed below.
27
Tax. Under Indiana gaming law, a tax is imposed on admissions to gaming
excursions at a rate of three dollars ($3.00) for each person admitted to the
gaming excursion. This admission tax is imposed upon the riverboat owner's
licensee conducting the gaming excursion on a per-person basis without regard to
the actual fee paid by the person using the ticket, with the exception that no
tax shall be paid by admittees who are actual and necessary officials, employees
of the licensee or other persons actually working on the riverboat. The IGC may
suspend or revoke the license of a riverboat owner's licensee that does not
submit the payment or the tax return form regarding admission tax within the
required time established by the IGC.
A tax is imposed on the adjusted gross receipts received from gaming
authorized under the Riverboat Gambling Act at a rate of 20.0% of the amount of
the adjusted gross receipts. Adjusted gross receipts is defined as the total of
all cash and property (including checks received by a licensee), whether
collected or not, received by a licensee from gaming operations less the total
of all cash paid out as winnings to patrons including a provision for
uncollectible gaming receivables as is further set forth in the Riverboat
Gambling Act. The IGC may, from time to time, impose other fees and assessments
on riverboat owner's licensees. In addition, all use, excise and retail taxes
apply to sales aboard riverboats.
In addition to the Indiana tax requirements, a similar payment on adjusted
gross receipts is payable to the City of Gary at a rate of 4.0% pursuant to the
Development Agreement. See "Business; Indiana Riverboat; Business and Marketing
Strategy."
Restricted Contracts. Under proposed IGC rules, no riverboat owner's
licensee or riverboat license applicant may enter into or perform any contract
or transaction in which it transfers or receives consideration which is not
commercially reasonable or which does not reflect the fair market value of the
goods or services rendered or received as determined at the time the contract is
executed. Any contract entered into by a riverboat licensee or riverboat license
applicant that exceeds the total dollar amount of $50,000 shall be a written
contract. A riverboat license applicant means an applicant for a riverboat
owner's license that has been issued a certificate of suitability.
Pursuant to IGC proposed rules, riverboat licensees and riverboat license
applicants must submit an internal control procedure regarding purchasing
transactions which must contain provisions regarding ethical standards,
compliance with state and federal laws, and prohibitions on the acceptance of
gifts and gratuities by purchasing and contracting personnel from suppliers of
goods or services. The proposed rules also require any riverboat licensee or
applicant to submit any contract, transaction, or series of transactions greater
than $500,000 in any twelve-month period to the IGC within 10 days of the
execution, and to submit a summary of all contracts or transactions greater than
$50,000 in any twelve-month period on a quarterly basis. The proposed rules
provide that contracts submitted to the IGC are not submitted for approval by
the IGC, but grant the IGC authority to cancel or terminate any contract not in
compliance with Indiana law and the IGC rules.
Finance. Pursuant to IGC rules, any person (other than an institutional
investor) acquiring 5.0% or more of any class of voting securities of a publicly
traded corporation that owns a riverboat owner's license or 5.0% or more of the
beneficial interest in a riverboat licensee, directly or indirectly, through any
class of the voting securities of any holding or intermediary company of a
riverboat licensee shall apply to the IGC for a finding of suitability within 45
days after acquiring the securities. Each institutional investor who,
individually or in association with others, acquires, directly or indirectly,
5.0% or more of any class of voting securities of a publicly-traded corporation
that owns a riverboat owner's license or 5.0% or more of the beneficial interest
in a riverboat licensee through any class of the voting securities of any
holding or intermediary company of a riverboat licensee shall notify the IGC
within 10 days after the institutional investor acquires the securities and
shall provide additional information and may be subject to a finding of
suitability as required by the IGC.
Under IGC rules, an institutional investor who would otherwise be subject
to a suitability finding shall, within 45 days after acquiring the interests,
submit the following information: (i) a description of the institutional
investor's business and a statement as to why the institutional investor
satisfies the definitional requirements of an institutional investor under
Indiana gaming rule requirements; (ii) a certification made under oath that the
voting securities were acquired and are held for investment purposes only and
were acquired and are held in the ordinary course of business as an
institutional investor; (iii) the name, address, telephone number and the social
security number or federal tax identification number of each person who has the
power to direct or control the institutional investor's exercise of its voting
rights as a holder of voting securities of the riverboat licensee; (iv) the name
of each person who beneficially owns 5.0% or more of the institutional
investor's voting securities or equivalent; (v) a list of the institutional
investor's affiliates; (vi) a list of all securities of the riverboat licensee
that are or were beneficially owned by the institutional investor or its
affiliates within the preceding one year; (vii) a disclosure of all criminal and
regulatory sanctions imposed during the preceding 10 years; (viii) a copy of any
filing made under 16 U.S.C. Section 18(a); and (ix) any other additional
information the IGC may request to insure compliance with Indiana gaming laws.
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Each institutional investor who, individually or in association with
others, acquires, directly or indirectly, the beneficial ownership of 15.0% or
more of any class of voting securities of a publicly-traded corporation that
owns a riverboat owner's license or 15.0% or more of the beneficial interest in
a riverboat licensee through any class of voting securities of any holding
company or intermediary company of a riverboat licensee shall apply to the IGC
for a finding of suitability within 45 days after acquiring the securities.
The Certificate of Incorporation of THCR provides that THCR may redeem any
shares of THCR's capital stock held by any person or entity whose holding of
shares may cause the loss or nonreinstatement of a governmental license held by
THCR. As defined in THCR's Certificate of Incorporation, such redemption shall
be at the lesser of (x) the market price of the stock or (y) the price at which
the stock was purchased.
Under IGC rules, an institutional investor means any of the following: (i)
a retirement fund administered by a public agency for the exclusive benefit of
federal, state, or local public employees; (ii) an investment company registered
under the Investment Company Act of 1940, as amended; (iii) a collective
investment trust organized by banks under Part 9 of the Rules of the Comptroller
of the Currency; (iv) a closed end investment trust; (v) a chartered or licensed
life insurance company or property and casualty insurance company; (v) a
banking, chartered or licensed lending institution; (vi) an investment adviser
registered under the Investment Advisers Act of 1940, as amended; and (vi) any
other entity the IGC determines constitutes an institutional investor. The IGC
may in the future promulgate regulations with respect to the qualification of
other financial backers, mortgagees, bond holders, holders of indentures, or
other financial contributors.
Minority and Women Business Participation. Indiana gaming laws provide that
the opportunity for full minority and women's business enterprise participation
in the riverboat industry in Indiana is essential to social and economic parity
for minority and women business persons. The IGC has the power to review
compliance with the goals of participation by minority and women business
persons and impose appropriate conditions on licensees to insure that goals for
such business enterprises are met.
Under Indiana gaming laws, a riverboat licensee or a riverboat license
applicant shall designate certain minimum percentages of the value of its
contracts for goods and services to be expended with minority business
enterprises and women's business enterprises such that 10.0% of the dollar value
of the riverboat licensee's or the riverboat license applicant's contracts be
expended with minority business enterprises and 5.0% of the dollar value of the
riverboat licensee's or the riverboat license applicant's contracts be expended
with women's business enterprises. Expenditures with minority and women's
business enterprises are not mutually exclusive.
IGC Action. All licensees subject to the jurisdiction of the IGC have a
continuing duty to maintain suitability for licensure. The IGC may initiate an
investigation or disciplinary action or both against a licensee whom the
commission has reason to believe is not maintaining suitability for licensure,
is not complying with licensure conditions, and/or is not complying with Indiana
gaming laws or regulations. The IGC may suspend, revoke, restrict, or place
conditions on the license of a licensee; require the removal of a licensee or an
employee of a licensee; impose a civil penalty or take any other action deemed
necessary by the IGC to insure compliance with Indiana gaming laws.
Clean Water Regulations
Operation of the Indiana Riverboat must be in compliance with state and
federal clean water requirements, including the Federal Water Pollution Control
Act and the Oil Pollution Act of 1990, as amended (the "OPA"). The OPA
establishes an extensive regulatory and liability regime for the protection and
cleanup of the environment from oil spills and affects all owners and operators
whose vessels operate in United States waters, which include the Great Lakes.
The OPA requires vessel owners and operators to establish and maintain with the
U.S. Coast Guard evidence of financial responsibility sufficient to meet their
potential liabilities under the OPA. U.S. Coast Guard regulations also implement
the financial responsibility requirements of the Comprehensive Environmental
Response, Compensation and Liability Act by requiring evidence of financial
responsibility in an amount of $300 per gross ton, in addition to any required
under the OPA. THCR and Trump Indiana have obtained insurance coverage and a
Certificate of Financial Responsibility as required by the OPA. However, in the
case of a catastrophic spill or a spill in a sensitive environment, there can be
no assurance that such occurrence would not result in liability in excess of the
insurance coverage.
29
Other Laws and Regulations
The United States Department of the Treasury (the "Treasury") has
adopted regulations pursuant to which a casino is required to file a report of
each deposit, withdrawal, exchange of currency, gambling tokens or chips, or
other payments or transfers by, through or to such casino which involves a
transaction in currency of more than $10,000 per patron, per gaming day (a
"Currency Transaction Report"). Such reports are required to be made on forms
prescribed by the Secretary of the Treasury and are filed with the Commissioner
of the Internal Revenue Service (the "Service"). In addition, THCR is required
to maintain detailed records (including the names, addresses, social security
numbers and other information with respect to its gaming customers) dealing
with, among other items, the deposit and withdrawal of funds and the maintenance
of a line of credit.
In the past, the Service had taken the position that gaming winnings
from table games by nonresident aliens were subject to a 30.0% withholding tax.
The Service, however, subsequently adopted a practice of not collecting such
tax. Recently enacted legislation exempts from withholding tax table game
winnings by nonresident aliens, unless the Secretary of the Treasury determines
by regulation that such collections have become administratively feasible.
From 1992 through 1995, the Service conducted an audit of Currency
Transaction Reports filed by Taj Associates for the period from April 2, 1990
through December 31, 1991. The Treasury received a report detailing the audit as
well as the response of Taj Associates. As a result of Taj Associates' audit,
the Treasury notified Taj Associates that it had failed to timely file Currency
Transaction Reports in connection with certain currency transactions. In
December 1997, Taj Associates paid a fine of $477,000 in connection with 106 of
these violations. In November 2000, the Service completed a compliance audit of
Currency Transaction Reports filed by Plaza Associates for the period from
January 1, 1998 through September 30, 1999. Of the 6,600 Currency Transaction
Reports filed by Plaza Associates during that period, the Service noted 17
filing violations. The Service submitted recommendations to improve reporting
and record keeping practices. No penalties were assessed as a result of the
audit.
Plaza Associates and Taj Associates, together with Castle Associates
and Trump Indiana, have adopted the following internal control procedures to
increase compliance with these Treasury regulations: (i) computer exception
reporting; (ii) establishment of a committee to review Currency Transaction
Report transactions and reporting which consists of executives from the Casino
Operations, Marketing and Administration Departments; (iii) internal audit
testing of compliance with the Treasury regulations; (iv) training for all new
and existing employees in compliance with the Treasury regulations; and (v) a
disciplinary program for employee violations of the policy.
The Indiana Riverboat site is located near or adjacent to and may
include protected wetlands which may subject THCR to obligations or liabilities
in connection with wetlands mitigation or protection.
THCR is subject to other federal, state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages in the state of New Jersey as well as in
other jurisdictions. Management believes all required licenses and permits
necessary to conduct the business of THCR has been obtained for operations in
the states of New Jersey and Indiana.
THCR expects to be subject to similar rigorous regulatory standards in
each other jurisdiction in which it seeks to conduct gaming operations. There
can be no assurance that regulations adopted, permits required or taxes imposed
by other jurisdictions will permit profitable operations by THCR in those
jurisdictions.
In addition, the Federal Merchant Marine Act of 1936 and the Federal
Shipping Act of 1916 and the applicable regulations thereunder contain
provisions designed to prevent persons who are not citizens of the United
States, as defined therein, from beneficially owning more than 25.0% of the
capital stock of any entity operating a vessel on the Great Lakes.
ITEM 2. PROPERTIES.
THCR
In July 1995, THCR entered into a ten-year lease with The
Trump-Equitable Fifth Avenue Company, a corporation wholly-owned by Trump (the
"Trump-Equitable Company"), pursuant to which THCR leased office space in the
Trump Tower located in New York City (the "Trump Tower") for general, executive
and administrative purposes (the "THCR Trump Tower Lease Agreement"). For the
initial five-year period, commencing July 1, 1995 to June 30, 2000, the fixed
rent was $115,500 per
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year, payable in equal monthly installments. For the remaining five-year period,
commencing July 1, 2000 to June 30, 2005, the fixed rent was $129,250 per year,
paid in equal monthly installments. In addition, the THCR Trump Tower Lease
Agreement required THCR to pay as additional rent, among other things, a portion
of the property taxes due each year. THCR had the option to terminate this lease
upon 90 days' prior written notice and payment of $32,313. In March 2000, the
THCR Trump Tower Lease Agreement was terminated, and THCR moved into the office
space in the Trump Tower previously occupied by Taj Associates pursuant to a
lease agreement, dated September 1992 (the "Taj Mahal Trump Tower Lease"), with
Trump-Equitable Company for marketing purposes. See "Executive Compensation;
Compensation Committee Interlocks and Insider Participation."
In September 1992, Taj Associates had entered into the Taj Mahal Trump
Tower Lease with Trump-Equitable Company for the lease of office space in the
Trump Tower in New York City for marketing purposes. The monthly payments under
the lease had been $1,000, and the premises were leased at such rent for four
months in 1992, the full 12 months in each of 1993 and 1994 and eight months in
1995. On September 1, 1995, the Taj Mahal Trump Tower Lease was renewed for an
additional term of five years with an option for Taj Associates to terminate the
Taj Mahal Trump Tower Lease on September 1st of each year, upon six months'
prior written notice and payment of the six months' rent. Under the renewed Taj
Mahal Trump Tower Lease, the monthly payments were $2,285. In March 2000, THCR
terminated the THCR Trump Tower Lease Agreement, assumed the Taj Mahal Trump
Tower Lease and moved THCR's offices into the office space previously occupied
by Taj Mahal. See "Executive Compensation; Compensation Committee Interlocks and
Insider Participation."
Trump Plaza
Plaza Associates owns and leases several parcels of land in and around
Atlantic City, New Jersey, each of which is used in connection with the
operation of Trump Plaza and each of which is subject to the liens of the
mortgages associated with the TAC I Notes, the TAC II Notes and the TAC III
Notes (collectively, the "Plaza Mortgages") and certain other liens.
Plaza Casino Parcel. The Trump Plaza Main Tower is located on the
Boardwalk in Atlantic City, New Jersey, next to the Atlantic City Convention
Center. It occupies the entire city block (approximately 2.38 acres) bounded by
the Boardwalk, Mississippi Avenue, Pacific Avenue and Columbia Place (the "Plaza
Casino Parcel").
The Plaza Casino Parcel consists of four tracts of land, three of which
are currently owned by Plaza Associates and one of which is leased by Plaza
Hotel Management Company ("PHMC") to Plaza Associates pursuant to a
non-renewable ground lease, which expires on December 31, 2078 (the "PHMC
Lease"). The land which is subject to the PHMC Lease is referred to as the
"Plaza Leasehold Tract." Seashore Four Associates ("Seashore Four") and Trump
Seashore Associates ("Trump Seashore") had leased to Plaza Associates two of the
tracts which are now owned by Plaza Associates. Trump Seashore and Seashore Four
are 100.0% beneficially owned by Trump and are, therefore, affiliates of THCR.
Plaza Associates purchased the tract from Seashore Four in January 1997 and the
tract from Trump Seashore in September 1996 for $10.1 million and $14.5 million,
respectively.
The PHMC Lease is a "net lease" pursuant to which Plaza Associates, in
addition to the payment of fixed rent, is responsible for all costs and expenses
with respect to the use, operation and ownership of the Plaza Leasehold Tract
and the improvements now, or which may in the future be, located thereon,
including, but not limited to, all maintenance and repair costs, insurance
premiums, real estate taxes, assessments and utility charges. The improvements
located on the Plaza Leasehold Tract are owned by Plaza Associates during the
term of the PHMC Lease, and upon the expiration of the term of the PHMC Lease
(for any reason), ownership of such improvements will vest in PHMC. The PHMC
Lease also contains an option pursuant to which Plaza Associates may purchase
the Plaza Leasehold Tract at certain times during the term of such PHMC Lease
under certain circumstances.
Trump Plaza East. In connection with the Taj Acquisition in April 1996,
Plaza Associates exercised its option to purchase certain of the fee and
leasehold interests comprising the Trump Plaza East Tower for an aggregate
purchase price of $28.0 million. Plaza Associates currently leases a portion of
the land which comprises Trump Plaza East Tower from an unrelated third party.
In September 1993, Warner Brothers entered into the Time Warner Plaza
Lease pursuant to which Warner Brothers leased approximately 17,000 square feet
of retail space with Boardwalk frontage in Trump Plaza's East Tower for the
operation of the Plaza Warner Brothers Store for a period of 10 years. Pursuant
to the Time Warner Plaza Lease, Time Warner is obligated to pay to Trump Plaza
an amount equal to (i) 7.5 percent (7.5%) of gross annual sales up to and
including $15.0 million and (ii) 10 percent (10.0%) of gross sales in excess of
$15.0 million. The Time Warner Plaza Lease also grants Time Warner the option to
renew the Time Warner Plaza Lease for two additional five years terms.
31
Recent public reports, confirmed with Time Warner officials, indicate that
Time Warner intends to close the Warner Brothers retail chain in the third
quarter of calendar 2001, including the Plaza Warner Brothers Store, as a cost
savings measure related to Time Warner's recent January 2001 merger with AOL.
Management currently intends to utilize this space to expand its existing casino
floor with additional slot machines.
Trump World's Fair. Using a portion of the net proceeds received by THCR
from its initial public offering in June 1995, Plaza Associates acquired title
to Trump World's Fair pursuant to an option to purchase. Further, Plaza
Associates also entered into an easement agreement with the NJSEA with annual
payments of $2.0 million. However, because of operational inefficiencies,
including the lack of a parking garage, management decided to close the Trump
World's Fair in October 1999, and the facility is currently in the process of
being dismantled. In December 1999, in connection with the closure of Trump
World's Fair, Plaza Associates terminated the easement in accordance with its
terms. See "Business; Trump Plaza; Atlantic City Marketing Strategy."
Parking Parcels. Plaza Associates owns a parcel of land (the "Plaza Garage
Parcel") located across the street from the Plaza Casino Parcel and along
Pacific Avenue in a portion of the block bound by Pacific Avenue, Mississippi
Avenue, Atlantic Avenue and Missouri Avenue. Plaza Associates has constructed
the Trump Plaza Transportation Facility on the Plaza Garage Parcel. An enclosed
pedestrian walkway from the parking garage provide access to the Trump Plaza at
the casino level. Parking at the parking garage is available to Trump Plaza's
guests, as well as to the general public.
Plaza Associates leases, pursuant to the PHMC Lease, a parcel of land
located on the northwest corner of the intersection of Mississippi and Pacific
Avenues consisting of approximately 11,800 square feet (the "Additional Parcel")
and owns another parcel on Mississippi Avenue adjacent to the Additional Parcel
consisting of approximately 5,750 square feet.
Plaza Associates also owns five parcels of land, aggregating approximately
43,300 square feet, and subleases one parcel consisting of approximately 3,125
square feet. All of such parcels are contiguous and are located along Atlantic
Avenue, in the same block as the Plaza Garage Parcel. They are used for signage
and surface parking and are not encumbered by any mortgage liens other than that
of the Plaza Mortgages.
Warehouse Parcel. Plaza Associates owns a warehouse and office facility
located in Egg Harbor Township, New Jersey, containing approximately 64,000
square feet of space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is
encumbered by a first mortgage having an outstanding principal balance, as of
December 31, 2000, of approximately $1.2 million and is encumbered by the Plaza
Mortgages. This lien is senior to the liens of the Plaza Mortgages. This
facility is currently being utilized by Taj Associates.
Plaza Associates has financed or leased and from time to time will finance
or lease its acquisition of furniture, fixtures and equipment. The lien in favor
of any such lender or lessor may be superior to the liens of the Plaza
Mortgages.
Taj Mahal
Taj Associates currently owns the parcels of land which are used in
connection with the operation of the Taj Mahal. Each of these parcels is
encumbered by the mortgages securing the TAC I Notes, TAC II Notes and TAC III
Notes.
The Casino Parcel. The land comprising the Taj Mahal site consists of
approximately 30.0 acres, bounded by the Boardwalk to the south, vacated former
States Avenue to the east, Pennsylvania Avenue to the west and Pacific Avenue to
the north. The Taj Mahal was opened to the public on April 2, 1990.
Taj Entertainment Complex. In connection with the Taj Acquisition, Taj
Associates purchased the Taj Entertainment Complex from Realty Corp. The Taj
Entertainment Complex is a 20,000-square-foot multipurpose entertainment complex
known as the Xanadu Theater with seating capacity for approximately 1,200
people, which can be used as a theater, concert hall, boxing arena or exhibition
hall.
Steel Pier. In connection with the Taj Acquisition, Taj Associates
purchased the approximately 3.6 acre pier and related property located across
the Boardwalk from the Taj Mahal (the "Steel Pier") from Realty Corp. Taj
Associates initially proposed a concept to improve the Steel Pier, the estimated
cost of which improvements was $30.0 million. Such concept was approved by the
New Jersey Department of Environment Protection ("NJDEP"), the agency which
administers the Coastal Area Facilities Review Act ("CAFRA"). A condition
imposed on Taj Associates' CAFRA permit initially required that Taj Associates
begin
32
construction of certain improvements on the Steel Pier by October 1992, which
improvements were to be completed within 18 months of commencement. In March
1993, Taj Associates obtained a modification of its CAFRA permit providing for
the extensions of the required commencement and completion dates of the
improvements to the Steel Pier for one year based upon an interim use of the
Steel Pier for an amusement park. Taj Associates received additional one-year
extensions of the required commencement and completion dates of the improvements
of the Steel Pier based upon the same interim use of the Steel Pier as an
amusement park pursuant to a sublease ("Pier Sublease") with an amusement park
operator. The Pier Sublease terminates on December 31, 2003, unless extended.
Office and Warehouse Space. Taj Associates owns an office building
located on South Pennsylvania Avenue adjacent to the Taj Mahal. In addition, Taj
Associates, in April 1991, purchased for approximately $1.7 million certain
facilities of Castle Associates which are presently leased to commercial tenants
and used for office space and vehicle maintenance facilities. In connection with
the Taj Acquisition, Taj Associates purchased from Realty Corp. a warehouse
complex of approximately 34,500 square feet. This warehouse complex was sold to
the CRDA in November 1998 as part of the location of a new neighborhood housing
development completed as part of the redevelopment of the road corridors and
adjoining neighborhoods to the Taj Mahal.
In September 1992, Taj Associates entered into the Taj Mahal Trump
Tower Lease with Trump Equitable Company pursuant to which Taj Associates leased
office space in the Trump Tower for marketing purposes. The monthly payments
under the Taj Mahal Trump Tower Lease were $1,000, and the premises were leased
at such rent for four months in 1992, the full 12 months in each of 1993 and
1994 and eight months in 1995. On September 1, 1995, the Taj Mahal Trump Tower
Lease was renewed for an additional term of five years with an option for Taj
Associates to terminate the Taj Mahal Trump Tower Lease on September 1st of each
year, upon six months' prior written notice and payment of the six months' rent.
Under the renewed Taj Mahal Trump Tower Lease, the monthly payments were $2,285.
In March 2000, THCR terminated the THCR Trump Tower Lease Agreement, assumed the
Taj Mahal Trump Tower Lease and moved its offices into the office space
previously occupied by Taj Mahal. See "Executive Compensation; Compensation
Committee Interlocks and Insider Participation."
Parking. The Taj Mahal provides parking spaces for approximately 6,950
cars, of which 6,725 parking spaces are located indoors and 225 are parking
spaces located on land purchased from Realty Corp. in connection with the Taj
Acquisition.
Themed Restaurants and Retail Shopping. In February 1996, Hard Rock
Cafe International (N.J.), Inc. ("Hard Rock") entered into a 15-year lease
agreement (the "Hard Rock Cafe Lease") with Taj Associates pursuant to which
Hard Rock leases an approximately 11,500 square-foot space at the Taj Mahal for
a Hard Rock Cafe. The Hard Rock Cafe opened in November 1996. The basic rent
under the Hard Rock Cafe Lease is $750,000 per year, payable in equal monthly
installments, for the first 10 years of the lease term, and will be $825,000 per
year, payable in equal monthly installments, for the remaining five years of the
lease term. In addition, Hard Rock will pay percentage rent in an amount equal
to 10.0% of Hard Rock's annual gross sales in excess of $10.0 million. Hard Rock
has the right to terminate the Hard Rock Cafe Lease on the tenth anniversary
thereof, and also has the option to extend the term of the Hard Rock Cafe Lease
for an additional five-year period at an annual basic rent of $907,500 during
such renewal term.
In January 1996, All Star Cafe, Inc. ("All Star") entered into a
twenty-year lease (the "All Star Cafe Lease") with Taj Associates for the lease
of space at the Taj Mahal to operate an All Star Cafe. The basic rent under the
All Star Cafe Lease was $1.0 million per year, payable in equal monthly
installments. In addition, All Star was to pay percentage rent to Taj Associates
in an amount equal to the difference, if any, between (i) 8.0% of All Star's
gross sales made during each calendar month during the first lease year, 9.0% of
All Star's gross sales made during each calendar month during the second lease
year and 10.0% of All Star's gross sales made during each calendar month during
the third through the twentieth lease years, and (ii) one-twelfth of the annual
basic rent. The All Star Cafe opened in March 1997. In September 1999, an
agreement was reached between Taj Associates, All Star and Planet Hollywood
International, Inc. to terminate the All Star Cafe Lease, effective September
24, 1999. Upon termination of the All Star Cafe Lease, all improvements,
alterations and All Star's personal property, with the exception of specialty
trade fixtures, became the property of Taj Associates. Taj Associates recorded
the estimated $17.2 million fair market value of these assets in other revenue
based on an independent appraisal. Taj Associates has since remodeled the
facility into an entertainment complex called the "Casbah" consisting of a
Boardwalk level bar, a seasonal outdoor dining area with live bands and a
centerpiece high-energy nightclub. The Casbah complex opened in June 2000.
33
In June 1997, Stage Deli of Atlantic City, Inc. ("Stage Deli") entered
into a ten-year, five-month lease, commencing on July 7, 1997 (the "Stage Deli
Lease"), with Taj Associates for the lease of space at the Taj Mahal for a Stage
Deli of New York Restaurant. Stage Deli has an option to renew the Stage Deli
Lease for an additional five-year term. Commencing September 1, 1998, the Stage
Deli Lease was amended to eliminate the basic rent provisions and provide for
monthly percentage rents of 8.0% or 10.0% of gross monthly sales based on actual
average sales volumes as defined in the Stage Deli Lease.
In February 1997, Warner Brothers entered into a ten-year lease (the
"Time Warner Taj Lease") with Taj Associates for the lease of space at the Taj
Mahal for a Warner Brothers Studio Store (the "Taj Warner Brothers Store"). Time
Warner had an option to renew the Time Warner Taj Lease for two additional
five-year terms. Pursuant to the Time Warner Taj Lease, Warner Brothers was
obligated to pay to Taj Mahal monthly rent in an amount equal to (i) 7.5% of
gross annual sales up to and including $5.0 million and (ii) 10.0% sales of
gross annual sales in excess of $5.0 million. No minimum or "base" rent was
payable under the Time Warner Taj Lease. Also, pursuant to the Time Warner Taj
Lease, Warner Brothers had the right to terminate the Time Warner Taj Lease if
(i) gross annual sales were less than $2.5 million for the second year of the
lease or less than $2.5 million, as adjusted by CPI, for the third through ninth
years of the lease; and (ii) the Taj Mahal ceased to operate as a first class
hotel. The Taj Warner Brothers Store opened in May 1997. Following the recent
merger of Time Warner with AOL in January 2001, AOL Time Warner has announced
its intention of closing or selling its Warner Brothers Studio Store operations,
including the Taj Warner Brothers Store. Management currently intends to locate
a new retail tenant for this space.
In October 1999, Taj Mahal recently completed its expansion of the
retail shopping area along the length of its parking garage promenade walkway
which immediately adjoins the Taj Mahal's main retail shopping area. The first
tenant, Starbucks, operated by Host International, Inc., opened in September
1996. Sbarro's, an Italian eatery, operated by Sbarro America Properties, Inc.,
opened in October 1998. Boardwalk Treats, Beka's Pastries and a Harley Davidson
retail merchandise outlet opened at various times during 1999. A Sunglass Hut,
operated by Sunglass Hut International, opened in August 1998 in a separate
location also adjoining the Taj Mahal's main retail shopping area. The Taj
Mahal's retail shopping outlets also include an upscale collection of women's
and men's clothing and shoe shops, jewelry stores and a variety of gift and
specialty shops.
Trump Marina
The Casino Parcel. Trump Marina is located in the Marina District on an
approximately 14.7 acre triangular-shaped parcel of land, which is owned by
Castle Associates in fee, located at the intersection of Huron Avenue and
Brigantine Boulevard directly across from the marina, approximately two miles
from the Boardwalk and one-quarter mile from the H-Tract.
Trump Marina has approximately 82,100 square-feet of gaming space which
accommodates 76 table games, approximately 2,500 slot machines and a simulcast
racetrack facility. In addition to the casino, Trump Marina consists of a
27-story hotel with 728 guest rooms, including 153 suites, of which 97 are
"Crystal Tower" luxury suites. The facility also offers seven restaurants, two
clubs for the exclusive use of select patrons, a 540-seat cabaret theater, two
cocktail lounges, 58,000 square-feet of convention, ballroom and meeting space,
a swimming pool, tennis courts and a sports and health club facility. Trump
Marina has been designed so that it can be enlarged in phases into a facility
containing up to 2,000 rooms and a 1,600-seat cabaret theater. Trump Marina also
has a nine-story garage providing on-site parking for approximately 3,000
vehicles and a roof-top helipad, making Trump Marina the only Atlantic City
casino with access by land, sea and air.
In the second quarter of 2000, Trump Marina completed its slot room
expansion. This expansion project increased Trump Marina's gaming space by
approximately 6,200 square feet (an 8.2% increase) and added approximately 250
slot machines. Between 1994 and 2000, management replaced substantially all of
Trump Marina's slot machines with newer, more popular models and upgraded its
computerized slot tracking and slot marketing system. Also, management has
increased the number of slot machines offering patrons stools on which to sit
while gaming, which has proven to be effective in increasing patrons' comfort
and gaming entertainment experience.
