TRUMP ENTERTAINMENT RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
Predecessor
Company
|
|
|
|
Year Ended
December 31,
|
|
|
May 20, 2005
through
December 31,
2005
|
|
|
January 1, 2005
through
May 19,
2005
|
|
|
|
2007
|
|
|
2006
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(188,681
|
)
|
|
$
|
(18,507
|
)
|
|
$
|
(26,528
|
)
|
|
$
|
278,384
|
|
Adjustments to reconcile net (loss) income to net cash flows provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(49,125
|
)
|
|
|
1,930
|
|
|
|
8,687
|
|
|
|
|
|
Minority interest in net loss
|
|
|
(60,251
|
)
|
|
|
(5,445
|
)
|
|
|
(6,618
|
)
|
|
|
|
|
Depreciation and amortization
|
|
|
65,632
|
|
|
|
68,091
|
|
|
|
40,071
|
|
|
|
38,486
|
|
Goodwill and other asset impairment charges
|
|
|
277,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
4,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of interest income related to property tax settlement
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
|
|
2,694
|
|
|
|
2,631
|
|
|
|
1,519
|
|
|
|
665
|
|
Provisions for losses on receivables
|
|
|
7,742
|
|
|
|
5,168
|
|
|
|
2,330
|
|
|
|
1,445
|
|
Stock-based compensation expense
|
|
|
3,269
|
|
|
|
5,197
|
|
|
|
2,753
|
|
|
|
|
|
Valuation allowanceCRDA investments
|
|
|
4,346
|
|
|
|
4,478
|
|
|
|
2,907
|
|
|
|
1,731
|
|
Compensatory stock warrants
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
Non-cash reorganization (income) expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210,117
|
)
|
Extraordinary gain on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(196,932
|
)
|
Gain on sale of assets
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
(256
|
)
|
|
|
755
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in receivables
|
|
|
(4,436
|
)
|
|
|
(13,522
|
)
|
|
|
(9,505
|
)
|
|
|
546
|
|
Decrease (increase) in inventories
|
|
|
804
|
|
|
|
(1,323
|
)
|
|
|
1,219
|
|
|
|
(485
|
)
|
(Increase) decrease in other current assets
|
|
|
(628
|
)
|
|
|
(877
|
)
|
|
|
1,427
|
|
|
|
(2,143
|
)
|
(Increase) decrease in other assets
|
|
|
(14,404
|
)
|
|
|
6,573
|
|
|
|
1,543
|
|
|
|
(816
|
)
|
Decrease in due to affiliates, net
|
|
|
|
|
|
|
|
|
|
|
(2,767
|
)
|
|
|
(538
|
)
|
Increase (decrease) in accounts payable, accrued expenses and other current liabilities
|
|
|
16,223
|
|
|
|
(26,556
|
)
|
|
|
(16,327
|
)
|
|
|
60,847
|
|
Increase (decrease) in accrued interest payable
|
|
|
4,457
|
|
|
|
2,128
|
|
|
|
(73,012
|
)
|
|
|
68,866
|
|
(Decrease) increase in other long-term liabilities
|
|
|
(1,180
|
)
|
|
|
(1,411
|
)
|
|
|
(6,026
|
)
|
|
|
3,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) operating activities including discontinued operations
|
|
|
67,391
|
|
|
|
28,555
|
|
|
|
(70,583
|
)
|
|
|
44,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment, net
|
|
|
(232,188
|
)
|
|
|
(127,566
|
)
|
|
|
(58,752
|
)
|
|
|
(39,033
|
)
|
(Increase) decrease in restricted cash
|
|
|
(25,327
|
)
|
|
|
17,630
|
|
|
|
(45,005
|
)
|
|
|
|
|
Purchases of CRDA investments
|
|
|
(13,065
|
)
|
|
|
(13,269
|
)
|
|
|
(7,307
|
)
|
|
|
(6,115
|
)
|
Capitalized interest on construction in progress
|
|
|
(4,202
|
)
|
|
|
(1,191
|
)
|
|
|
|
|
|
|
|
|
Cash proceeds from sale of Trump Indiana
|
|
|
|
|
|
|
|
|
|
|
227,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in) provided by investing activities
|
|
|
(274,782
|
)
|
|
|
(124,396
|
)
|
|
|
116,462
|
|
|
|
(45,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from term loans
|
|
|
540,625
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
Repayment of term loans
|
|
|
(295,125
|
)
|
|
|
(1,500
|
)
|
|
|
(750
|
)
|
|
|
|
|
Borrowings under revolving credit facility
|
|
|
76,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of revolving credit facility
|
|
|
(76,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of other long-term debt
|
|
|
(8,994
|
)
|
|
|
(28,042
|
)
|
|
|
(21,873
|
)
|
|
|
|
|
Payment of deferred financing costs
|
|
|
(6,563
|
)
|
|
|
(597
|
)
|
|
|
(11,078
|
)
|
|
|
(2,926
|
)
|
Partnership distributions
|
|
|
(1,030
|
)
|
|
|
(3,020
|
)
|
|
|
|
|
|
|
|
|
Contributed capital from reorganization
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
|
|
Cash distributions to noteholders and stockholders
|
|
|
|
|
|
|
|
|
|
|
(41,120
|
)
|
|
|
|
|
(Repayments of) borrowings from DIP facility, net
|
|
|
|
|
|
|
|
|
|
|
(53,958
|
)
|
|
|
18,172
|
|
Repayment of long-term debt, subject to compromise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,439
|
)
|
Other
|
|
|
(220
|
)
|
|
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities
|
|
|
228,693
|
|
|
|
(32,706
|
)
|
|
|
76,221
|
|
|
|
1,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
21,302
|
|
|
|
(128,547
|
)
|
|
|
122,100
|
|
|
|
1,188
|
|
Cash and cash equivalents at beginning of period
|
|
|
100,007
|
|
|
|
228,554
|
|
|
|
106,454
|
|
|
|
105,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
121,309
|
|
|
$
|
100,007
|
|
|
$
|
228,554
|
|
|
$
|
106,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
39
TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
120,357
|
|
|
$
|
99,094
|
|
Restricted cash
|
|
|
|
|
|
|
27,375
|
|
Accounts receivable, net of allowance for doubtful accounts of $15,925 and $13,032, respectively
|
|
|
45,053
|
|
|
|
45,342
|
|
Accounts receivable, other
|
|
|
6,366
|
|
|
|
9,000
|
|
Inventories
|
|
|
11,235
|
|
|
|
12,039
|
|
Deferred income taxes
|
|
|
1,183
|
|
|
|
672
|
|
Other current assets
|
|
|
13,644
|
|
|
|
13,049
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
197,838
|
|
|
|
206,571
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
1,630,453
|
|
|
|
1,535,057
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
52,702
|
|
|
|
|
|
Goodwill
|
|
|
76,362
|
|
|
|
129,024
|
|
Trademarks
|
|
|
91,357
|
|
|
|
197,000
|
|
Intangible assets, net of accumulated amortization of $4,599 and $2,787, respectively
|
|
|
5,918
|
|
|
|
7,730
|
|
Deferred financing costs, net of accumulated amortization of $4,031 and $4,279, respectively
|
|
|
17,725
|
|
|
|
17,914
|
|
Property taxes receivable
|
|
|
18,872
|
|
|
|
|
|
Other assets, net of reserve of $33,209 and $36,203, respectively
|
|
|
63,940
|
|
|
|
59,152
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
326,876
|
|
|
|
410,820
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,155,167
|
|
|
$
|
2,152,448
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
59,741
|
|
|
$
|
33,088
|
|
Accrued payroll and related expenses
|
|
|
25,642
|
|
|
|
28,332
|
|
Income taxes payable
|
|
|
8,195
|
|
|
|
24,904
|
|
Accrued partner distributions
|
|
|
250
|
|
|
|
260
|
|
Accrued interest payable
|
|
|
18,102
|
|
|
|
13,645
|
|
Self-insurance reserves
|
|
|
13,016
|
|
|
|
13,299
|
|
Other current liabilities
|
|
|
39,047
|
|
|
|
31,941
|
|
Current maturities of long-term debt
|
|
|
5,646
|
|
|
|
11,263
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
169,639
|
|
|
|
156,732
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities
|
|
|
1,638,300
|
|
|
|
1,396,170
|
|
Deferred income taxes
|
|
|
26,198
|
|
|
|
38,992
|
|
Other long-term liabilities
|
|
|
31,849
|
|
|
|
17,013
|
|
|
|
|
Partners capital:
|
|
|
|
|
|
|
|
|
Partners capital
|
|
|
596,259
|
|
|
|
594,230
|
|
Accumulated deficit
|
|
|
(307,078
|
)
|
|
|
(50,689
|
)
|
|
|
|
|
|
|
|
|
|
Total partners capital
|
|
|
289,181
|
|
|
|
543,541
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital
|
|
$
|
2,155,167
|
|
|
$
|
2,152,448
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
40
TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
Predecessor
Company
|
|
|
|
Year Ended
December 31,
|
|
|
May 20, 2005
through
December 31,
2005
|
|
|
January 1,
through
May 19,
2005
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
|
|
$
|
1,021,625
|
|
|
$
|
1,079,245
|
|
|
$
|
663,140
|
|
|
$
|
398,409
|
|
Rooms
|
|
|
83,733
|
|
|
|
77,836
|
|
|
|
48,257
|
|
|
|
26,360
|
|
Food and beverage
|
|
|
118,959
|
|
|
|
122,611
|
|
|
|
77,806
|
|
|
|
44,198
|
|
Other
|
|
|
46,019
|
|
|
|
43,370
|
|
|
|
26,833
|
|
|
|
12,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,270,336
|
|
|
|
1,323,062
|
|
|
|
816,036
|
|
|
|
481,776
|
|
Less promotional allowances
|
|
|
(282,101
|
)
|
|
|
(296,783
|
)
|
|
|
(188,254
|
)
|
|
|
(117,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
988,235
|
|
|
|
1,026,279
|
|
|
|
627,782
|
|
|
|
364,439
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
|
|
|
474,023
|
|
|
|
481,747
|
|
|
|
298,190
|
|
|
|
179,496
|
|
Rooms
|
|
|
16,501
|
|
|
|
12,458
|
|
|
|
6,079
|
|
|
|
3,139
|
|
Food and beverage
|
|
|
51,260
|
|
|
|
48,585
|
|
|
|
30,074
|
|
|
|
16,860
|
|
General and administrative
|
|
|
274,552
|
|
|
|
278,305
|
|
|
|
172,693
|
|
|
|
97,995
|
|
Income from settlement of property tax appeals
|
|
|
(30,705
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and development
|
|
|
26,839
|
|
|
|
33,120
|
|
|
|
21,528
|
|
|
|
5,584
|
|
Corporaterelated party
|
|
|
2,552
|
|
|
|
2,363
|
|
|
|
9,819
|
|
|
|
775
|
|
Goodwill and other asset impairment charges
|
|
|
249,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
65,632
|
|
|
|
68,091
|
|
|
|
37,434
|
|
|
|
35,753
|
|
Reorganization expense (income) and related costs
|
|
|
|
|
|
|
|
|
|
|
9,058
|
|
|
|
(25,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,129,932
|
|
|
|
924,669
|
|
|
|
584,875
|
|
|
|
313,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(141,697
|
)
|
|
|
101,610
|
|
|
|
42,907
|
|
|
|
50,804
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
7,514
|
|
|
|
10,271
|
|
|
|
2,151
|
|
|
|
836
|
|
Interest expense
|
|
|
(131,034
|
)
|
|
|
(130,144
|
)
|
|
|
(79,602
|
)
|
|
|
(85,678
|
)
|
Loss on early extinguishment of debt
|
|
|
(4,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenserelated party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,184
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(127,647
|
)
|
|
|
(119,873
|
)
|
|
|
(77,451
|
)
|
|
|
(86,026
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes, minority interest, discontinued operations and extraordinary item
|
|
|
(269,344
|
)
|
|
|
(18,263
|
)
|
|
|
(34,544
|
)
|
|
|
(35,222
|
)
|
Income tax benefit (provision)
|
|
|
12,955
|
|
|
|
(5,151
|
)
|
|
|
(6,434
|
)
|
|
|
(2,074
|
)
|
Minority interest
|
|
|
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(256,389
|
)
|
|
|
(23,264
|
)
|
|
|
(40,978
|
)
|
|
|
(37,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trump Indiana
|
|
|
|
|
|
|
678
|
|
|
|
15,658
|
|
|
|
142,959
|
|
Provision for income taxes
|
|
|
|
|
|
|
56
|
|
|
|
(2,839
|
)
|
|
|
(24,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
|
|
734
|
|
|
|
12,819
|
|
|
|
118,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before extraordinary item
|
|
|
(256,389
|
)
|
|
|
(22,530
|
)
|
|
|
(28,159
|
)
|
|
|
81,452
|
|
Extraordinary gain on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(256,389