The Marina. Pursuant to an agreement with the New Jersey Division of
Parks and Forestry (the "Marina Agreement"), Castle Associates in 1987 began
operating and renovating the marina at Trump Marina, including docks containing
approximately 645 slips. An elevated pedestrian walkway connecting Trump Marina
to a two-story building at the marina was completed in 1989. Castle Associates
constructed the two-story building, which contains a 240-seat restaurant and
offices as well as a snack bar and a large nautical theme retail store. Pursuant
to the Marina Agreement and a certain lease between the state of New Jersey, as
landlord, and Castle Associates, as tenant, dated as of September 1, 1990 (the
"Marina Lease"), Castle Associates commenced leasing the marina and the
improvements thereon for an initial term of 25 years. The Marina Lease is a net
lease pursuant to which Castle Associates, in addition to the payment of annual
rent equal to the greater of (i) a certain percentage of gross revenues of
34
Castle Associates from operation of the marina during the lease year and (ii) an
initial minimum base rent of $300,000 annually (increasing every five years to
$500,000 in 2010), is responsible for all costs and expenses related to the
premises, including but not limited to, all maintenance and repair costs,
insurance premiums, real estate taxes, assessments and utility charges. Any
improvements made to the marina (which is owned by the state of New Jersey),
excluding the elevated pedestrian walkway, automatically becomes the property of
the state of New Jersey upon their completion.
The Parking Parcel. Castle Associates also owns an employee parking lot
located on Route 30, approximately two miles from Trump Marina, which can
accommodate approximately 1,000 cars.
Indiana Riverboat
See "Business; Indiana Riverboat."
ITEM 3. LEGAL PROCEEDINGS.
General. From time to time, THCR and certain of its officers,
directors, agents and employees are subject to various legal proceedings against
them in connection with services rendered to THCR or its subsidiaries. Such
persons have vigorously defended all allegations against them and intend to
continue to do so in all pending and future proceedings, if any. In general,
pursuant to the terms of its Certificate of Incorporation, as amended, THCR has
undertaken to indemnify to the fullest extent permitted under and in accordance
with the laws of the state of Delaware such persons against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of THCR, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful.
Metelman Action. On or about March 20, 2000, Mark Metelman, a
stockholder of THCR, filed a proposed class action on behalf of all THCR
stockholders in the Superior Court of New Jersey, Chancery Division, Atlantic
County (Civil Action No. Atl-C-43-00) against THCR and each member of the Board
of Directors of THCR. The plaintiff claimed that a third party made an offer to
purchase THCR, and that one or more members of the Board of Directors wrongly
failed to consider the supposed offer. The defendants filed a motion to dismiss
in lieu of answer. On July 21, 2000, the Court dismissed plaintiff's Complaint
without prejudice. The Court granted the plaintiffs 10 weeks during which to
file an Amended Complaint, pleading a stockholder derivative action, and
effective October 12, 2000, plaintiff filed an Amended Complaint, pleading a
stockholder derivative action. In March 2001, without admitting any wrongdoing
or liability, the parties reached an agreement to settle the case, which is
being submitted to the Court for approval. THCR believes that the settlement
will not have a material adverse effect on THCR's financial condition and
operations.
SEC Investigation. The Enforcement Staff (the "Staff") of the Northeast
Regional Office of the Securities and Exchange Commission (the "Commission") has
informed THCR that it is considering recommending that the Commission authorize
the commencement of proceedings against THCR and its former Chief Executive
Officer, charging that they violated the Securities Exchange Act of 1934, as
amended, by issuing on October 25, 1999, a press release that was materially
false and misleading because it failed to disclose that $17.0 million of THCR's
operating income in the third quarter of 1999 came from a one-time gain in
connection with Taj Associates' September 1999 acquisition of the All Star Cafe
restaurant from Planet Hollywood International, Inc. The details of that
transaction, and its effects on the Company's third quarter results, were
discussed in the Company's report on Form 10-Q filed with the Commission on
November 4, 1999. The Staff has indicated to the Company that it may seek
authority from the Commission to seek injunctive relief, a cease and desist
order, and/or civil penalties, among other things.
THCR intends to submit a memorandum to the Commission setting forth the
reasons why it believes that the contemplated proceedings should not be brought.
If, notwithstanding THCR's submission, proceedings are brought against it, THCR
intends to defend them vigorously. There can be no assurances, however, of the
outcome of such proceedings. THCR continues to believe that such proceedings, if
brought, would not have a material adverse effect on its business, operating
results or financial position.
Trump Indiana. Commencing in early 1994, Trump Indiana, through its
Indiana legal counsel, had discussions with eight Indiana residents regarding
(i) the potential purchase by such residents of non-voting stock of Trump
Indiana, representing a total of 7.5% of the value of Trump Indiana, and (ii)
the creation and funding of a charitable foundation for the benefit of residents
of the Gary, Indiana area. Subsequent to those discussions, however, management
determined to include Trump Indiana as a
35
wholly-owned subsidiary of THCR Holdings in connection with the June 1995
Offering. The residents then asserted a right to purchase stock in Trump Indiana
equal to 7.5% of the value of Trump Indiana, and also asserted that Trump
Indiana was required to contribute an additional 7.5% of its value, represented
by shares of its stock, into the charitable foundation. Trump Indiana and THCR
did not agree with the residents' assertions and so advised them. Such residents
then caused a complaint to be filed in the United States District Court,
Southern District of Indiana, against Trump Indiana, THCR, THCR Holdings, and
Trump ("the litigation"). Later, The Trump Organization, Inc. was added as a
defendant. The claims sought (i) compensatory damages to the eight plaintiffs
equal to 7.5% of the value of Trump Indiana, (ii) funding of the charitable
foundation in an amount equal to an additional 7.5% of the value of Trump
Indiana, (iii) transfer of Trump Indiana stock to the plaintiffs and to the
charitable foundation and (iv) punitive damages in an unspecified amount.
Monetary settlements later were reached between all defendants and six of the
eight plaintiffs. Thereafter, the remaining two plaintiffs voluntarily dismissed
their claims for the transfer of ownership of stock in Trump Indiana but
proceeded in the litigation with (i) their claim for monetary damages against
the defendants and (ii) a claim that a charitable foundation be established and
funded with an amount equal to 7.5% of the value of Trump Indiana. In February
1999, these two remaining plaintiffs voluntarily dismissed all claims against
The Trump Organization, Inc., and the court entered summary judgment against the
plaintiffs and in favor of THCR and THCR Holdings on all claims in the
litigation. The case was then tried in United States District Court,
Indianapolis. On March 3, 1999, the jury assessed damages against Trump Indiana
for breach of contract in the total amount of approximately $1.3 million and
further determined that Trump Indiana had breached a contract to create and fund
a charitable foundation. The jury assessed no damages against Mr. Trump
personally. Punitive damages were not awarded against either Trump Indiana or
Trump. On December 9, 1999, the United States District Court, sitting in equity,
decided the equity claim ruling that the plaintiffs were not entitled to the
equitable relief sought and that Trump Indiana had met its obligation by
establishing and funding another charitable foundation for the benefit of the
residents of the City of Gary. Plaintiffs have appealed the ruling in equity in
favor of Trump Indiana and Trump Indiana has appealed the jury verdict in favor
of plaintiffs. These appeals are currently pending in the United States Seventh
Circuit Court of Appeals.
Castle Acquisition. On August 14, 1996, certain stockholders of THCR
filed two derivative actions in the Court of Chancery in Delaware (Civil Action
Nos. 15148 and 15160) (the "Delaware cases") against each of the members of the
Board of Directors of THCR, THCR Holdings, Castle Associates and TCI-II. The
plaintiffs claim that the directors of THCR breached their fiduciary duties in
connection with its acquisition of Castle Associates (the "Castle Acquisition")
by purchasing these interests at an excessive price in a self-dealing
transaction. The complaint sought to enjoin the transaction, and also sought
damages and an accounting. The injunction was never pursued. These plaintiffs
served a notice of dismissal in the Delaware cases on December 29, 1997.
On October 16, 1996, a stockholder of THCR filed a derivative action in
the United States District Court, Southern District of New York (96 Civ. 7820)
against each member of the Board of Directors of THCR, THCR Holdings, Castle
Associates, TCI, TCI-II, TCHI and Salomon Brothers, Inc ("Salomon"). The
plaintiff claimed that certain of the defendants breached their fiduciary duties
and engaged in ultra vires acts in connection with the Castle Acquisition and
that Salomon was negligent in the issuance of its fairness opinion with respect
to the Castle Acquisition. The plaintiff also alleged violations of the federal
securities laws for alleged omissions and misrepresentations in THCR's proxies,
and that Trump, TCI-II and TCHI breached the acquisition agreement by supplying
THCR with untrue information for inclusion in the proxy statement delivered to
THCR's stockholders in connection with the Castle Acquisition. The plaintiff
sought removal of the directors of THCR, and an injunction, rescission and
damages.
The Delaware cases were amended and refiled in the Southern District of
New York and consolidated with the federal action for all purposes, including
pretrial proceedings and trial. On or about January 17, 1997, the plaintiffs
filed their Consolidated Amended Derivative Complaint (the "First Amended
Complaint"), reflecting the consolidation. On or about March 24, 1997, the
plaintiffs filed their Second Consolidated Amended Derivative Complaint (the
"Second Amended Complaint"). In addition to the allegations made in the First
Amended Complaint, the Second Amended Complaint claimed that certain of the
defendants breached their fiduciary duties and wasted corporate assets in
connection with a previously contemplated transaction with Colony Capital, Inc.
("Colony Capital"). The Second Amended Complaint also includes claims against
Colony Capital for aiding and abetting certain of those violations. In addition
to the relief sought in the First Amended Complaint, the Second Amended
Complaint sought to enjoin the previously contemplated transaction with Colony
Capital or, if it was effectuated, to rescind it. On March 27, 1997, THCR and
Colony Capital mutually agreed to end negotiations with respect to such
transaction. On June 26, 1997, plaintiffs served their Third Consolidated
Amended Derivative Complaint (the "Third Amended Complaint"), which omitted the
claims against Colony Capital. THCR and the other defendants in the action moved
to dismiss the Third Amended Complaint on August 5, 1997. By decision and order
dated September 21, 2000, the Court denied, in substantial part, the defendants'
motion to dismiss. The Court also granted plaintiffs' application to amend the
Third Amended Complaint. On October 11, 2000, plaintiffs served their Fourth
Consolidated Amended Stockholder's Derivative Complaint (the "Fourth Amended
36
Complaint"). The defendants served answers to the Fourth Amended Complaint on
November 17, 2000 and began discovery. The defendants intend to defend
vigorously this litigation. THCR cannot predict, however, the outcome of this
case.
On September 9, 1997, Mirage Resorts, Inc. filed a complaint against Trump,
THCR and Hilton Hotels Corporation, in the United States District Court for the
Southern District of New York (the "New York Action"). The complaint sought
damages for alleged violations of antitrust laws, tortious interference with
prospective economic advantage and tortious inducement of a breach of fiduciary
duties arising out of activities purportedly engaged in by defendants in
furtherance of an alleged conspiracy to impede Mirage's efforts to build a
casino resort in the Marina District. Among other things, Mirage contended that
the defendants filed several frivolous lawsuits and funded others that challenge
the proposed state funding mechanisms for the construction of a proposed roadway
and tunnel that would be paid for chiefly through government funds and which
would link the Atlantic City Expressway with the site of Mirage's proposed new
casino resort. On November 10, 1997, THCR and Trump moved to dismiss the
complaint. On December 18, 1998, the Court denied the motion to dismiss brought
by Trump and THCR. On April 20, 1999, Mirage and an affiliate, the Mirage Casino
Hotel filed a complaint against THCR and other defendants in Nevada State Court
(the "Nevada Action"). The Nevada Action, which was subsequently removed to the
United States District Court for the District of Nevada, sought damages and an
injunction for an alleged misappropriation of trade secrets, intentional
interference with prospective economic advantage and contractual relations and
conspiracy to injure Mirage. On or about February 23, 2000, THCR and Mirage
entered into an agreement to dismiss with prejudice the New York Action and the
Nevada Action against THCR and all of its officers and directors. The parties
exchanged mutual releases and no money was paid by either side. On or about
February 23, 2000, the Court in Nevada dismissed the Nevada Action. On or about
February 29, 2000, the Court in New York dismissed the New York Action.
New York Temporary State Commission on Lobbying. On November 13, 2000, THCR
entered into a Settlement Agreement with the New York Temporary State Commission
on Lobbying regarding alleged deficiencies in reports THCR filed with the New
York Temporary State Commission on Lobbying. THCR paid civil penalties of an
aggregate amount of $250,000 with respect to the alleged filing deficiencies,
and filed an amended semi-annual report.
Various other legal proceedings are now pending against THCR. Management
considers all such proceedings to be ordinary litigation incident to the
character of its business. Management believes that the resolution of these
claims will not, individually or in the aggregate, have a material adverse
effect on its financial condition or results of operations.
From time to time, Plaza Associates, Taj Associates, Castle Associates and
Trump Indiana may be involved in routine administrative proceedings involving
alleged violations of certain provisions of the Casino Control Act and the
Riverboat Gambling Act, as the case may be. However, management believes that
the final outcome of these proceedings will not, either individually or in the
aggregate, have a material adverse effect on THCR or on the ability of Plaza
Associates, Taj Associates, Castle Associates or Trump Indiana to otherwise
retain or renew any casino or other licenses required under the Casino Control
Act or the Indiana Riverboat Act, as the case may be, for the operation of Trump
Plaza, the Taj Mahal, Trump Marina and the Indiana Riverboat, respectively,
although no assurances can be given.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted by THCR to its security holders for a vote during
the fourth quarter of 2000.
37
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
THCR. The Common Stock of THCR is listed on the NYSE under the symbol
"DJT." The initial public offering price of the THCR Common Stock was $14.00 per
share on June 7, 1995. The following table reflects the high and low sales
prices, rounded to the nearest penny, of the THCR Common Stock as reported by
the NYSE for each quarter of the two most recent fiscal years and subsequent
interim period.
38
High Low
---- ---
1999
----
First quarter ................................... $ 5.94 $ 3.88
Second quarter .................................. $ 6.81 $ 3.56
Third quarter ................................... $ 6.69 $ 4.13
Fourth quarter .................................. $ 4.88 $ 3.25
2000
----
First quarter ................................... $ 4.00 $ 2.93
Second quarter .................................. $ 3.43 $ 2.06
Third quarter ................................... $ 3.12 $ 2.43
Fourth quarter .................................. $ 3.06 $ 1.75
2001
----
First quarter (through March 22, 2001) .......... $ 3.12 $ 1.90
As of March 8, 2001, there were approximately 939 holders of record of
THCR Common Stock.
Trump is the sole beneficial owner of all 1,000 outstanding shares of
THCR's Class B Common Stock, par value $.01 per share (the "THCR Class B Common
Stock"). No established trading market exists for the THCR Class B Common Stock,
and Trump has been the beneficial owner of all THCR Class B Common Stock since
its issuance. The THCR Class B Common Stock has no right to receive any dividend
or other distribution (other than certain distributions upon liquidation) with
respect to the equity of THCR.
THCR has never paid a dividend on the THCR Common Stock and does not
anticipate paying one in the foreseeable future. The payment of any future
dividends will be at the discretion of the THCR Board of Directors and will
depend upon, among other things, THCR's financial condition and capital needs,
legal restrictions on the payment of dividends, contractual restrictions in
financing agreements and on other factors deemed pertinent by the THCR Board of
Directors. It is the current policy of the THCR Board of Directors to retain
earnings, if any, for use in THCR's subsidiaries' operations (except as set
forth in the THCR Holdings Partnership Agreement). In addition, the TAC I Note
Indenture, the TAC II Note Indenture, the TAC III Note Indenture, the Senior
Note Indenture and the indenture agreements governing the Castle Notes and the
terms of the Castle Working Capital Loan each contain certain covenants,
including, without limitation, limiting the payment of dividends and THCR's
ability to obtain funds from THCR Holdings with which to pay dividends. Pursuant
to these indentures, there are restrictions on the payment of dividends unless,
among other things, (i) no default or event of default has occurred and is
continuing under the indenture, (ii) certain entities meet certain consolidated
financial ratios and (iii) the total amount of the dividends does not exceed
certain amounts specified in the indentures.
The Board of Directors of THCR authorized THCR Holdings to repurchase,
from time to time, up to an aggregate of 2.5 million shares of THCR's Common
Stock either in the open market or through privately negotiated transactions
(the "Repurchase Program"). The Repurchase Program expired on January 1, 2001.
As of December 31, 2000, THCR Holdings repurchased an aggregate of 2,196,729
shares of THCR Common Stock.
THCR Holdings. THCR Holdings is a limited partnership of which THCR is
currently a 59.87743% general partner. Trump is currently a 27.06457% limited
partner. THCR/LP Corporation, a New Jersey corporation formerly known as TM/GP
Corporation ("THCR/LP"), is currently a 3.55096% limited partner. Trump Casinos,
Inc., a New Jersey Corporation of which Mr. Trump owns 100.0% ("TCI"), is
currently a 3.69695% limited partner, and Trump Casinos II, Inc., a Delaware
corporation of which Mr. Trump owns 100.0% ("TCI-II"), is currently a 5.81009%
limited partner. There currently is no established trading market for the equity
interests of THCR Holdings.
39
THCR Funding. THCR Holdings owns 100.0% of the outstanding shares of
THCR Funding's common stock. There currently is no established trading market
for THCR Funding's common stock. The Senior Note Indenture restricts the ability
of THCR Funding to declare or pay dividends.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain historical consolidated
financial information of THCR for the years ended December 31, 1996, 1997, 1998,
1999 and 2000 (see Note 1 below). All financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of THCR," and the consolidated financial statements
and the related notes thereto included elsewhere in this Form 10-K.
40
Year Ended Year Ended Year Ended Year Ended Year Ended
December December December December December
31, 31, 31, 31, 31,
1996 (1) 1997 1998 1999 2000
-------- ---- ---- ---- ----
(in thousands, except per share data)
Statement of Operations Data:
Revenues:
Gaming $ 883,441 $ 1,281,374 $ 1,288,394 $ 1,275,829 $ 1,245,014
Other (a) 205,829 298,950 285,277 300,054 258,659
--------- ----------- ----------- ----------- -----------
Gross Revenues 1,089,270 1,580,324 1,573,671 1,575,883 1,503,673
Promotional Allowances 122,326 179,822 169,581 164,690 152,301
--------- ----------- ----------- ----------- -----------
Net Revenues 966,944 1,400,502 1,404,090 1,411,193 1,351,372
--------- ----------- ----------- ----------- -----------
Costs and Expenses:
Gaming 538,398 811,458 806,907 808,585 770,011
Other 58,971 81,033 82,971 88,256 78,172
General and administrative 192,082 275,717 274,770 292,288 282,194
Depreciation and amortization 69,035 89,094 83,722 83,323 77,231
Pre-opening 13,839 -- 747 -- --
Trump World's Fair closing costs (b) -- -- -- 123,959 814
--------- ----------- ----------- ----------- -----------
Total costs and expenses 872,325 1,257,302 1,249,117 1,396,411 1,208,422
--------- ----------- ----------- ----------- -----------
Income from operations 94,619 143,200 154,973 14,782 142,950
Interest expense, net (139,530) (205,008) (213,507) (215,566) (212,890)
Other non-operating (expense) income (c) 14,869 (1,028) (1,093) (1,501) (653)
Loss in joint venture (925) (3,478) (2,969) (3,008) (3,134)
Extraordinary (loss) gain (d) (60,732) -- -- -- 9,453
Minority interest 26,022 24,186 22,878 75,076 26,962
Cumulative effect of change in accounting
principle -- -- -- (3,565) --
--------- ----------- ----------- ----------- -----------
Net loss $ (65,677) $ (42,128) $ (39,718) $ (133,782) $ (37,312)
========= =========== =========== =========== ===========
Basic loss per common share (e) $ (3.27) $ (1.85) $ (1.79) $ (6.03) $ (1.69)
========= =========== =========== =========== ===========
Average Shares Outstanding 20,081,122 22,794,921 22,203,612 22,178,878 22,041,048
========= =========== =========== =========== ===========
Balance Sheet Data (at end of period):
Cash and cash equivalents $ 175,749 $140,328 $114,757 $104,026 $95,429
Property and equipment, net 2,009,261 2,004,751 1,977,609 1,860,596 1,815,068
Total assets 2,455,643 2,473,309 2,429,578 2,267,242 2,199,313
Total long-term debt, net of current maturities 1,713,425 1,817,569 1,838,492 1,855,327 1,827,023
Minority interest 172,604 148,418 125,540 48,409 26,897
Total capital 388,095 328,885 286,908 152,664 115,149
41
-----------------
Note 1: On April 17, 1996, THCR Holdings acquired all of the outstanding
equity of Taj Associates. On October 7, 1996, THCR Holdings acquired
from Trump all of the outstanding equity of Castle Associates.
Therefore, the financial data as of December 31, 1996 and for the year
ended December 31, 1996 reflect the operations of THCR and Plaza
Associates for the full year, Taj Associates for the period from April
17, 1996 to December 31, 1996, Castle Associates from October 7, 1996
to December 31, 1996, and Trump Indiana for the period June 8, 1996
(the opening date of the Indiana Riverboat) to December 31, 1996.
(a) On September 15, 1999, an agreement was reached between Taj Associates,
All Star and Planet Hollywood International, Inc. to terminate the All
Star Cafe Lease effective September 24, 1999. Upon termination of the
All Star Cafe Lease, all improvements, alterations and All Star's
personal property, with the exception of specialty trade fixtures,
became the property of Taj Associates. Taj Associates recorded the
$17.2 million estimated fair market value of these assets in other
revenue based on an independent appraisal.
(b) On October 4, 1999, THCR closed Trump World's Fair. The estimated cost
of closing Trump World's Fair was approximately $123.959 million, which
includes $97.221 million for the writedown of the net book value of the
assets and $26.738 million of costs incurred and to be incurred in
connection with the closing and demolition of the building.
(c) Other non-operating income for the years ended December 31, 1997, 1998,
1999 and 2000 includes $1.028 million, $0.725 million, $1.501 million
and $0.2 million respectively, of costs associated with certain
litigation.
(d) The extraordinary loss for the year ended December 31, 1996 relates to
the redemption of Plaza PIK Notes and Plaza PIK Note Warrants and $10.0
million of THCR Holdings Senior Notes. The extraordinary gain for the
year ended December 31, 2000 relates to the repurchase by THCR
Enterprises of $35.5 million of THCR Holdings Senior Notes, net of the
writedown of unamortized loan costs and minority interest.
(e) Basic loss per share has been calculated for all periods presented in
accordance with Statement of Financial Accounting Standards Board No.
128 "Earnings per Share." Earnings per share is based upon average
shares outstanding, shares and phantom stock units awarded to the Chief
Executive officer of THCR under the 1995 Stock Plan (as defined) and
common stock equivalents, if dilutive earnings per share represents net
loss divided by such amounts. The shares of THCR Class B Common Stock
owned by Trump have no economic interest and, therefore, are not
considered.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
Cash flows from operating activities are THCR's principal source of
liquidity. THCR expects to have sufficient liquidity to meet its obligations
over the next operating period. Cash flow is managed based upon the seasonality
of the operations. Any excess cash flow achieved from operations during peak
periods is utilized to subsidize non-peak periods where necessary.
The indenture governing the Senior Notes (the "Senior Note Indenture")
restricts the ability of THCR Holdings and its subsidiaries to make
distributions to partners or pay dividends, as the case may be, unless certain
financial ratios are achieved. Further, given the rapidly changing competitive
environment, THCR's future operating results are highly conditional and could
fluctuate significantly.
The indentures of Trump AC and Castle Associates restrict their ability
to make distributions to THCR Holdings. Therefore, the ability of THCR Holdings
to service its debt is dependent on the successful operations of Trump Indiana
and other future operations and the permitted distributions from Trump AC and
Castle Associates.
In addition, the ability of (i) Plaza Associates and Taj Associates
(through Trump AC) and (ii) Castle Associates to make payments of dividends or
distributions to THCR Holdings may be restricted by the New Jersey Casino
Control Commission ("CCC"). Similarly, the ability of Trump Indiana to make
payments of dividends or distributions to THCR Holdings may be restricted by the
Indiana Gaming Commission.
42
Capital expenditures for Trump AC were $21.5 million and $15.1 million for
the years ended December 31, 1999 and 2000, respectively. Capital expenditures
for improvements to Trump Plaza's facilities were $10.7 million and $4.3 million
for the years ended December 31, 1999 and 2000, respectively. Capital
expenditures attributable to the Taj Mahal were $9.3 million and $10.1 million
for the years ended December 31, 1999 and 2000 respectively.
Castle Associates' capital expenditures for 1999 and 2000 were $4.5 million
and $5.1 million, respectively. These capital expenditures consisted principally
of a slot room expansion project completed in 2000, which increased gaming space
approximately 6,200 square feet (8.2%) and added approximately 250 machines, and
ongoing property enhancements.
Capital expenditures attributable to Trump Indiana were $5.4 million and
$0.4 million for the years ending December 31, 1999 and 2000, respectively.
Approximately $15.0 million costs of hotel construction and other infrastructure
improvements will be applied towards satisfying the economic development
commitment required in connection with the Indiana licensing process. In
September 2000, THCR along with Majestic Star Casino, L.L.C. ("Barden"), the
other riverboat licensee and joint owner with Trump Indiana of Buffington Harbor
Riverboats, L.L.C. ("BHR") formed a joint venture, Buffington Harbor Parking
Associates ("BHPA") for the purpose of constructing and operating a parking
garage.
The Castle Senior Notes have an outstanding principal amount of $62.0
million and bear interest at the rate of 10 1/4% per annum, payable
semi-annually each April and October. The Castle Senior Notes mature on April
30, 2003.
The Castle Working Capital Loan has an outstanding principal amount of $5.0
million and bears interest at the rate of 10 1/4% per annum, payable
semi-annually each April and October. The entire principal balance of the Castle
Working Capital Loan matures on April 30, 2003.
Castle Associates has the authority to obtain a working capital facility of
up to $10.0 million (of which approximately $5.0 million is outstanding)
although there can be no assurance that such financing will be available or on
terms acceptable to Castle Associates.
The ability of THCR to pay its indebtedness when due will depend on the
ability of THCR to either generate cash from operations sufficient for such
purposes or to refinance such indebtedness on or before the date on which it
becomes due. Cash flow from operations may not be sufficient to repay a
substantial portion of the principal amount of the debt at maturity. The future
operating performance of THCR and the ability to refinance its debt will be
subject to the then prevailing economic conditions, industry conditions and
numerous other financial, business and other factors, many of which are beyond
the control of THCR. There can be no assurance that the future operating
performance of THCR will be sufficient to meet these repayment obligations or
that the general state of the economy, the status of the capital markets or the
receptiveness of the capital markets to the gaming industry will be conducive to
refinancing this debt or other attempts to raise capital.
Seasonality
The gaming industry in Atlantic City and Indiana is seasonal, with the
heaviest activity occurring during the period from May through September.
Consequently, THCR's operating results during the two quarters ending in March
and December would not likely be as profitable as the two quarters ending in
June and September.
Inflation
There was no significant impact on operations as a result of inflation
during 1998, 1999 or 2000.
43
The following tables include selected data of Plaza Associates, Taj
Associates, Trump Indiana and Castle Associates (d/b/a Trump Marina) for the
years ended December 31, 1998, 1999 and 2000, respectively.
Year Ended December 31,
-----------------------
1998 1998 1998 1998 1998
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated*
---------- ---------- ------- ------ -------------
(in millions)
Revenues:
Gaming ........................................ $ 374.5 $ 514.0 $ 137.8 $ 262.1 $ 1,288.4
Other ......................................... 101.6 119.1 3.6 61.0 285.3
-------- -------- -------- -------- ----------
Gross Revenue ............................. 476.1 633.1 141.4 323.1 1,573.7
Less: Promotional Allowance ........................ 63.4 66.7 0.8 38.7 169.6
-------- -------- -------- -------- ----------
Net Revenue ............................... 412.7 566.4 140.6 284.4 1,404.1
-------- -------- -------- -------- ----------
Costs and Expenses:
Gaming ........................................ 228.8 316.4 94.7 167.0 806.9
General & Administrative ...................... 79.1 89.2 34.6 60.1 275.6
Depreciation & Amortization ................... 24.7 36.4 5.7 16.6 83.7
Other ......................................... 32.4 33.8 3.9 12.9 82.9
-------- -------- -------- -------- ----------
Total Costs and Expenses .................. 365.0 475.8 138.9 256.6 1,249.1
-------- -------- -------- -------- ----------
Income from Operations ............................. 47.7 90.6 1.7 27.8 155.0
-------- -------- -------- -------- ----------
Non-Operating Income ............................... 1.4 2.4 0.1 0.9 8.5
Interest Expense ................................... (47.7) (94.1) (9.0) (52.3) (223.1)
Total Non-Operating Expense ............... (46.3) (91.7) (8.9) (51.4) (214.6)
-------- -------- -------- -------- ----------
Loss in Joint Venture .............................. - - (3.0) - (3.0)
-------- -------- -------- -------- ----------
Net Loss Before Minority Interest .................. $ 1.4 $ (1.1) $ (10.2) $ (23.6) $ (62.6)
======== ======== ======== ========
Minority Interest .................................. 22.9
----------
Net Loss ........................................... $ (39.7)
==========
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
Year Ended December 31,
-----------------------
1999 1999 1999 1999 1999
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated*
---------- ---------- ------- ------ -------------
(In millions)
Revenues:
Gaming .......................................... $ 354.5 $ 513.1 $ 139.0 $ 269.3 $ 1,275.8
Other (a) ....................................... 97.8 132.8 8.2 61.3 300.1
-------- -------- -------- -------- ----------
Gross Revenue ................................. 452.3 645.9 147.2 330.6 1,575.9
Less: Promotional Allowance ........................ 59.8 64.9 3.2 36.8 164.7
-------- -------- -------- -------- ----------
Net Revenue ................................... 392.5 581.0 144.0 293.8 1,411.2
-------- -------- -------- -------- ----------
Costs and Expenses:
Gaming .......................................... 215.2 335.2 94.7 163.5 808.6
General & Administrative ........................ 76.4 97.1 33.2 66.4 292.3
Depreciation & Amortization ..................... 21.9 36.7 7.0 17.3 83.3
Trump World's Fair closing ...................... 124.0 - - - 124.0
Other ........................................... 30.0 36.3 7.0 15.0 88.2
-------- -------- -------- -------- ----------
Total Costs and Expenses ...................... 467.5 505.3 141.9 262.2 1,396.4
-------- -------- -------- -------- ----------
Income from Operations ............................. (75.0) 75.7 2.1 31.6 14.8
-------- -------- -------- -------- ----------
Non-Operating Income (Expense) ..................... 1.1 2.1 (1.3) 0.8 5.6
Interest Expense ................................... (47.5) (93.6) (7.1) (54.2) (222.7)
-------- -------- -------- -------- ----------
Total Non-Operating Expense ................... (46.4) (91.5) (8.4) (53.4) (217.1)
-------- -------- -------- -------- ----------
Loss in Joint Venture .............................. (3.0) (3.0)
-------- ----------
Net Loss Before Minority Interest .................. $ (121.4) $ (15.8) $ (9.3) $ (21.8) $ (205.3)
======== ======== ======== ========
Minority Interest .................................. 75.1
Cumulative Effect of Accounting
Change .......................................... (3.6)
----------
Net Loss ........................................... $ (133.8)
==========
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
44
(a) On September 15, 1999, an agreement was reached between Taj Associates, All
Star and Planet Hollywood International, Inc. to terminate the All Star
Cafe Lease effective September 24, 1999. Upon termination of the All Star
Cafe Lease, all improvements, alterations and All Star's personal property,
with the exception of specialty trade fixtures, became the property of Taj
Associates. Taj Associates recorded the $17.2 million estimated fair market
value of these assets in other revenue based on an independent appraisal.