|
)
|
|
$
|
(22,530
|
)
|
|
$
|
(28,159
|
)
|
|
$
|
278,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
41
TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners
Capital
|
|
|
Accumulated
Deficit
|
|
|
Treasury
Stock
|
|
|
Total
Partners
Capital
|
|
Predecessor Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
$
|
667,503
|
|
|
$
|
(832,677
|
)
|
|
$
|
(20,200
|
)
|
|
$
|
(185,374
|
)
|
Net income
|
|
|
|
|
|
|
278,384
|
|
|
|
|
|
|
|
278,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 19, 2005
|
|
$
|
667,503
|
|
|
$
|
(554,293
|
)
|
|
$
|
(20,200
|
)
|
|
$
|
93,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of partnership on May 20, 2005
|
|
$
|
582,300
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
582,300
|
|
Stock-based compensation expense
|
|
|
2,753
|
|
|
|
|
|
|
|
|
|
|
|
2,753
|
|
Compensatory stock warrants
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
Partnership distributions
|
|
|
(3,041
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,041
|
)
|
Net loss
|
|
|
|
|
|
|
(28,159
|
)
|
|
|
|
|
|
|
(28,159
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
590,012
|
|
|
|
(28,159
|
)
|
|
|
|
|
|
|
561,853
|
|
Stock-based compensation expense
|
|
|
5,197
|
|
|
|
|
|
|
|
|
|
|
|
5,197
|
|
Partnership distributions
|
|
|
(979
|
)
|
|
|
|
|
|
|
|
|
|
|
(979
|
)
|
Net loss
|
|
|
|
|
|
|
(22,530
|
)
|
|
|
|
|
|
|
(22,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
594,230
|
|
|
|
(50,689
|
)
|
|
|
|
|
|
|
543,541
|
|
Stock-based compensation expense, net of forfeitures and repurchases
|
|
|
3,049
|
|
|
|
|
|
|
|
|
|
|
|
3,049
|
|
Partnership distributions
|
|
|
(1,020
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,020
|
)
|
Net loss
|
|
|
|
|
|
|
(256,389
|
)
|
|
|
|
|
|
|
(256,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
596,259
|
|
|
$
|
(307,078
|
)
|
|
$
|
|
|
|
$
|
289,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
42
TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
Predecessor
Company
|
|
|
|
Year Ended
December 31,
|
|
|
May 20, 2005
through
December 31,
2005
|
|
|
January 1,
2005
through
May 19,
2005
|
|
|
|
2007
|
|
|
2006
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(256,389
|
)
|
|
$
|
(22,530
|
)
|
|
$
|
(28,159
|
)
|
|
$
|
278,384
|
|
Adjustments to reconcile net (loss) income to net cash flows provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(13,105
|
)
|
|
|
630
|
|
|
|
3,700
|
|
|
|
|
|
Minority interest in net loss
|
|
|
|
|
|
|
(150
|
)
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
65,632
|
|
|
|
68,091
|
|
|
|
40,071
|
|
|
|
38,486
|
|
Goodwill and other asset impairment charges
|
|
|
249,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
4,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of interest income related to property tax settlement
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
|
|
2,694
|
|
|
|
2,631
|
|
|
|
1,519
|
|
|
|
665
|
|
Provisions for losses on receivables
|
|
|
7,742
|
|
|
|
5,168
|
|
|
|
2,330
|
|
|
|
1,445
|
|
Stock-based compensation expense
|
|
|
3,269
|
|
|
|
5,197
|
|
|
|
2,753
|
|
|
|
|
|
Valuation allowanceCRDA allowance
|
|
|
4,346
|
|
|
|
4,478
|
|
|
|
2,907
|
|
|
|
1,731
|
|
Compensatory stock warrants
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
Non-cash reorganization income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210,117
|
)
|
Extraordinary gain on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(196,932
|
)
|
Loss on sale of assets
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
(256
|
)
|
|
|
755
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in receivables
|
|
|
(4,436
|
)
|
|
|
(13,522
|
)
|
|
|
(9,505
|
)
|
|
|
546
|
|
Decrease (increase) in inventories
|
|
|
804
|
|
|
|
(1,323
|
)
|
|
|
1,219
|
|
|
|
(485
|
)
|
(Increase) decrease in other current assets
|
|
|
(628
|
)
|
|
|
(877
|
)
|
|
|
1,427
|
|
|
|
(2,143
|
)
|
(Increase) decrease in other assets
|
|
|
(14,404
|
)
|
|
|
6,573
|
|
|
|
1,543
|
|
|
|
(816
|
)
|
Decrease in due to affiliates, net
|
|
|
|
|
|
|
|
|
|
|
(2,767
|
)
|
|
|
(538
|
)
|
Increase (decrease) in accounts payable, accrued expenses and other current liabilities
|
|
|
16,223
|
|
|
|
(26,556
|
)
|
|
|
(16,323
|
)
|
|
|
60,847
|
|
Increase (decrease) in accrued interest payable
|
|
|
4,457
|
|
|
|
2,128
|
|
|
|
(73,012
|
)
|
|
|
68,866
|
|
(Decrease) increase in other long-term liabilities
|
|
|
(1,180
|
)
|
|
|
(1,411
|
)
|
|
|
(6,030
|
)
|
|
|
3,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) operating activities including discontinued operations
|
|
|
67,352
|
|
|
|
28,527
|
|
|
|
(70,583
|
)
|
|
|
44,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment, net
|
|
|
(232,188
|
)
|
|
|
(127,566
|
)
|
|
|
(58,752
|
)
|
|
|
(39,033
|
)
|
(Increase) decrease in restricted cash
|
|
|
(25,327
|
)
|
|
|
17,630
|
|
|
|
(45,005
|
)
|
|
|
|
|
Purchases of CRDA investments
|
|
|
(13,065
|
)
|
|
|
(13,269
|
)
|
|
|
(7,307
|
)
|
|
|
(6,115
|
)
|
Capitalized interest on construction in progress
|
|
|
(4,202
|
)
|
|
|
(1,191
|
)
|
|
|
|
|
|
|
|
|
Cash proceeds from sale of Trump Indiana
|
|
|
|
|
|
|
|
|
|
|
227,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in) provided by investing activities
|
|
|
(274,782
|
)
|
|
|
(124,396
|
)
|
|
|
116,462
|
|
|
|
(45,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from term loans
|
|
|
540,625
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
Repayments of term loan
|
|
|
(295,125
|
)
|
|
|
(1,500
|
)
|
|
|
(750
|
)
|
|
|
|
|
Borrowings under revolving credit facility
|
|
|
76,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of revolving credit facility
|
|
|
(76,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of other long-term debt
|
|
|
(8,994
|
)
|
|
|
(28,042
|
)
|
|
|
(21,873
|
)
|
|
|
|
|
Payment of deferred financing costs
|
|
|
(6,563
|
)
|
|
|
(597
|
)
|
|
|
(11,078
|
)
|
|
|
(2,926
|
)
|
Partnership distributions
|
|
|
(1,030
|
)
|
|
|
(3,760
|
)
|
|
|
|
|
|
|
|
|
Contributed capital from reorganization
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
|
|
Cash distributions to noteholders and stockholders
|
|
|
|
|
|
|
|
|
|
|
(41,120
|
)
|
|
|
|
|
(Repayments of) borrowings from DIP facility, net
|
|
|
|
|
|
|
|
|
|
|
(53,958
|
)
|
|
|
18,172
|
|
Repayment of long-term debt, subject to compromise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,439
|
)
|
Other
|
|
|
(220
|
)
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities
|
|
|
228,693
|
|
|
|
(33,587
|
)
|
|
|
76,221
|
|
|
|
1,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
21,263
|
|
|
|
(129,456
|
)
|
|
|
122,100
|
|
|
|
1,188
|
|
Cash and cash equivalents at beginning of period
|
|
|
99,094
|
|
|
|
228,550
|
|
|
|
106,450
|
|
|
|
105,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
120,357
|
|
|
$
|
99,094
|
|
|
$
|
228,550
|
|
|
$
|
106,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
The accompanying consolidated
financial statements include those of Trump Entertainment Resorts, Inc. (TER, formerly Trump Hotels & Casino Resorts, Inc.), a Delaware corporation, its majority-owned subsidiary, Trump Entertainment Resorts Holdings, L.P.
(TER Holdings, formerly Trump Hotels & Casino Resorts Holdings, L.P. THCR), a Delaware limited partnership, and their respective subsidiaries. Except where otherwise noted, the words we, us,
our and similar terms, as well as Company, refer to TER and all of its subsidiaries. Through TER Holdings and its wholly owned subsidiaries we own and operate the Trump Taj Mahal Casino Resort (Trump Taj Mahal),
Trump Plaza Hotel and Casino (Trump Plaza) and Trump Marina Hotel Casino (Trump Marina) each in Atlantic City, New Jersey. During September 2005, TER Keystone Development Co., LLC (TER Keystone) was formed by TER
Holdings to pursue a gaming license in Philadelphia, Pennsylvania, see Note 18. Prior to the December 2005 sale of our former subsidiary Trump Indiana, Inc. (Trump Indiana), we also owned and operated a riverboat casino in Gary, Indiana.
See Note 16 for additional information regarding this discontinued operation.
TER beneficially owns an approximate 76.5% profits interest
in TER Holdings, as both a general and limited partner, and Donald J. Trump (Mr. Trump) owns directly and indirectly an approximate 23.5% profits interest in TER Holdings, as a limited partner. Mr. Trumps limited partnership
interests are exchangeable at Mr. Trumps option into 9,377,484 shares of TERs Common Stock, par value $0.001 per share (the TER Common Stock) (subject to certain adjustments), which, if exchanged, would give
Mr. Trump an aggregate ownership of approximately 26.2% of the TER Common Stock (including shares currently held directly by Mr. Trump) or approximately 28.8% assuming currently exercisable warrants held by Mr. Trump were exercised.
Mr. Trump also holds 900 shares of TERs Class B Common Stock, par value $0.001 per share (the Class B Common Stock). The Class B Common Stock has the voting equivalency of the 9,377,484 shares of TER Common Stock for
which his limited partnership interests in TER Holdings may be exchanged, and generally votes on all matters with the TER Common Stock as a single class. The Class B Common Stock is redeemable at par to the extent that Mr. Trump exchanges his
limited partnership interests in TER Holdings for TER Common Stock and is not entitled to receive any dividends.
(2)
|
Summary of Significant Accounting Policies
|
Basis of Presentation
The consolidated financial statements include our accounts and those of our controlled subsidiaries and partnerships. We have eliminated all significant intercompany transactions. We view each casino
property as an operating segment and all such operating segments have been aggregated into one reporting segment.
Reorganization and
Emergence from Chapter 11
On November 21, 2004, Trump Hotels & Casino Resorts, Inc. and its subsidiaries (collectively, the Debtors) filed voluntary petitions for relief under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey (the Bankruptcy Court), as part of a prearranged plan of reorganization. While in bankruptcy, the Debtors continued to manage their properties and
operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court. The term Predecessor Company refers to the Company and its subsidiaries for periods prior to and including May 19, 2005,
and the term Reorganized Company refers to the Company and its subsidiaries for periods on and subsequent to May 20, 2005.
On April 5, 2005, the Bankruptcy Court entered an order confirming the Second Amended and Restated Joint Plan of Reorganization, dated March 30, 2005, of the Debtors, as amended (the Plan). The Plan became effective on
May 20, 2005 (the Effective Date), at which time all material conditions to the Plan were satisfied and the Debtors emerged from Chapter 11.