Taj Associates has since remodeled the facility into an entertainment
complex called the "Casbah," consisting of a Boardwalk level bar, a
seasonal outdoor dining area with live bands and a centerpiece high-energy
nightclub. The Casbah complex opened in June 2000.
Year Ended December 31,
-----------------------
2000 2000 2000 2000 2000
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated*
---------- ---------- ------- ------ -------------
(In millions)
Revenues:
Gaming ........................................ $ 320.2 $ 538.3 $ 119.2 $ 267.4 $ 1,245.0
Other ......................................... 75.3 113.1 8.6 61.5 258.7
-------- -------- -------- -------- ----------
Gross Revenue ............................ 395.5 651.4 127.8 328.9 1,503.7
Less: Promotional Allowance ................... 50.0 63.0 2.9 36.3 152.3
-------- -------- -------- -------- ----------
Net Revenue .............................. 345.5 588.4 124.9 292.6 1,351.4
-------- -------- -------- -------- ----------
Costs and Expenses:
Gaming ........................................ 212.7 317.3 78.2 161.8 770.0
General & Administrative ...................... 72.5 101.6 31.7 68.6 282.2
Depreciation & Amortization ................... 16.3 35.6 7.8 17.4 77.2
Trump World's Fair Closing Costs .............. 0.8 - - - 0.8
Other ......................................... 20.5 36.1 6.3 15.1 78.2
-------- -------- -------- -------- ----------
Total Costs and Expenses ................. 322.8 490.6 124.0 262.9 1,208.4
-------- -------- -------- -------- ----------
Income from Operations ........................ 22.7 97.8 0.9 29.7 143.0
-------- -------- -------- -------- ----------
Non-Operating Income .......................... 1.1 2.2 0.4 1.5 6.7
Interest Expense .............................. (47.8) (93.4) (5.7) (56.8) (220.2)
-------- -------- -------- -------- ----------
Total Non-Operating Expense .............. (46.7) (91.2) (5.3) (55.3) (213.5)
-------- -------- -------- -------- ----------
Loss in Joint Venture ......................... - - (3.2) - (3.2)
-------- -------- -------- -------- ----------
Net Loss Before Minority Interest ............. ($ 24.0) $ 6.6 ($ 7.6) ($ 25.6) ($ 73.7)
======== ======== ======== ========
Minority Interest ............................. 27.0
Extraordinary Gain, Net of Minority
Interest .................................... 9.4
----------
Net Loss ...................................... ($ 37.3)
==========
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
45
Trump Hotels & Casino Resorts, Inc.
Results of Operations
Comparison of Years Ended December 31, 1998, 1999 and 2000
(in millions, except statistical data)
1998 1998 1998 1998 1998
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated
---------- ---------- ------- ------ ------------
Table Game Revenues ......................... $ 102.4 $ 198.6 $ 34.3 $ 72.9 $ 408.2
Table Game Drop ............................. $ 643.0 $ 1,204.8 $ 217.5 $ 452.6 $ 2,517.9
Table Win Percentage ........................ 15.9% 16.5% 15.8% 16.1% 16.2%
Number of Table Games ....................... 108 147 58 92 405
Slot Revenues ............................... $ 272.1 $ 295.0 $ 103.5 $ 187.2 $ 857.8
Slot Handle ................................. $ 3,366.8 $ 3,623.7 $ 1,630.8 $ 2,321.9 $ 10,943.2
Slot Win Percentage ......................... 8.1% 8.1% 6.3% 8.1% 7.8%
Number of Slot Machines ..................... 4,144 4,152 1,352 2,167 11,815
Other Gaming Revenues ....................... N/A $ 20.4 N/A $ 2.0 $ 22.4
Total Gaming Revenues ....................... $ 374.5 $ 514.0 $ 137.8 $ 262.1 $ 1,288.4
1998 1998 1998 1998 1998
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated
---------- ---------- ------- ------ ------------
Table Game Revenues ......................... $ 97.6 $ 173.3 $ 30.9 $ 72.9 $ 374.6
Incr (Decr) over prior period ............ $ (4.8) $ (25.3) $ (3.4) - $ (33.6)
Table Game Drop ............................. $ 631.5 $ 1,079.4 $ 183.0 $ 459.0 $ 2,352.9
Incr (Decr) over prior period ............ $ (11.5) $ (125.4) $ (34.5) $ 6.4 $ (165.0)
Table Win Percentage ........................ 15.4% 16.1% 16.9% 15.9% 15.9%
Incr (Decr) over prior period ............ (0.5)pts. (0.4)pts. 1.1pts. (0.2)pts. (0.3)pts.
Number of Table Games ....................... 98 143 50 86 377
Incr (Decr) over prior period ............ (10) (4) (8) (6) (28)
Slot Revenues ............................... $ 256.9 $ 317.1 $ 108.1 $ 194.6 $ 876.7
Incr (Dec) over prior period ............. $ (15.2) $ 22.1 $ 4.6 $ 7.4 $ 18.9
Slot Handle ................................. $ 3,250.3 $ 3,996.9 $ 1,659.9 $ 2,476.0 $ 11,383.1
Incr (Decr) over prior period ............ $ (116.5) $ 373.2 $ 29.1 $ 154.1 $ 439.9
Slot Win Percentage ......................... 7.9% 7.9% 6.5% 7.9% 7.7%
Incr (Decr) over prior period ............ (0.2)pts. (0.2)pts. 0.2pts. (0.2)pts. (0.1)pts.
Number of Slot Machines ..................... 3,807 4,452 1,250 2,159 11,668
Incr (Decr) over prior period ............ (337) 300 (102) (8) (147)
Other Gaming Revenues ....................... N/A $ 22.7 N/A $ 1.8 $ 24.5
Incr (Decr) over prior period ............ N/A $ 2.3 N/A $ (0.2) $ 2.1
Total Gaming Revenues ....................... $ 354.5 $ 513.1 $ 139.0 $ 269.3 $ 1,275.8
Incr (Decr) over prior period ............ $ (20.0) $ (0.9) $ 1.2 $ 7.2 $ (12.6)
46
2000 2000 2000 2000 2000
Plaza Taj Trump Trump THCR
Associates Associates Indiana Marina Consolidated
---------- ---------- ------- ------ ------------
Table Game Revenues $ 93.1 $ 182.2 $ 26.7 $ 73.1 $ 375.1
Incr (Decr) over prior period $ (4.5) $ 8.9 $ (4.2) $ 0.2 $ 0.5
Table Game Drop $ 648.7 $ 1,071.2 $ 161.8 $ 440.8 $ 2,322.5
Incr (Decr) over prior period $ 17.2 $ (8.2) $ (21.2) $ (18.2) $ (30.4)
Table Win Percentage 14.4% 17.0% 16.5% 16.6% 16.2%
Incr (Decr) over prior period (1.0)pts. 0.9pts (0.4)pts 0.7pts 0.3pts
Number of Table Games 96 143 50 76 365
Incr (Decr) over prior period (2) -- -- (10) (12)
Slot Revenues $ 227.0 $ 333.7 $ 92.5 $ 192.9 $ 846.1
Incr (Dec) over prior period $ (29.9) $ 16.6 $ (15.6) $ (1.7) $ (30.6)
Slot Handle $ 2,905.9 $ 4,313.2 $ 1,422.3 $ 2,459.2 $ 11,100.6
Incr (Decr) over prior perio $ (344.4) $ 316.3 $ (237.6) $ (16.8) $ (282.5)
Slot Win Percentage 7.8% 7.7% 6.5% 7.8% 7.6%
Incr (Decr) over prior period (0.1)pts (0.2)pts -- (0.1)pts (0.1)pts
Number of Slot Machines 2,839 4,557 1,251 2,410 11,057
Incr (Decr) over prior period (968) 105 2 251 (610)
Other Gaming Revenues N/A $ 22.4 N/A $ 1.4 $ 23.8
Incr (Decr) over prior period N/A $ (0.3) N/A $ (0.4) $ (0.7)
Total Gaming Revenues $ 320.1 $ 538.3 $ 119.2 $ 267.4 $ 1,245.0
Incr (Decr) over prior period $ (34.4) $ 25.2 $ (19.8) $ (1.9) $ (30.8)
Results of Operations for the Years Ended December 31, 1999 and 2000
Gaming revenues are the primary source of THCR's revenues. Table game
revenues represent the amount retained by THCR from amounts wagered at table
games. The table win percentage tends to be fairly constant over the long term,
but may vary significantly in the short term, due to large wagers by "high
rollers." The Atlantic City industry table game win percentages were 15.3% and
15.4% for the years ended December 31, 1999 and 2000.
An $8.9 million increase in table games revenue at the Taj Mahal, due
to increased volumes and an improved table win percentage (17% in 2000 vs 16.1%
in 1999), was primarily offset by a $4.4 million decrease at Trump Plaza due to
a 1% decrease in table win percentage and a $4.2 million decrease at Trump
Indiana due to lower table drop and win percentage.
Slot revenues declined $30.6 million or 3.5% from the comparable period
in 1999 primarily due to the closing of Trump World's Fair at Trump Plaza. A
$16.6 million or 5.2% increase at the Taj Mahal was primarily offset by a $15.6
million or 14.4% decrease at Trump Indiana due to the legalization of dockside
gaming competition in Illinois. Trump Marina's slot revenues declined $1.7
million from the comparable period in 1999 due to a slightly decreased slot
handle along with a decreased slot win percentage.
Other non-gaming revenues and their associated expenses, as well as
depreciation and amortization were reduced from the comparable period in 1999
due to the closing of Trump World's Fair. Additionally, 1999 other non-gaming
revenues at the Taj Mahal included a one-time gain of $17.2 million on the
acquisition of the All Star Cafe.
Gaming costs and expenses were $770.0 million for the year ended
December 31, 2000, a decrease of $38.6 million or 4.8% from $808.6 million for
the comparable period in 1999. The Taj Mahals's gaming costs decreased $17.9
million or 5.3% from the comparable period in 1999, primarily due to a decrease
in gaming bad debt expense. Trump Plaza's gaming costs decreased $2.5 million
primarily due to the closing of Trump World's Fair. Trump Indiana's gaming costs
decreased $16.5 million or 17.4% due to decreased coin and cash promotional
expenses as well as reduced gaming taxes proportionate to the reduction in
gaming revenues. Trump Marina's gaming costs decreased $1.7 million as a result
of reduced promotional and complimentary expense attributed to the elimination
of less profitable programs.
General and administrative expenses were $282.2 million for the year
ended December 31, 2000, a decrease of $10.1 million or 3.5% from $292.3 million
for the comparable period in 1999. General and administrative expenses at Trump
Plaza decreased $3.9 million or 5.1% from the comparable period in 1999 due to
the closing of Trump World's Fair. Expenses at the Taj Mahal increased $4.5
million or 4.6% from the comparable period in 1999 primarily due to additional
entertainment costs resulting from a higher ratio of cash to complimentary
ticket sales, increases in regulatory costs, utility expense, real estate taxes
and insurance reserves.
47
The Taj Mahal's costs also increased due to the increased write-off of CRDA
deposits as a result of additional CRDA donations in 2000, which is also the
primary reason for the $2.2 million increase in general and administrative costs
at Trump Marina. These increases were offset by a $1.5 million decrease in costs
at Trump Indiana and an $11.4 million decrease in corporate expenses. The
decrease in corporate general and administrative expenses is primarily due to
the downsizing in 2000 of the New York corporate office, an aircraft lease
termination, as well as decreased legal and advertising costs.
During 2000, THCR Enterprises, a wholly owned subsidiary of THCR
Holdings, purchased $35.5 million of the THCR Senior Notes. The decrease in
interest expense is primarily due to the elimination of interest expense
associated with these notes.
Results of Operations for the Years Ended December 31, 1998 and 1999
Gaming revenues are the primary source of THCR's revenues. Table game
revenues represent the amount retained by THCR from amounts wagered at table
games. The table win percentage tends to be fairly constant over the long term,
but may vary significantly in the short term, due to large wagers by "high
rollers." The Atlantic City industry table game win percentage percentage
remained constant at 15.3% for the years ended December 31, 1998 and 1999.
All Star had entered into the All Star Cafe Lease with Taj Associates
for the lease of space at Taj Mahal to operate as an All Star Cafe. The basic
rent under the All Star Cafe Lease was $1.0 million per year, paid in equal
monthly installments. In addition, All Star was to pay percentage rent (as
defined).
On September 15, 1999 an agreement was reached between Taj Associates,
All Star and Planet Hollywood International, Inc. to terminate the All Star Cafe
Lease effective September 24, 1999. Upon termination of the All Star Cafe Lease,
all improvements, alterations and All Star's personal property, with the
exception of specialty trade fixtures, became the property of Taj Associates.
Taj Associates recorded the $17.2 million estimated fair market value of these
assets in other revenue based on an independent appraisal.
Taj Associates has since remodeled the facility into an entertainment
complex called the "Casbah", consisting of a Boardwalk level bar, a seasonal
outdoor dining area with live bands and a centerpiece high-energy nightclub. The
Casbah complex opened in June 2000.
Gaming costs and expenses were $808.6 million for the year ended
December 31, 1999, an increase of $1.7 million or .2% from $806.9 million for
the comparable period in 1998. The Taj Mahal's gaming costs increased $8.8
million or 2.8% for the year ended December 31, 1999 from the comparable period
in 1998 due primarily to additional casino bad debt provisions. The casino bad
debt provisions at the Taj Mahal were made after appropriate legal advice had
been obtained which indicated the likelihood of collection was remote. THCR's
policy is to aggressively pursue collection issues regarding markers if such
issues occur. These costs were offset by reduction in costs and expenses at
Trump Plaza of $3.6 million or 1.6% due to the closure of Trump World's Fair on
October 4, 1999 and Trump Marina's $3.5 million or 2.1% decrease for the year
ended December 31, 1999 from the comparable period in 1998. Trump Marina's
decrease is primarily attributed to decreased promotional and complimentary
expenses achieved by eliminating less profitable programs.
General and administrative expenses were $292.3 million for the year
ended December 31, 1999, an increase of $16.7 million or 6.1% from general and
administrative expenses of $275.6 million for the prior year. This increase is
attributed to increases of $6.3 million at Trump AC due primarily to charges at
Taj Associates related to employee severance charges and litigation settlement
reserves; $6.3 million at Trump Marina due primarily to incremental costs
incurred related to the Castle Services Agreement (as defined), employee
incentive compensation and insurance costs; and $6.7 million for THCR corporate
expenses including development and litigation costs.
On October 4, 1999, THCR closed Trump World's Fair. Management
estimates that the cost of closing Trump World's Fair will be approximately
$124.0 million, which includes $97.2 million for the writedown of the net book
value of the assets and $26.8 million of costs incurred and to be incurred in
connection with the closing and demolition of the building.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Management has reviewed the disclosure requirements for Item 7A and,
based upon the Registrants' current capital structure, scope of operations and
financial statement structure, management believes that such disclosure is not
warranted at this time. Since conditions may change, the Registrants' will
periodically review their compliance with this disclosure requirement to the
extent applicable.
48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
An index to financial statements and required financial statement
schedules is set forth in Item 14 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Management of THCR
The following table sets forth certain information concerning each of
THCR's directors and executive officers:
Name Position
---- --------
Donald J. Trump .............. Chairman of the Board of Directors, President
and Chief Executive Officer
Mark A. Brown ................ Chief Operating Officer
Robert M. Pickus ............. Executive Vice President, General Counsel and
Secretary
Francis X. McCarthy, Jr ...... Executive Vice President of Corporate Finance
and Chief Financial Officer
John P. Burke ................ Executive Vice President and Corporate Treasurer
Joseph A. Fusco .............. Executive Vice President of Government and
Regulatory Affairs
Wallace B. Askins ............ Director
Don M. Thomas ................ Director
Peter M. Ryan ................ Director
Donald J. Trump (54 years old) has been the Chairman of the Board of
---------------
THCR and THCR Funding since their formation in 1995, and has been serving as the
President and Chief Executive Officer of THCR, THCR Funding and THCR Holdings
since June 2000. Trump was a 50.0% stockholder, the Chairman of the Board of
Directors, President and Treasurer of Trump Plaza GP, a New Jersey corporation
("Trump Plaza GP"), until June 1993. Trump was Chairman of the Executive
Committee and President of Plaza Associates from May 1986 to May 1992, and was
the managing general partner of Plaza Associates until June 1993. Trump has been
the Chairman of the Board of Directors of Trump AC Holding since February 1993,
served as the President of Trump AC Holding from February 1993 until December
1997 and has been serving as President of Trump AC Holding since June 2000.
Trump was a partner in Trump AC from February 1993 until June 1995. Trump has
been Chairman of the Board of Directors of Trump AC Funding since its formation
in January 1996 and the Chairman of the Board of Directors of Funding II and
Funding III since their formation in November 1997. Since June 2000, Trump has
also been serving as the President and Chief Executive Officer of Trump AC,
Trump AC Funding, Funding II and Funding III. Trump has been Chairman of the
Board of Directors of THCR Holding Corp. and THCR/LP since October 1991;
President and Treasurer of THCR Holding Corp. since March 1991; President and
Treasurer of THCR/LP since June 2000; Chairman of the Board of Directors,
President and Treasurer of TCI since June 1988; Chairman of the Executive
Committee of Taj Associates from June 1988 to October 1991 and Chief Executive
Officer since June 2000; and President and sole Director of Realty Corp. since
May 1986. Trump has been the sole director of TACC since March 1991. Trump was
President and Treasurer of TACC from March 1991 until December 1997, and has
been the President of TACC since June 2000. Trump has been the Chairman of the
Board of Directors, President and Treasurer of Plaza Funding since its formation
in March 1986. Trump has been the sole director of Trump Indiana since its
formation, and has been the President and Chief Executive Officer of Trump
Indiana since June 2000. Trump has been Chairman of the Board of Partner
Representatives of Castle Associates since May 1992; and was Chairman of the
Executive Committee of Castle Associates from June 1985 to May 1992. Trump is
the Chairman of the Board of Directors of Trump's Castle Funding, served as
President and Treasurer of Castle Funding until April 1998, and has served as
President and Chief Executive Officer of Castle Funding since June 2000. Trump
has served as the Chairman of the Board of Directors of TCHI since its formation
in March 1985, and has been the President and Chief Executive Officer of TCHI
since June 2000. Trump has been the President, Treasurer, sole director and sole
stockholder of TCI and TCI-II since their formation in June 1988 and November
1991, respectively. Trump has been a Director of THCR Enterprises, Inc., a
Delaware corporation ("THCR Enterprises"), since its formation in January 1997
and has served the President of THCR Enterprises since June 2000. Trump is also
the President of The Trump Organization, Inc. which has been in the business,
through its affiliates and subsidiaries, of acquiring, developing and managing
real estate properties for more than the past five years. Trump was a member of
the Board of Directors of Alexander's Inc. from 1987 to March 1992.
50
Mark A. Brown (40 years old) was appointed Chief Operating Officer of THCR
-------------
and Trump AC effective June 13, 2000, at which time he was also appointed Chief
Executive Officer of each of Taj Associates, Plaza Associates, Castle Associates
and Trump Indiana, subject to necessary licensing by the Indiana Gaming
Commission. Mr. Brown served as President and Chief Operating Officer of Taj
Associates since January 2000. Mr. Brown was President and Chief Operating
Officer of Castle Associates from November 1997 until his transfer to Taj
Associates, Executive Vice President of Operations of Castle Associates from
July 1995 until November 1997 and Vice President of TCHI until his transfer to
Taj Associates. From 1993 until 1995, Mr. Brown served as Senior Vice President
of Eastern Operations for Caesar's World Marketing Corporation, National and
International Divisions. Prior to that, Mr. Brown served as Vice President of
Casino Operations at the Taj Mahal from 1989 until 1993. From 1979 until 1989,
Mr. Brown worked for Resorts International Hotel Casino departing as Casino
Shift Manager.
Robert M. Pickus (46 years old) has been the Executive Vice President,
----------------
General Counsel and Secretary of THCR since its formation in 1995. He has also
been the Executive Vice President of Corporate and Legal Affairs of Plaza
Associates since February 1995. Since April 2000, Mr. Pickus has been serving as
the Executive Vice President and General Counsel of each of THCR Holdings and
Trump AC. Mr. Pickus served as the President of TCS from April 2000 until TCS
was merged into Taj Associates on December 31, 2000. From December 1993 to
February 1995, Mr. Pickus was the Senior Vice President and General Counsel of
Plaza Associates. Mr. Pickus served as the Assistant Secretary of Trump AC
Holding from April 1994 until February 1998. Since February 1998, Mr. Pickus has
served as the Secretary of Trump AC Holding. Mr. Pickus has been the Secretary
and a director of Trump AC Funding since its formation in January 1996, the
Secretary and a director of Funding II and Funding III since their formation in
November 1997, the Vice President and Secretary of Plaza Funding since its
inception in March 1986, the Executive Vice President and Secretary of Trump
Indiana since its inception in December 1992, the Executive Vice President of
Corporate and Legal Affairs of Taj Associates since February 1995, and a
Director of THCR Holding Corp. and THCR/LP from November 1995 through May 2000.
Mr. Pickus has been the Secretary of THCR Holding Corp. since January 1997 and
the Secretary and Vice President of THCR/LP since June 2000. He was the Senior
Vice President and Secretary of Castle Funding from June 1988 to December 1993
and General Counsel of Castle Associates from June 1985 to December 1993. Mr.
Pickus has served as the Secretary of Castle Funding since April 1998. Mr.
Pickus served as the Assistant Secretary of TACC until February 1998. Since
February 1998, Mr. Pickus has served as the Secretary of TACC. Mr. Pickus was
also Secretary of TCHI from October 1991 until December 1993. Mr. Pickus is a
director of TCHI, and has served as the Assistant Secretary of TCHI from
February 1998 until April 1998. Since April 1998, Mr. Pickus has served as the
Secretary of TCHI. Mr. Pickus has been the Executive Vice President of Corporate
and Legal Affairs of Castle Associates since February 1995, Secretary of Castle
Associates since February 1996 and a member of the Board of Partner
Representatives of Castle Associates since October 1995. Mr. Pickus has been the
Vice President, Secretary and Director of THCR Enterprises since January 1997,
and had been the Executive Vice President of TCS since its inception in June
1996 until April 2000. Mr. Pickus has been admitted to practice law in the
states of New York and New Jersey since 1980, and in the Commonwealth of
Pennsylvania since 1981.
Francis X. McCarthy, Jr. (48 years old) has served as the Executive Vice
------------------------
President of Corporate Finance and Chief Financial Officer of THCR, THCR
Holdings and THCR Funding since September 1998. Mr. McCarthy has also served as
the Chief Financial Officer of Trump AC, Trump AC Funding, Funding II and
Funding III since September 1998, and served as the Chief Financial Officer,
Chief Accounting Officer and Assistant Treasurer of Castle Funding since August
2000 and as the Chief Financial Officer of Castle Associates since August 2000.
Mr. McCarthy served as the Executive Vice President of Corporate Finance of TCS
from October 1996 until TCS was merged into Taj Associates on December 31, 2000.
Mr. McCarthy was Vice President of Finance and Accounting of Trump Plaza GP from
October 1992 until June 1993, Senior Vice President of Finance and
Administration of Plaza Associates from August 1990 to June 1994 and Executive
Vice President of Finance and Administration of Plaza Associates from June 1994
to October 1996. Mr. McCarthy previously served in a variety of financial
positions for Greate Bay Hotel and Casino, Inc. from June 1980 through August
1990.
John P. Burke (53 years old) has served as Executive Vice President of
-------------
THCR, THCR Holdings, THCR Funding and Trump AC since January 1999. Mr. Burke has
been the Corporate Treasurer of THCR, THCR Holdings, THCR Funding and Trump AC
since their formation in 1995. He has also been Corporate Treasurer of Plaza
Associates and Taj Associates since October 1991. Mr. Burke has been the
Treasurer of Trump Indiana since its formation in December 1992. Mr. Burke has
been Treasurer of Trump AC Funding since its formation in January 1996 and
Treasurer of Funding II and Funding III since their formation in November 1997.
Mr. Burke has been Treasurer of TACC since February 1998. Mr. Burke served as
the Senior Vice President of Corporate Finance of THCR from January 1996 to June
1997. Mr. Burke served as the Senior Vice President of THCR, THCR Holdings and
THCR Funding from June 1997 to January 1999. Mr. Burke was a Director of THCR/LP
and THCR Holding Corp. from October 1991 to April 1996 and Vice President of
THCR/LP until June 1995. Mr. Burke has served as the Assistant Treasurer of THCR
Holding Corp. and THCR/LP since February 1998. Mr. Burke has been the Corporate
Treasurer of Castle Associates since October 1991, the Vice President of Castle
Associates, Castle Funding, TCI-II and TCHI since December 1993, Assistant
Treasurer of TCHI since April 1998, Treasurer of Castle Funding since April
1998, a member of the Board of Partner Representatives of Castle Associates
since March 1997 and the Vice President of Finance of The Trump Organization
since September 1990. Mr. Burke was an Executive Vice President and Chief
51
Administrative Officer of Imperial Corporation of America from April 1989
through September 1990. Mr. Burke has been the Vice President and Treasurer of
THCR Enterprises since January 1997.
Joseph A. Fusco (56 years old) has been the Executive Vice President of
---------------
Government Relations & Regulatory Affairs of THCR, THCR Holdings and Trump AC
since June 1996 and of TCS from July 1996 until TCS was merged into Taj
Associates on December 31, 2000. From August 1985 to June 1996, Mr. Fusco
practiced law as a partner in various Atlantic City law firms specializing in
New Jersey casino regulatory, commercial and administrative law matters, most
recently from January 1994 to June 1996 as a partner in the law firm of Sterns &
Weinroth, P.C., located in Atlantic City. Mr. Fusco previously served as
Atlantic County Prosecutor, a Gubernatorial appointment, from April 1981 to July
1985 and as Special Counsel for Licensing for the CCC from the inception of that
agency in September 1977 to March 1981. Mr. Fusco has been admitted to practice
law in the state of New Jersey since 1969.
Wallace B. Askins (70 years old) has been a director of THCR and THCR
-----------------
Funding since June 1995. He has also been a director of Trump AC Holding since
April 1994, and was a partner representative of the Board of Partner
Representatives of Castle Associates from May 1992 to June 1995. Mr. Askins has
been a director of Trump AC Funding since April 1996 and a director of Funding
II and Funding III since December 1997. Mr. Askins served as a director of
TCI-II from May 1992 to December 1993. From June 1984 to November 1992, Mr.
Askins served as Executive Vice President, Chief Financial Officer and as a
director of Armco Inc. Mr. Askins also serves as a director of EnviroSource,
Inc., a waste and recycling management company.
Don M. Thomas (70 years old) has been a director of THCR and THCR Funding
-------------
since June 1995. Mr. Thomas has been a director of Trump AC Funding since April
1996 and a director of Funding II and Funding III since December 1997. He has
also been the Senior Vice President of Corporate Affairs of the Pepsi-Cola
Bottling Co. of New York since January 1985. Mr. Thomas was the acting Chairman,
and a Commissioner, of the CRDA from 1985 through 1987, and a Commissioner of
the CCC from 1980 through 1984 during a portion of which time Mr. Thomas served
as acting Chairman of the CCC. Mr. Thomas was a director of Trump Plaza GP until
June 1993 and has been a director of Trump AC Holding since June 1993. Mr.
Thomas is an attorney licensed to practice law in the state of New York.
Peter M. Ryan (63 years old) has been a director of THCR and THCR Funding
-------------
since June 1995. He has also been the President of each of The Marlin Group, LLC
and The Brookwood Carrington Fund, LLC, real estate financial advisory groups,
since January 1995. Prior to that, Mr. Ryan was the Senior Vice President of The
Chase Manhattan Bank for more than five years. Mr. Ryan has been a director of
the Children's' Hospital FTD since October 1995.
Messrs. Trump, Brown, Pickus, McCarthy, Burke and Fusco have executive
employment agreements pursuant to which such individuals serve as officers of
the Registrants. See " -- Employment Agreements, Termination of Employment and
Change-in-Control Arrangements" for a description of certain of these
agreements.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
THCR is the sole general partner of THCR Holdings. As the sole general
partner of THCR Holdings, THCR generally has the exclusive rights,
responsibilities and discretion in the management and control of THCR Holdings.
Management of Plaza Associates
Trump AC is the managing general partner of Plaza Associates. Trump AC
Holding is the managing general partner of Trump AC. The Board of Directors of
Trump AC Holding consists of Messrs. Trump (Chairman), Askins and Thomas.
Set forth below are the names, ages, positions and offices held with Plaza
Associates and a brief summary of the business experience during the past five
years of each of the executive officers of Plaza Associates other than those who
are also directors or executive officers of THCR.
Matthew A. Harkness (44 years old) has been the Chief Operating Officer of
-------------------
Plaza Associates since January 2001. Mr. Harkness served as Senior Vice
President of Marketing at the Taj Mahal throughout 2000. From September 1995 to
December 1999, Mr. Harkness served as the Executive Director of Marketing at
Trump Marina.
52
Theresa C. Glebocki (38 years old) has been the Vice President of Finance
-------------------
of Plaza Associates since September 2000. Ms. Glebocki served as the Executive
Director of Finance of Plaza Associates and TCS from November 1996 until
September 2000, and Financial Controller of Plaza Associates from 1991 until
1996. Prior to that, Ms. Glebocki held various financial positions at Bally's
Grand (now the Atlantic City Hilton).