44
From the filing of the Chapter 11 petition to the Effective Date, our Predecessor Company operated as
debtors-in-possession under the jurisdiction of the Bankruptcy Court. Accordingly, the consolidated financial statements for periods from the filing of the Chapter 11 petition through the emergence from Chapter 11 were prepared in accordance with
the American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code (SOP 90-7). SOP 90-7 required the reporting of pre-petition
liabilities subject to compromise separately on the balance sheet at an estimate of the amount ultimately allowable by the Bankruptcy Court. SOP 90-7 also required separate reporting of certain expenses relating to the Debtors Chapter 11
filings as reorganization items. See Note 12 for a summary of reorganization expenses.
Upon emergence from Chapter 11, we adopted
fresh-start reporting in accordance with SOP 90-7. Under fresh-start reporting, a new entity was deemed to have been created for financial reporting purposes and the recorded amounts of assets and liabilities were adjusted to reflect their estimated
fair values.
As a result of the adoption of fresh-start reporting, the Reorganized Companys post-emergence financial statements are
generally not comparable with the financial statements of the Predecessor Company prior to its emergence from bankruptcy, including the historical financial statements included in this annual report. Due to the adoption of fresh-start reporting, the
Predecessor and Reorganized Company financial statements are prepared on different bases. See Note 12 for a condensed balance sheet which shows the impact of fresh-start accounting at May 20, 2005.
Under the terms of the Plan, any of the Reorganized Companys Senior Secured Notes, cash, common stock or Class A Warrants issued to the
Plans disbursing agent and not distributed as of May 20, 2006, reverted to the Reorganized Company. Undistributed amounts included $1,038 in Senior Secured Notes, $414 in cash and 36,809 shares of TER Common Stock. Goodwill has been
reduced by $1,442 and our Senior Secured Notes have been reduced by $1,038 to reflect this matter.
Use of Estimates
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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
We consider cash and all highly liquid
investments with an original maturity of three months or less to be cash equivalents.
Restricted Cash
Restricted cash at
December 31, 2007 includes the unused proceeds from borrowings under our Credit Facility, which are restricted to fund construction of a new hotel tower at Trump Taj Mahal, and $8,382 of interest bearing cash collateral for outstanding letters
of credit. Restricted cash at December 31, 2006 represented a portion of the proceeds from the sale of Trump Indiana placed in an escrow account pending the payment and resolution of various liabilities relating to the sold entity.
Revenue Recognition and Allowance for Doubtful Accounts
The majority of our revenue is derived from gaming activities. As our gaming
revenues are primarily generated from cash transactions, our revenues do not typically require the use of estimates. Gaming revenues represent the difference between amounts of gaming wins and losses. Revenues from hotel and other services are
recognized at the time the related services are performed. We extend credit on a discretionary basis to certain qualified patrons. Our casino properties establish credit limits for approved casino customers following investigations of
creditworthiness. We maintain an allowance for doubtful accounts based on a specific review of customer accounts as well as a review of the history of write-offs of returned markers. Management believes that the reserve recorded is reasonable;
however, these estimates could change based on the actual collection experience with each returned marker.
Inventories
Inventories of provisions and supplies are carried at the lower of cost (weighted average) or market value.
45
Property and Equipment
The carrying value of property and equipment acquired prior to
May 20, 2005, is based on its allocation of reorganization value and is being depreciated on the straight-line method using rates based on the estimated remaining useful lives. Property and equipment acquired on or after May 20, 2005, is
recorded at cost. Property and equipment is depreciated on the straight-line method using rates based on the estimated useful lives as follows:
|
|
|
Buildings and building improvements
|
|
20 40 years
|
Furniture, fixtures and equipment
|
|
3 10 years
|
Depreciation expense includes amortization of assets under capital lease obligations.
Capitalized Interest
We capitalize interest for associated borrowing costs of construction projects. Capitalization of interest ceases
when the asset is substantially complete and ready for its intended use. Interest capitalized during the years ended December 31, 2007 and 2006 was $4,202 and $1,191, respectively.
Impairment of Long-lived Assets
In accordance with the provisions of Statement of Financial Accounting Standards (SFAS)
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), when events or circumstances indicate that the carrying amount of long-lived assets to be held and used might not be recoverable, the
expected future undiscounted cash flows from the assets are estimated and compared with the carrying amount of the assets. If the sum of the estimated undiscounted cash flows was less than the carrying amount of the assets, an impairment loss would
be recorded. The impairment loss would be measured on a location by location basis by comparing the fair value of the asset with its carrying amount. Long-lived assets that are held for disposal are reported at the lower of the assets carrying
amount or fair value less costs related to the assets disposition. See Note 5 regarding impairment charges recorded during 2007.
Goodwill and Other Intangible Assets
In accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), we amortize intangible assets over their estimated useful
lives unless we determined their lives to be indefinite. Goodwill and other intangible assets with indefinite lives are not amortized but are subject to tests for impairment at least annually. SFAS 142 requires that we perform impairment tests more
frequently than annually if events or circumstances indicate that the value of goodwill or intangible assets with indefinite lives might be impaired. Goodwill represents our reorganization value in excess of amounts allocable to identifiable assets.
Goodwill was allocated to our operating entities based primarily upon an independent appraisal. See Note 6 regarding goodwill and other intangible asset impairment charges recorded during 2007 resulting from our annual impairment test.
Deferred Financing Costs
Financing costs, including underwriters discounts and direct transactional fees associated with the
issuance of debt, are capitalized as deferred financing costs and are amortized to interest expense over the terms of the related debt.
Self-insurance Reserves
Self-insurance reserves represent the estimated amounts of uninsured claims related to employee health medical costs, workers 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. The costs of the ultimate disposition of these claims
may differ from these reserve amounts.
46
Promotional Allowances
The retail value of accommodations, food, beverage and other services
provided to patrons without charge is included in revenues and deducted as promotional allowances. The estimated costs of providing such promotional allowances are included in gaming costs and expenses in the accompanying consolidated statements of
operations and consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
Predecessor
Company
|
|
|
Year Ended
December 31,
|
|
May 20, 2005
through
December 31,
2005
|
|
January 1, 2005
through
May 19,
2005
|
|
|
2007
|
|
2006
|
|
|
Rooms
|
|
$
|
24,463
|
|
$
|
25,346
|
|
$
|
17,281
|
|
$
|
10,536
|
Food and beverage
|
|
|
74,202
|
|
|
79,772
|
|
|
49,871
|
|
|
29,834
|
Other
|
|
|
10,686
|
|
|
9,364
|
|
|
5,257
|
|
|
2,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
109,351
|
|
$
|
114,482
|
|
$
|
72,409
|
|
$
|
42,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash discounts based upon a negotiated amount with each affected patron are recognized as
promotional allowances on the date the related revenue is recorded. Cash-back program awards that are given to patrons based upon earning points for future awards are accrued as the patron earns the points. The amounts are recorded as promotional
allowances in the statements of operations.
Advertising Expense
We expense advertising costs as they are incurred. Advertising
expense was $14,483, $11,885, $7,232 and $4,378 for the years ended December 31, 2007 and 2006, the period from May 20, 2005 through December 31, 2005 and the period from January 1, 2005 through May 19, 2005, respectively.
Derivative Instruments and Hedging Activities
We account for derivative instruments and hedging activities under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 138, Accounting for Certain Derivatives Instruments and Certain Hedging Activitiesan Amendment of FASB Statement
No. 133. We recognize derivatives on the balance sheet at fair value.
We currently have no outstanding interest rate swaps.
From time to time, we enter into interest rate swap agreements to change the proportion of fixed to variable rate debt within parameters established by management. In accordance with these parameters, the agreements are used to manage interest rate
risks and cost inherent in our debt portfolio.
Income Taxes
The provision for income taxes included in the respective
statements of operations of TER and TER Holdings differs because of the tax status of these entities. TER Holdings provision for income taxes includes only state income tax provisions and balances because of its status as a partnership for
federal tax purposes.
Minority Interests
TER reports Mr. Trumps direct and indirect 23.5% limited partnership
interest in TER Holdings and other parties interests in its less than 100%-owned, consolidated subsidiaries as minority interests. Minority interests are adjusted by the proportionate share of the less than 100%-owned subsidiaries
earnings (losses) and partner distributions to the minority interest holders.
Stock-based Compensation
Effective May 20,
2005, we adopted SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R requires the fair value of equity awards for new awards and previously granted awards that are not yet fully vested on the adoption
date to be recognized in the financial statements. Compensation expense is recognized on a straight-line basis over the vesting period.
Our Predecessor Company followed the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for
its stock-based compensation awards. Under APB 25, no compensation expense was reflected in net income as all stock options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.
47
Reclassifications
Certain reclassifications have been made to the prior years financial
statements to conform to the current year presentation.
Recently Issued Accounting Pronouncements
In December 2007, the
Financial Accounting Standards Board (FASB) issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial StatementsAn amendment of ARB No. 51 (SFAS 160). SFAS 160 amends ARB No. 51
to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority
interest, is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Among other requirements, SFAS 160 requires consolidated net income to be reported including the amounts
attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest.
SFAS 160 is effective for our fiscal year beginning January 1, 2009. Earlier adoption is prohibited. We are currently evaluating the effect that the adoption of SFAS 160 will have on our consolidated financial statements, including the
presentation of minority interests in our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (Revised
2007), Business Combinations (SFAS 141(R)). This Statement retained the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination. SFAS 141(R), which is broader in scope than that of SFAS 141, which applied only to business combinations in which control was obtained by transferring consideration,
applies the same method of accounting (the purchase method) to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141(R) also makes certain other modifications to SFAS 141. We are required
to apply the provisions of SFAS 141(R) to business combinations for which the acquisition date is on or after January 1, 2009. Earlier application is prohibited. We do not expect the adoption of SFAS 141(R) to have a material effect on our
consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities (SFAS 159). SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the
opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The fair value option established by SFAS 159 permits all companies
to choose to measure eligible items at fair value at specified election dates. At each subsequent reporting date, companies shall report in earnings any unrealized gains and losses on items for which the fair value option has been elected. SFAS 159
is effective for our fiscal year beginning January 1, 2009. We are currently evaluating whether to adopt the fair value option under SFAS 159 and evaluating what impact such adoption would have on our consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157) which defines fair value,
establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously
concluded in those accounting pronouncements that fair value is the relevant measurement attribute. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. On February 12, 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), delaying the effective date of SFAS 157 to fiscal years beginning after
November 15, 2008, for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. We do not expect that the adoption of SFAS 157 will have
a material effect on our consolidated financial statements and are currently evaluating the effects of the deferment provisions of FSP 157-2.
48
(3)
|
Settlement of Property Tax Appeals
|
On
November 7, 2007, we entered into a stipulation of settlement with the City of Atlantic City (City) to settle a series of appealed real property tax assessments relating to Trump Taj Mahal, Trump Plaza and Trump Marina for various
tax years through 2007. Under the terms of the agreement, we will receive a refund of $34,000 relating to previously paid taxes consisting of (i) $12,000 in cash, which was received on December 7, 2007 and (ii) $22,000 in credits to
be applied against future real property tax payments as follows: $4,000 per year in 2009, 2010 and 2011 and $5,000 per year in 2012 and 2013.
The present value of the settlement was $30,705 and is reflected on the 2007 statement of operations as Income from settlement of property tax appeals. The present value of the future real property tax credits is reflected on the
consolidated balance sheet as long-term property taxes receivable. In addition, included in general and administrative expenses in 2007 is $1,927 in legal fees incurred in connection with the settlement.
(4)
|
TrumpONE Unified Players Program
|
In June
2007, we implemented the TrumpONE unified players program (TrumpONE), our new, company-wide customer loyalty program. Under TrumpONE, our customers are able to accumulate complimentary dollars (comp dollars) based upon
their slot machine and table games play which may be redeemed at their discretion for complimentary food, beverage and retail items. Unredeemed comp dollars are subject to the terms of the TrumpONE program, including forfeiture based upon the
lapsing of time. We record the cost of comp dollars as a gaming expense when earned by our customers. The retail value of the complimentary food, beverage and other retail items is recorded as revenue with an offset to promotional allowances at the
time our customers redeem comp dollars. We recorded $4,261 of gaming expense in June 2007 to record the initial comp dollar liability, including consideration of estimated forfeitures. As of December 31, 2007, we have $5,656 accrued for our
outstanding comp dollar liability.
In addition to comp dollars, our customers have the ability to earn points based on slot machine or
table games play that are redeemable in cash (cash-back points). We historically have accrued the cost of cash-back points, after consideration of estimated forfeitures, as they are earned. The cost is recorded in promotional allowances.
Customers may also receive discretionary complimentary rooms, food and beverage and other services which are expensed as incurred.
(5)
|
Property and Equipment
|
Property and equipment
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
Land and land improvements
|
|
$
|
424,964
|
|
|
$
|
467,731
|
|
Building and building improvements
|
|
|
1,017,698
|
|
|
|
974,511
|
|
Furniture, fixtures and equipment
|
|
|
195,405
|
|
|
|
151,334
|
|
Construction in progress
|
|
|
126,751
|
|
|
|
43,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,764,818
|
|
|
|
1,637,194
|
|
Less accumulated depreciation and amortization
|
|
|
(134,365
|
)
|
|
|
(102,137
|
)
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
$
|
1,630,453
|
|
|
$
|
1,535,057
|
|
|
|
|
|
|
|
|
|
|
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
(SFAS 144) requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. During 2007, our results were negatively impacted
principally
49
due to increased regional competition and a partial smoking ban in Atlantic City. As a result, we performed an impairment test in accordance with SFAS 144.
Based upon our review, the sum of the estimated undiscounted future cash flows expected to be generated by the long-lived asset group of
Trump Marina was less than the carrying value of those assets. We estimated the fair value of the asset group using a discounted cash flow methodology among other valuation metrics and sought the assistance of an independent valuation firm. We
recorded an asset impairment charge totaling $91,271, which was allocated to the asset group on a pro-rata basis based upon the carrying value of the assets in accordance with SFAS 144. The impairment charge is included in Goodwill and other asset
impairment charges in the 2007 statement of operations. Additionally, as a result of the competition in our marketplace, the investment of other capital in the Marina district of Atlantic City and the operating performance of Trump Marina during
2007, we reduced the estimated remaining useful life of the building to 20 years in connection with our impairment test.
(6)
|
Intangible Assets and Goodwill
|
In accordance with
SFAS 142, we performed our annual goodwill and other intangible asset impairment test as of October 1, 2007. With the assistance of an independent valuation firm, we used discounted cash flow, market capitalization and market multiple
methodologies in our determination of the estimated fair value of our reporting units. Our estimated future cash flows assumed under the discounted cash flow approach were negatively impacted by the recent increase in regional competition, the
partial smoking ban in Atlantic City and a general weakening of the economy.
Based upon the results of our impairment testing, we
determined that our trademarks relating to Trump Taj Mahal, Trump Marina and Trump Plaza and goodwill relating to TER, Trump Marina and Trump Plaza were impaired. As a result, we recognized goodwill and other intangible asset impairment charges
totaling $186,609, of which $28,602 related to TER, $30,447 related to Trump Taj Mahal, $70,858 related to Trump Marina and $56,702 related to Trump Plaza.
The impairment test procedures performed in accordance with SFAS 142 require management to make comprehensive estimates of the future cash flows of our reporting units. Due to uncertainties associated with such
estimates, actual results could differ from such estimates. A continuation of the previously mentioned conditions may result in the determination that some or all of our remaining goodwill and other intangible assets have become impaired, which
could result in additional impairment charges.
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
As of December 31, 2006
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
$
|
91,357
|
|
|
|
|
|
$
|
91,357
|
|
$
|
197,000
|
|
|
|
|
|
$
|
197,000
|
Other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold interests (weighted average useful life1.6 years)
|
|
$
|
517
|
|
$
|
(486
|
)
|
|
$
|
31
|
|
$
|
517
|
|
$
|
(479
|
)
|
|
$
|
38
|
Customer relationships (weighted average useful life
7 years)
|
|
|
10,000
|
|
|
(4,113
|
)
|
|
|
5,887
|
|
|
10,000
|
|
|
(2,308
|
)
|
|
|
7,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets
|
|
$
|
10,517
|
|
$
|
(4,599
|
)
|
|
$
|
5,918
|
|
$
|
10,517
|
|
$
|
(2,787
|
)
|
|
$
|
7,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These intangible assets were recorded at May 20, 2005, as a part of our fresh-start
reporting, see Note 12. We recorded amortization expense of $1,436 and $1,615 for the years ended December 31, 2007 and 2006, respectively, and $1,172 for the period from May 20, 2005 through December 31, 2005.
50
Future amortization expense of our amortizable intangible assets for each of the years ended
December 31, is as follows:
|
|
|
|
2008
|
|
$
|
1,347
|
2009
|
|
|
1,347
|
2010
|
|
|
1,347
|
2011
|
|
|
1,347
|
2012
|
|
|
530
|
Thereafter
|
|
|
|
A rollforward of goodwill for the period from December 31, 2005 to December 31, 2007 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
TER
|
|
|
TER
Holdings
|
|
Balance, December 31, 2005
|
|
$
|
238,045
|
|
|
$
|
139,289
|
|
Undistributed amounts in connection with Predecessor Company's reorganization plan
|
|
|
(1,442
|
)
|
|
|
(1,442
|
)
|
Reduction in Trump Indiana income tax accrual
|
|
|
(8,193
|
)
|
|
|
(8,193
|
)
|
Charge in lieu of income taxes
|
|
|
(1,930
|
)
|
|
|
(630
|
)
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
|
226,480
|
|
|
|
129,024
|
|
Goodwill impairment charges
|
|
|
(80,590
|
)
|
|
|
(51,988
|
)
|
Charge in lieu of income taxes
|
|
|
(200
|
)
|
|
|
(200
|
)
|
Reduction in Trump Indiana income tax accrual
|
|
|
(481
|
)
|
|
|
(481
|
)
|
Other
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
$
|
145,216
|
|
|
$
|
76,362
|
|
|
|
|
|
|
|
|
|
|
The difference in goodwill between TER Holdings and TER is primarily related to the recognition of
an additional federal deferred tax liability due to TERs status as a corporation.
Long-term debt consists of the
following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
Senior Secured Credit Facilities:
|
|
|
|
|
|
|
|
|
2007 Credit Facility:
|
|
|
|
|
|
|
|
|
Term Loan, matures December 21, 2012, interest and principal payments due quarterly at LIBOR plus 3.2% (8.11% at December 31, 2007)
|
|
$
|
393,250
|
|
|
$
|
|
|
2005 Credit Facility:
|
|
|
|
|
|
|
|
|
Term Loans
|
|
|
|
|
|
|
147,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
393,250
|
|
|
|
147,750
|
|
Senior Secured Notes, due June 1, 2015, interest payable semi-annually at 8.5%, interest payments due June 1 and December 1
|
|
|
1,248,969
|
|
|
|
1,248,962
|
|
Other:
|
|
|
|
|
|
|
|
|
Capitalized lease obligations, payments due at various dates from 2007 through 2009, secured by slot and other equipment, interest at 4.3% to
11.2%
|
|
|
1,727
|
|
|
|
10,721
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
1,643,946
|
|
|
|
1,407,433
|
|
|
|
|
|
|
|
|
|
|
Less: current maturities
|
|
|
(5,646
|
)
|
|
|
(11,263
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities
|
|
$
|
1,638,300
|
|
|
$
|
1,396,170
|
|
|
|
|
|
|
|
|
|
|
51
Senior Secured Credit Facility
On December 21, 2007, TER and TER Holdings entered into
an agreement for a $493,250 senior secured credit facility (the 2007 Credit Facility). Under the 2007 Credit Facility, TER Holdings borrowed $393,250 which was to be used to (i) refinance all amounts outstanding under its Credit
Agreement dated May 20, 2005 (the 2005 Credit Facility), (ii) pay fees and expenses incurred in connection with the 2007 Credit Facility and the refinancing of the 2005 Credit Facility, (iii) fund construction of the new
hotel tower at Trump Taj Mahal, and (iv) provide financing for working capital, capital expenditures and other general corporate purposes. The 2007 Credit Facility also provides for the availability of $100,000 of additional funds prior to
December 21, 2008, subject to the satisfaction of standard conditions. To the extent amounts available under the 2007 Credit Facility have not been drawn by TER Holdings by December 21, 2008, the lenders will have the option to direct that
such amounts be funded to TER Holdings. The 2007 Credit Facility matures on December 21, 2012 and must be repaid during the final year of such loans in equal quarterly amounts, subject to amortization of approximately 1.0% per year prior
to the final year. At December 31, 2007, we had $100,000 available under the 2007 Credit Facility.
TER Holdings incurred $6,563 of
costs associated with entering into the 2007 Credit Facility. TER Holdings recorded a $4,127 non-cash loss on early extinguishment of debt during the year ended December 31, 2007 relating to the write-off of unamortized debt issuance costs
associated with the 2005 Credit Facility.
Borrowings under the 2007 Credit Facility are secured by a first priority security interest in
substantially all of the assets of TER Holdings and it subsidiaries. TER Holdings obligations under the 2007 Credit Facility are guaranteed by TER and certain of its direct and indirect subsidiaries. We and our subsidiaries are subject to a
number of affirmative and negative covenants. The 2007 Credit Facility restricts our ability to make certain distributions or pay dividends. At December 31, 2007, we were in compliance with the covenants.
The 2005 Credit Facility consisted of (i) a revolving credit facility in the amount of $200,000, (ii) a single-draw term loan facility in the
amount of $150,000, which was drawn on the Effective Date, and (iii) a delayed draw term loan facility in the amount of $150,000, which was restricted to fund construction of the new hotel tower at Trump Taj Mahal.
A portion of the proceeds from the single-draw term loan was utilized to pay off amounts outstanding under the debtor-in-possession financing, which
occurred on the Effective Date. During May 2007, we borrowed $147,375 under the delayed draw term loan facility. As required under the terms of the senior secured notes, the proceeds from the delayed draw term loan facility are being used in
connection with the construction of the new hotel tower at Trump Taj Mahal. At December 31, 2007 unused proceeds from the delayed draw term loan totaling $44,320 are reflected as restricted cash.
Senior Secured Notes
On the Effective Date, TER Holdings and its wholly owned finance subsidiary, Trump Entertainment Resorts Funding, Inc.
(TER Funding), issued $1,250,000 of Senior Secured Notes (Senior Notes). These Senior Notes were used to pay distributions under the Plan. The Senior Notes due June 1, 2015, bear interest at 8.5% per annum. $1,038
of the Senior Secured Notes were returned to us under the terms of the Predecessor Companys Bankruptcy Plan and retired during 2006. During June 2007, we were notified by our bond trustee of the issuance of $7 in additional Senior Notes as a
result of a clerical adjustment in the original issuance. As such, we recorded additional outstanding Senior Notes and increased our goodwill by $7 as these notes were issued as part of our reorganization.
$730,000 of the aggregate principal amount of the Senior Notes is nonrecourse to the issuers and to the partners of TER Holdings (the Qualified
Portion). $520,000 of the aggregate principal amount of the Senior Notes is recourse to the issuers and to TER, in its capacity as general partner of TER Holdings (the Non-Qualified Portion).
The Non-Qualified Portion and Qualified Portion are recalculated on a periodic basis no less frequently than annually based on certain tax
considerations, provided that in no event will the Qualified Portion exceed $730,000 in aggregate principal amount of Senior Notes.
52
TER Funding has no assets, operations, revenues or cash flows other than those related to the issuance,
administration and repayment of our Senior Notes. All other subsidiaries of TER Holdings, except a minor non-guarantor subsidiary (the Guarantors), are guarantors of the Senior Notes on a joint and several basis. TER Holdings and TER
Funding have no independent assets or operations from the Guarantors. Therefore, condensed consolidating financial statements are not presented.
The Senior Notes are senior obligations of the issuers and are guaranteed on a senior basis by the Guarantors and rank senior in right of payment to the issuers and Guarantors future subordinated indebtedness. The Senior Notes
are secured by substantially all of our real property and incidental personal property, subject to liens securing amounts borrowed under the 2007 Credit Facility and certain permitted prior liens. Because amounts borrowed under the 2007 Credit
Facility are secured by substantially all the assets of the issuers and the Guarantors on a priority basis, the Senior Notes are effectively subordinated to amounts borrowed under the 2007 Credit Facility.