All of the persons listed above are citizens of the United States and are
licensed by the CCC.
Management of Taj Associates
Trump AC is the managing general partner of Taj Associates. Trump AC
Holding is the managing general partner of Trump AC. The Board of Directors of
Trump AC Holding consists of Messrs. Trump (Chairman), Askins and Thomas.
Set forth below are the names, ages, positions and offices held with Taj
Associates and a brief summary of the business experience during the past five
years of each of the executive officers and certain key employees of Taj
Associates other than those who are also directors or executive officers of the
Registrants.
Mark A. Brown-- See "--Management of THCR."
-------------
Matthew A. Harkness-- See "--Management of Plaza Associates."
-------------------
Stephen S. Oskiera (42 years old) has served as the Senior Vice President
------------------
of Finance of Taj Associates since January 2000. Mr. Oskiera previously served
as the Vice President of Finance of TCS from November 1999 until January 2000
and as Vice President of Finance of Castle Associates from October 1998 until
November 1999. Mr. Oskiera served as Executive Director of Finance for both
Castle Associates and TCS from October 1995 to October 1998. Previously, Mr.
Oskiera served as Corporate Controller of American Gaming & Entertainment, Ltd.,
a casino development company, from December 1993 to October 1995 and, prior to
that, served as Financial Controller for Greate Bay Hotel & Casino, Inc. d/b/a/
the Sands Hotel & Casino in Atlantic City, New Jersey from May 1987 to December
1993.
All of the persons listed above are citizens of the United States and are
licensed by the CCC.
Management of Trump Marina
All decisions affecting the business and affairs of Castle Associates,
including the operation of Trump Marina, are decided by the general partners
acting by and through a Board of Partner Representatives (the "Board of Partner
Representatives"), which includes a minority of Representatives elected
indirectly by the holders of the Castle Mortgage Notes and the Castle PIK Notes.
As currently constituted, the Board of Partner Representatives consists of
Donald J. Trump (Chairman), John P. Burke, Robert M. Pickus, Thomas F. Leahy,
Walter L. Leib, and Asher O. Pacholder
Set forth below are the names, ages, positions, and offices held with
Castle Associates, and a brief account of the business experience during the
past five years of each member of the Board of Partner Representatives and the
executive officers of Castle Associates other than those who are also directors
or executive officers of THCR.
Lawrence J. Mullin (38 years old) joined Castle Associates as Vice
------------------
President of Slot Operations and Marketing in August 1995. From January to May
2000, Mr. Mullin served as the President and Chief Operating Officer of Castle
Associates, and has recommenced such position since January 1, 2001. In the
interim period of June 1, 2000 to December 31, 2000, Mr. Mullin served as the
President and Chief Operating Officer of Plaza Associates. Mr. Mullin also
serves as Vice President of TCHI as well as Vice President and Assistant
Secretary of Castle Funding. From 1992 to 1995, Mr. Mullin served as Vice
President of Slot and Casino Marketing at the Taj Mahal. From 1995 to 1998, Mr.
Mullin served as Senior Vice President of Slot and Casino Marketing of Castle
Associates.
Thomas F. Leahy (63 years old) has been a member of the Board of Partner
---------------
Representatives since June 1993. Mr. Leahy served as a director and Treasurer of
TCI-II from May 1992 to December 1993. From 1991 to July 1992, Mr. Leahy served
as Executive Vice President of CBS Broadcast Group, a unit of CBS, Inc. Mr.
Leahy retired from CBS, Inc. in 1992, having served in various executive
capacities over a 30-year period. Since November 1992, Mr. Leahy has served as
President of The Theater Development Fund, a service organization for the
performing arts. Since July 1992, Mr. Leahy has served as Chairman of VT
Properties, Inc., a privately held corporation which invests in literary, stage
and film properties.
53
Walter L. Leib (71 years old) has been a member of the Board of Partner
--------------
Representatives since October 2000. Since 1972, Mr. Leib has been a senior
partner of Leib, Kraus, Grispin & Roth, PC, a law firm located in Scotch Plains,
New Jersey. Since 1996, Mr. Leib has been a member of the Board of Directors and
Audit Committee of ICO International, Inc., an oil field services and
petrochemicals processing company quoted on the NASDAQ Market System.
(Previously, from 1984 to 1996, Mr. Leib was director, general counsel, and
member of the Audit Committee of Wedco International, a company on the American
Stock Exchange and NASDAQ.) Since 1998, Mr. Leib has been a Lifetime Trustee
Emeritus of Rutgers University (having served as a trustee from 1992 through
1998). He presently is as a member of the Board of Overseers and Foundation of
Rutgers University and is a member of the Budget Committee and was Chairman of
the Advisory Board of Trustees of Rutgers University Law School in 1998. Since
1993, Mr. Leib has served on the Board of Advisors of Rutgers University School
of Business Management and Graduate School of Business.
Asher O. Pacholder (63 years old) has been a member of the Board of Partner
-----------------
Representatives since May 1992. Dr. Pacholder served as a director and the
President of TCI-II from May 1992 to December 1993. He has served as the
Chairman of the Board of Directors and Chief Financial Officer of ICO
International, Inc., an oil field services and petrochemicals processing company
quoted on the NASDAQ Market System, since February 1995 and Chief Operating
Officer and a director of Wedco Technology, Inc. since May 1996. Dr. Pacholder
has served as Chairman of the Board and Managing Director of Pacholder
Associates, Inc., an investment advisory firm, since 1983. In addition, Dr.
Pacholder is Chairman of the Board of Directors of USF&G Pacholder Fund, Inc., a
closed-end investment company, and he serves on the Board of Directors of
Southland Corporation, which owns and operates convenience stores.
Each member of the Board of Partner Representatives and all of the other
persons listed above have been licensed or found qualified by the CCC.
The employees of Castle Associates serve at the pleasure of the Board of
Partner Representatives subject to any contractual rights contained in any
employment agreement.
Management of Trump Indiana
The sole director of Trump Indiana is Mr. Trump. Set forth below are the
names, ages, positions and offices held with Trump Indiana and a brief account
of the business experience during the past five years of each of the directors
and executive officers of Trump Indiana other than those who are also directors
or executive officers of THCR.
Catherine A. Walker (46 years old) has been the General Manager of Trump
-------------------
Indiana since August 24, 2000. Prior to joining Trump Indiana, Ms. Walker served
from March 24, 2000 to August 4, 2000, as Vice President of Operations and
Assistant General Manager of Harrah's East Chicago. From July 1996 to March
2000, Ms. Walker served as Vice President and General Manager of Players Lake
Charles LLC and Showboat Star Partnership. From May 1995 to July 1996, Ms.
Walker held various operating and management positions with Players Lake
Charles. Previously, Ms. Walker served as an Assistant General Counsel with the
CCC from March 1982 to May 1995.
Michael Darley (49 years old) has been Vice President of Operations of
--------------
Trump Indiana since November 5, 2000. Prior to joining Trump Indiana, Mr. Darley
served from September 1998 to November 2000 as Director of Table Games at
Harrah's East Chicago. From September 1993 to September 1998, Mr. Darley served
as Casino Manager and Director of Slot Operations at Harrah's Tunica. From July
1982 to September 1993, Mr. Darley held various positions in Table Games and
Player Development at Harrah's Reno. Previously, Mr. Darley taught at Nogales
High School in Southern California from September 1976 to June 1982.
Robert J. Henrikson (53 years old) currently serves as Director of
-------------------
Finance/Chief Financial Officer for Trump Indiana. Mr. Henrikson was previously
the Financial Accounting Manager from May 1999, when he joined the organization,
until August 1999. Prior to joining Trump Indiana, Mr. Henrikson served under
two Mayors as the Director of Finance/Controller for the City of Gary, Indiana
from January 1995. He had worked for the U.S. Government Agency, The Resolution
Trust Company (RTC) from January 1991 through December 1994 having held
positions as Field Accounting Officer from January 1991 to April 1993; as
Supervisory Accountant from April 1993 to January 1994; and as Manager of
Internal Review from January 1994 to December 1995. Before joining the RTC, Mr.
Henrikson worked 15 years for the First National Bank of East Chicago having
served as Vice President and Cashier, Vice President and Auditor, and Vice
President and Controller during his employment.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires that the directors and executive officers
of THCR, as well as any person who becomes the beneficial owner of more than
10.0% of any class of equity and/or equity-linked securities of THCR
(collectively, the "Reporting Persons"), file a statement called a "Form 3" with
54
the Commission within 10 days after becoming a Reporting Person, therein
disclosing the nature and amount of all equity and equity-linked securities of
THCR beneficially owned, and a statement called a "Form 4" within 10 days after
the close of each calendar month thereafter, if there has been a change in
ownership during such month, therein indicating such changes. In some instances,
Reporting Persons may be required to file a statement called a "Form 5" with the
Commission no later than the 45th day after THCR's fiscal year end. The
Reporting Persons are required to furnish THCR with copies of all Section 16(a)
forms filed by them with the Commission which pertain to THCR. Pursuant to the
Exchange Act, THCR may presume that any Section 16(a) form received by it within
three calendar days such form was due to be filed with Commission to be timely
filed.
To THCR's knowledge, based solely upon its review of copies of such
reports furnished to THCR by or on behalf of the Reporting Persons, all Section
16(a) filing requirements applicable to the Reporting Persons were complied with
during the fiscal year ended December 31, 2000.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table. The following table sets forth information
regarding compensation paid to or accrued by the Chief Executive Officer of
THCR, and any person who served in such or similar capacity during the fiscal
year ended December 31, 2000, and the four most highly compensated executive
officers of THCR whose total annual salary and bonus during the last fiscal year
exceeded $100,000 (collectively, the "Named Executive Officers") for each of the
last three completed fiscal years. Compensation accrued during one year and paid
in another is recorded under the year of accrual. All cash compensation paid to
the Named Executive Officers in consideration for services rendered by such
persons to THCR and its subsidiaries are paid by THCR Holdings in accordance
with the THCR Holdings Partnership Agreement.
55
Long-Term Compensation
Annual Compensation Awards
------------------------------------------- ---------------------------
Securities
Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options Compensation ($)
(#)(1)
Donald J. Trump 2000 $1,250,000 - 500,000 $2,414,266(2)
-Chairman of the Board, President 1999 1,000,000 - - 2,648,000(2)
and Chief Executive Officer 1998 1,000,000 - 500,000 222,474(2)
Nicholas L. Ribis 2000 $732,050 - - $888,925(4)(5)(6)
-Former President and Chief Executive 1999 1,996,500 $480,000 - 4,800(4)
Officer(3) 1998 1,996,500 - 183,333 4,000(4)
Mark A. Brown 2000 $807,657 $175,036 - $4,500(4)
-Chief Operating Officer 1999 487,762 109,410(7) - 4,286(4)
1998 436,323 75,000 8,000 4,286(4)
Robert M. Pickus 2000 $338,790 - - $ 4,500(4)
-Executive Vice President, General 1999 324,653 $50,000 - 4,800(4)
Counsel and Secretary 1998 299,428 - 30,000 4,298(4)
Francis X. McCarthy, Jr. 2000 $333,120 - - $ 4,800(4)
-Executive Vice President of Corp. 1999 320,073 - - 4,800(4)
Fin. and Chief Financial Officer 1998 303,593 - 10,000 4,621(4)
Joseph A. Fusco 2000 $335,639 - - $4,800(4)
-Executive Vice President of 1999 324,510 $36,470 - 4,800(4)
Government Relations/Regulatory Affairs 1998 296,343 - 20,000 4,800(4)
-----------------
(1) Options granted under THCR's 1995 Stock Plan. One-third of option vests on
the date of grant and on each of the first two anniversary dates of the
date of grant.
(2) The amount listed in 2000 and 1999 includes $2.306 million and $2.258
million, respectively, recorded pursuant to the Castle Services Agreement
(as defined herein) in addition to reimbursement of expenses pursuant to
the Executive Agreement, as amended, between Mr. Trump and THCR and THCR
Holdings. See "Compensation Committee Interlocks and Insider Participation;
Certain Related Party Transactions-Castle Associates."
(3) Mr. Ribis served as the President and Chief Executive Officer of THCR, and
as an officer of certain of its subsidiaries, pursuant to a five-year
employment agreement, dated June 12, 1995 (the "Ribis Employment
Agreement"). On June 12, 2000, the Ribis Employment Agreement expired in
accordance with its terms.
(4) Represents vested and unvested contributions made by Plaza Associates, Taj
Associates, Castle Associates and/or TCS to Trump Plaza Hotel and Casino
Retirement Savings Plan, Trump Taj Mahal Retirement Savings Plan, Trump's
Castle Hotel and Casino Retirement Savings Plan and Trump Casino Services
Retirement Savings Plan, respectively. Funds accumulated for an employee
under these plans consisting of a certain percentage of the employee's
compensation plus the employer matching contributions equaling 50.0% of the
participant's contributions, are retained until termination of employment,
attainment of age 59 1/2 or financial hardship, at which time the employee
may withdraw his or her vested funds.
(5) On June 12, 2000, the Ribis Employment Agreement expired in accordance with
its terms. Loans which had been advanced to Mr. Ribis to satisfy personal
income taxes were settled through the repurchase by THCR on June 12, 2000
of an aggregate of 69,229 shares of THCR Common Stock held by Mr. Ribis
("Ribis Treasury Stock") in consideration for approximately $2.938 per
share, the closing sale price of the THCR Common Stock on June 12, 2000,
for an aggregate purchase price of $203,360. The difference between the
outstanding balance of the loans ($962,475) and the value of the Ribis
Treasury Stock
56
($203,360) on the date of the repurchase was $759,115, and which was
charged to the general and administrative expenses of THCR for its second
quarter ended June 30, 2000. Such amount is deemed to be considered as
income received by Mr. Ribis. See " -- Compensation Committee Interlocks
and Insider Participation; Certain Related Transactions -- Other
Relationships."
(6) Includes an aggregate payment of $125,010 paid to Mr. Ribis pursuant to a
consulting agreement, effective as of July 1, 2000, between THCR and Mr.
Ribis.
(7) In January 1999, Mr. Brown received a net bonus of $75,000 which resulted
in a before tax bonus of $109,410.
1995 Stock Incentive Plan. The THCR Board of Directors adopted the 1995
Stock Incentive Plan (the "1995 Stock Plan"), pursuant to which, directors,
employees and consultants of THCR and certain of its subsidiaries and affiliates
who have been selected as participants are eligible to receive awards of various
forms of equity-based incentive compensation, including stock options which are
intended to qualify as incentive stock options ("ISOs") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), as well as stock options
not intended to so qualify ("NQSOs"), stock-appreciation rights ("SARs"), stock
bonuses, restricted stock awards, performance units and phantom stock, and
awards consisting of combinations of such incentives. The 1995 Stock Plan is
administered by the Stock Incentive Plan Committee of the Board of Directors of
THCR consisting of Messrs. Trump, Askins, Ryan and Thomas (the "Stock Incentive
Plan Committee"). Subject to the provisions of the 1995 Stock Plan, the Stock
Incentive Plan Committee has sole discretionary authority to interpret the 1995
Stock Plan and to determine the type of awards to grant, when, if and to whom
awards are granted, the number of shares covered by each award and the terms and
conditions of the award.
In 1996, THCR obtained approval from its stockholders to increase the
number of shares of THCR Common Stock authorized for issuance under the 1995
Stock Plan from 1.0 million to 4.0 million. In November 1998, THCR canceled all
options previously granted to certain employees and approved a grant of new
options. On November 18, 1998, THCR granted certain employees and its
independent directors approximately 1,166,800 options to purchase THCR Common
Stock at a price of $4.625 per share. One-third of the options vested on the
date of the grant and on each of the first two anniversaries of the date of the
grant. The options expire 10 years after the date of issuance.
Option Grants in Fiscal 2000. The following table sets forth certain
information with respect to options granted to the Named Executive Officers
during the fiscal year ended December 31, 2000:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
Individual Grants
-----------------
Number of Percent of Total
Securities Options/SARs Grant
Underlying Granted to Exercise or Date
Options/SARs Employees in Base Present
Name Granted(#) Fiscal Year Price ($/Sh) Expiration Date Value ($)
---- ---------- ----------- ------------ --------------- ---------
Donald J. Trump
-Chairman of the Board, 500,000(1) 100.0% $2.625 September 19, 2010 $600,388(2)
President and Chief Executive
Officer
-----------------
(1) NQSO granted to Trump by the THCR Board of Directors on September 20,
2000. One-third of option vests on the date of grant and on each of the
first two anniversary dates of the date of grant, provided that with each
installment, Mr. Trump's employment with THCR has not been terminated
prior to the installment date.
(2) Represents a fair value of approximately $1.20 per option, estimated using
the Black-Scholes option-pricing model based upon the weighted average
market price at grant date of $2.625 and the following weighted average
assumptions: risk-free interest rate of 6.0%, expected life of 7.0 years,
volatility of 30.0% and a dividend yield of 0%.
57
None of the Named Executive Officers exercised any stock options during
the fiscal year ended December 31, 2000. The following table sets forth
information concerning the fiscal year-end value of unexercised options provided
on an aggregate basis.
Fiscal Year End Option Value(1)
Number of Securities
Underlying Unexercised
Options at Fiscal Year End (#)
Name Exercisable/Unexercisable
---- -------------------------
Donald J. Trump 666,667 333,333
Mark A. Brown 8,000 0
Robert M. Pickus 30,000 0
Francis X. McCarthy, Jr. 10,000 0
Joseph A. Fusco 20,000 0
-----------------
(1) Based on a closing sale price of $1.875 per share of THCR Common Stock
on December 29, 2000, the last day of trading of the fiscal year ended
December 31, 2000, all of the options reflected in the above table were
"out-of-the-money" (i.e., the exercise prices of the options exceeded
the fair market value of the underlying THCR Common Stock).
Employment Agreements, Termination of Employment and Change-in-Control
Arrangements
Donald J. Trump. Mr. Trump serves as the Chairman of the Board of
---------------
Directors of THCR pursuant to the Executive Agreement dated as of June 12, 1995,
among Mr. Trump and THCR Holdings (the "Trump Executive Agreement"). In
consideration for Mr. Trump's services under the Trump Executive Agreement,
Trump received a salary of $1.0 million per year through June 30, 2000, plus
reimbursement expenses. Effective July 1, 2000, upon Mr. Trump's appointment as
President and Chief Executive Officer of THCR, the fee was increased to $1.5
million per year. Pursuant to the terms of the Trump Executive Agreement, Mr.
Trump provides to THCR and its subsidiaries, from time to time, when reasonably
requested, marketing, advertising, professional and other similar and related
services with respect to the operation and business of THCR. Trump Executive
Agreement continues in effect for a three-year rolling term until either Mr.
Trump or THCR provides notice to the other of its election not to continue
extending the term, in which case the term of the Trump Executive Agreement will
end three years from the date such notice is given.
Nicholas L Ribis. Concurrent with the June 1995 Offering, Mr. Ribis,
----------------
THCR and THCR Holdings entered into the Ribis Employment Agreement, pursuant to
which Mr. Ribis served as President and Chief Executive Officer of THCR and
Chief Executive Officer of THCR Holdings, and as an executive officer of certain
of THCR Holdings' subsidiaries. The term of the Ribis Employment Agreement was
five years. Pursuant to the Ribis Employment Agreement, Mr. Ribis' annual salary
was $1,996,500, payable in equal parts by THCR, Plaza Associates, Taj Associates
and Castle Associates. In the event Mr. Ribis' employment was terminated by THCR
other than for "Cause," or if Mr. Ribis incurred a "Constructive termination
without cause," Mr. Ribis was entitled to receive a severance payment equal to
one year's base salary, and any granted phantom stock units and options would
fully vest. The Ribis Employment Agreement defined "Cause" as (i) the revocation
of Mr. Ribis' casino key employee license, (ii) Mr. Ribis' conviction for
certain crimes, (iii) Mr. Ribis' death or disability or (iv) Mr. Ribis' gross
negligence or willful misconduct in carrying out his duties. "Constructive
termination without cause" was defined in the Ribis Employment Agreement as the
termination of Mr. Ribis' employment at his initiative following the occurrence
of certain events, including (i) a reduction in compensation, (ii) the failure
to elect Mr. Ribis as Chief Executive Officer of THCR, (iii) the failure to
elect Mr. Ribis a director of THCR or (iv) a material diminution of Mr. Ribis'
duties. The Ribis Employment Agreement also provided for up to an aggregate of
$2.0 million of loans to Mr. Ribis to be used by him to pay his income tax
liability in connection with stock options, phantom stock units and stock bonus
awards, which loans would have been forgiven, including both principal and
interest, in the event of a "Change of Control," defined as the occurrence of
any of the following events: (i) any person (other than THCR Holdings, Trump or
an affiliate of either) becoming a beneficial owner of 50.0% or more of the
voting stock of THCR, (ii) the majority of the Board of Directors of THCR
consisting of individuals that were not directors on June 12, 1995 (the "June 12
Directors"), provided, however, that any person who became a director subsequent
to June 12, 1995, would have been considered a June 12 Director if his election
or nomination had been supported by at least three-quarters of the June 12
Directors, (iii) the adoption and implementation by THCR of a plan of
liquidation or (iv) if all or substantially all of the assets or business of
THCR were disposed of in a sale or business combination in which stockholders of
THCR would not beneficially own the same proportion of voting stock of the
successor entity. The Ribis Employment Agreement also provided certain demand
and piggyback registration rights for THCR Common Stock issued pursuant to the
foregoing.
58
Pursuant to the Ribis Employment Agreement, Mr. Ribis had agreed that upon
termination of his employment other than for "Cause" or following a "Change of
Control," he would not have engaged in any activity competitive with THCR for a
period of up to one year.
Mr. Ribis also had an employment agreement with Taj Associates and
Castle Associates pursuant to which Mr. Ribis acted as Chief Executive Officer
of Taj Associates and Castle Associates, respectively. These agreements were
terminated in connection with the acquisitions of the Taj Mahal and Trump
Marina, and Mr. Ribis was compensated for his services to Taj Associates and
Castle Associates under the Ribis Employment Agreement.
On June 12, 2000, the Ribis Employment Agreement expired in accordance
with its terms.
Mark A. Brown. On January 4, 2000, Mr. Brown's employment agreement
-------------
with Castle Associates, dated as of March 6, 1998, was amended and assigned to
Taj Associates (the "Brown Employment Agreement"). The Brown Employment
Agreement was to expire on January 2, 2003, and provided for annual compensation
of $600,000, $650,000, and $700,000 during years 2000, 2001, and 2002,
respectively. On August 4, 2000, the Brown Employment Agreement was amended,
effective as of July 1, 2000 (the "Brown Amended Employment Agreement"), to
confirm Mr. Brown's employment as President and Chief Executive Officer of each
of Taj Associates, Plaza Associates, Castle Associates and Trump Indiana
(collectively, the "Trump Entities"), subject to necessary licensing by the
Indiana Gaming Commission. The Brown Amended Employment Agreement expires on
July 31, 2003. During the term of the Brown Amended Employment Agreement, Mr.
Brown is to receive an annual salary of (i) $1.0 million, effective as of July
1, 2000, (ii) $1.1 million, commencing on January 1, 2001, and (iii) $1.2
million, commencing on January 1, 2002. Upon 180 days notice prior to
expiration, the Brown Amended Employment Agreement may be extended by the Trump
Entities to July 31, 2005. If so extended, Mr. Brown is to receive an annual
salary of (i) $1.3 million, commencing on August 1, 2003, and (ii) $1.4 million,
commencing on August 1, 2004. Mr. Brown's employment may be terminated by the
Trump Entities for "Cause," defined as (i) the revocation of Mr. Brown's casino
key employee license, (ii) Mr. Brown's conviction for certain crimes, (iii) Mr.
Brown's disability or death or (iv) Mr. Brown's breach of loyalty to the Trump
Entities. Upon termination for "Cause," Mr. Brown is entitled to receive
compensation earned as of the date of termination; provided, however, that if
Mr. Brown's employment is terminated due to Mr. Brown's death or disability, Mr.
Brown or his estate will be entitled to a lump sum severance payment equal to
six months' compensation based on his then current salary. Mr. Brown may
terminate the Brown Amended Employment Agreement at any time following a "Change
of Control," effective on the 30th day after such notice, and Mr. Brown shall be
entitled to receive a lump sum payment for the full amount of unpaid
compensation for the full term of the Brown Amended Employment Agreement.
"Change of Control" is defined as (i) the acquisition of (x) the Trump Entities
or (y) more than thirty-five percent (35.0%) of THCR's Common Stock, or
equivalent limited partnership interests of THCR Holdings, by an unrelated party
or (ii) the sale or long-term lease of all or substantially all of the assets of
Trump Entities. Also, in the event Mr. Brown is transferred to a position
located outside of Atlantic City, New Jersey, Mr. Brown shall have the right to
terminate his employment within seven days of the occurrence of such transfer
and be entitled to receive a severance payment equal to three months'
compensation based on his then current salary. During the term of the Brown
Amended Employment Agreement, Mr. Brown has agreed not to obtain employment for
or on behalf of any other casino hotel located in Atlantic City, New Jersey.
Robert M. Pickus. On April 17, 2000, THCR, THCR Holdings, and Trump AC
----------------
(collectively, the "Trump Companies") entered into an employment agreement with
Mr. Pickus (the "Pickus Employment Agreement") pursuant to which Mr. Pickus
serves as Executive Vice President and General Counsel of the Trump Companies
and also served as the TCS before it was merged into Taj Associates
effective December 31, 2000. The Pickus Employment Agreement, the term of which
expires on April 16, 2003, if not extended, provides for annual compensation of
not less than his current salary and a discretionary annual bonus. Mr. Pickus'
employment may be terminated by the Trump Companies for "Cause," defined as (i)
the revocation of Mr. Pickus' casino key employee license, (ii) Mr. Pickus'
conviction for certain crimes, (iii) Mr. Pickus' disability or death or (iv) Mr.
Pickus' breach of his duty to the Trump Companies. Upon termination for "Cause,"
Mr. Pickus will receive compensation earned as of the date of termination. Mr.
Pickus may terminate the Pickus Employment Agreement at any time following a
"Change of Control," effective on the 30th day after such notice, and Mr. Pickus
shall be entitled to receive a lump sum payment for the full amount of unpaid
compensation for the full term of the Pickus Employment Agreement. The Pickus
Employment Agreement defines "Change of Control" as (i) the acquisition of (x)
the Trump Companies or (y) more than thirty-five percent (35.0%) of THCR's
Common Stock, or equivalent limited partnership interests of THCR Holdings, by
an unrelated party or (ii) the sale or long-term lease of all or substantially
all of the assets of the Trump Companies. During the term of the Pickus
Employment Agreement, Mr. Pickus has agreed to devote his full time, attention
and efforts to the Trump Companies, and not to accept employment, either as an
employee, consultant or independent contractor, with any other casino hotel
located in Atlantic City, New Jersey. Mr. Pickus has also agreed not to consult
with or otherwise engage, either directly or indirectly, in any other activities
of a business nature for any other person or entity without the Trump Companies'
prior written consent.
Francis X. McCarthy, Jr. On April 17, 2000, the Trump Companies entered
-----------------------
into an employment agreement with Mr. McCarthy (the "McCarthy Employment
Agreement") pursuant to which Mr. McCarthy serves as Executive Vice President of
59
Corporate Finance of the Trump Companies. The McCarthy Employment Agreement, the
term of which expires on April 16, 2003, if not extended, provides for annual
compensation of not less than his current salary and a discretionary annual
bonus. Employment may be terminated for "Cause," defined as (i) the revocation
of Mr. McCarthy's casino key employee license, (ii) Mr. McCarthy's conviction
for certain crimes, (iii) Mr. McCarthy's disability or death or (iv) the breach
by Mr. McCarthy of his duty to the Trump Companies. Upon termination for
"Cause," Mr. McCarthy will receive compensation earned as of the date of
termination. Mr. McCarthy may terminate the McCarthy Employment Agreement at any
time following a "Change of Control," effective on the 30th day after such
notice and Mr. McCarthy shall be entitled to receive a lump sum payment of the
full amount of the unpaid compensation for the full term of the McCarthy
Employment Agreement. The McCarthy Employment Agreement defines "Change of
Control" as (i) the acquisition of (x) the Trump Companies or (y) more than
thirty-five percent (35.0%) of THCR's Common Stock, or equivalent limited
partnership interests of THCR Holdings, by an unrelated party or (ii) the sale
or long-term lease of all or substantially all of the assets of the Trump
Companies. During the term of the McCarthy Employment Agreement, Mr. McCarthy
has agreed to devote his full time, attention and efforts to the Trump
Companies, and not to accept employment, either as an employee, consultant or
independent contractor, with any other casino hotel located in Atlantic City,
New Jersey. Mr. McCarthy has also agreed not to consult with or otherwise
engage, either directly or indirectly, in any other activities of a business
nature for any other person or entity without the Trump Companies' prior written
consent.
Joseph A. Fusco. On April 17, 2000, the Trump Companies entered into an
---------------
employment agreement with Mr. Fusco (the "Fusco Employment Agreement") pursuant
to which Mr. Fusco serves as Executive Vice President of Government Relations
and Regulatory Affairs of the Trump Companies. The Fusco Employment Agreement,
the term of which expires on April 16, 2003, if not extended, provides for
annual compensation of not less than his current salary and a discretionary
annual bonus. Employment may be terminated for "Cause," defined as (i) the
revocation of Mr. Fusco's casino key employee license, (ii) Mr. Fusco's
conviction for certain crimes, (iii) Mr. Fusco's disability or death or (iv) the
breach by Mr. Fusco of his duty to the Trump Companies. Upon termination for
"Cause," Mr. Fusco will receive compensation earned as of the date of
termination. Mr. Fusco may terminate the Fusco Employment Agreement at any time
following a "Change of Control," effective on the 30th day after such notice and
Mr. Fusco shall be entitled to receive a lump sum payment of the full amount of
the unpaid compensation for the full term of the Fusco Employment Agreement. The
Fusco Employment Agreement defines "Change of Control" as (i) the acquisition of
(x) the Trump Companies or (y) more than thirty-five percent (35.0%) of THCR's
Common Stock, or equivalent limited partnership interests of THCR Holdings, by
an unrelated party or (ii) the sale or long-term lease of all or substantially
all of the assets of the Trump Companies. During the term of the Fusco
Employment Agreement, Mr. Fusco has agreed to devote his full time, attention
and efforts to the Trump Companies, and not to accept employment, either as an
employee, consultant or independent contractor, with any other casino hotel
located in Atlantic City, New Jersey. Mr. Fusco has also agreed not to consult
with or otherwise engage, either directly or indirectly, in any other activities
of a business nature for any other person or entity without the Trump Companies'
prior written consent.