The issuers and Guarantors of the Senior Notes are subject to certain covenants under the indenture governing the Senior Notes. Under these covenants,
TER Holdings and its guarantor subsidiaries are subject to limitations on the incurrence of additional indebtedness and payment of dividends. In addition, the ability of Trump Taj Mahal, Trump Plaza or Trump Marina to make payments to TER may be
restricted by the New Jersey Casino Control Commission (the CCC).
Mortgage Notes (Predecessor Company)
Prior to
the filing of the Chapter 11 petition, we and certain of our subsidiaries had issued first and second mortgage notes (Mortgage Notes). On May 20, 2005, these Mortgage Notes were cancelled as a result of the reorganization described
in Note 2. Upon consummation of the Plan, the Mortgage Notes were exchanged for cash, Senior Notes and TER Common Stock (subject to an election mechanism whereby holders of such notes could maximize the Senior Notes or TER Common Stock received by
such holders). Holders of first Mortgage Notes were also entitled to receive the proceeds of the exercise of Class A Warrants issued on the Effective Date, or, to the extent Class A Warrants are not exercised, the shares of TER Common
Stock reserved for issuance upon exercise of such warrants, as well as other consideration pursuant to the Plan. The difference between the carrying value of the Mortgage Notes and the value received in exchange has been recorded as an extraordinary
gain in the Predecessor Companys statement of operations for the period January 1, 2005 through May 19, 2005.
Long-term
debt and capital lease obligations mature as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Long-term
debt
|
|
Captial lease
obligations
|
|
|
Total
|
|
2008
|
|
$
|
3,933
|
|
$
|
1,867
|
|
|
$
|
5,800
|
|
2009
|
|
|
3,933
|
|
|
16
|
|
|
|
3,949
|
|
2010
|
|
|
3,933
|
|
|
|
|
|
|
3,933
|
|
2011
|
|
|
3,933
|
|
|
|
|
|
|
3,933
|
|
2012
|
|
|
377,518
|
|
|
|
|
|
|
377,518
|
|
Thereafter
|
|
|
1,248,969
|
|
|
|
|
|
|
1,248,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,642,219
|
|
|
1,883
|
|
|
|
1,644,102
|
|
Less: amount representing interest
|
|
|
|
|
|
(156
|
)
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,642,219
|
|
$
|
1,727
|
|
|
$
|
1,643,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
Our income tax provision (benefit)
attributable to continuing operations and discontinued operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
Predecessor
Company
|
|
|
Year Ended
December 31,
|
|
|
May 20, 2005
through
December 31, 2005
|
|
January 1, 2005
through
May 19, 2005
|
|
|
2007
|
|
|
2006
|
|
|
|
Continuing operations
|
|
$
|
(48,975
|
)
|
|
$
|
6,451
|
|
|
$
|
11,421
|
|
$
|
2,074
|
Discontinued operations
|
|
|
|
|
|
|
(56
|
)
|
|
|
2,839
|
|
|
24,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(48,975
|
)
|
|
$
|
6,395
|
|
|
$
|
14,260
|
|
$
|
26,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax provision attributable to income (loss) from continuing operations before income
taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
Predecessor
Company
|
|
|
Year Ended
December 31,
|
|
May 20, 2005
through
December 31, 2005
|
|
January 1, 2005
through
May 19, 2005
|
|
|
2007
|
|
|
2006
|
|
|
Currentfederal
|
|
$
|
103
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Deferredfederal
|
|
|
(36,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for federal income taxes
|
|
|
(35,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currentstate
|
|
|
47
|
|
|
|
4,521
|
|
|
2,734
|
|
|
2,074
|
Deferredstate
|
|
|
(13,305
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for state income taxes
|
|
|
(13,258
|
)
|
|
|
4,521
|
|
|
2,734
|
|
|
2,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash charge in lieu of taxes
|
|
|
200
|
|
|
|
1,930
|
|
|
8,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(48,975
|
)
|
|
$
|
6,451
|
|
$
|
11,421
|
|
$
|
2,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our current federal income tax provision reflects the utilization of net operating loss
carryforwards and our deferred income tax provision reflects the impact of a reduction in our net deferred tax liabilities. The non-cash charge in lieu of taxes represents the utilization of pre-reorganization tax benefits that are reflected as a
reduction to goodwill. The difference between TERs and TER Holdings tax provision is due to a federal deferred tax benefit of $36,020 for the year ended December 31, 2007 and a non-cash charge-in-lieu of taxes of $1,300 and $4,987
for the year ended December 31, 2006 and the period from May 20, 2005 through December 31, 2005, respectively, because of TERs status as a corporation for federal income taxes.
On January 1, 2007, we adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty
in Income Taxes (FIN 48) which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109
,
Accounting for Income Taxes. FIN 48
provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on classification, interest and penalties, accounting in interim periods,
disclosures and transition.
At December 31, 2007, we had unrecognized tax benefits of approximately $35,337 (including interest) of
which $7,053 would affect our effective tax rate, if recognized. The application of FIN 48 did not have an impact on stockholders equity or partners capital on the date of adoption. It is reasonably possible that certain unrecognized tax
benefits related to income tax examinations totaling $8,195 could be settled during the next twelve months.
54
The following table summarizes the activity related to our unrecognized tax benefits:
|
|
|
|
Unrecognized tax benefits at January 1, 2007
|
|
$
|
26,400
|
Increases (decreases) related to current year tax positions
|
|
|
316
|
Increases (decreases) related to prior year tax positions
|
|
|
340
|
Decreases related to settlements with taxing authorities
|
|
|
|
Decreases resulting from the expiration of the statute of limitations
|
|
|
|
|
|
|
|
Unrecognized tax benefits at December 31, 2007
|
|
$
|
27,056
|
|
|
|
|
We recognize interest accrued related to unrecognized tax benefits in interest expense and
penalties as a component of income tax expense. During the year ended December 31, 2007, we recognized approximately $2,506 in potential interest associated with uncertain tax positions. At December 31, 2007, we had approximately $8,281
accrued for the payment of interest on uncertain tax positions. To the extent interest is not assessed with respect to uncertain tax positions of the Reorganized Company, amounts accrued will be reduced and reflected as a reduction of interest
expense. To the extent interest is not assessed with respect to uncertain tax positions of the Predecessor Company, amounts accrued prior to the reorganization date will be reduced and the impact will reduce goodwill in accordance with Emerging
Issues Task Force Issue 93-7, Uncertainties Related to Income Taxes in a Purchase Business Combination (EITF 93-7).
Federal and
State Income Tax Audits
Tax years 2005 through 2007 remain subject to examination by the federal tax authority. Tax years 1995 through
2007 remain subject to examination by state tax jurisdictions.
At December 31, 2007, we have accrued $675 to reflect the expected
federal tax liability (including interest) for the period from January 1, 2005 through December 21, 2005, the date of the sale of Trump Indiana to Majestic Star Casino, LLC (Majestic Star), resulting from agreed upon IRS audit
adjustments for 1996 through 2004. During 2007, we have reduced goodwill by $482 in accordance with EITF 93-7 to reflect the settlement of Pre-Reorganization tax audits related to Trump Indiana. Additionally, we have accrued a liability of $5,731
related to the impact on state income taxes (including interest) resulting from agreed upon IRS audit adjustments for 1996 through December 21, 2005. In accordance with the terms of our Stock Purchase Agreement with Majestic Star (the
Stock Purchase Agreement), TER Holdings has retained the liability for expected federal and state income taxes (including interest) related to Trump Indiana for the tax years 1995 through December 21, 2005.
Prior to 2007, state income taxes for our New Jersey operations were computed under the alternative minimum assessment method. This alternative minimum
tax assessment expired as of December 31, 2006 and therefore we have not recorded a provision for New Jersey state alternative minimum taxes in 2007. We have asserted our position that New Jersey partnerships are exempt from these taxes and, as
such, have not remitted payments of the amounts provided. The New Jersey Division of Taxation has issued an assessment to collect the unpaid taxes for the tax years 2002 and 2003. At December 31, 2007, we have accrued $26,086 for taxes and
interest relating to this alternative minimum tax assessment for 2002 and 2003, as well as the open years 2004 through 2006. We are currently in discussions with the New Jersey Division of Taxation regarding settlement of these assessments.
55
A reconciliation of our federal income tax at the federal statutory rate to our income tax provision from
continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
|
Predecessor
Company
|
|
|
|
Year Ended
December 31,
|
|
|
May 20, 2005
through
December 31,
2005
|
|
|
January 1, 2005
through
May 19, 2005
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Federal statutory rate
|
|
$
|
(104,267
|
)
|
|
$
|
(6,382
|
)
|
|
$
|
(12,090
|
)
|
|
$
|
(12,328
|
)
|
State taxes, net of federal benefit
|
|
|
(8,618
|
)
|
|
|
2,939
|
|
|
|
1,777
|
|
|
|
1,348
|
|
Permanent differences, net
|
|
|
1,715
|
|
|
|
1,170
|
|
|
|
14,051
|
|
|
|
12,583
|
|
Goodwill impairment
|
|
|
28,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest on land and trademark impairment
|
|
|
15,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash charge-in-lieu of income taxes
|
|
|
200
|
|
|
|
1,930
|
|
|
|
8,687
|
|
|
|
|
|
Valuation allowance
|
|
|
17,964
|
|
|
|
6,794
|
|
|
|
(1,123
|
)
|
|
|
414
|
|
Other, net
|
|
|
102
|
|
|
|
|
|
|
|
119
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(48,975
|
)
|
|
$
|
6,451
|
|
|
$
|
11,421
|
|
|
$
|
2,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of significant temporary differences representing deferred tax assets and
liabilities, subject to valuation allowances are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TER
|
|
|
TER Holdings
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruals and prepayments
|
|
$
|
58,393
|
|
|
$
|
58,745
|
|
|
$
|
15,751
|
|
|
$
|
15,620
|
|
NOL carryforwards
|
|
|
92,669
|
|
|
|
75,817
|
|
|
|
35,139
|
|
|
|
35,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151,062
|
|
|
|
134,562
|
|
|
|
50,890
|
|
|
|
50,845
|
|
Less: Valuation allowance
|
|
|
(124,997
|
)
|
|
|
(90,815
|
)
|
|
|
(46,232
|
)
|
|
|
(41,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,065
|
|
|
|
43,747
|
|
|
|
4,658
|
|
|
|
9,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis differences on property and equipment, net
|
|
|
(80,077
|
)
|
|
|
(117,501
|
)
|
|
|
(19,227
|
)
|
|
|
(29,283
|
)
|
Trademarks and other
|
|
|
(38,726
|
)
|
|
|
(68,309
|
)
|
|
|
(10,446
|
)
|
|
|
(18,427
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(118,803
|
)
|
|
|
(185,810
|
)
|
|
|
(29,673
|
)
|
|
|
(47,710
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax liability
|
|
$
|
(92,738
|
)
|
|
$
|
(142,063
|
)
|
|
$
|
(25,015
|
)
|
|
$
|
(38,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TER Holdings deferred tax assets and liabilities only reflect the state tax effects, because
of TER Holdings status as a partnership for federal income taxes.
Net Operating Loss Carryforwards
Utilization of Predecessor Company federal net operating loss carryforwards (NOLs) available to the Reorganized Company is limited pursuant to
Section 382 of the Internal Revenue Code. As of December 31, 2007, we have federal NOLs of approximately $191,200 available to offset future taxable income of which approximately $38,800 are limited pursuant to Section 382 of the
Internal Revenue Code to approximately $2,000 annually until expiration. The federal NOLs expire from 2011 through 2027.
Under the New
Jersey Casino Control Act, Trump Taj Mahal, Trump Plaza and Trump Marina are required to file New Jersey corporation business tax returns. As of December 31, 2007, Trump Taj Mahal, Trump Plaza and Trump Marina had NOLs of approximately $35,200,
$256,000 and $99,100, respectively, for New Jersey state income tax purposes. The New Jersey state NOLs expire from 2008 through 2014.
56
Predecessor Company net operating losses utilized to offset taxable income of the Reorganized Company
will be recorded in our provision for income taxes as a non-cash charge in lieu of taxes and as a reduction to goodwill, if available, and additional paid-in-capital to the extent goodwill would be reduced to zero.
Tax Distributions
TER Holdings partnership
agreement requires distributions to its partners, TER and Mr. Trump, sufficient in amount to cover all federal, state and local income taxes incident to their ownership of TER Holdings, including special allocations of income, gains, losses,
deductions and credits. TER Holdings has recorded distributions of $1,020 and $979 for the years ended December 31, 2007 and 2006, respectively, and $3,041 for the period May 20, 2005 through December 31, 2005. In addition, the
partnership agreement contains an indemnification clause which may result in additional payments to Mr. Trump upon the disposition of the Trump Taj Mahal Casino Resort property, Trump Plaza Hotel and Casino property or Trump Marina Hotel Casino
property. The amount of these indemnification payments would be sufficient in amount to cover the impact of the disposition on Mr. Trumps federal, state and local income tax positions up to $100,000 and would only be due if Mr. Trump
does not consent to the transaction.
The computations of basic and
diluted net (loss) income per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except share and per share data)
|
|
|
|
Reorganized Company
|
|
|
Predecessor
Company
|
|
|
|
Year Ended
December 31,
|
|
|
May 20, 2005
through
December 31, 2005
|
|
|
January 1, 2005
through
May 19, 2005
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(188,681
|
)
|
|
$
|
(19,069
|
)
|
|
$
|
(36,334
|
)
|
|
$
|
(37,296
|
)
|
Income from discontinued operations
|
|
|
|
|
|
|
562
|
|
|
|
9,806
|
|
|
|
118,748
|
|
Extraordinary gain on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(188,681
|
)
|
|
$
|
(18,507
|
)
|
|
$
|
(26,528
|
)
|
|
$
|
278,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding including Class A Warrants
|
|
|
31,086,918
|
|
|
|
30,920,616
|
|
|
|
30,533,041
|
|
|
|
29,904,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(6.07
|
)
|
|
$
|
(0.62
|
)
|
|
$
|
(1.19
|
)
|
|
$
|
(1.25
|
)
|
Discontinued operations
|
|
|
|
|
|
|
0.02
|
|
|
|
0.32
|
|
|
|
3.97
|
|
Extraordinary gain on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(6.07
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(0.87
|
)
|
|
$
|
9.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potentially dilutive common shares excluded from the computation of diluted net (loss) income per
share due to anti-dilution are as follows:
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
Predecessor
Company
|
|
|
December 31,
|
|
May 20, 2005
Through
December 31, 2005
|
|
January 1, 2005
Through
May 19, 2005
|
|
|
2007
|
|
2006
|
|
|
Potentially dilutive common shares:
|
|
|
|
|
|
|
|
|
Exchangeable limited partnership interest
|
|
9,377,484
|
|
9,377,484
|
|
9,377,484
|
|
13,918,723
|
Ten year warrants
|
|
1,446,706
|
|
1,446,706
|
|
1,446,706
|
|
|
Restricted stock
|
|
|
|
|
|
265,000
|
|
|
Employee stock options
|
|
300,000
|
|
300,000
|
|
300,000
|
|
2,474,500
|
|
|
|
|
|
|
|
|
|
Total
|
|
11,124,190
|
|
11,124,190
|
|
11,389,190
|
|
16,393,223
|
|
|
|
|
|
|
|
|
|
57
The minority interest recorded in our statement of operations would be added to our net income to
calculate diluted earnings per share should the Class B Common Stock become dilutive.
The shares attributable to our Class A Warrants
are considered outstanding for both basic and diluted earnings per share, for all periods from May 20, 2005 through May 20, 2006 (date shares were issued) as there were no events precluding their eventual issuance.
(10)
|
Stock-based Compensation Plans
|
Reorganized
Company
Our shareholders have approved the 2005 Incentive Award Plan (the 2005 Stock Plan) allowing for incentive stock
options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares and other stock-based awards to our officers, employees, consultants and independent directors. A total of 4,000,000 shares of Common Stock has been
reserved for the issuance of awards available for grant under the 2005 Stock Plan.
In accordance with the provisions of SFAS 123R, general
and administrative expenses include compensation expense for our stock option and restricted stock awards of $3,269, $5,197 and $2,753 for the years ended December 31, 2007 and 2006 and the period from May 20, 2005 through
December 31, 2005, respectively.
A summary of activity under the 2005 Stock Plan for restricted stock for the period from
May 20, 2005 to December 31, 2007, is as follows:
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted Average
Grant Date Fair
Value Per Share
|
Outstanding May 20, 2005
|
|
|
|
|
$
|
|
Granted
|
|
350,000
|
|
|
|
18.05
|
Vested
|
|
(35,000
|
)
|
|
|
17.75
|
|
|
|
|
|
|
|
Outstanding December 31, 2005
|
|
315,000
|
|
|
|
18.07
|
Granted
|
|
158,700
|
|
|
|
20.37
|
Vested
|
|
(175,833
|
)
|
|
|
18.83
|
Forfeited
|
|
(1,238
|
)
|
|
|
20.13
|
|
|
|
|
|
|
|
Outstanding December 31, 2006
|
|
296,629
|
|
|
|
18.86
|
Granted
|
|
149,084
|
|
|
|
16.12
|
Vested
|
|
(177,028
|
)
|
|
|
17.14
|
Repurchased
|
|
(20,935
|
)
|
|
|
19.00
|
Forfeited
|
|
(48,097
|
)
|
|
|
19.36
|
|
|
|
|
|
|
|
Outstanding December 31, 2007
|
|
199,653
|
|
|
|
16.99
|
|
|
|
|
|
|
|
Restricted Stock
At December 31, 2007, the remaining unrecognized compensation
expense for nonvested restricted stock to be recognized over the remaining contractual life was $1,252. The weighted-average remaining contractual life of outstanding restricted stock grants at December 31, 2007 was approximately 10 months.
Subsequent to December 31, 2007, 657,253 shares of additional restricted stock were awarded to employees with unrecognized
compensation expense of $2,587 to be recognized over the contractual life. The weighted-average contractual life of these grants was 2 years.
58
Stock Options
The following table summarizes stock option information at December 31,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of
Exercise Prices
|
|
Outstanding
as of
December 31, 2007
|
|
Weighted-average
Remaining
Contractual Life
|
|
Outstanding
Weighted-average
Exercise Price
|
|
Exercisable
as of
December 31, 2007
|
|
Exercisable
Weighted-average
Exercise Price
|
$ 17.75
|
|
300,000
|
|
7.7 years
|
|
$
|
17.75
|
|
|
|
$
|
|
These stock options, which were granted during the period from May 20, 2005 through
December 31, 2005, vest in 100,000 share increments on July 31, 2008, 2009 and 2010. At December 31, 2007, the remaining unrecognized compensation expense for nonvested stock options to be recognized over the remaining contractual
life was $977.
The following table sets forth information about the fair value of the option grant on the date of grant using the
Black-Scholes option pricing model and the weighted-average assumptions used for the grant during the period from May 20, 2005 to December 31, 2005:
|
|
|
|
|
Weighted-average fair value of options granted
|
|
$
|
8.19
|
|
Dividend yields
|
|
|
0.0
|
%
|
Expected volatility
|
|
|
40.5
|
%
|
Risk-free interest rates
|
|
|
4.5
|
%
|
Expected lives
|
|
|
2.4 to 4.6 years
|
|
Predecessor Company
Our Predecessor Company had adopted the 1995 Stock Incentive Plan (the 1995 Stock Plan) allowing for incentive stock options,
nonqualified stock options, stock appreciation rights, phantom stock and performance share awards to our officers, employees, consultants and independent directors. A total of 4,000,000 shares of Common Stock had been reserved for the issuance of
awards available for grant under the 1995 Stock Plan. Effective with our reorganization, all remaining outstanding grants under the 1995 Stock Plan were cancelled.
A summary of activity under the 1995 Stock Plan for our Predecessor Company follows:
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted Average
Exercise Price
Per
Share
|
Outstanding December 31, 2004
|
|
2,474,500
|
|
|
$
|
3.15
|
Forfeited and cancelled
|
|
(2,474,500
|
)
|
|
|
3.15
|
|
|
|
|
|
|
|
Outstanding May 20, 2005
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
Pro forma results of operations if our Predecessor Company had accounted for its stock plans under
the fair value method of SFAS 123R would not be materially different from the reported results of operations.
59
(11)
|
Supplemental Cash Flow Information
|
Supplemental
cash flow information for TER and TER Holdings follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
Predecessor Company
|
|
|
Year Ended
December 31,
|
|
|
May 20, 2005
through
December 31,
2005
|
|
January 1, 2005
through
May 19,
2005
|
|
|
2007
|
|
2006
|
|
|
|
Cash paid for interest
|
|
$
|
129,544
|
|
$
|
126,603
|
|
|
$
|
153,264
|
|
$
|
16,129
|
Cash paid for income taxes
|
|
|
|
|
|
5,172
|
|
|
|
19,486
|
|
|
6,014
|
Equipment purchased under capital leases
|
|
|
|
|
|
277
|
|
|
|
10,468
|
|
|
122
|
Debt of Reorganized Company issued in exchange for debt and accrued interest of Predecessor Company
|
|
|
|
|
|
(1,038
|
)
|
|
|
1,250,000
|
|
|
|
Stock and minority interest of Reorganized Company issued in exchange for debt and accrued interest of Predecessor Company
|
|
|
|
|
|
|
|
|
|
527,300
|
|
|
|
Increase in accounts payable for accrued purchases of property and equipment
|
|
|
13,826
|
|
|
9,350
|
|
|
|
|
|
|
|
(12)
|
Fresh-Start Reporting, Capitalization of the Reorganized Company and Reorganization Expenses
|
Fresh-Start Accounting
We adopted fresh-start reporting upon our emergence from Chapter 11 on the Effective Date in accordance with SOP 90-7.
We were required to apply the fresh-start provisions of SOP 90-7 to our financial statements because (i) the reorganization value of the assets of the emerging entity immediately before the date of confirmation was less than the total of all
post-petition liabilities and allowed claims and (ii) the holders of shares of the common stock of the Predecessor Company (the Old Common Stock) received less than 50 percent of the voting shares of the Reorganized Company. Under
SOP 90-7, application of fresh-start reporting is required on the date on which the plan of reorganization is confirmed by a bankruptcy court and all material conditions to the Plan are satisfied. All material conditions to the Plan were satisfied
as of Effective Date.
Fresh-start reporting required us to adjust the historical cost bases of our assets and liabilities to their
fair value as determined by the reorganization value of the Company as set forth in the Plan. To facilitate the calculation of the Reorganized Companys enterprise value, we developed financial projections. Based on these projections and with
the assistance of an independent appraiser, the Reorganized Company enterprise value was determined using various valuation methods, including (i) a comparison of the Reorganized Company and its projected performance to the market values of
comparable companies, (ii) a review and analysis of several recent transactions of companies within our industry and (iii) a calculation of the present value of the future cash flows under these projections. Based upon the valuations
determined by the independent appraiser, which ranged from $1,800,000 to $2,000,000, we estimated the enterprise value to be $2,000,000. After deducting the total debt of the Reorganized Company, less excess cash, the equity value of the reorganized
company, including minority interest, was $582,300.
The reorganization value, as stated in the disclosure statement relating to the
Plan, was allocated among the reorganized entitys net assets in conformity with procedures specified by SFAS No. 141, Business Combinations (SFAS 141). We engaged an independent appraiser to assist us in the
allocation of reorganization value to our assets and liabilities and we used the independent appraisers analysis and other information to make the allocations as of the Effective Date. Our intangible assets include trademarks (including a
perpetual, exclusive royalty-free license of the Trump name and certain derivatives thereof, subject to certain terms and conditions), customer relationships, leasehold interests and goodwill.