Compensation of Directors
Mr. Trump, the Chairman of the Board of Directors, President and Chief
Executive Officer of THCR, received no remuneration for serving on the Board of
Directors of THCR for the fiscal year ended December 31, 2000. Directors of THCR
who are also employees or consultants of THCR and its affiliates receive no
directors' fees. Non-employee directors are paid an annual stipend of $50,000,
plus $2,000 per meeting attended and reasonable out-of-pocket expenses incurred
in attending these meetings, provided that directors currently serving on the
Board of Directors of Trump AC Funding or Trump AC Holding receive no additional
compensation. All such fees are paid by THCR Holdings in accordance with the
THCR Holdings Partnership Agreement.
Committees of the Board of Directors
THCR has the following committees: (i) Executive Committee, (ii) Audit
Committee, (iii) Special Committee, (iv) Stock Incentive Plan Committee and (v)
Compensation Committee. The Executive Committee consists of Mr. Trump. Both the
Audit Committee and the Special Committee consist of Messrs. Askins, Ryan and
Thomas, each of whom is an "independent director" of THCR, as defined by the
rules and regulations promulgated by the NYSE. The Stock Incentive Plan
Committee consists of Messrs. Trump, Askins, Ryan and Thomas. The Compensation
Committee consists of Messrs. Trump, Askins and Thomas. The Special Committee
was established pursuant to the THCR By-Laws and the THCR Holdings Partnership
Agreement, and is empowered to vote on any matters which require approval of a
majority of the independent directors of THCR, including affiliated
transactions.
60
Compensation Committee Interlocks and Insider Participation
In general, the compensation of executive officers of THCR is
determined by the Compensation Committee of the THCR Board of Directors, which
currently consists of Messrs. Trump, Askins and Thomas. During the fiscal year
ended December 31, 2000, Mr. Ribis also served on the Compensation Committee of
the THCR Board of Directors prior to the termination of the Ribis Employment
Agreement on June 12, 2000 in accordance with its terms. No officer or employee
of THCR, other than Mr. Trump who serves on the THCR Board of Directors,
participated in the deliberations of the THCR Board of Directors concerning
executive compensation.
Certain Related Party Transactions--THCR. In July 1995, THCR entered
into the THCR Trump Tower Lease Agreement with Trump-Equitable Company pursuant
to which THCR leased office space in the Trump Tower located in midtown New York
City for general, executive and administrative purposes. For the initial
five-year period, commencing July 1, 1995 to June 30, 2000, the fixed rent was
$115,500 per year, paid in equal monthly installments. For the remaining
five-year period, commencing July 1, 2000 to June 30, 2005, the fixed rent was
$129,250 per year, paid in equal monthly installments. In addition, the THCR
Trump Tower Lease Agreement required THCR to pay as additional rent, among other
things, a portion of the property taxes due each year. THCR had the option to
terminate this lease upon 90 days' prior written notice and payment of $32,313.
In March 2000, the THCR Trump Tower Lease Agreement was terminated, and THCR
moved into the office space in the Trump Tower which had been previously
occupied by Taj Associates pursuant to a lease agreement with Trump-Equitable
Company (the "Taj Mahal Trump Tower Lease"). See "Properties; THCR" and "-Taj
Mahal."
During the fiscal quarter ended September 30, 1998, THCR Holdings
advanced a loan to Trump in the principal amount of $11.0 million (the
"September 1998 Loan"). On October 19, 1998, THCR Holdings advanced a loan to
Trump in the principal amount of $13.5 million (the "October 1998 Loan"). The
October 1998 Loan was offset in its entirety when Trump advanced $13.5 million
to THCR Enterprises, LLC, which then purchased Trump's indebtedness to Donaldson
Lufkin & Jenrette Securities Corporation. All of such indebtedness by Trump was
payable on May 17, 2000 and secured by a pledge of Mr. Trump's (i) shares of
THCR Class B Common Stock, (ii) limited partnership interests in THCR Holdings
and (iii) 250,000 shares of THCR Common Stock, as well as a pledge by TCI and
TCI-II of their shares of THCR Class B Common Stock and their limited
partnership interests in THCR Holdings. On April 27, 2000, prior to the maturity
date, Mr. Trump repaid the outstanding principal balance of approximately $24.5
million, including interest.
Beginning in late 1997, the Trump Atlantic City Properties began to
utilize certain facilities owned by Trump to entertain high-end customers.
Management believes that the ability to utilize these facilities has enhanced
THCR revenues. In 1998, 1999 and 2000, THCR incurred approximately $1.1 million,
$2.2 million and $0.6 million, respectively, in customer costs associated with
such utilization. In exchange for having Trump's airplane available to customers
of the Trump Atlantic City Properties, THCR incurred pilot costs of
approximately $246,000, $298,000 and $186,000 for the years ended December 31,
1998, 1999 and 2000, respectively.
Certain Related Party Transactions--Taj Associates. In September 1992,
Taj Associates entered into the Taj Mahal Trump Tower Lease with Trump-Equitable
Company for the lease of office space in the Trump Tower. The monthly payments
under the Taj Mahal Trump Tower Lease had been $1,000, and the premises were
leased at such rent for four months in 1992, the full 12 months in each of 1993
and 1994, and eight months in 1995. On September 1, 1995, the Taj Mahal Trump
Tower Lease was renewed for an additional term of five years with an option for
Taj Associates to terminate the Taj Mahal Trump Tower Lease on September 1st of
each year, upon six months' prior written notice and payment of the six months'
rent. Under the renewed Taj Mahal Trump Tower Lease, the monthly payments were
$2,285. In March 2000, THCR assumed the Taj Mahal Trump Tower Lease and moved to
this office space from its previous location in the Trump Tower. See
"Properties; THCR" and "-Taj Mahal."
Certain Related Party Transactions--Castle Associates. On December 28,
1993, Castle Associates entered into a Services Agreement with TCI-II (the
"Castle Services Agreement"). In general, the Castle Services Agreement
obligates TCI-II to provide to Castle Associates, from time-to-time when
reasonably requested, consulting services on a non-exclusive basis, relating to
marketing, advertising, promotional and other services (the "Castle Services")
with respect to the business and operations of Castle Associates, in exchange
for certain fees to be paid only in those years in which EBITDA (EBITDA
represents income from operations before depreciation, amortization,
restructuring costs and the non-cash write-down of CRDA investments) exceeds
prescribed amounts.
In consideration for the Castle Services to be rendered by TCI-II,
Castle Associates will pay an annual fee (which is identical to the fee which
was payable under the previously existing management agreement) to TCI-II in the
amount of $1.5 million for each year in which EBITDA exceeds the following
amounts for the years indicated: (i) 1993--$40.5 million; (ii) 1994--$45.0
million; and (iii) 1995 and thereafter--$50.0 million. If EBITDA in any fiscal
year does not exceed the applicable amount, no annual fee is due. In addition,
if the annual fee is attained, TCI-II will be entitled to an incentive fee,
beginning with the fiscal year ending December 31, 1994, in an amount equal to
10.0% of EBITDA in excess of $45.0 million for such fiscal year. Castle
Associates will also be
61
required to advance to TCI-II $125,000 per month which will be applied toward
the annual fee, provided, however, that no advances will be made during any year
if and for so long as the Managing Partner (defined in the Castle Services
Agreement as Trump) determines, in his good faith reasonable judgment, that
Castle Associates' budget and year-to-date performance indicate that the minimum
EBITDA levels (as specified above) for such year will not be met. If for any
year during which annual fee advances have been made it is determined that the
annual fee was not earned, TCI-II will be obligated to promptly repay any
amounts previously advanced. For purposes of calculating EBITDA under the Castle
Services Agreement, any incentive fees paid in respect of 1994 or thereafter
shall not be deducted in determining net income. Pursuant to the Castle Services
Agreement, Trump earned approximately $2.258 million and $2.306 million based on
Castle Associates' EBITDA for the years ended December 31, 1999 and 2000,
respectively. During the fiscal year ended December 31, 1998, no fees were
payable by Castle Associates under the Castle Services Agreement. The Castle
Services Agreement expires on December 31, 2005.
Trump has granted Castle Associates a license to use the Marks in
connection with the operations of Trump Marina since June 17, 1985. See
"Business; Trademark/Licensing."
Other Relationships. The Commission requires registrants to disclose
the existence of any other corporation in which both (i) an executive officer of
the registrant serves on the board of directors and/or compensation committee
and (ii) a director of the registrant serves as an executive officer. Messrs.
Pickus and Burke, executive officers of THCR, have served on the boards of
directors of other entities in which members of the THCR Board of Directors
(namely, Mr. Trump) served and continue to serve as executive officers.
Management believes that such relationships have not affected the compensation
decisions made by the THCR Board of Directors in the last fiscal year.
On June 12, 2000, the Ribis Employment Agreement expired in accordance
with its terms. Loans which had been advanced to Mr. Ribis to satisfy personal
income tax were settled through the repurchase by THCR of an aggregate amount of
69,229 shares of THCR Common Stock held by Mr. Ribis for a purchase price of
approximately $2.938 per share, or an aggregate purchase price of $203,360.
See "Executive Compensation."
An additional loan advanced by THCR to Mr. Ribis of approximately $1.9
million, comprised of a principal amount of $1.5 million and accrued interest of
approximately $0.4 million, was extended on June 13, 2000. The loan bears
interest at the J.P. Morgan Chase Bank prime rate, which was 9.5% at the fiscal
year ended December 31, 2000, and is due no later than July 11, 2001. On July
19, 2000, Mr. Ribis repaid an amount of approximately $0.5 million, and on
February 2, 2001, Mr. Ribis repaid an additional amount of approximately $0.7
million. The remaining principal balance of approximately $0.8 million is
payable no later than July 11, 2001.
Mr. Ribis also served on the Board of Directors of Realty Corp. which
prior to April 17, 1996, leased certain real property to Taj Associates, of
which Trump is an executive officer. Trump, however, does not receive any
compensation for serving as an executive officer of Realty Corp.
Tompkins, McGuire, Wachenfeld & Barry, a law firm of which Mr. Trump's
brother-in-law, John Barry, had been a partner, received an aggregate amount of
$0.4 million during the fiscal year ended December 31, 2000 in consideration for
legal services rendered. Mr. Barry passed away in 2000.
62
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Generally, under the Exchange Act, a person is deemed to "beneficially
own" a security which that person has the right to acquire within 60 days (i)
through the exercise of any option, warrant or right, (ii) through the
conversion of a security or (iii) pursuant to the power to revoke a trust,
discretionary account or similar arrangement. The following table sets forth
certain information regarding the beneficial ownership of THCR's Common Stock
and Class B Common Stock as of March 30, 2001 by (i) each Named Executive
Officer of THCR, (ii) each director of THCR, (iii) each person deemed to be the
beneficial owner of more than 5.0% of any class of THCR's voting securities and
(iv) all directors and executive officers of THCR as a group, without naming
them. In the case of persons other than officers and directors of THCR, such
information is based solely upon a review of Schedules 13D or 13G, as amended,
which have been filed by such persons with the Commission.
Common Stock Class B Common Stock
---------------------- ------------- ----------------------- -- -------------------
Number of Shares Percent of Number of Shares Percent of
Name of Beneficial Owner(1) Beneficially Owned Class(2) Beneficially Owned Class(3)
----------------------------------------- ---------------------- ------------- ----------------------- -------------------
Donald J. Trump 16,003,840(4) 43.0% 1,000(5) 100.0%
Mark A. Brown 11,000(6) * - -
Robert M. Pickus 32,000(7) * - -
Francis X. McCarthy, Jr. 13,454(8) * - -
Joseph A. Fusco 20,000(9) * - -
Wallace B. Askins 5,500(10) * - -
Peter M. Ryan 12,500(11) * - -
Don M. Thomas 5,000(12) * - -
Conseco, Inc. 2,010,000(13) 9.1% - -
Dimensional Fund Advisors, Inc. 1,862,000(14) 8.5% - -
Bay Harbour Management, L.C. 1,392,600(15) 6.3% - -
All executive officers and directors of
THCR as a group, without naming them (9 16,136,287(16) 43.3% 1,000(5) 100.0%
persons)
-----------------
* Represents less than 1.0%
(1) Unless otherwise noted, the address of each beneficial owner is c/o Trump
Hotels & Casino Resorts, Inc., Trump Tower, 725 Fifth Avenue, New York, NY
10022.
(2) Based on 22,010,027 shares of THCR's Common Stock issued and outstanding as
of March 30, 2001.
(3) Based on 1,000 shares of THCR's Class B Common Stock issued and outstanding
as of March 30, 2001.
(4) Includes (i) 818,300 shares of Common Stock held directly by Mr. Trump,
(ii) 150 shares of Common Stock held by Mr. Trump as custodian for his
children, (iii) 500,000 shares of Common Stock issuable upon the exercise
of options exercisable within 60 days from the date hereof at an exercise
price of $4.625 per share, (iv) 166,667 shares of Common Stock issuable
upon the exercise of options exercisable within 60 days from the date
hereof at an exercise price of $2.625 per share, (v) 600,000 shares of
Common Stock issuable upon the exercise of warrants exercisable within 60
days from the date hereof at an exercise price of $40 per share, (vi)
10,300,456 shares of Common Stock issuable upon the conversion of limited
partnership interests of THCR Holdings held directly by Mr. Trump, (vii)
1,407,017 shares of Common Stock issuable upon the conversion of limited
partnership interests of THCR Holdings held by TCI, an entity of which Mr.
Trump owns 100.0%, (viii) 2,211,250 shares of Common Stock issuable upon
the conversion of limited partnership interests of THCR Holdings held by
TCI-II, an entity of which Mr. Trump owns 100.0%. Does not include 333,333
shares of Common Stock issuable upon the exercise of options not
exercisable within 60 days from the date hereof.
(5) Includes (i) 850 shares of Class B Common Stock held directly by Mr. Trump,
(ii) 50 shares of Class B Common Stock held by TCI, an entity of which Mr.
Trump owns 100.0%, and (iii) 100 shares held by TCI-II, an entity of which
Mr. Trump owns 100.0%.
(6) Includes (i) 3,000 shares of Common Stock and (ii) 8,000 shares of Common
Stock issuable upon the exercise of options exercisable within 60 days from
the date hereof at an exercise price of $4.625 per share.
(7) Includes (i) 2,000 shares of Common Stock and (ii) 30,000 shares of Common
Stock issuable upon the exercise of options exercisable within 60 days from
the date hereof at an exercise price of $4.625 per share.
(8) Includes (i) 3,454 shares of Common Stock in Mr. McCarthy's 401K Plan and
(ii) 10,000 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days from the date hereof at an exercise price of
$4.625 per share.
(9) Includes 20,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days from the date hereof at an exercise
price of $4.625 per share.
(10) Includes (i) 3,000 shares of Common Stock and (ii) 2,500 shares of Common
Stock issuable upon the exercise of options exercisable within 60 days from
the date hereof at an exercise price of $4.625 per share
(11) Includes (i) 10,000 shares of Common Stock and (ii) 2,500 shares of Common
Stock issuable upon the exercise of options exercisable within 60 days from
the date hereof at an exercise price of $4.625 per share.
63
(12) Includes (i) 2,500 shares of Common Stock and (ii) 2,500 shares of Common
Stock issuable upon the exercise of options exercisable within 60 days from
the date hereof at an exercise price of $4.625 per share.
(13) 11825 North Pennsylvania Street, Carmel, Indiana 46032. These shares are
beneficially owned by Bankers Life and Casualty Company, an insurance
company, of which Conseco, Inc. is the parent holding company.
(14) 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. Dimensional Fund
Advisors Inc., a registered investment advisor ("Dimensional"), is deemed
to beneficial own shares of THCR Common Stock held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company,
or in series of the DFA Investment Trust Company, a Delaware business
trust, or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
Fund Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
(15) 777 South Harbour Island Boulevard, Suite 270, Tampa, Florida 33602. Bay
Harbour Management, L.C. is an investment advisor formed under the laws of
Florida ("Bay Harbour"), and claims beneficial ownership of these shares
which it holds for the account of investment funds and managed accounts.
Tower Investment Group, Inc. ("Tower") is the majority stockholder of Bay
Harbour. Mr. Steven A. Dyke is a stockholder and President of Tower. Mr.
Douglas A. Teitelbaum is a stockholder of Tower.
(16) Includes (i) 845,397 shares of Common Stock, 5,747 of which are held in
certain Reporting Persons' 401K Plans, (ii) 772,167 shares of Common Stock
issuable upon the exercise of options exercisable within 60 days from the
date hereof, (iii) 600,000 shares of Common Stock issuable upon the
exercise of warrants exercisable within 60 days from the date hereof and
(iv) 13,918,723 shares of Common Stock issuable upon the conversion of
limited partnership interests of THCR Holdings convertible within 60 days
from the date hereof.
THCR Holdings. THCR Holdings is a limited partnership of which THCR is a
59.87743% general partner, Trump is a 27.06457% limited partner, THCR/LP is a
3.55096% limited partner, TCI is a 3.69695% limited partner and TCI -II is a
5.81009% limited partner. Trump owns 100.0% of each of TCI and TCI-II.
THCR Funding. THCR Holdings beneficially owns 100.0% of the issued and
outstanding common stock of THCR Funding.
Changes in Control
As a part of the June 1995 Offering, THCR Holdings and THCR Funding issued
the Senior Notes. Pursuant to the Senior Note Indenture, THCR Holdings pledged
for the benefit of the holders of the Senior Notes, among other things, 100.0%
of the common stock of THCR Funding. A foreclosure on all of such collateral
would result in a change of control of THCR Funding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Affiliate party transactions are governed by the provisions of the Senior
Note Indenture, the TAC I Note Indenture, the TAC II Note Indenture and the TAC
III Note Indenture, which provisions generally require that such transactions be
on terms as favorable as would be obtainable from an unaffiliated party, and
require the approval of a majority of the independent directors of THCR for
certain affiliated transactions. Affiliated transactions with respect to Castle
Associates are governed by the indentures under which Castle Associates' Notes
were issued.
Trump and certain affiliates have engaged in certain related party
transactions with respect to THCR and its subsidiaries. See "Executive
Compensation; Compensation Committee Interlocks and Insider Participation;
Certain Related Party Transactions-THCR," "-Plaza Associates," "-Taj
Associates," "-Castle Associates" and "-Other Relationships."
Indemnification Agreements. In addition to the indemnification provisions
in THCR's and its subsidiaries' employment agreements with its officers (see
"Executive Compensation-Employment Agreements"), certain former and current
directors of Plaza Funding have entered into separate indemnification agreements
in May 1992 and June 1993 with Plaza Associates pursuant to which such persons
are afforded the full benefits of the indemnification provisions of the
partnership agreement governing Plaza Associates. Plaza Associates also entered
into an indemnification trust agreement in November 1992 with Midlantic (the
"Indemnification Trustee") pursuant to which the sum of $100,000 was deposited
by Plaza Associates with the Indemnification Trustee for the benefit of the
directors of Plaza Funding and certain former directors of Trump Plaza GP to
provide a source for indemnification for such persons if Plaza Associates, Plaza
Funding or Trump Plaza GP, as the case may be, fails to immediately honor a
demand for indemnification by such persons. The indemnification agreements with
the directors of Plaza Funding and directors of Trump Plaza GP were amended in
June 1993 to provide, among other things, that Plaza Associates would (i) not
terminate, amend or modify certain agreements in a manner which may adversely
affect the rights or interests of such directors unless an additional sum of
$600,000 was first deposited with the Indemnification Trustee, and (ii) maintain
directors' and officers' insurance covering such persons during the ten-year
term (subject to extension) of the indemnification agreements; provided,
however, that if such insurance would not be available on a commercially
practicable basis, Plaza Associates could, in lieu of obtaining such insurance,
annually deposit an amount in a trust fund equal to $500,000 for the benefit of
such directors; provided further, that deposits relating to the failure to
obtain such insurance shall not exceed $2.5 million. Such directors are covered
by directors' and officers' insurance maintained by Plaza Associates. In June
1993,
64
an additional sum of $600,000 was deposited with the Indemnification
Trustee for the benefit of the directors of Plaza Funding and certain former
directors of Trump Plaza GP.
In connection with the Taj Acquisition, Trump AC has agreed to provide to
the former officers and directors of THCR Holding Corp. and THCR/LP (the "Taj
Indemnified Parties"), including Messrs. Pickus and Burke, indemnification as
provided in the THCR's Amended and Restated Certificate of Incorporation and
Amended and Restated By-Laws until April 17, 2002. In addition, THCR has agreed,
and agreed to cause THCR Holding Corp. and THCR/LP to agree, that until April
17, 2002, unless otherwise required by law, the Certificate of Incorporation and
By-Laws of THCR Holding Corp. and THCR/LP shall not be amended, repealed or
modified to reduce or limit the rights of indemnity afforded to the former
directors, officers and employees of THCR Holding Corp. and THCR/LP or the
ability of THCR Holding Corp. or THCR/LP to indemnify such persons, nor to
hinder, delay or make more difficult the exercise of such rights of indemnity or
the ability to indemnify. In addition, Trump AC has also agreed to purchase and
maintain in effect, until April 17, 2002, directors' and officers' liability
insurance policies covering the Taj Indemnified Parties on terms no less
favorable than the terms of the then current insurance policies' coverage or, if
such directors' and officers' liability insurance is unavailable for an amount
no greater than 150.0% of the premium paid by THCR Holding Corp. (on an
annualized basis) for directors' and officers' liability insurance during the
period from January 1, 1996, to April 17, 1996, Trump AC has agreed to obtain as
much insurance as can be obtained for a premium not in excess (on an annualized
basis) of such amount.
In March 2000, the Board of Directors of THCR authorized and directed THCR
to cause Taj Associates, Plaza Associates, Castle Associates and Trump Indiana
to enter into indemnification agreements with each of the Directors of THCR in
connection with the performance of their duties as Directors.
65
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements. See the Index immediately following the signature
page.
(b) Reports on Form 8-K. The Registrants did not file any reports on Form 8-K
during the quarter ended December 31, 2000.
(c) Exhibits.
Exhibit No Description of Exhibit
2.1(12) Agreement, dated as of June 24, 1996, among Trump Hotels & Casino
Resorts, Inc., Trump Hotels & Casino Resorts Holdings, L.P.,
TC/GP, Inc., Trump's Castle Hotel & Casino, Inc. and Donald J.
Trump.
3.1(9) Amended and Restated Certificate of Incorporation of Trump Hotels
& Casino Resorts, Inc.
3.2(9) Amended and Restated By-Laws of Trump Hotels & Casino Resorts,
Inc.
3.1.3(14) Amendment to the Amended and Restated Certificate of Incorporation
of Trump Hotels & Casino Resorts, Inc.
4.1(4) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as
issuer, Plaza Associates, as guarantor, and First Bank National
Association, as trustee.
4.2(4) Indenture of Mortgage, between Plaza Associates, as mortgagor, and
Trump Plaza Funding, Inc., as mortgagee.
4.3(4) Assignment Agreement between Trump Plaza Funding, Inc., and First
Bank National Association, as trustee.
4.4(4) Assignment of Operating Assets from Plaza Associates to Trump
Plaza Funding, Inc.
4.5(4) Assignment of Leases and Rents from Plaza Associates to Trump
Plaza Funding, Inc.
4.6(4) Indenture of Mortgage between Plaza Associates and First Bank
National Association, as trustee.
4.7(4) Assignment of Leases and Rents from Plaza Associates to First Bank
National Association, as trustee.
4.8(4) Assignment of Operating Assets from Plaza Associates to First Bank
National Association, as trustee.
4.9(4) Plaza Associates Note to Trump Plaza Funding, Inc.
4.10(4) Mortgage Note Certificate (included in Exhibit 4.1).
4.11(4) Pledge Agreement of Trump Plaza Funding, Inc., in favor and for
the benefit of First Bank National Association, as trustee.
4.12-4.16 Intentionally omitted.
4.17.1(9) Senior Secured Note Indenture between Trump Hotels & Casino
Resorts Holdings, L.P. and Trump Hotels & Casino Resorts Funding,
Inc., as issuers, and First Bank National Association, as trustee.
4.17.2(11) Supplemental Indenture by Trump Hotels & Casino Resorts Holdings,
L.P. and Trump Hotels & Casino Resorts Funding, Inc. with respect
to their 15-1/2% Senior Secured Notes due 2005.
4.17.3(11) Second Supplemental Indenture by Trump Hotels & Casino Resorts
Holdings, L.P. and Trump Hotels & Casino Resorts Funding, Inc.
with respect to their 15-1/2% Senior Secured Notes due 2005.
4.17.4 Third Supplemental Indenture, dated August 1, 2000, by Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino
Resorts Funding, Inc. with respect to their 15-1/2% Senior Secured
Notes due 2005.
4.18(9) Senior Secured Note Certificate (included in Exhibit 4.17).
4.19.1(9) Pledge Agreement, dated June 12, 1995, from Trump Hotels &
Casino Resorts Holdings, L.P. as pledgor to First Bank
National Association as collateral agent, on behalf of First
Bank National Association in its respective capacities as
trustees.
4.19.2(9) Pledge Agreement, dated June 12, 1995, from Trump Hotels & Casino
Resorts Holdings, L.P. as pledgor to First Bank National
Association as trustee.
4.19.3(9) Pledge Agreement, dated June 12, 1995, from Trump Plaza
Holding Associates as pledgor to First Bank National
Association as collateral agent, on behalf of First Bank
National Association in its respective capacities as trustees.
4.19.4(9) Pledge Agreement, dated June 12, 1995, from Trump Plaza Holding,
Inc. as pledgor to First Bank National Association as collateral
agent, on behalf of First Bank National Association in its
respective capacities as trustees.
4.19.5(11) Pledge Agreement, dated April 17, 1996, from Trump Hotels &
Casino Resorts Holdings, L.P. as pledgor to First Bank National
Association as Senior Note Trustee.
4.19.6(11) Pledge Agreement, dated April 17, 1996, from Trump Atlantic
City Associates as pledgor to First Bank National
Association as Senior Note Trustee.
4.19.7(11) Pledge Agreement, dated April 17, 1996, from Trump Atlantic City
Holding, Inc. as pledgor to First Bank National Association as
Senior Note Trustee.
4.19.8(11) Pledge Agreement, dated April 17, 1996, from Trump Atlantic
City Corporation as pledgor to First Bank National
Association as Senior Note Trustee.
4.20(14) Pledge Agreement, dated as of October 7, 1996, by and between
Trump Hotels & Casino Resorts Holdings, L.P. and First Bank
National Association, as trustee.
4.21(14) Pledge Agreement, dated as of October 7, 1996, by and between
Trump's Castle Hotel & Casino, Inc. and First Bank National
66
Association, as trustee.
4.22-4.23 Intentionally omitted.
4.24(9) Cash Collateral and Disbursement Agreement, dated June 12,
1995, among First Bank National Association, as
disbursement agent, First Bank National Association, as
trustee, and Trump Hotels & Casino Resorts Holdings,
L.P. and Trump Hotels & Casino Resorts Funding, Inc., as
issuers.
4.25(8) Certificate of Common Stock of Trump Hotels & Casino
Resorts, Inc.
4.26(11) Indenture, dated April 17, 1996, among Trump Atlantic City
Associates and Trump Atlantic City Funding, Inc., as
issuers, Plaza Associates, Trump Taj Mahal Associates and
The Trump Taj Mahal Corporation, as guarantors, and First
Bank National Association as trustee.
4.27(11) First Mortgage Note Certificate (included in Exhibit 4.26.1).
4.28.1(11) Indenture of Mortgage and Security Agreement among Trump Taj
Mahal Associates, as mortgagor, and First Bank National
Association, as collateral agent, as mortgagee.
4.28.2(11) Indenture of Mortgage and Security Agreement among Plaza
Associates, as mortgagor, and First Bank National
Association, as collateral agent, as mortgagee.
4.29.1(11) Assignment of Leases and Rents among Trump Taj Mahal
Associates, as assignor, and First Bank National
Association, as collateral agent, as mortgagee.
4.29.2(11) Assignment of Leases and Rents among Plaza Associates, as
assignor, and First Bank National Association, as
collateral agent, as mortgagee.
4.30(11) Collateral Agency Agreement among First Bank National
Association, as collateral agent, First Bank National
Association, as trustee, Trump Atlantic City Associates,
Trump Atlantic City Funding, Inc., the other secured parties
signatory thereto, and the guarantors under the First
Mortgage Note Indenture.
4.31(11) Warrants of Trump Hotels & Casino Resorts, Inc. issued to
Donald J. Trump.
4.32(17) Indenture, dated as of December 10, 1997, by and among
Trump Atlantic City Associates and Trump Atlantic City
Funding II, Inc., as issuers, Trump Atlantic City
Corporation, Trump Casino Services, L.L.C., Trump
Communications, L.L.C., Plaza Associates and Trump Taj
Mahal Associates, as guarantors, and U.S. Bank
National Association, as trustee.
4.33(16) Registration Rights Agreement, dated as of December 10,
1997, by and among Trump Atlantic City Associates and Trump
Atlantic City Funding II, as issuers, Trump Atlantic City
Corporation, Trump Casino Services, L.L.C., Trump
Communications, L.L.C., Plaza Associates and Trump Taj Mahal
Associates as guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, as initial purchaser.
4.34(18) Indenture, dated as of December 10, 1997, by and among Trump
Atlantic City Associates and Trump Atlantic City
Funding III, Inc., as issuers, Trump Atlantic City
Corporation, Trump Casino Services, L.L.C., Trump
Communications, L.L.C., Plaza Associates and Trump Taj Mahal
Associates, as guarantors, and U.S. Bank National
Association, as trustee.
4.35(15) Registration Rights Agreement, dated as of December 10,
1997, by and among Trump Atlantic City Associates and Trump
Atlantic City Funding III, as issuers, Trump Atlantic City
Corporation, Trump Casino Services, L.L.C., Trump
Communications, L.L.C., Plaza Associates and Trump Taj Mahal
Associates, as guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, as initial purchaser.
4.36(18) Indenture of Mortgage and Security Agreement dated as of
December 10, 1997, by Plaza Associates as mortgagor
and U.S. Bank National Association (as Collateral Agent) as
mortgagee.
4.37(18) Indenture of Mortgage and Security Agreement dated as of
December 10, 1997, by Trump Taj Mahal Associates as
mortgagor and U.S. National Association (as Collateral
Agent) as mortgagee.
4.38(18) Assignment of Leases and Rents dated as of December 10,
1997, by Plaza Associates as assignor and U.S. Bank
National Association (as Collateral Agent) as assignee.