60
The adoption of fresh-start reporting resulted in the following adjustments to our consolidated balance
sheet (including Trump Indiana, Inc.) as of May 20, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
Company
May 20, 2005
|
|
|
Restructuring
of Debt and
Equity
|
|
|
Fresh-start
Adjustments
|
|
|
Reorganized
Company
May 20, 2005
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
106,454
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
106,454
|
Accounts receivable, net
|
|
|
39,611
|
|
|
|
49
|
|
|
|
|
|
|
|
39,660
|
Other current assets
|
|
|
26,540
|
|
|
|
|
|
|
|
4,489
|
|
|
|
31,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
172,605
|
|
|
|
49
|
|
|
|
4,489
|
|
|
|
177,143
|
Net property and equipment
|
|
|
1,701,156
|
|
|
|
|
|
|
|
(223,037
|
)
|
|
|
1,478,119
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
|
|
257,517
|
|
|
|
257,517
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
372,932
|
|
|
|
372,932
|
Other assets, net
|
|
|
129,091
|
|
|
|
(17,921
|
)
|
|
|
18,108
|
|
|
|
129,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,002,852
|
|
|
$
|
(17,872
|
)
|
|
$
|
430,009
|
|
|
$
|
2,414,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
213,938
|
|
|
$
|
(25,431
|
)
|
|
$
|
|
|
|
$
|
188,507
|
Accrued interest payable
|
|
|
172,778
|
|
|
|
(172,778
|
)
|
|
|
|
|
|
|
|
Due to affiliates, net
|
|
|
2,767
|
|
|
|
|
|
|
|
|
|
|
|
2,767
|
Current maturities of long-term debt
|
|
|
83,455
|
|
|
|
(52,458
|
)
|
|
|
|
|
|
|
30,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
472,938
|
|
|
|
(250,667
|
)
|
|
|
|
|
|
|
222,271
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
166,552
|
|
|
|
166,552
|
Long-term debt, net of current maturities
|
|
|
1,816,835
|
|
|
|
(397,423
|
)
|
|
|
|
|
|
|
1,419,412
|
Other long-term liabilities
|
|
|
27,457
|
|
|
|
|
|
|
|
(3,003
|
)
|
|
|
24,454
|
Minority Interest
|
|
|
|
|
|
|
136,841
|
|
|
|
|
|
|
|
136,841
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor Company common stock and warrants
|
|
|
(314,378
|
)
|
|
|
314,378
|
|
|
|
|
|
|
|
|
Reorganized Company common stock, warrants and additional paid-in capital
|
|
|
|
|
|
|
178,999
|
|
|
|
266,460
|
|
|
|
445,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders (deficit) equity
|
|
|
(314,378
|
)
|
|
|
493,377
|
|
|
|
266,460
|
|
|
|
445,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, minority interest and stockholders' (deficit) equity
|
|
$
|
2,002,852
|
|
|
$
|
(17,872
|
)
|
|
$
|
430,009
|
|
|
$
|
2,414,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TER Holdings reorganized balance sheet as of May 20, 2005 differs from TERs
reorganized balance sheet as of May 2005, due to the recognition of TERs additional deferred income tax liability and related goodwill of $103,743. Additionally, TERs minority interest is included in TER Holdings partners
capital.
The net reorganization gain for the period from January 1, 2005 through May 19, 2005, includes $210,117 related to
fresh-start adjustments to assets and liabilities pursuant to SOP 90-7. Net reorganization gain of $75,367 relating to our continuing operations is included as reorganization expense (income) and related costs and net reorganization gain of $134,750
is included in income from our Trump Indiana discontinued operations. The extraordinary gain from reorganization of debt of $196,932 relates to the settlement of long-term debt and accrued interest at an amount less than the historical recorded
value. This gain resulted from the bankruptcy recapitalization and, as such, was unusual and infrequent in nature, it has been reflected as an extraordinary gain pursuant to APB Opinion No. 30, Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, and SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections.
61
Capitalization of the Reorganized Company
On May 20, 2005, the Reorganized Company was
capitalized with non-cash transactions in accordance with the Plan as follows:
Common Stock
We issued
27,089,849 shares of Common Stock in accordance with the Plan. We effected a reverse stock split and the Predecessor Company Common Stock Holders received one share of Common Stock of the Reorganized Company for each 1,000 shares of the Predecessor
Company Common Stock.
Class B Common Stock
We issued 900 shares of Class B Common Stock in accordance with the
Plan approved by the Bankruptcy Court to Mr. Trump, which have the voting equivalency of 9,377,484 shares of TER Common Stock.
Class A Warrants
We issued one-year Class A Warrants to purchase up to 2,207,260 shares of TER Common Stock, at an exercise price of $14.60 per share on a pro rata basis to holders of Old Common Stock and issued
one-year Class A Warrants to purchase up to 1,217,933 shares of TER Common Stock to Mr. Trump at an exercise price of $14.60, in each case subject to certain anti-dilution provisions. On May 20, 2006, holders of First Mortgage Notes
of the Predecessor Company received, on a pro rata basis, the cash proceeds from the exercise of Class A Warrants issued to holders of Old Common Stock and to Mr. Trump, plus any interest accrued thereon. In addition, the holders of the
First Mortgage Notes received 220,379 shares of TER Common Stock relating to Class A Warrants not exercised.
Ten
Year Warrants
Mr. Trump also received ten-year warrants to purchase 1,446,706 shares of TER Common Stock, at an exercise price of $21.90 per share, subject to certain anti-dilution provisions. These ten-year warrants were granted in
connection with a services agreement entered into on the Effective Date. This services agreement is for a three-year rolling term, subject to certain terms and conditions. The ten-year warrants were fully vested on the date of grant and
Mr. Trump does not need to perform any services under the terms of the service agreement in order to retain the rights to such warrants. As such, we have recorded the $8,000 fair value of the ten-year warrants as a non-cash charge to
compensation expense on the Effective Date in the Reorganized Companys statement of operations. The fair value of these warrants was determined using the Black-Scholes valuation method.
Limited Partnership Interests in TER Holdings
As a result of the transactions that took place on the Effective Date,
Mr. Trump owns, directly and indirectly, an approximately 23.5% profits interest in TER Holdings, as a limited partner. Such limited partnership interests are exchangeable at Mr. Trumps option into 9,377,484 shares of TER Common
Stock, subject to certain adjustments.
Reorganization Expenses and Related Costs
Reorganization expenses
(income) and related costs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganized Company
|
|
Predecessor
Company
|
|
|
|
Year Ended
December 31,
|
|
May 20, 2005
through
December 31, 2005
|
|
January 1,
2005 through
May 19, 2005
|
|
|
|
2007
|
|
2006
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-off of deferred financing costs
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Accretion of unamortized debt discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees and other expenses
|
|
|
|
|
|
|
|
|
9,058
|
|
|
49,400
|
|
Revaluation of assets and liabilities pursuant to SOP 90-7
|
|
|
|
|
|
|
|
|
|
|
|
(75,367
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
9,058
|
|
$
|
(25,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-off of deferred financing costs
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Professional fees and other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation of assets and liabilities pursuant to SOP 90-7
|
|
|
|
|
|
|
|
|
|
|
|
(134,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
(134,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
(13)
|
Employee Benefit Plans
|
We have a 401(k) Plan for
our non-union employees. Eligible employees may contribute up to 30% of their earnings, subject to certain limitations, to the 401(k) Plan. We match a portion of participants contributions on an annual basis as determined by management.
Matching contributions under the 401(k) Plan were $3,863, $3,747, $2,379 and $1,497 during the years ended December 31, 2007 and 2006, the period May 20, 2005 through December 31, 2005 and the period January 1, 2005 through
May 19, 2005, respectively.
We also make payments to various multi-employer pension plans under industry-wide union agreements. Under
the Employee Retirement Income Security Act, we may be liable for our share of unfunded liabilities, if any, if the plans are terminated. Pension expense for the years ended December 31, 2007 and 2006, the period May 20, 2005 through
December 31, 2005 and the period January 1, 2005 through May 19, 2005 was $6,478, $7,120, $4,277 and $2,445, respectively.
(14)
|
Transactions with Affiliates
|
Services and
Executive Agreements
We have entered into a services agreement with Mr. Trump whereby Mr. Trump serves as Chairman of the Board of Directors as well as provides other services as defined therein. The initial term of the services
agreement is three years, with automatic renewal options. Our Predecessor Company had an executive agreement with Mr. Trump whereby he agreed to act as President and Chief Executive Officer as well as Chairman of the Board of Directors. This
executive agreement was terminated with the execution of the services agreement. Expenses incurred under these agreements were $2,000, $1,878, $1,565 and $692 during the years ended December 31, 2007 and 2006, the period from May 20, 2005
through December 31, 2005 and the period from January 1, 2005 through May 19, 2005, respectively.
Trademark License
Agreement and Trademark Security Agreement
Under a trademark license agreement dated as of the Effective Date, we have a perpetual, exclusive and royalty-free license to use Mr. Trumps name and likeness in connection with our
casino and gaming activities, subject to certain terms and conditions. Mr. Trumps obligations under the trademark license agreement are secured by an amended and restated trademark security agreement, pursuant to which Mr. Trump has
granted us a first priority security interest in the licensed marks in connection with casino services and gaming activities, subject to certain terms and conditions.
If the services agreement is terminated by us other than for cause, as defined, or if it is terminated by Mr. Trump for good reason, as defined (in each case other than as a result of Mr. Trumps death
or permanent disability) and we do not offer terms to Mr. Trump pursuant to a new services agreement at least as favorable to Mr. Trump as his existing services agreement, then we will have the option to convert the trademark license into
a royalty-bearing license with a ten-year term.
Use of Trump Facilities
In the normal course of business, we engage in various
transactions with other entities owned by Mr. Trump including leasing certain office space and periodic use of Mr. Trumps airplane. During the years ended December 31, 2007 and 2006, the period from May 20, 2005 through
December 31, 2005 and the period from January 1, 2005 through May 19, 2005, we incurred approximately $430, $485, $254 and $83, respectively, relating to such transactions. In 2007, TER entered into an understanding with
Mr. Trump pursuant to which and for no cash consideration, Mr. Trump would make available certain mailing lists or databases developed through his other business activities for TER to make certain offers to individuals on such lists in
order to provide an incentive to visit a TER property.
Right of First Offer Agreement
During September 2006, we amended the
Right of First Offer Agreement (ROFO Agreement) with Trump Organization LLC, an entity controlled by Mr. Trump. The amended ROFO Agreement pertains to construction projects greater than $35,000. Under the terms of the amended ROFO
Agreement we paid Trump Organization LLC $1,870, including minimum monthly fees of $600 and cost saving commissions of $1,270, during the year ended December 31, 2007 and $1,051, including minimum monthly fees of $350 and cost saving
commissions of $701, during the year ended December 31, 2006.
63
(15)
|
Fair Value of Financial Instruments
|
The carrying
amounts of financial instruments included in current assets and current liabilities approximate their fair values due to their short-term nature. The carrying amounts of Casino Reinvestment Development Authority bonds and deposits approximate their
fair values as a result of allowances established to give effect to below-market interest rates.
The estimated fair values of other
financial instruments at December 31, 2007 are as follows:
|
|
|
|
|
|
|
|
|
Carrying Amount
|
|
Fair Value
|
Term Loan
|
|
$
|
393,250
|
|
$
|
393,250
|
Senior Secured Notes
|
|
|
1,248,969
|
|
|
946,094
|
Other long-term debt
|
|
|
1,727
|
|
|
1,727
|
The fair values of the Term Loan and Senior Secured Notes are based on quoted market prices. The
carrying amounts of the remainder of our long-term debt and capital lease obligations approximate fair value.
(16)
|
Discontinued Operations
|
Trump
Indiana
On December 21, 2005, TER Holdings completed the sale of Trump Indiana under the terms of the Stock Purchase Agreement. After accounting for certain taxes, fees and other closing costs and expenses, we received $227,526 in net
proceeds. Under the terms of the Stock Purchase Agreement, $45,005 of the proceeds was placed in escrow and classified as restricted cash pending resolution of certain adjustments. During 2006, we received distributions of $17,630 from the escrow
account following our settlement of IRS tax audits for the years 1995 through 1997. During 2007, the remaining balance of the restricted cash totaling $27,375 became unrestricted following our settlement of IRS tax audits for the years 1998 to 2004.