4.39(18) Assignment of Leases and Rents dated as of December 10,
1997, by Trump Taj Mahal Associates as assignor and
U.S. Bank National Association (as Collateral Agent) as
assignee.
10.1-10.6 Intentionally omitted.
10.7(6) Employment Agreement between Plaza Associates and Barry
Cregan.
10.8-10.27 Intentionally omitted.
10.28(1) Option Agreement, dated as of February 2, 1993, between
Donald J. Trump and Plaza Associates.
10.29 Intentionally omitted.
10.30(2) Amended and Restated Services Agreement between Plaza
Associates and Trump Plaza Management Corp.
10.31-10.32 Intentionally omitted.
10.33(3) Mortgage from Donald J. Trump, as nominee, to Albert
Rothenberg and Robert Rothenberg, dated October 3, 1983.
10.34 Intentionally omitted.
10.35.1(3) Mortgage from Plaza Associates to The Mutual Benefit Life
Insurance Company, dated October 5, 1990.
10.35.2(3) Collateral Assignment of Leases from Plaza Associates to
The Mutual Benefit Life Insurance Company, dated
October 5, 1990.
10.36-10.37 Intentionally omitted.
10.38.1(5) Employment Agreement between Plaza Associates and Nicholas
L. Ribis.
10.38.2(9) Employment Agreement between Trump Hotels & Casino
Resorts Holdings, L.P. and Nicholas L. Ribis (with
exhibits).
10.39.1(5) Severance Agreement between Plaza Associates and Robert M.
Pickus.
10.39.2(15) Employment Contract, dated July 7, 1995, between Trump
Hotels & Casino Resorts Holdings, L.P. and Robert M.
Pickus.
10.40(7) Employment Agreement, dated as of February 7, 1995, between
Plaza Associates and Kevin S. Smith.
67
10.41(7) Employment Agreement between Plaza Associates and James A.
Rigot.
10.42(7) Option and Right of First Offer Agreement between Plaza
Associates and Missouri Boardwalk Inc., dated June
24, 1993.
10.43(7) Lease between Donald J. Trump and Missouri Boardwalk Inc.,
dated June 24, 1993.
10.44(7) Sublease between Donald J. Trump and Missouri Boardwalk
Inc., dated June 24, 1993.
10.45 Intentionally omitted.
10.46.1(9) Executive Agreement among Donald J. Trump, Trump Hotels &
Casino Resorts, Inc. and Trump Hotels & Casino Resorts
Holdings, L.P.
10.46.2(13) Amendment to Executive Agreement, dated as of May 16, 1996,
by and among Donald J. Trump, Trump Hotels & Casino Resorts,
Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
10.46.3 Second Amendment to Executive Agreement, dated October 2000,
by and among Donald J. Trump, Trump Hotels & Casino Resorts,
Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
10.47.1(9) 1995 Stock Incentive Plan of Trump Hotels & Casino Resorts,
Inc.
10.47.2(13) Amendment No. 1 to Trump Hotels & Casino Resorts, Inc. 1995
Stock Incentive Plan.
10.50(8) Acquisition Agreement, dated April 27, 1995, between Trump
Oceanview, Inc. and The New Jersey Sports and Exposition
Authority.
10.51.1(8) Amended and Restated Partnership Agreement of Trump Hotels
& Casino Resorts Holdings, L.P.
10.51.2(11) Second Amended and Restated Agreement of Limited Partnership
of Trump Hotels & Casino Resorts Holdings,
10.51.3(14) Third Amended and Restated Agreement of Limited Partnership
of Trump Hotels & Casino Resorts Holdings, L.P., dated as of
October 7, 1996.
10.52.1(9) Exchange and Registration Rights Agreement, dated June 12,
1995, between Trump Hotels & Casino Resorts, Inc. and Donald
J. Trump.
10.52.2(11) Amended and Restated Exchange and Registration Rights
Agreement, dated April 17, 1996, among Trump Hotels &
Casino Resorts, Inc., Donald J. Trump and Trump Casinos,
Inc.
10.52.3(14) Second Amended and Restated Exchange and Registration Rights
Agreement among Donald J. Trump, Trump Casinos, Inc., Trump
Casinos II, Inc. and Trump Hotels & Casino Resorts, Inc.,
dated as of October 7, 1996.
10.53.1(9) Contribution Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts Holdings, L.P. and Donald J. Trump.
10.53.2(11) 1996 Contribution Agreement among Trump Hotels & Casino
Resorts Holdings, L.P., Donald J. Trump, THCR/LP
Corporation (formerly known as TM/GP Corporation) and Trump
Casinos, Inc. (formerly known as Trump Taj Mahal, Inc.).
10.54.1(9) Trademark License Agreement, dated June 12, 1995, between
Donald J. Trump and Trump Hotels & Casino Resorts, Inc.
10.54.2(11) Amendment to Trademark License Agreement, dated April 17,
1996, between Donald J. Trump and Trump Hotels & Casino
Resorts, Inc.
10.55.1(9) Trademark Security Agreement, dated June 12, 1995, between
Trump Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.55.2(11) Amendment to Trademark Security Agreement, dated April 17,
1996, between Donald J. Trump and Trump Hotels & Casino
Resorts, Inc.
10.56(8) Agreement of Sublease between Donald J. Trump and Time
Warner Entertainment Company, L.P., as amended.
10.57-10.58 Intentionally omitted.
10.59(10) First Amended and Restated Operating Agreement of Buffington
Harbor Riverboat, L.L.C. by and between Trump Indiana, Inc.
and Barden-Davis Casinos, L.L.C., dated as of October 31,
1995.
10.60.1(10) Loan and Security Agreement, by and between Debis Financial
Services, Inc. and Trump Indiana, Inc., dated August 30,
1995.
10.60.2(10) Amendment Agreement to Loan and Security Agreement, by and
between Debis Financial Services, Inc. and Trump Indiana,
Inc., dated as of October 25, 1995.
10.61(10) Voting Agreement between Donald J. Trump and Trump Hotels &
Casino Resorts, Inc., dated January 8, 1996.
10.63(11) Third Amended and Restated Partnership Agreement of Plaza
Associates.
10.64(11) Amended and Restated Partnership Agreement of Trump Atlantic
City Associates.
10.65.1(13) Services Agreement, dated as of July 8, 1996, among Plaza
Associates, Trump Taj Mahal Associates and Trump Casino
Services, L.L.C.
10.65.2(14) Amended and Restated Services Agreement, dated as of October
23, 1996, by and among Plaza Associates, Trump Taj Mahal
Associates, Trump's Castle Associates, L.P. and Trump Casino
Services, L.L.C.
10.66(13) Thermal Energy Service Agreement, dated as of June 30, 1996,
by and between Atlantic Jersey Thermal Systems, Inc. and
Trump Taj Mahal Associates.
10.67.1(14) Amendment to the Second Amended and Restated Partnership
Agreement of Trump's Castle Associates, dated as of October
7, 1996.
10.67.2(14) Third Amended and Restated Partnership Agreement of Trump's
Castle Associates, L.P., dated as of October 7, 1996.
10.68(14) Registration Agreement among Donald J. Trump, Trump Casinos,
Inc., Trump Casinos II, Inc., Trump Hotels & Casino Resorts,
Inc. and Donaldson Lufkin & Jenrette, Inc., dated as of
October 7, 1996.
10.69(14) Thermal Energy Service Agreement, dated as of September 26,
1996, by and between Atlantic Jersey Thermal Systems, Inc.
and Plaza Associates.
10.70(19) Employment Agreement, dated May 3, 1996, between Trump
Hotels & Casinos Resorts Holdings, L.P. and Joseph A.
Fusco.
10.71(19) Promissory Note of Nicholas L. Ribis in favor of Trump
Hotels & Casino Resorts Holdings, L.P., dated December
4, 1996.
10.72 Second Amendment, dated August 4, 2000, of the Employment
Agreement, dated March 6, 1998, between Mark A. Brown and
Trump's Castle Associates, as assigned to Trump Taj Mahal
Associates and amended effective as of January 3, 2000.
68
10.73 Employment Agreement, dated April 17, 2000, between Robert
M. Pickus and Trump Hotels & Casino Resorts, Inc.,
Trump Hotels & Casino Resorts Holdings, L.P. and Trump
Atlantic City Associates.
10.74 Employment Agreement, dated April 17, 2000, between Francis
X. McCarthy, Jr. and Trump Hotels & Casino Resorts, Inc.,
Trump Hotels & Casino Resorts Holdings, L.P. and Trump
Atlantic City Associates.
10.75 Employment Agreement, dated April 17, 2000, between Joseph
A. Fusco and Trump Hotels & Casino Resorts, Inc., Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Atlantic
City Associates.
10.76 Employment Agreement, dated April 17, 2000, between John P.
Burke and Trump Hotels & Casino Resorts, Inc., Trump Hotels
& Casino Resorts Holdings, L.P. and Trump Atlantic City
Associates.
21.1 List of Subsidiaries of Trump Hotels & Casino Resorts, Inc.,
Trump Hotels & Casino Resorts Holdings, L.P. and Trump
Hotels & Casino Resorts Funding, Inc.
---------------------------------
(1) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year ended
December 31, 1992.
(2) Previously filed in the Registration Statement on Form S-1, Registration
No. 33-58608, of Trump Atlantic City Associates (formerly Trump Plaza
Holding Associates) and incorporated by reference herein.
(3) Incorporated herein by reference to the identically numbered Exhibit in the
Registration Statement on Form S-1, Registration No. 33-58602, of Trump
Plaza Funding, Inc. and Trump Plaza Associates.
(4) Incorporated herein by reference to the identically numbered Exhibit in the
Registration Statement on Form S-1, Registration No. 33-58608, of Trump
Atlantic City Associates (formerly Trump Plaza Holding Associates).
(5) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump Atlantic
City Associates (formerly Trump Plaza Holding Associates) for the year
ended December 31, 1993.
(6) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 1O-Q of Trump Plaza Funding, Inc. for the quarter
ended September 30, 1994.
(7) Incorporated herein by reference to the identically numbered Exhibit in the
Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump Atlantic
City Associates (formerly Trump Plaza Holding Associates) for the year
ended December 31, 1994.
(8) Incorporated herein by reference to the identically numbered Exhibit to the
Registration Statement on Form S-1, Registration No. 33-90784, of Trump
Hotels & Casino Resorts, Inc.
(9) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc., Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc. for the quarter ended June 30, 1995.
(10) Incorporated by reference to the identically numbered Exhibit in the
Registration Statement on Form S-1, Registration No. 333-639, of Trump
Hotels & Casino Resorts, Inc.
(11) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc. for
the quarter ended March 31, 1996.
(12) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Trump Hotels & Casino Resorts, Inc., dated June 25, 1996.
(13) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc. for
the quarter ended June 30, 1996.
(14) Incorporated herein by reference to the identically numbered Exhibit in the
Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc. for
the quarter ended September 30, 1996.
(15) Incorporated herein by reference to the identically numbered Exhibit to the
Registration Statement on Form S-4, Registration No. 333-43975, of Trump
Atlantic City Associates and Trump Atlantic City Funding III, Inc.
(16) Incorporated herein by reference to the identically numbered Exhibit to the
Registration Statement on Form S-4, Registration No. 333-43979, of Trump
Atlantic City Associates and Trump Atlantic City Funding II, Inc.
(17) Incorporated herein by reference to the identically numbered Exhibit in
Amendment No. 1 to Registration Statement on Form S-4, Registration No.
333-43979, of Trump Atlantic City Associates and Trump Atlantic City
Funding II, Inc.
(18) Incorporated herein by reference to the identically numbered Exhibit to the
Annual Report on Form 10-K of Trump Atlantic City Associates, Trump
Atlantic City Funding, Inc., Trump Atlantic City Funding II, Inc. and Trump
Atlantic City Funding III, Inc. for the year ended December 31, 1997.
(19) Incorporated herein by reference to the identically numbered Exhibit to the
Annual Report on Form 10-K of Trump Hotels & Casino Resorts, Inc. for the
year ended December 31, 1996.
69
(d) Financial Statement Schedules. See "Financial Statements and Supplementary
Data--Index to Financial Statements and Financial Statement Schedules" for
a list of the financial statement schedules included in this Annual Report.
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Annual Report on Form 10-K
and those that may be made in the future by or on behalf of the Registrants, the
Registrants note that there are various factors that could cause actual results
to differ materially from those set forth in any such forward-looking
statements. The forward-looking statements contained in this Annual Report were
prepared by management and are qualified by, and subject to, significant
business, economic, competitive, regulatory and other uncertainties and
contingencies, all of which are difficult or impossible to predict and many of
which are beyond the control of the Registrants. Accordingly, there can be no
assurance that the forward-looking statements contained in this Annual Report
will be realized or that actual results will not be significantly higher or
lower. The statements have not been audited by, examined by, compiled by or
subjected to agreed-upon procedures by independent accountants, and no
third-party has independently verified or reviewed such statements. Readers of
this Annual Report should consider these facts in evaluating the information
contained herein. In addition, the business and operations of the Registrants
are subject to substantial risks which increase the uncertainty inherent in the
forward-looking statements contained in this Annual Report. The inclusion of the
forward-looking statements contained in this Annual Report should not be
regarded as a representation by the Registrants or any other person that the
forward-looking statements contained in this Annual Report will be achieved. In
light of the foregoing, readers of this Annual Report are cautioned not to place
undue reliance on the forward-looking statements contained herein.
70
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TRUMP HOTELS & CASINO RESORTS, INC.
By: /s/ Donald J. Trump
-------------------
Donald J. Trump
Title: President and Chief Executive Officer
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Donald J. Trump Chairman of the Board of Directors, March 30, 2001
--------------------------- President and Chief Executive Officer
Donald J. Trump (principal executive officer)
/s/ Francis X. McCarthy, Jr. Executive Vice President, Corporate Finance March 30, 2001
--------------------------- Accounting and Chief Financial Officer
Francis X. McCarthy, Jr. (principal financial officer)
/s/ Wallace B. Askins Director March 30, 2001
---------------------------
Wallace B. Askins
/s/ Don M. Thomas Director March 30, 2001
---------------------------
Don M. Thomas
/s/ Peter M. Ryan Director March 30, 2001
---------------------------
Peter M. Ryan
71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
By: Trump Hotels & Casino Resorts, Inc.,
as General Partner
By: /s/ Donald J. Trump
-------------------
Donald J. Trump
Title: President and Chief Executive Officer
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Donald J. Trump Chairman of the Board of Directors, March 30, 2001
---------------------------- President and Chief Executive Officer
Donald J. Trump (principal executive officer)
/s/ Francis X. McCarthy, Jr. Executive Vice President, Corporate Finance March 30, 2001
---------------------------- Accounting and Chief Financial Officer
Francis X. McCarthy, Jr. (principal financial officer)
/s/ Wallace B. Askins Director March 30, 2001
----------------------------
Wallace B. Askins
/s/ Don M. Thomas Director March 30, 2001
----------------------------
Don M. Thomas
/s/ Peter M. Ryan Director March 30, 2001
----------------------------
Peter M. Ryan
72
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TRUMP HOTELS & CASINO RESORTS FUNDING, INC.
By: /s/ Donald J. Trump
-------------------
Donald J. Trump
Title: President and Chief Executive Officer
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Donald J. Trump Chairman of the Board of Directors, March 30, 2001
---------------------------- President and Chief Executive Officer
Donald J. Trump (principal executive officer)
/s/ Francis X. McCarthy, Jr. Executive Vice President, Corporate Finance March 30, 2001
---------------------------- Accounting and Chief Financial Officer
Francis X. McCarthy, Jr. (principal financial officer)
/s/ Wallace B. Askins Director March 30, 2001
----------------------------
Wallace B. Askins
/s/ Don M. Thomas Director March 30, 2001
----------------------------
Don M. Thomas
/s/ Peter M. Ryan Director March 30, 2001
----------------------------
Peter M. Ryan
73
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page
Trump Hotels & Casino Resorts, Inc.
Report of Independent Public Accountants ........................................................ F-2
Consolidated Balance Sheets as of December 31, 1999 and 2000 ................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1998, 1999 and 2000 ...... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1999
and 2000 ..................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000 ...... F-6
Trump Hotels & Casino Resorts Holdings, L.P.
Report of Independent Public Accountants ........................................................ F-7
Consolidated Balance Sheets as of December 31, 1999 and 2000 ................................... F-8
Consolidated Statements of Operations for the years ended December 31, 1998, 1999 and 2000 ...... F-9
Consolidated Statements of Partners' Capital for the years ended December 31, 1998,
1999 and 2000 ................................................................................. F-10
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000 ...... F-11
Notes to Consolidated Financial Statements of Trump Hotels & Casino Resorts, Inc. and Trump
Hotels & Casino Resorts Holdings, L.P. ........................................................ F-12
Financial Statement Schedules
Reports of Independent Public Accountants ....................................................... S-1
Schedule II--Trump Hotels & Casino Resorts, Inc. and Trump Hotels & Casino Resorts
Holdings, L.P. Valuation and Qualifying Accounts for the years ended December 31, 1998,
1999 and 2000 ................................................................................. S-3
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.:
We have audited the accompanying consolidated balance sheets of Trump Hotels &
Casino Resorts, Inc. and subsidiary (a Delaware corporation) as of December 31,
1999 and 2000, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2000. These consolidated financial statements are the
responsibility of the management of Trump Hotels & Casino Resorts, Inc. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trump Hotels & Casino Resorts,
Inc. and subsidiary as of December 31, 1999 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 2, 2001
F-2
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 and 2000
(in thousands, except share data)
1999 2000
----------- -----------
ASSETS
CURRENT ASSETS:
Cash & cash equivalents ....................................................................... $ 104,026 $ 95,429
Trade receivables, net of allowances for doubtful accounts of $ 11,950 and $15,376,
respectively (Note 2)........................................................................ 40,119 42,498
Accounts receivable, other (Note 2) ........................................................... 7,662 10,217
Inventories ................................................................................... 13,060 12,324
Due from Affiliates (Note 7) .................................................................. 27,590 2,687
Prepaid expenses and other current assets ..................................................... 8,618 9,941
---------- ----------
Total current assets ..................................................................... 201,075 173,096
---------- ----------
INVESTMENT IN BUFFINGTON HARBOR, L.L.C. (Note 2) ................................................... 38,185 36,585
INVESTMENT IN TRUMP'S CASTLE PIK NOTES (Note 3) .................................................... 76,250 90,101
PROPERTY AND EQUIPMENT (Notes 2 and 3):
Land and land improvements .................................................................... 264,155 264,886
Buildings and building improvements ........................................................... 1,688,929 1,699,499
Riverboat ..................................................................................... 33,713 33,581
Furniture, fixtures and equipment ............................................................. 277,747 298,881
Leasehold improvements ........................................................................ 3,374 2,524
Construction in progress ...................................................................... 24,873 17,483
---------- ----------
2,292,791 2,316,854
Less--accumulated depreciation and amortization ............................................... (432,195) (501,786)
---------- ----------
Net property and equipment ............................................................... 1,860,596 1,815,068
---------- ----------
DEFERRED BOND AND LOAN ISSUANCE COSTS, net of accumulated amortization of $29,514 and
$34,227, respectively (Note 2) .................................................................. 30,838 23,273
OTHER ASSETS (Note 2) .............................................................................. 60.298 61,190
---------- -----------
Total assets ............................................................................. $2,267,242 $2,199,313
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3) ................................................. $ 12,411 $ 27,021
Accounts payable .............................................................................. 43,790 55,351
Accrued payroll ............................................................................... 30,869 29,630
Accrued interest payable ...................................................................... 30,301 29,967
Due to affiliates (Note 7) .................................................................... 222 162
Other accrued expenses ........................................................................ 44,560 35,261
Self insurance reserves (Note 5) .............................................................. 12,181 11,968
Other current liabilities ..................................................................... 14,770 15,429
---------- ----------
Total current liabilities ................................................................ 189,104 204,789
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities (Note 3) ............................................ 1,855,327 1,827,023
Other long-term liabilities ................................................................... 21,738 25,455
---------- ----------
Total liabilities ........................................................................ 2,066,169 2,057,267
---------- ----------
MINORITY INTEREST .................................................................................. 48,409 26,897
COMMITMENTS AND CONTINGENCIES (Notes 5 and 8)
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 1,000,000 shares authorized, none issued and
outstanding in 1999 and 2000, respectively .................................................. -- --
Common Stock, $.01 par value, 75,000,000 shares authorized, 24,206,756 issued;
22,079,256 and 22,010,027 outstanding in 1999 and 2000, respectively ........................ 242 242
Class B Common Stock, $.01 par value, 1,000 shares authorized, issued and outstanding
in 1999 and 2000, respectively .............................................................. -- --
Additional paid-in capital .................................................................... 455,645 455,645
Accumulated deficit .......................................................................... (283,226) (320,538)
Less--treasury stock, 2,127,500 and 2,196,729 shares of THCR common stock respectively,
at cost (Note 5) ........................................................................... (19,997) (20,200)
---------- ----------
Total stockholders' equity ............................................................... 152,664 115,149
---------- ----------
Total liabilities & stockholders' equity ................................................. $2,267,242 $2,199,313
========== ==========
The accompanying notes to financial statements are an integral
part of these consolidated balance sheets.
F-3
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 and 2000
(in thousands, except share data)
1998 1999 2000
------------ ------------ ------------
REVENUES:
Gaming (Note 2) ............................................................. $ 1,288,394 $ 1,275,829 $ 1,245,014
Rooms ....................................................................... 93,549 93,491 81,411
Food and beverage ........................................................... 146,842 144,103 136,492
Other (Note 11) ............................................................. 44,886 62,460 40,756
------------ ------------ ------------
Gross revenues ........................................................... 1,573,671 1,575,883 1,503,673
Less--Promotional allowances ................................................ (169,581) (164,690) (152,301)
------------ ------------ ------------
Net Revenues ............................................................. 1,404,090 1,411,193 1,351,372
------------ ------------ ------------
COSTS AND EXPENSES:
Gaming ...................................................................... 806,907 808,585 770,011
Rooms ....................................................................... 31,587 34,916 31,843
Food and beverage ........................................................... 51,384 53,340 46,329
General and administrative .................................................. 275,517 292,288 282,194
Depreciation and amortization ............................................... 83,722 83,323 77,231
Trump World's Fair closing (Note 12) ........................................ -- 123,959 814
------------ ------------ ------------
1,249,117 1,396,411 1,208,422
------------ ------------ ------------
Income from operations ................................................... 154,973 14,782 142,950
------------ ------------ ------------
NON-OPERATING INCOME AND (EXPENSE): (Note 4)
Interest income ............................................................. 9,591 7,102 7,327
Interest expense ............................................................ (223,098) (222,668) (220,217)
Other non-operating expense, net ............................................ (1,093) (1,501) (653)
------------ ------------ ------------
(214,600) (217,067) (213,543)
------------ ------------ ------------
Loss before equity in loss from Buffington Harbor, L.L.C., minority interest,
cumulative effect of change in accounting principle, and extraordinary item ...... (59,627) (202,285) (70,593)
Equity in loss from Buffington Harbor, L.L.C ..................................... (2,969) (3,008) (3,134)
Minority interest ................................................................ 22,878 75,076 26,962
Cumulative effect of change in accounting principle, net of minority interest
(Note 2) .................................................................... -- (3,565) --
Extraordinary gain, net of minority interest (Note 3) ............................ -- -- 9,453
------------ ------------ ------------
Net Loss ......................................................................... $ (39,718) $ (133,782) $ (37,312)
============ ============ ============
SHARE DATA:
Basic and diluted loss per share before cumulative effect of change in
accounting principle and extraordinary item ................................... $ (1.79) $ (5.87) $ (2.12)
Cumulative effect of change in accounting principle .............................. -- (.16) --
Extraordinary item ............................................................... -- -- .43
------------ ------------ ------------
Basic and diluted loss per share ................................................. $ (1.79) $ (6.03) $ (1.69)
============ ============ ============
Average number of shares outstanding ............................................. 22,203,612 22,178,878 22,041,048
============ ============ ============
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-4
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 and 2000
(in thousands, except share data)
Number of Shares
----------------
Additional
Class B Paid In Accumulated Treasury
Common Common Amount Capital Deficit Stock Total
---------- ------- ------- ---------- ----------- -------- ---------
Balance, December 31, 1997 .................. 24,206,756 1,000 $ 242 $455,645 $(109,726) $(17,276) $328,885
Purchase of treasury stock, 305,000 shares
to THCR Common Stock, at cost ............... -- -- -- -- -- (2,259) (2,259)
Net Loss .................................... -- -- -- -- (39,718) -- (39,718)
---------- ------- ------- -------- --------- -------- --------
Balance, December 31, 1998 .................. 24,206,756 1,000 242 455,645 (149,444) (19,535) 286,908
Purchase of treasury stock, 116,000 shares
of THCR Common Stock, at cost ............... -- -- -- -- -- (462) (462)
Net Loss .................................... -- -- -- -- (133,782) -- (133,782)
---------- ------- ------- -------- --------- -------- --------
Balance, December 31, 1999 .................. 24,206,756 1,000 242 455,645 (283,226) (19,997) 152,664
Receipt of treasury stock, 69,229 shares of
THCR Common Stock in satisfaction of
debt (Note 5) ............................... -- -- -- -- -- (203) (203)
Net Loss .................................... -- -- -- -- (37,312) -- (37,312)
---------- ------- ------- -------- --------- -------- --------
Balance, December 31, 2000 .................. 24,206,756 1,000 $ 242 $455,645 $(320,538) $(20,200) $115,149
========== ======= ======= ======== ========= ======== ========
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-5
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(in thousands)
1998 1999 2000
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................................ $ (39,718) $(133,782) $ (37,312)
Adjustments to reconcile net loss to net cash flows provided by operating
activities:
Non Cash Charges:
Issuance of debt in satisfaction of accrued interest ........................... 11,614 13,281 15,188
Extraordinary gain, net of minority interest ................................... - - (9,453)
Cumulative effect of accounting change ......................................... - 3,565 -
Depreciation and amortization .................................................. 83,722 83,323 77,231
Minority interest in net loss .................................................. (22,878) (75,076) (26,962)
Accretion of discount on mortgage notes and amortization of loan costs ......... 12,331 12,203 12,028
Provisions for losses on receivables ........................................... 15,535 25,434 6,857
Equity in loss of Buffington Harbor L.L.C. ..................................... 2,969 3,008 3,134
Interest income Castle-PIK notes ............................................... (10,591) (12,113) (13,851)
Valuation allowance of CRDA investments and amortization of Indiana gaming
costs ........................................................................ 7,155 9,414 14,275
(Gain) loss on disposition of fixed assets ..................................... - (460) 1,509
Gain on property received upon lease termination ............................... - (17,200) -
Write-off net book value of Trump World's Fair ................................. - 97,221 -
Increase in receivables ........................................................ (17,550) (2,231) (11,791)
Decrease (increase) in inventories ............................................. 207 (257) 736
(Increase) decrease in due from affiliates ..................................... (11,953) (269) 24,640
(Increase) decrease in other current assets .................................... (4,101) 4,719 (1,166)
(Increase) decrease in other assets ............................................ (5,106) 5,203 (2,136)
Increase in accounts payable, accrued expenses, and other
current liabilities .......................................................... 8,246 27,830 1,291
Increase (decrease) in accrued interest payable ................................ 1,341 (78) (334)
(Decrease) increase in other long-term liabilities ............................ (2,735) (6) 17
--------- --------- ---------
Net cash flows provided by operating activities ............................. 28,488 43,729 53,901
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net ............................................. (38,294) (31,671) (20,742)
Restricted cash ..................................................................... 10,477 2,523 -
Purchase of CRDA investments, net ................................................... (10,845) (14,328) (14,208)
Investment in Buffington Harbor L.L.C. .............................................. (199) (428) (1,534)
Proceeds from disposition of property ............................................... - 4,502 -
--------- --------- ---------
Net cash flows used in investing activities ................................. (38,861) (39,402) (36,484)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock .......................................................... (2,259) (462) -
Debt issuance costs ................................................................. (2,021) - (301)
Debt payments - other ............................................................... (77,918) (14,596) (33,691)
Proceeds from borrowings ............................................................ 67,000 - 7,978
--------- --------- ---------
Net cash flows used in financing activities ................................. (15,198) (15,058) (26,014)
--------- --------- ---------
Net decrease in cash and cash equivalents ............................................. (25,571) (10,731) (8,597)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...................................... 140,328 114,757 104,026
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................................ $ 114,757 $ 104,026 $ 95,429
========= ========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest ............................................... $ 208,793 $ 209,699 $ 209,166
Cash paid during the year for state and Federal taxes ................................ 25 - -
Equipment purchased under capital leases ............................................. 7,223 14,275 8,315
Receipt of THCR Common Stock in satisfaction of debt ................................. - - 203
The accompanying notes to financial statements are an integral
part of these consolidated financial statements
F-6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts Holdings, L.P.:
We have audited the accompanying consolidated balance sheets of
Trump Hotels & Casino Resorts Holdings, L.P. and subsidiaries (a
Delaware limited partnership) as of December 31, 1999 and 2000, and
the related consolidated statements of operations, partners' capital
and cash flows for each of the three years in the period ended
December 31, 2000. These consolidated financial statements are the
responsibility of the management of Trump Hotels & Casino Resorts
Holdings, L.P. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Trump Hotels & Casino Resorts Holdings, L.P. as of December 31, 1999
and 2000, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2000,
in conformity with accounting principles generally accepted in the
United States.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 2, 2001
F-7
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 and 2000
(in thousands)
1999 2000
---- ----
CURRENT ASSETS:
Cash & cash equivalents .......................................................... $ 104,022 $ 95,425
Trade receivables, net of allowances for doubtful accounts of $11,950 and $15,376,
respectively (Note 2) ....................................................... 40,119 42,498
Accounts receivable, other (Note 2) .............................................. 7,662 10,217
Inventories ...................................................................... 13,060 12,324
Due from affiliates (Note 7) ................................................... 27,590 2,687
Prepaid expenses and other current assets ........................................ 8,618 9,941
----------- -----------
Total current assets ......................................................... 201,071 173,092
----------- -----------
INVESTMENT IN BUFFINGTON HARBOR L.L.C. (Note 2) ..................................... 38,185 36,585
INVESTMENT IN TRUMP'S CASTLE PIK NOTES (Note 3) ..................................... 76,250 90,101
PROPERTY AND EQUIPMENT (Notes 2 and 3):
Land and land improvements ....................................................... 264,155 264,886
Buildings and building improvements .............................................. 1,688,929 1,699,499
Riverboat ........................................................................ 33,713 33,581
Furniture, fixtures and equipment ................................................ 277,747 298,881
Leasehold improvements ........................................................... 3,374 2,524
Construction in progress ......................................................... 24,873 17,483
----------- -----------
2,292,791 2,316,854
Less--accumulated depreciation and amortization .................................. (432,195) (501,786)
----------- -----------
Net property and equipment .................................................. 1,860,596 1,815,068
----------- -----------
DEFERRED BOND AND LOAN ISSUANCE COSTS, net of accumulated amortization of $29,514 and
$34,227, respectively (Note 2)................................................... 30,838 23,273
OTHER ASSETS (Note 2) ............................................................... 60,298 61,190
----------- -----------
Total assets ................................................................ $ 2,267,238 $ 2,199,309
=========== ===========
LIABILITIES & PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3) .................................... $ 12,411 $ 27,021
Accounts payable ................................................................. 43,790 55,351
Accrued payroll .................................................................. 30,869 29,630
Accrued interest payable ......................................................... 30,301 29,967
Due to affiliates (Note 7) ....................................................... 222 162
Other accrued expenses ........................................................... 44,560 35,261
Self insurance reserves (Note 5) ................................................. 12,181 11,968
Other current liabilities ........................................................ 14,770 15,429
----------- -----------
Total current liabilities .................................................... 189,104 204,789
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities (Note 3) ............................... 1,855,327 1,827,023
Other long-term liabilities ...................................................... 21,738 25,455
----------- -----------
Total liabilities ........................................................... 2,066,169 2,057,267
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 8)
PARTNERS' CAPITAL
Partners' capital .............................................................. 652,503 652,503
Accumulated deficit ............................................................ (431,437) (490,261)
Less--stock of THCR ............................................................ (19,997) (20,200)
----------- -----------
Total partners' capital ................................................... 201,069 142,042
----------- -----------
Total liabilities & partners' capital ..................................... $ 2,267,238 $ 2,199,309
=========== ===========
The accompanying notes to financial statements are an integral
part of these consolidated balance sheets.
F-8
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 and 2000
(in thousands)
1998 1999 2000
---- ----- ----
REVENUES:
Gaming (Note 2) .............................. $ 1,288,394 $ 1,275,829 $ 1,245,014
Rooms ........................................ 93,549 93,491 81,411
Food and beverage ............................ 146,842 144,103 136,492
Other (Note 11) .............................. 44,886 62,460 40,756
----------- ----------- -----------
Gross revenues .......................... 1,573,671 1,575,883 1,503,673
Less--Promotional allowances ................. (169,581) (164,690) (152,301)
----------- ----------- -----------
Net revenues ............................ 1,404,090 1,411,193 1,351,372
----------- ----------- -----------
COSTS AND EXPENSES:
Gaming ....................................... 806,907 808,585 770,011
Rooms ........................................ 31,587 34,916 31,843
Food and beverage ............................ 51,384 53,340 46,329
General and administrative ................... 275,517 292,288 282,194
Depreciation and amortization ................ 83,722 83,323 77,231
Trump World's Fair closing (Note 12) ....... -- 123,959 814
----------- ----------- -----------
1,249,117 1,396,411 1,208,422
----------- ----------- -----------
Income from operations .................. 154,973 14,782 142,950
----------- ----------- -----------
NON-OPERATING INCOME (EXPENSE) (NOTE: 4)
Interest income .............................. 9,591 7,102 7,327
Interest expense ............................. (223,098) (222,668) (220,217)
Other non-operating expense, net ............ (1,093) (1,501) (653)
----------- ----------- -----------
(214,600) (217,067) (213,543)
----------- ----------- -----------
Loss before equity in loss from Buffington Harbor,
L.L.C., cumulative effect of change in accounting
principle and extraordinary item .................. (59,627) (202,285) (70,593)
Equity in loss from Buffington Harbor, L.L.C. ..... (2,969) (3,008) (3,134)
Cumulative effect of change in accounting principle
(Note 2) ...................................... -- (5,620) --
Extraordinary item (Note 3) ....................... -- -- 14,903
----------- ----------- -----------
Net Loss .......................................... $ (62,596) $ (210,913) $ (58,824)
=========== =========== ===========
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-9
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 and 2000
THCR
Partners' Accumulated Common
Capital Deficit Stock Total
--------- ------------ -------- --------
Balance, December 31, 1997......................................... $652,503 $(157,928) $(17,276) $477,299
Purchase of 305,000 shares of THCR Common Stock , at cost.......... - - (2,259) (2,259)
Net Loss............................................................ - (62,596) - (62,596)
--------- ----------- -------- --------
Balance, December 31, 1998.......................................... 652,503 (220,524) (19,535) 412,444
Purchase of 116,000 shares of THCR Common Stock, at cost............ - - (462) (462)
Net Loss............................................................ - (210,913) - (210,913)
--------- ----------- -------- --------
Balance, December 31, 1999.......................................... 652,503 (431,437) (19,997) 201,069
Receipt of 69,229 shares of THCR Common Stock in
satisfaction of debt (Note 5)....................................... - - (203) (203)
Net Loss............................................................ - (58,824) - (58,824)
--------- ----------- -------- --------
Balance, December 31, 2000.......................................... $652,503 $(490,261) $(20,200) $142,042
======== ========= ======== ========
The accompanying notes to financial statements are an integral
part of these consolidated financial statements.
F-10
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(in thousands)
1998 1999 2000
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................................... $ (62,596) $(210,913) $ (58,824)
Adjustments to reconcile net loss to net cash flows provided by
operating activities:
Non Cash Charges:
Issuance of debt in satisfaction of accrued interest ......................... 11,614 13,281 15,188
Extraordinary gain ........................................................... -- -- (14,903)
Cumulative effect of accounting change ....................................... -- 5,620 --
Depreciation and amortization ................................................ 83,722 83,323 77,231
Accretion of discount on mortgage notes and amortization of loan costs ....... 12,331 12,203 12,028
Provisions for losses on receivables ......................................... 15,535 25,434 6,857
Equity in loss of Buffington Harbor L.L.C .................................... 2,969 3,008 3,134
Interest income Castle-PIK notes ............................................. (10,591) (12,113) (13,851)
Valuation allowance of CRDA investments and amortization
of Indiana gaming costs ................................................... 7,155 9,414 14,275
(Gain) loss on disposition of fixed assets ................................... -- (460) 1,509
Gain on property received upon lease termination ............................. -- (17,200) --
Write-off net book value of Trump World's Fair ............................... -- 97,221 --
Increase in receivables ...................................................... (17,550) (2,231) (11,791)
Decrease (increase) in inventories ........................................... 207 (257) 736
(Increase) decrease in due from affiliates ................................... (11,953) (269) 24,640
(Increase) decrease in other current assets .................................. (4,101) 4,719 (1,166)
(Increase) decrease in other assets .......................................... (5,106) 5,203 (2,136)
Increase in accounts payable, accrued expenses, and other
current liabilities ........................................................ 8,246 27,830 1,291
Increase (decrease) in accrued interest payable .............................. 1,341 (78) (334)
(Decrease) increase in other long-term liabilities ........................... (2,735) (6) 17
--------- --------- ---------
Net cash flows provided by operating activities ............................ 28,488 43,729 53,901
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net ........................................... (38,294) (31,671) (20,742)
Restricted cash ................................................................... 10,477 2,523 --
Purchase of CRDA investments, net ................................................. (10,845) (14,328) (14,208)
Investment in Buffington Harbor LLC ............................................... (199) (428) (1,534)
Proceeds from disposition of property ............................................. -- 4,502 --
--------- --------- ---------
Net cash flows used in investing activities ................................ (38,861) (39,402) (36,484)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of THCR Common Stock ..................................................... (2,259) (462) --
Debt issuance costs ............................................................... (2,021) -- (301)
Debt payments--other .............................................................. (77,918) (14,596) (33,691)
Proceeds from borrowings .......................................................... 67,000 -- 7,978
--------- --------- ---------
Net cash flows used in financing activities ................................ (15,198) (15,058) (26,014)
--------- --------- ---------
Net decrease in cash and cash equivalents ............................................ (25,571) (10,731) (8,597)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..................................... 140,324 114,753 104,022
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................................... $ 114,753 $ 104,022 $ 95,425
========= ========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest ............................................... $ 208,793 $ 209,699 $ 209,516
Cash paid during the year for state and Federal taxes ................................ 25 -- --
Equipment purchased under capital leases ............................................. 7,223 14,275 8,315
Receipt of THCR Common Stock in satisfaction of debt ................................. -- -- 203
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-11
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(1) Organization and Operations
The accompanying consolidated financial statements include those of Trump
Hotels & Casino Resorts, Inc. ("THCR"), a Delaware corporation, and Trump Hotels
& Casino Resorts Holdings, L.P., a Delaware limited partnership ("THCR
Holdings"), and Subsidiaries. THCR Holdings is an entity which is currently
owned approximately 63.4% by THCR as both a general and limited partner, and
approximately 36.6% by Donald J. Trump ("Trump"), as a limited partner. Trump's
limited partnership interest in THCR Holdings represents his economic interests
in the assets and operations of THCR Holdings. Such limited partnership interest
is convertible at Trump's option into 13,918,723 shares of THCR's common stock,
par value $.01 per share (the "THCR Common Stock") (subject to certain
adjustments), and if converted, would give Mr. Trump ownership of 40.9% of the
THCR Common Stock (including his current share ownership) or 42.1% (assuming
currently exercisable warrants and options held by Mr. Trump were exercised).
Accordingly, the accompanying consolidated financial statements include those of
(i) THCR and its 63.4% owned subsidiary, THCR Holdings, and (ii) THCR Holdings
and its wholly owned subsidiaries:
o Trump Atlantic City Associates ("Trump AC") and its subsidiaries:
Trump Plaza Associates ("Plaza Associates"), Trump Taj Mahal
Associates ("Taj Associates"), Trump Atlantic City Funding, Inc.
("Trump AC Funding"), Trump Atlantic City Funding II, Inc. ("Trump AC
Funding II"), Trump Atlantic City Funding III, Inc. ("Trump AC III"),
Trump Atlantic City Corporation ("TACC"), Trump Casino Services,
L.L.C. ("Trump Services"),which discontinued operations on December
31,2000, and Trump Communications, L.L.C. Plaza Associates owns and
operates the Trump Plaza Hotel and Casino ("Trump Plaza") located in
Atlantic City, New Jersey. Taj Associates owns and operates the Trump
Taj Mahal Casino Resort (the "Taj Mahal"), located in Atlantic City,
New Jersey. Taj Associates was acquired on April 17, 1996.
o Trump Indiana, Inc. ("Trump Indiana") owns and operates a riverboat
gaming facility at Buffington Harbor, on Lake Michigan, Indiana (the
"Indiana Riverboat").
o Trump's Castle Associates, L.P. ("Castle Associates") owns and
operates Trump Marina Hotel Casino ("Trump Marina") located
in Atlantic City, New Jersey.
o Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding").
o THCR Enterprises, L.L.C. ("THCR Enterprises")
THCR, THCR Holdings and THCR Funding have no operations and their ability
to service their debt is dependent on the successful operations of Trump AC,
Trump Indiana and Castle Associates. THCR, through THCR Holdings and its
subsidiaries, is the exclusive vehicle through which Trump engages in new gaming
activities in emerging or established gaming jurisdictions.
All significant intercompany balances and transactions have been eliminated
in the accompanying consolidated financial statements.
(2) Summary of Significant Accounting Policies
Organization and Basis of Presentation
THCR has no operations, except for its ownership of Plaza Associates, Taj
Associates, Castle Associates and Trump Indiana. A substantial portion of THCR's
revenues are derived from its gaming operations. Competition in the Atlantic
City and Indiana casino markets is intense and management believes that this
competition will continue as more casinos are opened and new entrants into the
gaming industry become operational.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-12
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
Revenue Recognition
Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. Revenue from
hotel and other services are recognized at the time the related service is
performed.
THCR provides an allowance for doubtful accounts arising from casino, hotel
and other services, which is based upon a specific review of certain outstanding
receivables as well as historical collection information. In determining the
amount of the allowance, management is required to make certain estimates and
assumptions regarding the timing and amount of collection. Actual results could
differ from those estimates and assumptions.
Promotional Allowances
The retail value of accommodations, food, beverage and other services
provided to customers without charge is included in gross revenue and deducted
as promotional allowances. The estimated departmental costs of providing such
promotional allowances are included in gaming costs and expenses as follows:
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1999 December 31,2000
----------------- ----------------- ----------------
Rooms $30,788,000 $29,816,000 $29,094,000
Food and beverage 80,848,000 78,211,000 80,984,000
Other 18,601,000 18,931,000 12,263,000
------------ ------------ ------------
$130,237,000 $126,958,000 $122,341,000
============ ============ ============
Inventories
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
Property and Equipment
Property and equipment is carried at cost and is depreciated on the
straight-line method using rates based on the following estimated useful lives:
Buildings and building improvements 40 years
Riverboat 30 years
Furniture, fixtures and equipment 3-10 years
Leasehold improvements 4-40 years
Interest associated with borrowings used to finance construction projects has
been capitalized and is being amortized over the estimated useful lives of the
assets. Interest of approximately $864,000, and $378,000 was capitalized in 1998
and 1999. No interest was capitalized in 2000.
Investment in Buffington Harbor Riverboats, L.L.C.
THCR accounts for its investment in the Buffington Harbor Riverboats, L.L.C.
("BHR") (a 50% joint venture between Trump Indiana and the Majestic Star Casino,
L.L.C. ("Barden")) under the equity method of accounting. Trump Indiana and
Barden formed BHR and have entered into an agreement (the "BHR Agreement")
relating to the joint ownership, development and operation of all common
land-based and waterside operations in support of each of Trump Indiana's and
Barden's separate riverboat casinos at Buffington Harbor. Trump Indiana and
Barden are equally responsible for the operating expenses of the common
land-based facilities at the site. There can be no assurance that Trump Indiana
and/or Barden will be able to fund their respective share of future capital
contributions or operating expenses. In accordance with the BHR Agreement, Trump
Indiana and Barden pay berthing and other fees in an amount to cover the
operating expenses of BHR. Berthing fees and other fees paid are included in
general and administrative expenses in the accompanying statement of operations.
In September 2000, Buffington Harbor Parking Associates ("BHPA") was formed
as a joint venture between Trump Indiana and Barden for the purpose of
constructing and operating a parking garage.
F-13
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
Long-Lived Assets
The provisions of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets" ("SFAS No. 121") requires,
among other things, that an entity review its long-lived assets and certain
related intangibles for impairment whenever changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. Impairment of
long-lived assets exists if, at a minimum, the future expected cash flows
(undiscounted and without interest charges) from an entity's operations are less
than the carrying value of these assets. Except as discussed in Note 12, THCR
does not believe that any such changes have occurred.
Income Taxes
The provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109") requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted tax rates.
The accompanying financial statements do not include a provision for federal
income taxes since (i) THCR has net operating loss carryforwards of
approximately $300,000,000 for which a valuation allowance has been provided due
to the uncertainty of its realization, (ii) Plaza Associates', Taj Associates'
and Castle Associates' income or losses are allocated to the partners and are
reportable for federal income tax purposes by the partners, and (iii) Trump
Indiana, which is a C Corporation, had no taxable income for financial reporting
purposes for the years ended December 31, 1998, 1999 and 2000.
Under the New Jersey Casino Control Act (the "Casino Control Act"), Plaza
Associates, Taj Associates and Castle Associates are required to file a New
Jersey corporation business tax return. As of December 31, 2000, Plaza
Associates, Taj Associates and Castle Associates had net operating loss
carryforwards of approximately $172,000,000, $165,000,000 and $108,500,000
respectively, for New Jersey State Income Tax purposes. No tax benefits have
been reflected in the accompanying financial statements for Plaza Associates',
Taj Associates' and Castle Associates' operating loss carryforwards as
utilization of such carryforwards is not considered to be likely.
Statements of Cash Flows
For purposes of the statements of cash flows, cash and cash equivalents
include hotel and casino funds, funds on deposit with banks and temporary
investments purchased with a maturity of three months or less.
Basic and Diluted Loss Per Share
Basic loss per share is based on the weighted average number of shares of
THCR common stock outstanding. Diluted earnings per share are the same as basic
earnings per share as common stock equivalents have not been included as the
result would have been anti-dilutive. The shares of THCR Class B Common Stock
owned by Trump have no economic interest and therefore are not considered in the
calculation of weighted average shares outstanding.
New Accounting Pronouncements
In 1998, the Financial Accounting Standards Board issued SFAS No 133,
"Accounting for Derivative Instruments and Hedging Activities." In June 2000,
the Financial Accounting Standards Board Issued SFAS No 138, which amended SFAS
No 133. These statements establish accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or a liability measured at its fair value. The statements require that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for qualifying
hedges allows a derivative's gains and losses to offset related results on the
hedged item in the income statement and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting. THCR is required to adopt these standards in the first quarter
of 2001. Based on Management's current understanding of the statements, adoption
is not expected to have a material impact on THCR's financial statements.
F-14
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 addresses various topics in revenue recognition including
the recognition of revenue for contracts involving multiple deliverables. The
adoption of SAB 101, which THCR adopted during 2000, did not have a material
impact on THCR's financial statements.
Deferred Financing Costs
Deferred financing costs associated with the issuance of debt are being
amortized using the effective interest method over the terms of the related
debt.
Change in Accounting Policy
On April 9, 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-5 "Reporting on the Costs of
Start-Up Activities". THCR adopted the new standard in the first quarter of 1999
and wrote off development costs of $5,620,000 as a change in accounting policy.
The cumulative effect after minority interest of $2,055,000 was $3,565,000. Had
THCR adopted the new standard as of December 31, 1998, the net loss of
$39,718,000 for the year ended December 31, 1998 would have increased by
$1,693,000 for the effect of the write-off of capitalized costs incurred during
1998. The corresponding earnings per share effect would increase the net loss
per share as reported of $1.79 for the year ended December 31, 1998 by $.08 for
the cumulative costs incurred during 1998.
Other Assets
Plaza Associates is appealing a real estate tax assessment by the City of
Atlantic City. As of December 31, 1999 and 2000, other assets include
$8,014,000, which Plaza Associates believes will be recoverable on the
settlement of the appeal.
Reclassifications
Certain reclassifications have been made to prior year financial statements
to conform to the current year presentation.
(3) Long-Term Debt
Long-term debt consists of the following:
December 31, 1999 December 31, 2000
----------------- -----------------
Trump AC Funding 11 1/4% First Mortgage Notes, due 2006 (a) ..................... $ 1,200,000,000 $ 1,200,000,000
Trump AC Funding II 11 1/4% First Mortgage Notes, due 2006, net of unamortized
discount of $1,932,000 and $1,525,000 respectively (b) ..................... 73,068,000 73,475,000
Trump AC Funding III 11 1/4% First Mortgage Notes due 2006, net of unamortized
discount of $949,000 and $749,000, respectively (b) .......................... 24,051,000 24,251,000
THCR Holdings 15 1/2% Senior Secured Notes due 2005 (c) ......................... 145,000,000 109,500,000
Castle Associates 11 3/4% Mortgage Notes due 2003, net of unamortized discount of
$22,906,000 and $18,383,000, respectively (d) ................................ 219,235,000 223,758,000
Castle Associates Pay-In-Kind 13 7/8% Notes (Castle PIK Notes) due 2005, net of
unamortized discount of $6,325,000 and $5,726,000, respectively (e) .......... 99,466,000 115,253,000
Castle Associates Working Capital Loan (f) ...................................... 5,000,000 5,000,000
Castle Associates Senior Notes (g) .............................................. 62,000,000 62,000,000
Trump Indiana Notes (h) ......................................................... 24,132,000 23,563,000
Other notes payable (i) ......................................................... 15,786,000 17,244,000
--------------- ---------------
1,867,738,000 1,854,044,000
Less - current maturities .................................................... (12,411,000) (27,021,000)
--------------- ---------------
$ 1,855,327,000 $ 1,827,023,000
=============== ===============
F-15
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
(a) Trump AC together with Trump AC Funding issued the Trump AC Mortgage
Notes in the aggregate principal amount of $1,200,000,000 which bear
interest at 11 1/4% and are due May 1, 2006. Interest on the Trump AC
Mortgage Notes is due semi-annually. The Trump AC Mortgage Notes are
guaranteed as to payment of principal and interest, jointly and
severally, by Taj Associates, Plaza Associates, Trump AC and all future
subsidiaries of Trump AC (other than Trump AC Funding). The Trump AC
Mortgage Notes are jointly and severally secured by mortgages
representing a first lien and security interest on substantially all
the assets of Taj Associates and Plaza Associates.
The indenture pursuant to which the Trump AC Mortgage Notes were issued
restricts the ability of Trump AC and its subsidiaries to make
distributions or to 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 New Jersey Casino Control Commission
(the "CCC").
(b) Trump AC together with Trump AC Funding II and Trump AC Funding III
issued the Trump AC Mortgage Notes in an aggregate principal amount of
$75,000,000 and $25,000,000, respectively, which bear interest at 11
1/4% and are due May 1, 2006. Interest on the Trump AC Mortgage Notes
is due semi-annually. The Trump AC Mortgage Notes are guaranteed as to
payment of principal and interest jointly and severally by Taj
Associates, Plaza Associates, Trump AC and all future subsidiaries of
Trump AC (other than Trump AC Funding, Trump AC Funding II and Trump AC
Funding III). The Trump AC Mortgage Notes are jointly and severally
secured by mortgages representing a first lien and security interest on
substantially all of the assets of Taj Associates and Plaza Associates.
(c) THCR Holdings and THCR Funding issued $155,000,000 principal amount of
Senior Notes. The Senior Notes are redeemable in cash at the option of
THCR Holdings and THCR Funding, in whole or in part, at any time on or
after June 15, 2000 at redemption prices as defined, and mature in
2005. Interest on these notes is payable semi-annually at 15 1/2%, and
is secured by substantially all of the assets of THCR Holdings.
During 2000, THCR Enterprises repurchased $35,500,000 of THCR Holdings'
Senior Notes for $19,030,000 plus accrued interest. The gain of
$16,470,000 was partially offset by the write-down of unamortized loan
costs of $1,567,000, resulting in an extraordinary gain of $14,903,000,
($9,453,000 net of minority interest).
(d) The Castle Mortgage Notes bear interest, payable in cash,
semi-annually, at 11 3/4% and mature on November 15, 2003. The Castle
Mortgage Notes may be redeemed at Castle Funding's option at a
specified percentage of the principal amount. The Castle Mortgage Notes
are secured by a mortgage on Trump's Castle and substantially all of
the other assets of Castle Associates. The Castle Mortgage Notes are
expressly subordinated to the indebtedness described in (g) (the
"Senior Notes") and the liens or the mortgages securing the Castle
Mortgage Notes are subordinate to the liens securing the Senior Notes.
The terms of the Castle Mortgage Notes include limitations on the
amount of additional indebtedness Castle Associates may incur,
distributions of Partnership capital, investments, and other business
activities.
(e) The Castle PIK Notes bear interest, payable at Castle Funding's option,
in whole or in part in cash and through the issuance of additional
Castle PIK Notes, semi-annually at the rate of 13 7/8% through November
15, 2003. After November 15, 2003, interest on the Castle PIK Notes is
payable in cash at the rate of 13 7/8%. The Castle PIK Notes mature on
November 15, 2005 and may be redeemed at Castle Funding's option at
100% of the principal amount under certain conditions, as defined in
the PIK Note Indenture, and are required to be redeemed from a
specified percentage of any equity offering which includes Castle
Associates.
On May 21, 1996, THCR Holdings acquired approximately 90% of the
outstanding Castle PIK Notes for approximately $38,700,000, in exchange
for which THCR Holdings received an aggregate of approximately
$59,300,000 of Castle PIK Notes.
F-16
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
The terms of the Castle PIK Notes include limitations on the amount of
additional indebtedness Castle Associates may incur, distributions of
Partnership capital, investments, and other business activities. The
Castle PIK Notes are expressly subordinated to the Senior Notes. THCR
Holdings has recorded its investment in Castle Associates PIK Notes at
cost, plus accrued interest, in the accompanying balance sheet, as THCR
Holdings investment in the Castle PIK Notes has been pledged as
collateral to the Senior Notes.
(f) The Working Capital Loan has an outstanding principal amount of
$5,000,000, bears interest at the rate of 10 1/4% per annum, payable
semi-annually and matures on April 30, 2003.
(g) The Castle Associates' Senior Notes have a priority mortgage lien ahead
of Castle Associates' Mortgage Notes and are further secured by
virtually all of Castle Associates' assets. The Senior Notes have an
outstanding principal amount of $62,000,000 and bear interest at the
rate of 10 1/4% per annum, payable semi-annually each April and
October. The Senior Notes mature on April 30, 2003.
(h) Various notes payable, including:
_ $17,500,000 loan payable over 10 years, with a call at the
lender's option at the end of the fifth year (June 2001).
Interest on this note is payable monthly in arrears based on a
fixed rate of 9.75%. The Note is secured by the Indiana
Riverboat. At December 31, 2000, $11,655,000 was outstanding
on this note.
_ $13,000,000 note is payable in monthly installments based on a
ten year amortization schedule, until June 1, 2001, at which
time all remaining principal and interest is due in full. The
interest rate as defined in the agreement is equal to the
bank's reference rate plus 1.5% (11% at December 31, 2000).
The note is secured by the hotel at Trump Indiana. At December
31, 2000, $6,908,000 was outstanding on this note.
(1) $5,000,000 bridge loan providing temporary financing was
obtained for the riverboat, hotel loans and new parking
garage. Loan is payable over a two-year period with interest
only due during the first six months based on prime rate plus
125 basis points (10.4% at December 31, 2000). The note is
secured by Trump Indiana's ownership interest in BHPA and a
Second Position Leasehold Real Estate Mortgage with Trump
Indiana Realty, L.L.C.
(i) Mortgage notes payable and capitalized lease obligations with interest
rates ranging from 6.5% to 13.00%. The notes and lease obligations are
due at various dates between 2001 and 2012 and are secured by
underlying real property or equipment.
Future minimum payments under capital leases (principal portion
included in the table below of debt maturities) are as follows:
2001 .................................................... $ 8,526,000
2002 .................................................... 8,228,000
2003 .................................................... 2,088,000
2004 .................................................... 171,000
2005 .................................................... 42,000
-----------
Total Minimum Payments .................................. 19,055,000
Less - Amount representing interest ..................... (3,049,000)
-----------
Present Value of minimum lease payments ................. $ 16,006,000
=============
F-17
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
The aggregate maturities of long-term debt as of December 31, 2000 are
as follows:
2001.......................... $ 27,021,000
2002.......................... 10,649,000
2003.......................... 311,070,000
2004.......................... 217,000
2005.......................... 230,606,000
Thereafter.................... 1,300,864,000
-------------
$1,880,427,000
==============
The ability of THCR to repay its long-term debt when due will depend on
the ability of Plaza Associates, Taj Associates, Castle Associates and Trump
Indiana to generate cash from operations sufficient for such purposes or on the
ability of THCR to refinance such indebtedness. Cash flow from operations may
not be sufficient to repay a substantial portion of the principal amount of the
indebtedness upon maturity. The future operating performance and the ability to
refinance such indebtedness will be subject to the then prevailing economic
conditions, industry conditions and numerous other financial, business and other
factors, many of which are beyond the control of THCR. There can be no assurance
that the future operating performance of Plaza Associates, Taj Associates,
Castle Associates or Trump Indiana will be sufficient to meet these repayment
obligations or that the general state of the economy, the status of the capital
markets generally or the receptiveness of the capital markets to the gaming
industry will be conducive to refinancing or other attempts to raise capital.
The various debt agreements restrict the ability of THCR Holdings and
its subsidiaries to make distributions or pay dividends unless certain financial
ratios are achieved. In addition, the ability of Plaza Associates, Taj
Associates or Castle Associates to make payments to THCR Holdings may be
restricted by the CCC. Similarly, the ability of Trump Indiana to make
distributions or pay dividends to THCR Holdings may be restricted by the Indiana
Gaming Commission ("IGC").
(4) Non-Operating Income (Expense)
Non-operating income (expense) in 1998, 1999 and 2000 includes
$725,000, $1,501,000, and $202,000, respectively, of settlement costs incurred
in connection with the assertion by certain Indiana residents of rights to
purchase stock in Trump Indiana.
(5) Commitments and Contingencies
Leases
THCR has entered into leases for certain property (primarily land),
office, warehouse space, certain parking space, and various equipment under
operating leases. Rent expense for the years ended December 31, 1998, 1999 and
2000 was $13,992,000, $11,740,000 and $10,026,000 respectively, of which
$221,000, $275,000 and $136,000 respectively, relates to affiliates.
Future minimum lease payments under the noncancellable commitments as
of December 31, 2000 are as follows:
Total
-----
2001..................................... $ 6,627,000
2002..................................... 4,419,000
2003..................................... 2,202,000
2004..................................... 1,661,000
2005..................................... 1,712,000
Thereafter............................... 88,411,000
-------------
$ 105,032,000
=============
Certain of these leases contain options to purchase the leased
properties at various prices throughout the leased terms.
F-18
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
Employment Agreements
THCR has entered into employment agreements with certain key employees.
As of December 31, 2000, THCR had approximately $9,400,000 of annual commitments
under employment agreements. These commitments mature at various dates through
2003.
On June 12, 1995, Nicholas L. Ribis ("Ribis"), the President, Chief
Executive Officer and Chief Financial Officer of THCR and THCR Holdings, entered
into a five-year employment agreement ("Agreement") with THCR and THCR Holdings.
Pursuant to the employment agreement, Ribis was to be employed as the President
and Chief Executive Officer of THCR and THCR Holdings and was to receive a base
salary of $1,996,500 annually. In addition, the terms of the employment
agreement provided for up to an aggregate of $2,000,000 in loans to be used by
Ribis to pay his income tax liability in connection with a stock bonus award,
which loan, including interest, shall be forgiven in the event of a change in
control, as defined in such employment agreement.
On June 12, 2000, the employment agreement of Ribis expired in
accordance with its terms. Loans were settled through the receipt of 69,229
shares of THCR Common Stock from Ribis at an aggregate value of $203,360, the
closing market price at June 12, 2000. The difference between the outstanding
balance on the loan and the value of the treasury stock ($759,115), was charged
to general and administrative expenses.
An additional loan of $1,856,000 comprised of principal of $1,458,000
and accrued interest of $398,000 was rolled over on June 13, 2000. The loan
bears interest at the Chase Bank prime (9.5% at December 31, 2000) and is due on
or before July 11, 2001. On July 19, 2000, Ribis repaid $517,000. On February 2,
2001, Ribis repaid an additional amount of $669,000, including accrued interest.
The remaining principal balance of $756,000 is payable on or before July 11,
2001. The entire principal amount plus accrued interest through December 31,
2000 has been classified as current.