The operating results of Trump Indiana for all periods presented are shown as discontinued operations. Net revenues for Trump Indiana were
$81,558 and $52,160 for the period from May 20, 2005 through December 21, 2005 and the period from January 1, 2005 through May 19, 2005, respectively. Included in income from discontinued operations is an allocation of interest
expense based on Trump Indianas nonrelated party debt assumed by the purchaser of Trump Indiana of $123 and $17 for the period from May 20, 2005 through December 21, 2005 and the period from January 1, 2005 through May 19,
2005, respectively. Depreciation and amortization on assets of Trump Indiana ceased during the third quarter of 2005 in connection with our classification of Trump Indiana as a discontinued operation. Discontinued operations for the year ended
December 31, 2006 include $562 of income from Trump Indiana, net of income taxes and minority interest due to the favorable settlement of Trump Indiana liabilities retained by us on the date of sale.
64
(17)
|
Quarterly Financial Data (unaudited)
|
The following
unaudited quarterly data includes adjustments (consisting only of normal recurring adjustments) which we consider necessary for a fair presentation unless otherwise indicated. Our quarterly results fluctuate because of the seasonal nature of our
business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
2006
|
|
2007(a)
|
|
|
2006
|
|
Net revenues
|
|
$
|
234,279
|
|
|
$
|
237,652
|
|
|
$
|
244,240
|
|
|
$
|
256,041
|
|
|
$
|
281,102
|
|
$
|
288,390
|
|
$
|
228,614
|
|
|
$
|
244,196
|
|
Income (loss) from operations
|
|
|
19,625
|
|
|
|
18,302
|
|
|
|
13,110
|
|
|
|
24,418
|
|
|
|
39,878
|
|
|
40,979
|
|
|
(242,912
|
)
|
|
|
17,911
|
|
(Loss) income from continuing operations
|
|
|
(8,133
|
)
|
|
|
(9,723
|
)
|
|
|
(13,454
|
)
|
|
|
(4,934
|
)
|
|
|
6,626
|
|
|
5,833
|
|
|
(173,720
|
)
|
|
|
(10,245
|
)
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(8,133
|
)
|
|
$
|
(9,723
|
)
|
|
$
|
(13,454
|
)
|
|
$
|
(4,934
|
)
|
|
$
|
6,626
|
|
$
|
5,833
|
|
$
|
(173,720
|
)
|
|
$
|
(9,683
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.26
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.21
|
|
$
|
0.19
|
|
$
|
(5.59
|
)
|
|
$
|
(0.33
|
)
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(0.26
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.21
|
|
$
|
0.19
|
|
$
|
(5.59
|
)
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
During the quarter ended December 31, 2007, we recorded $28.8 million of income, net of legal fees, related to the settlement of property tax appeals with the City of Atlantic City
and $277.9 million of goodwill and other asset impairment charges.
|
(18)
|
Commitments and Contingencies
|
Operating
Leases
We have entered into operating leases for certain land, office, warehouse space, certain parking space and various equipment. Rent expense during the years ended December 31, 2007 and 2006, the period from May 20, 2005
through December 31, 2005 and the period from January 1, 2005 through May 19, 2005 was $10,537, $12,198, $8,304 and $5,130, respectively, of which $77, $79, $45 and $35, respectively, relates to affiliates.
Future minimum lease payments under noncancellable operating leases as of December 31, 2007, are as follows:
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
$
|
9,214
|
2009
|
|
|
7,106
|
2010
|
|
|
6,944
|
2011
|
|
|
4,059
|
2012
|
|
|
2,156
|
Thereafter
|
|
|
77,056
|
|
|
|
|
Total
|
|
$
|
106,535
|
|
|
|
|
Construction Commitments
At December 31, 2007, we have outstanding future construction
commitments of approximately $167,000 relating primarily to the new hotel tower at Trump Taj Mahal.
65
Philadelphia Option Agreements
On September 30, 2005, in connection with its pursuit of
a gaming license in Philadelphia, Pennsylvania, TER Keystone entered into an options agreement (the Options Agreement), relating to an approximate 18-acre parcel of land located in Philadelphia, Pennsylvania (the Philadelphia
Site). Pursuant to the Options Agreement, TER Keystone was granted the right to either (i) lease the Philadelphia Site (the Lease Option) on and subject to the terms and conditions set forth in a form of ground lease or
(ii) purchase the Philadelphia Site (the Purchase Option) on the terms and conditions set forth in the Options Agreement. During July 2006, TER Keystone entered into an option agreement for additional land
adjacent to the
original 18-acre parcel. On December 20, 2006, the Gaming Control Board of the Commonwealth of Pennsylvania awarded gaming licenses to entities other than TER Keystone. TER Keystone terminated both options agreements, which resulted in a $1,000
termination fee, paid in January 2007. During the year ended December 31, 2006 and the period from May 20, 2005 through December 31, 2005, fees totaling $5,466 and $4,937 relating to the option agreements and other expenses were
recorded as development costs in the accompanying statements of operations.
Casino Reinvestment Development Authority
Obligations
Pursuant to the provisions of the Casino Control Act, we must either obtain investment tax credits in an amount equivalent to 1.25% of our gross casino revenues, as defined in the Casino Control Act, or pay an alternative tax of
2.5% of our gross casino revenues. Investment tax credits may be obtained by making qualified investments, or by depositing funds which may be converted to bonds by the Casino Reinvestment Development Authority (CRDA), both of which bear
interest at two-thirds of market rates resulting in a fair value lower than cost. Certain of our subsidiaries are required to make quarterly deposits with the CRDA to satisfy their investment obligations.
Our qualified investments are classified as other long-term assets on the accompanying consolidated balance sheets and are summarized as follows:
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2007
|
|
2006
|
CRDA deposits, net of valuation allowance of $26,961 and $20,347, respectively
|
|
$
|
46,912
|
|
$
|
40,329
|
CRDA bonds, net valuation allowance of $6,248 and $7,842, respectively
|
|
|
9,277
|
|
|
7,838
|
|
|
|
|
|
|
|
|
|
$
|
56,189
|
|
$
|
48,167
|
|
|
|
|
|
|
|
During the years ended December 31, 2007 and 2006, the period May 20, 2005 through
December 31, 2005 and the period from January 1, 2005 through May 19, 2005, we charged to operations $4,346, $4,478, $2,907, and $1,731, respectively, to give effect to the below market interest rates associated with CRDA deposits and
bonds. From time to time, we have elected to donate funds on deposit with the CRDA for various projects.
NJSEA Subsidy
Agreement
On April 12, 2004, the twelve Atlantic City casinos (the Casinos), executed an agreement (the NJSEA Subsidy Agreement) with the New Jersey Sports & Exposition Authority (NJSEA) and
the CRDA. The NJSEA Subsidy Agreement provides that the Casinos, on a pro rata basis according to their gross revenues, shall: (i) pay $34,000 to the NJSEA in cash in four yearly payments through October 15, 2007, and donate $52,000 to the
NJSEA from the regular payment of their CRDA obligations for use by the NJSEA through 2008 to enhance purses, fund breeders awards and establish account wagering at New Jersey horse racing tracks; and (ii) donate $10,000 from the regular
payment of their CRDA obligations for use by the CRDA as grants to such other North Jersey projects as the CRDA shall determine. Our Atlantic City properties have estimated their portion of the industry obligation at approximately 23%.
The NJSEA Subsidy Agreement further provides for a moratorium until January 2009 on the conduct of casino gaming at any New Jersey racetrack (unless
casinos controlling a majority of the hotel rooms operated by the casinos in Atlantic City otherwise agree). Violation of the moratorium terminates the NJSEA Subsidy
66
Agreement and all further payment obligations to the NJSEA and requires the NJSEA to return all undistributed cash to the casinos and the CRDA to return all
undistributed donated investment alternative tax obligation payments to the casinos.
The NJSEA Subsidy Agreement also expressly
conditioned the provision that the Casinos donate $62,000 of CRDA obligations upon the timely enactment and funding of the Casino Expansion Fund Act. That act timely became effective in 2004 and established the Atlantic City Expansion Fund. It
further directed the CRDA to provide the fund with $62,000 and make that amount available, on a pro rata basis, to each casino licensee for investment in eligible projects in Atlantic City approved by the CRDA. An eligible project is defined by
statute as one which adds hotel rooms and, in certain circumstances, retail, dining or non-gaming entertainment venues or other non-gaming amenities including parking spaces. In September 2006, the CRDA approved the new hotel tower now under
construction at the Trump Taj Mahal as an eligible project and, pursuant to October 2006 agreements, authorized grants to our Atlantic City casinos in the aggregate amounts of approximately $13,800 from the Atlantic City Expansion Fund and $1,575
from a separate Casino Capital Construction Fund also administered by the CRDA.
The eleven Atlantic City casinos presently operating are
currently negotiating with representatives of New Jersey state government to obtain a further moratorium on the conduct of casino gaming at New Jersey race tracks in exchange for further subsidy payments to the NJSEA.
CAFRA Agreement
Trump Taj Mahal received a permit under the Coastal Area Facilities Review Act (CAFRA) (which is included as a
condition of the Trump Taj Mahals casino license) that initially required Trump Taj Mahal to begin construction of certain improvements on the Steel Pier by October 1992, which improvements were to be completed within 18 months of the
commencement of construction. Trump Taj Mahal initially proposed a concept to improve the Steel Pier, the estimated cost of which was $30,000. Such concept was approved by the New Jersey Department of Environmental Protection, the agency which
administers CAFRA. In March 1993, Taj Associates, one of our Predecessor Companys former subsidiaries, obtained a modification of its CAFRA permit providing for an 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, pursuant to which Trump Taj Mahal leases the Steel Pier to an amusement park operator, terminates
on December 31, 2008. The conditions of the CAFRA permit renewal thereafter are under discussion with the New Jersey Department of Environmental Protection.
We and certain of our employees
are involved from time to time in legal proceedings arising in the ordinary course of our business. While any proceeding or litigation contains an element of uncertainty, management believes that the final outcomes of these other matters are not
likely to have a material adverse effect on our results of operations or financial condition. In general, we have agreed to indemnify certain of our key executives and directors 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 any legal proceedings absent a showing of such persons
gross negligence or malfeasance.
Settlement of Atlantic City Property Tax Appeals
On November 7, 2007, we entered into a
stipulation of settlement with the City of Atlantic City (City) to settle a series of appealed real property tax assessments relating to Trump Taj Mahal, Trump Plaza and Trump Marina for various tax years through 2007. Under the terms of
the agreement, we will receive a refund of $34,000 relating to previously paid taxes consisting of (i) $12,000 in cash, which was received on December 7, 2007 and (ii) $22,000 in credits to be applied against future real property tax
payments as follows: $4,000 per year in 2009, 2010 and 2011 and $5,000 per year in 2012 and 2013.
67
South Jersey Transportation Authority Settlement
During 2006, we reached a settlement with
respect to a complaint we filed against the South Jersey Transportation Authority. General and administrative expenses in 2006 include a $1,750 reduction to reflect the amount of the settlement.
Chapter 11 Cases
Although we have emerged from bankruptcy, we still are in the process of resolving various claims and other litigation in
connection with the Plan, which may continue for the foreseeable future.
On July 18, 2005, the Bankruptcy Court considered a motion
brought by a certain group of persons alleging that they had held shares of THCR Common Stock on the record date for distributions under the Plan (and who subsequently sold their shares prior to the distribution date) but did not receive any
distributions under the Plan, which they believe were wrongly made to the beneficial holders of our stock on the distribution date. The movants had sought an order compelling us to make distributions to them under the Plan. After additional briefing
and a court hearing with respect to the issue on October 8, 2005, the Bankruptcy Court denied the movants motion on February 17, 2006. The movants filed an appeal from the judgment entered in the Bankruptcy Court in favor of the
Predecessor Company. The movants appealed this motion to the United States District Court for the district of New Jersey. Briefs have been filed. On January 26, 2007 oral argument occurred, and further briefing was thereafter completed.
68
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TRUMP ENTERTAINMENT RESORTS, INC.
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SCHEDULE II
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VALUATION AND QUALIFYING ACCOUNTS
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FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006,
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THE PERIOD FROM MAY 20, 2005 THROUGH DECEMBER 31, 2005 AND
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THE PERIOD FROM JANUARY 1, 2005 THROUGH MAY 19, 2005
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(in thousands)
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