CAFRA Agreement
Taj Associates received a permit under the Coastal Area Facilities
Review Act ("CAFRA") (which included a condition of Taj Associates' casino
license) that initially required Taj Associates to begin construction of certain
improvements on the Steel Pier by October 1992, which improvements were to be
completed within 18 months of commencement. Taj Associates initially proposed a
concept to improve the Steel Pier, the estimated cost of which was $30,000,000.
Such concept was approved by the New Jersey Department of Environmental
Protection, the agency which administers CAFRA. In March 1993, Taj Associates
obtained a modification of its CAFRA permit providing for the extension of the
required commencement and completion dates of the improvements to the Steel Pier
for one year, which has been renewed annually, based upon an interim use of the
Steel Pier as an amusement park. The pier sublease terminates on December 31,
2003 unless extended.
New Jersey Casino License Renewal
The operation of an Atlantic City hotel and casino is subject to
significant regulatory controls which affect virtually all of its operations.
Under the Casino Control Act, Plaza Associates, Taj Associates and Castle
Associates are required to maintain certain licenses. Casino licenses must be
renewed periodically, are not transferable, are dependent on the financial
stability of the licensee and can be revoked at any time.
In June 1999, the CCC renewed Plaza Associates', Taj Associates' and
Castle Associates' licenses to operate Trump Plaza, Trump Taj Mahal, Trump
Marina and Trump Services. The CCC renewed each casino license for a period of
four years through 2003. Upon revocation, suspension for more than 120 days, or
failure to renew a casino license, the Casino Control Act provides for the
mandatory appointment of a conservator to take possession of the hotel and
casino's business and property, subject to all valid liens, claims and
encumbrances.
F-19
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
Indiana Gaming Regulations
The ownership and operation of riverboat gaming operations in Indiana are
subject to strict state regulation under the Riverboat Gambling Act (the "Act")
and the administrative rules promulgated thereunder. In June 1996, the IGC
granted Trump Indiana a riverboat owner's license, which must be renewed by
2001. The IGC may place restrictions, conditions or requirements on the
permanent riverboat owner's license. An owner's initial license expires five
years after the effective date of the license, and unless the owner's license is
terminated, expires or is revoked, the owner's license may be renewed annually
by the IGC upon satisfaction of certain conditions contained in the Act. The IGC
has adopted certain rules and has published others in proposed or draft form
which are proceeding through the review and final adoption process. The IGC has
broad rule making power, and it is impossible to predict what effect, if any,
the amendment of existing rules or the finalization of currently new rules might
have on the operations of Trump Indiana.
Trump Indiana Certificate of Suitability
As a condition to the Certificate of Suitability, Trump Indiana has
committed to invest approximately $153,000,000 in the Indiana Riverboat,
including certain related projects of the City of Gary, Indiana. Failure to
comply with the foregoing conditions and/or failure to commence riverboat
excursions as required by the IGC may result in revocation of the Certificate of
Suitability. There can be no assurance that Trump Indiana will be able to comply
with the terms of the Certificate of Suitability. As part of the $153,000,000
commitment discussed above, Trump Indiana is obligated to fund $21,000,000 of
specified economic development and infrastructure projects of the City of Gary.
This obligation is being accrued over the five-year license period and
approximately $3,700,000 has been charged to expense each year during 1998, 1999
and 2000. Cumulative payments of approximately $565,000 through December 31,
2000 for the City of Gary projects have been made. In 1998, Trump Indiana paid
$10,000,000 for a surety bond which guarantees the mandated municipal
infrastructure improvements. This amount has been reduced as infrastructure
payments have been made. As of December 31, 2000, other assets includes
$6,436,000 related to the surety bond.
City of Gary Development Agreement
On September 29, 1995, as amended on October 6, 1995 and February 28, 2001,
Trump Indiana entered into a Memorandum of Understanding with respect to a
Development Agreement with the City of Gary in order to promote the economic
development, urban development and employment of citizens of the City of Gary.
As part of the $153,000,000 Certificate of Suitability investment described
above which includes the $21,000,000 off-site development infrastructure
projects described above. Trump Indiana contributed $6,477,000 to the City of
Gary and others under this Memorandum of Understanding in 1996. These costs are
being amortized over a period of five years and are included in Other Assets in
the accompanying Balance Sheets, net of accumulated amortization of $4,598,000
and $5,922,000 as of December 31, 1999 and 2000, respectively.
In addition, Trump Indiana established the Trump Indiana Foundation
("Foundation") , a private foundation founded for charitable purposes primarily
within the City of Gary and Lake County, Indiana. Trump Indiana initially funded
$1,000,000 to the Foundation and is required to make annual contributions of
$100,000.
Indiana Wagering Tax Add-back
In July 1999, the Indiana Department of Revenue ("Department") issued a
Letter of Findings to an Indiana gaming company that the Riverboat Wagering Tax
("RWT"), a tax deducted in computing Federal taxable income is not deductible
when computing Indiana adjusted gross income because the RWT represents a tax
that is "based on or measured by income." The Indiana gaming company, with the
assistance of the Indiana Casino Association, of which Trump Indiana is a
member, is vigorously contesting this finding in the Indiana Tax Court on the
basis that the RWT is an excise tax, which is excluded from Indiana's add-back
requirements. The Department has issued proposed assessments of $3,720,000 plus
interest for the 1996, 1997 and 1998 calendar years to Trump Indiana. The effect
of an assessment, if any, for 1999 and 2000, has not been determined. Trump
Indiana filed a written protest of such assessments with the Department in
November 2000.The Department has agreed to stay further proceedings with the
Trump Indiana proposed assessments until the Indiana Tax Court case noted above
is resolved. The Tax Court case is currently scheduled for a summary judgment
motion hearing in April 2001. Accordingly, no provision has been made in these
financial statements for additional Indiana state taxes.
F-20
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
Legal Proceedings
THCR and its subsidiaries, certain members of its former Executive
Committee, and certain of its employees have been involved in various legal
proceedings. In general, THCR has agreed to indemnify such persons against any
and all losses, claims, damages, expenses (including reasonable costs,
disbursements and counsel fees) and liabilities (including amounts paid or
incurred in satisfaction of settlements, judgments, fines and penalties)
incurred by them in said legal proceedings.
Various legal proceedings are now pending against THCR and its
subsidiaries. THCR considers all such proceedings to be ordinary litigation
incident to the character of its business. THCR believes that the resolution of
these claims will not, individually or in the aggregate, have a material adverse
effect on its financial condition or results of operations.
Plaza Associates, Taj Associates and Castle Associates are also a party to
various administrative proceedings involving allegations that they have violated
certain provisions of the Casino Control Act. Plaza Associates, Taj Associates
and Castle Associates believe that the final outcome of these proceedings will
not, either individually or in the aggregate, have a material adverse effect on
their financial condition, results of operations or on their ability to
otherwise retain or renew any casino or other licenses required under the Casino
Control Act for the operation of the respective properties.
Commencing in early 1994, THCR, through its Indiana counsel, had
discussions with eight Indiana residents regarding the potential purchase by
such residents of 7.5% of the nonvoting stock of Trump Indiana. These residents
have asserted a right to purchase 7.5% of the stock of Trump Indiana. During
1997, Trump Indiana settled with four of the eight plaintiffs for a total of
$1,047,000. The final settlement amount of $150,000 is payable in 2001. In
addition to the cash settlement, Trump Indiana is required to pay additional
periodic payments of up to $400,000 per year if its gross revenues exceed
certain thresholds, as defined. As Trump Indiana does not believe it will exceed
these revenue thresholds, no provision has been made for these payments. During
1998, Trump Indiana settled with two of the remaining four plaintiffs for a
total of $810,000, of which $290,000 was paid in 1998. The remaining settlement
amounts are payable in equal amounts over the next four years. The present value
of the settlement ($385,392) is included in other non-operating expense in the
1998 statement of operations.
During 1999, the remaining two plaintiffs commenced a litigation. On March
3, 1999 consequential damages were assessed against Trump Indiana for breach of
contract in the total amount of $1,334,000. In addition, it was further
determined that Trump Indiana had breached a contract to create and fund a
charitable foundation. The United State District Court determined that Trump
Indiana had satisfied its obligation by previously establishing and funding a
separate charitable foundation. Cross-appeals of that determination were filed
and are currently pending before the United States Circuit Court of Appeals.
Self-Insurance Reserves
Self-insurance reserves represent the estimated amounts of uninsured claims
related to employee health medical costs, workmen's compensation and personal
injury claims that have occurred in the normal course of business. These
reserves are established by management based upon specific review of open
claims, with consideration of incurred but not reported claims as of the balance
sheet date. Actual results may differ from these reserve amounts.
Federal Income Tax Examination
Plaza Associates and Taj Associates are currently involved in examinations
with the Internal Revenue Service ("IRS") concerning Plaza Associates' federal
partnership income tax returns for the tax years 1993 through 1996 and Taj
Associates' federal partnership income tax returns for the tax years 1994 and
1996. While any adjustment which results from this examination could affect
Plaza Associates' and Taj Associates' state income tax returns, Plaza Associates
and Taj Associates do not believe that adjustments, if any, will have a material
adverse effect on its financial condition or results of operations.
F-21
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
Casino Reinvestment Development Authority Obligations
Pursuant to the provisions of the Casino Control Act, Plaza Associates,
Taj Associates and Castle Associates must either obtain investment tax credits
(as defined in the Casino Control Act), in an amount equivalent to 1.25% of its
gross casino revenues, or pay an alternative tax of 2.5% of its gross casino
revenues (as defined in the Casino Control Act). Investment tax credits may be
obtained by making qualified investments or by the purchase of bonds at below
market interest rates from the Casino Reinvestment Development Authority
("CRDA"). Plaza Associates, Taj Associates and Castle Associates intend on
satisfying their obligations primarily by depositing funds and donations of
funds deposited. Plaza Associates, Taj Associates and Castle Associates are
required to make quarterly deposits with the CRDA based on 1.25% of their gross
revenue. For the years ended December 31, 1998, 1999 and 2000, THCR charged to
operations $4,809,000, $5,567,000 and $5,970,000 respectively, to give effect to
the below market interest rates associated with CRDA bonds that have either been
issued or are expected to be issued from funds deposited. From time to time,
Plaza Associates, Taj Associates and Castle Associates have elected to donate
funds they have on deposit with the CRDA for various projects. Donations in the
amounts of $249,000, $243,000 and $9,689,000 were made during the years ended
December 31, 1998, 1999 and 2000, respectively. As a result of these donations,
THCR charged the carrying value to operations of $118,000, $147,000 and
$4,605,000 during the years ended December 31, 1998, 1999 and 2000,
respectively.
Concentrations of Credit Risk
In accordance with casino industry practice, THCR extends credit to a
limited number of casino patrons, after background checks and investigations of
credit worthiness. As of both December 31, 1999 and 2000, approximately 22% and
13%, respectively, of THCR casino receivables (before allowances) were from
customers whose primary residence is outside the United States, and
approximately 5% represents credit extended to patrons from the Far East in both
1999 and 2000.
(6) Employee Benefit Plans
THCR has a retirement savings plan (the "Plan") for its nonunion
employees under Section 401(k) of the Internal Revenue Code. Employees are
eligible to contribute up to 15% of their earnings to the Plan in 1998, and 20%
in 1999 and 2000. THCR will match 50% of the first 6% of an eligible employee's
contributions in 1998, 1999 and 2000. In connection with this Plan, THCR
recorded charges of $4,947,000, $4,868,000 and $4,856,000 for the years ended
December 31, 1998, 1999 and 2000, respectively.
Plaza Associates, Taj Associates and Castle Associates make payments to
various trusteed multiemployer pension plans under industry-wide union
agreements. Under the Employee Retirement Income Security Act, THCR may be
liable for its share of unfunded liabilities, if any, if the plans are
terminated. Pension expense for the years ended December 31, 1998, 1999 and 2000
was $2,280,000, $2,817,000 and $3,960,000, respectively.
THCR provides no other material, post-retirement or post-employment
benefits.
(7) Transactions with Affiliates
Amounts due from (owed to) affiliates at December 31, consists of:
1999 2000
---- ----
Due from affiliates
Officers(a) ....................................... $27,590,000 $1,896,000
Trump Organization(b) ............................. -- 791,000
----------- ----------
Total Current Assets ............................ 27,590,000 2,687,000
----------- ----------
Due to affiliates
Buffington Harbor Riverboats, L.L.C. (Note 2) ..... (222,000) (162,000)
----------- ----------
Total Liabilities .............................. $ (222,000) $ (162,000)
=========== ==========
F-22
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
(a) During 2000, Trump repaid loans of $24,336,031, plus interest. As of
December 31, 2000, $1,416,047 is due from Ribis under his employment
agreement (See Note 5).
(b) In the normal course of business, THCR engages in various transactions
with the other entities owned by Trump. Beginning in late 1997, THCR's
Atlantic City properties began to utilize certain facilities owned by
Trump to entertain high-end customers. Management believes that the
ability to utilize these facilities has enhanced THCR revenues. In
1998, 1999 and 2000, THCR incurred approximately $1,100,000, $2,209,000
and $559,000, respectively, for customer costs associated with such
utilization. In exchange for having Trump's plane available to
customers of the Atlantic City properties, THCR has incurred pilot
costs of approximately $246,000, $298,000 and $186,000 for the years
ended December 31, 1998, 1999 and 2000, respectively.
Trump Management Fee
Castle Associates has a Services Agreement with TCI-II, a corporation
wholly owned by Trump. Pursuant to the terms of the Services Agreement, TCI-II
is obligated to provide Castle Associates from time to time, when reasonably
requested, consulting services on a non-exclusive basis, relating to marketing,
advertising, promotional and other similar and related services with respect to
the business and operations of Castle Associates, including such other services
as the Managing Partner may reasonably request.
Pursuant to the Services Agreement, Castle Associates is required to
pay an annual fee in the amount of $1,500,000 to TCI-II for each year in which
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), as
defined, exceeds certain levels. In addition, TCI-II is to receive an incentive
fee equal to 10% of the excess EBITDA over $45,000,000 for such fiscal year.
For the year ended December 31, 1998, Castle Associates incurred no
fees and expenses under the Services Agreement. For the years ended December 31,
1999 and 2000, Castle Associates incurred fees and expenses of $2,258,000 and
$2,306,000, respectively, under the Services Agreement. The Services Agreement
expires on December 31, 2005.
Partnership Agreement
Under the terms of a Partnership Agreement between Castle Associates
and TCI- II, Castle Associates is required to pay all costs incurred by TCI-II.
For the years ended December 31, 1998, 1999 and 2000, Castle Associates paid no
expenses on behalf of TCI-II.
Executive Agreement
Trump serves as the Chairman of the Board of Directors pursuant to an
Executive Agreement entered into between Trump, THCR and THCR Holdings (the
"Executive Agreement"). In consideration for Trump's services under the
Executive Agreement, Trump received a fee of $1,000,000 per year through June
30, 2000, plus reimbursement for expenses. Effective July 1, 2000, the fee was
increased to $1,500,000.
F-23
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
(8) Stock Incentive Plan
In connection with the June 1995 Offerings, the Board of Directors of
THCR (the "Board of Directors") adopted the 1995 Stock Incentive Plan (the "1995
Stock Plan"). Pursuant to the 1995 Stock Plan, directors, employees and
consultants of THCR and certain of its subsidiaries and affiliates who have been
selected as participants are eligible to receive awards of various forms of
equity-based incentive compensation, including stock options, stock appreciation
rights, stock bonuses, restricted stock awards, performance units and phantom
stock, and awards consisting of combinations of such incentives. The 1995 Stock
Plan is administered by a committee appointed by the Board of Directors (the
"Stock Incentive Plan Committee").
Options granted under the 1995 Stock Plan may be incentive stock
options ("ISOs"), within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or nonqualified stock options ("NQSOs"). The
vesting, exercisability and exercise price of the options are determined by the
Stock Incentive Plan Committee when the options are granted, subject to a
minimum price, in the case of ISOs, of the Fair Market Value (as defined in the
1995 Stock Plan) of THCR Common Stock on the date of the grant and a minimum
price, in the case of NQSOs, of the par value of the THCR Common Stock.
The 1995 Stock Plan permits the Stock Incentive Plan Committee to grant
stock appreciation rights ("SARs") either alone or in connection with an option.
A SAR granted as an alternative or a supplement to a related stock option will
entitle its holder to be paid an amount equal to the fair market value of THCR
Common Stock subject to the SAR on the date of exercise of the SAR, less the
exercise price of the related stock option or such other price as the Stock
Incentive Plan Committee may determine at the time of the grant of the SAR
(which may not be less than the lowest price which the Stock Incentive Plan
Committee may determine under the 1995 Stock Plan for such stock option).
The 1995 Stock Plan also provides that phantom stock and performance
unit awards may be settled in cash, at the discretion of the Stock Incentive
Plan Committee and if indicated by the applicable award agreement, on each date
on which the shares of THCR Common Stock covered by the awards would otherwise
have been delivered or become restricted, in an amount equal to the fair market
value of the shares on such date.
Subject to adjustment in the event of changes in the outstanding stock
or the capital structure of THCR, THCR has reserved 1,000,000 shares of THCR
Common Stock for issuance under the 1995 Stock Plan.
In 1998, THCR granted certain employees and its independent directors
approximately 1,166,800 options to purchase THCR Common Stock at a price of
$4.625 per share. One-third of the options vested on the date of the grant and
on each of the first two anniversaries of the date of the grant. The options
expire ten (10) years after the date of issuance.
On September 20, 2000, the Board of Directors granted Trump 500,000
options to purchase THCR Common Stock at a price of $2.625 per share. The
options expire ten (10) years after the date of issuance.
F-24
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
A summary of the option plan is as follows:
Year Ended 12/31
1998 1999 2000
---------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------
Employee Stock Options
----------------------
Outstanding, beginning of year 801,333 $ 14.00 1,166,833 $ 4.63 1,134,833 $ 4.63
Issued 1,166,833 4.63 500,000 2.63
Exercised -
Forfeited (801,333) 14.00 (32,000) 4.63 (374,333) 4.63
----------- ---------- ---------- ---------- ----------- ---------
Outstanding, end of year 1,166,833 $ 4.63 1,134,833 $ 4.63 1,260,500 $ 3.83
=========== ========== ========== ========== ========= =========
Options exerciseable at year end 388,944 $ 4.63 777,888 $ 4.63 927,166 $ 4.27
=========== ========== ========== ========== ========= =========
Weighted average fair value of
options granted during the period $ 4.63 N/A $ 2.63
========== ========== =========
The following table summarizes information about stock options outstanding at
December 31, 2000.
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------------
Weighted
Number Average Number
Range of Outstanding At Remaining Exercisable at
Exercise December 31, Contractual Exercise December 31, Exercise
Prices 2000 Life Price 2000 Price
------ ---- ---- ----- ---- -----
$2.63-$4.63 1,260,550 1.5 years $3.83 927,166 $4.27
Effective January 1, 1996, THCR adopted the provisions of Statement No.
123, Accounting for Stock-Based Compensation. As permitted by the Statement,
THCR has chosen to continue to account for stock-based compensation using the
intrinsic value method. Accordingly, no compensation expense has been recognized
for its stock-based compensation plans other than for awards described above.
Had the fair value method of accounting been applied to the THCR's stock option
plans, which required recognition of compensation cost ratably over the vesting
period of the underlying equity instruments, net loss would have been increased
by $810,000 or $(.04) per share in 1998, $787,000 or $(.04) per share in 1999,
and $728,000 or $(.03) per share in 2000. This pro forma impact only takes into
account options granted since the date of inception, June 12, 1995, and is
likely to increase in future years as additional options are granted and
amortized ratably over the vesting period. The average fair value of options
granted during 1998 and 2000 was $2.08. The fair value was estimated using the
Black-Scholes option-pricing model based on the weighted average market price at
grant date of $4.625 in 1998 and the following weighted average assumptions:
risk-free interest rate of 5.7% for 1998 and 1999 and 6% for 2000, expected
life of 7 years, volatility of 35% and dividend yield of 0%. The average fair
value of options granted during 2000 was $1.20 per option, estimated using the
Black-Scholes option-pricing model based upon the weighted average market price
at grant date of $2.625 in 2000 and the following weighted average assumptions:
risk-free interest rate of 6%, expected life of 7 years, volatility of 30% and
dividend yield of 0%.
F-25
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
(9) Fair Value of Financial Instruments
The carrying amount of the following financial instruments approximates
fair value, as follows: (a) cash and cash equivalents, receivables and payables
are based on the short-term nature of these financial instruments and (b) CRDA
bonds and deposits are based on the allowances to give effect to the below
market interest rates.
The estimated fair values of other financial instruments are as
follows:
Carrying Amount Fair Value
--------------- ------------
December 31, 2000
------------------
11 1/4% First Mortgage Notes $1,200,000,000 $792,000,000
Trump AC Funding II Mortgage Notes 73,475,000 49,500,000
Trump AC Funding III Mortgage Notes 24,251,000 16,500,000
15 1/2% Senior Secured Notes 109,500,000 71,175,000
11 3/4% Castle Associates Notes 223,758,000 184,027,000
13 7/8% Castle Associates Pay-In-Kind Notes 115,253,000 54,441,000
The fair values of the above instruments are based on quoted market
prices as of December 31, 2000. The fair value of the Trump AC Funding II
Mortgage Note and the Trump AC Funding III Mortgage Note approximate the
carrying values based upon the short term nature of the period outstanding.
There are no quoted market prices for bank borrowings, Castle
Associates Senior Notes, Mortgage Notes payable and other notes payable and a
reasonable estimate could not be made without incurring excessive costs.
F-26
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
(10) Financial Information - THCR Funding
Financial information relating to THCR Funding is as follows:
1998 1999 2000
---- ---- ----
Total Assets (including Senior Secured Notes $145,936,000 $145,936,000 $145,936,000
receivable of $145,000,000 at December 31, 1999 ============ ============ ============
and 2000) (a)
Total Liabilities and Capital (including $145,936,000 $145,936,000 $145,936,000
$145,000,000 of Senior Secured Notes Due 2005) ============ ============ ============
Interest Income from THCR Holdings $ 22,475,000 $ 22,475,000 $ 22,475,000
============ ============ ============
Interest Expense $ 22,475,000 $ 22,475,000 $ 22,475,000
============ ============ ============
Net income $ - $ - $ -
(a) THCR Enterprises, a wholly owned subsidiary of THCR Holdings, purchased
$35,500,000 of these Senior Secured Notes during 2000.
(11) All Star Cafe Transaction
All Star Cafe, Inc. ("All Star") had entered into a twenty-year lease
(the "All Star Cafe Lease") with Taj Associates for the lease of space at the
Taj Mahal for an All Star Cafe. The basic rent under the All Star Cafe Lease was
$1,000,000 per year, paid in equal monthly installments plus percentage rent, as
defined. On September 15, 1999, an agreement was reached between Taj Associates,
All Star and Planet Hollywood International, Inc. to terminate the All Star Cafe
Lease. Upon termination of the All Star Cafe Lease, all improvements,
alterations and All Star's personal property with the exception of Specialty
Trade Fixtures became the property of Taj Associates. Specialty Trade Fixtures,
which included signs, emblems, logos, memorabilia and other material with logos
of the Official All Star Cafe presently displayed at the premises, could be
continued to be used by Taj Associates for a period of up to 120 days without
charge. Taj Associates recorded the estimated fair market value of these assets
in other revenue based on an independent appraisal in the amount of $17,200,000.
(12) Trump World's Fair Closing
On October 4, 1999, THCR closed Trump World's Fair. The estimated cost
of closing Trump World's Fair was $123,959,000 which includes $97,221,000 for
the writedown of the assets and $26,738,000 of costs incurred and estimated to
be incurred in connection with the closing and demolition of the building. For
the year ended December 31, 2000, an additional $814,000 was charged to
operations.
(13) Twenty-Nine Palms Development
On April 27, 2000, THCR through subsidiaries, signed definitive
agreements with the Twenty-Nine Palms Band of Mission Indians for the
development and management of a Native American casino on Twenty-Nine Palms
tribal land in Southern California near Palm Springs. This development is
scheduled to open in late 2001 and is subject to certain approvals.
F-27
TRUMP HOTELS & CASINO RESORTS, INC.
TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2000
(14) Quarterly Financial Data (unaudited)
1999
----
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Net Revenues (a) ..................................... $ 315,711,000 $ 361,452,000 $ 403,071,000 $ 330,959,000
Income (Loss) from Operations (b) .................... 21,702,00 44,322,000 (51,334,000) 92,000
THCR Net Loss (c) .................................... (25,285,000) (6,534,000) (67,470,000) (34,493,000)
Basic and Diluted Loss per Share ..................... (1.14) (0.29) (3.04) (1.56)
THCR Holdings Net Loss ............................... (39,863,000) (10,301,000) (106,369,000) (54,380,000)
2000
----
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Net Revenues ......................................... $ 316,490,000 $ 339,748,000 $ 388,902,000 $ 306,232,000
Income from Operations ............................... 26,335,000 36,746,000 66,579,000 13,290,000
THCR Net Income (Loss) (d) ........................... (18,473,000) (2,873,000) 8,956,000 (24,922,000)
Basic and Diluted Earnings (Loss) per Share .......... (0.84) (0.13) 0.41 (1.13)
THCR Holdings Net Income (Loss) ...................... (29,123,000) (4,530,000) 14,119,000 (39,290,000)
Note: Net Revenues and Income (Loss) from Operations are the same for both THCR
and THCR Holdings.
a) Third quarter 1999 includes $17,200,000 one-time gain on the acquisition of
the All Star Cafe.
b) Third quarter 1999 includes Trump World's Fair closing costs of
$128,375,000, which were reduced by $4,416,000 in the fourth quarter 1999.
c) First quarter 1999 includes a ($5,620,000) cumulative effect of change in
accounting principle, ($3,565,000) after minority interest. The net effect
after minority interest on the All Star Cafe and Trump World's Fair closing
was $10,910,000 and ($78,627,000), respectively.
d) An extraordinary gain of $8,288,000 and $1,165,000, net of minority
interest, was recorded in the second and third quarters 2000, respectively.
(15) Industry Segment Information
THCR's primary business activity is gaming. It operates three casinos in the
Atlantic City market: Trump Taj Mahal Casino Resort, Trump Plaza Hotel and
Casino and Trump Marina Hotel Casino. It also operates a riverboat casino, Trump
Casino, at Buffington Harbor, Indiana on Lake Michigan.
F-28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.:
We have audited in accordance with auditing standards
generally accepted in the United States, the consolidated financial
statements of Trump Hotels & Casino Resorts, Inc. ("THCR") and
subsidiary included in this Form 10-K and have issued our report
thereon dated February 2, 2001. Our audit was made for the purpose
of forming an opinion on the basic financial statements taken as a
whole. The accompanying schedule is the responsibility of the
management of THCR and is presented for the purpose of complying
with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states
in all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 2, 2001
S-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts Holdings, L.P.:
We have audited in accordance with auditing standards generally
accepted in the United States, the consolidated financial statements of Trump
Hotels & Casino Resorts Holdings, L.P. and subsidiaries included in this Form
10-K and have issued our report thereon dated February 2, 2001. Our audit was
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The accompanying schedule is the responsibility of the
management of Trump Hotels & Casino Resorts Holdings, L.P. and is presented for
the purpose of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 2, 2001
S-2
SCHEDULE II
TRUMP HOTELS & CASINO RESORTS, INC.
AND TRUMP HOTELS & CASINO RESORTS HOLDINGS, L.P.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
Balance Charged Balance
at to Other at
Beginning Costs and Changes End of
of Period Expenses (Deductions) Period
--------- --------- ------------ -------
YEAR ENDED DECEMBER 31, 1998
Allowances for doubtful accounts $18,625,000 $15,535,000 $(6,439,000)(a) $27,721,000
Valuation allowance for CRDA investments $19,149,000 $ 4,927,000 $(8,720,000)(b) $15,356,000
YEAR ENDED DECEMBER 31, 1999
Allowances for doubtful accounts $27,721,000 $25,434,000 $(41,205,000)(a) $11,950,000
Valuation allowance for CRDA investments $15,356,000 $5,714,000 $(2,301,000)(c) $18,769,000
YEAR ENDED DECEMBER 31, 2000
Allowances for doubtful accounts $11,950,000 $6,857,000 $ (3,431,000)(a) $15,376,000
Valuation allowance for CRDA investments $18,769,000 $10,575,000 $(12,470,000)(d) $16,874,000
-----------
(a) Write-off uncollectible accounts.
(b) Includes the reclassification of approximately $14,330,000 of previous
CRDA deposits, the carrying value of which was $7,165,000 to property
and equipment and $1,505,000 representing the adjustment to the
allowance to give effect to the CRDA deposits to be refunded.
(c) Includes the reclassification of approximately $5,792,000 of previous
CRDA deposits to property and equipment, the carrying value of which
was $2,497,000.
(d) Includes the reclassification of approximately $7,237,000 of previous
CRDA deposits to property and equipment, the carrying value of which was
$4,642,000.
S-3
Exhibit No Description of Exhibit
---------- ----------------------
4.17.4 Third Supplemental Indenture, dated August 1, 2000, by Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino
Resorts Funding, Inc. with respect to their 15-1/2% Senior Secured
Notes due 2005.
10.46.3 Second Amendment to Executive Agreement, dated October 2000, by
and among Donald J. Trump, Trump Hotels & Casino Resorts, Inc. and
Trump Hotels & Casino Resorts Holdings, L.P.
10.72 Second Amendment, dated August 4, 2000, of the Employment
Agreement, dated March 6, 1998, between Mark A. Brown and Trump's
Castle Associates, as assigned to Trump Taj Mahal Associates and
amended effective as of January 3, 2000.
10.73 Employment Agreement, dated April 17, 2000, between Robert M.
Pickus and Trump Hotels & Casino Resorts, Inc., Trump Hotels &
Casino Resorts Holdings, L.P. and Trump Atlantic City Associates.
10.74 Employment Agreement, dated April 17, 2000, between Francis X.
McCarthy, Jr. and Trump Hotels & Casino Resorts, Inc., Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Atlantic City
Associates.
10.75 Employment Agreement, dated April 17, 2000, between Joseph A.
Fusco and Trump Hotels & Casino Resorts, Inc., Trump Hotels &
Casino Resorts Holdings, L.P. and Trump Atlantic City Associates.
10.76 Employment Agreement, dated April 17, 2000, between John P. Burke
and Trump Hotels & Casino Resorts, Inc., Trump Hotels & Casino
Resorts Holdings, L.P. and Trump Atlantic City Associates.
21.1 List of Subsidiaries of Trump Hotels & Casino Resorts, Inc., Trump
Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino
Resorts Funding, Inc.