10-K 1 d10k.htm FORM 10-K Form 10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


FORM 10-K

 


 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

 


TRUMP ENTERTAINMENT RESORTS, INC.

TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.

TRUMP ENTERTAINMENT RESORTS FUNDING, INC.

(Exact name of registrants as specified in their charters)

 


 

Delaware   1-13794   13-3818402
Delaware   33-90786   13-3818407
Delaware   33-90786-01   13-3818405

(State or other jurisdiction of

incorporation or organization)

  (Commission File Numbers)  

(I.R.S. Employer

Identification No.)

1000 Boardwalk at Virginia Avenue

Atlantic City, New Jersey 08401

(609) 449-6515

(Address, including zip code, and telephone number, including area code, of principal executive offices)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 


Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

 

Registrant

 

Title of Each Class

Trump Entertainment Resorts, Inc.   Common Stock, par value $0.001 per share
Trump Entertainment Resorts Holdings, L.P.   None
Trump Entertainment Resorts Funding, Inc.   None

Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if each registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether each registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

 

Trump Entertainment Resorts, Inc.

    

Large Accelerated Filer  ¨            Accelerated Filer  x            Non-Accelerated Filer  ¨

Trump Entertainment Resorts Holdings, L.P.

    

Large Accelerated Filer  ¨            Accelerated Filer  ¨            Non-Accelerated Filer  x

Trump Entertainment Resorts Funding, Inc.

    

Large Accelerated Filer  ¨            Accelerated Filer  ¨            Non-Accelerated Filer  x

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate by check mark whether the registrants have filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No  ¨

The aggregate market value of the voting and non-voting common equity of Trump Entertainment Resorts, Inc. held by non-affiliates as of June 30, 2005 was approximately $367,561,434, based upon the closing price of $13.60 for the common stock in the Over-the-Counter Market on that date. The aggregate market value of the voting and non-voting common equity of Trump Entertainment Resorts Funding, Inc. held by non-affiliates as of June 30, 2005 was $0. The common stock of Trump Entertainment Resorts, Inc. has been trading on the Nasdaq National Market since September 20, 2005 under the ticker symbol “TRMP.”

As of March 6, 2006, there were 27,635,876 shares of common stock and 900 shares of class B common stock (having a voting equivalency of 9,377,484 shares of common stock) of Trump Entertainment Resorts, Inc. outstanding. As of March 6, 2006, there were 100 shares of common stock of Trump Entertainment Resorts Funding, Inc. outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Certain portions of Trump Entertainment Resorts, Inc.’s definitive proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 in connection with the 2006 annual meeting of stockholders of Trump Entertainment Resorts, Inc. are incorporated by reference into Part III of this Report.

 



TABLE OF CONTENTS

 

         Page
PART I

Item 1.

   Business   1

Item 1A.

   Risk Factors   12

Item 1B.

   Unresolved Staff Comments   15

Item 2.

   Properties   16

Item 3.

   Legal Proceedings   17

Item 4.

   Submission of Matters to a Vote of Security Holders   19
PART II

Item 5.

   Market for Registrant’s Common Equity and Related Stockholder Matters   20

Item 6.

   Selected Financial Data   22

Item 7.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations   24

Item 7A.

   Quantitative and Qualitative Disclosures About Market Risk   30

Item 8.

   Financial Statements and Supplementary Data   31

Item 9.

   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   31

Item 9A.

   Controls and Procedures   31

Item 9B.

   Other Information   31
PART III

Item 10.

   Directors and Executive Officers of the Registrants   32

Item 11.

   Executive Compensation   32

Item 12.

   Security Ownership of Certain Beneficial Owners and Management   32

Item 13.

   Certain Relationships and Related Transactions   32

Item 14.

   Principal Accounting Fees and Services   32
PART IV

Item 15.

   Exhibits and Financial Statement Schedules   33

 

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PART I

 

Item 1. Business

In this Report, “TER” means Trump Entertainment Resorts, Inc., a Delaware corporation. The words “we,” “us,” “our” and similar terms collectively refer to TER and its subsidiaries, including, but not limited to, Trump Entertainment Resorts Holdings, L.P., a Delaware limited partnership of which TER is the sole general partner and an indirect limited partner (“TER Holdings”), and Trump Entertainment Resorts Funding, Inc., a Delaware corporation wholly-owned by TER Holdings (“TER Funding”). TER Holdings and TER Funding are co-issuers of $1.25 billion aggregate principal amount of 8.5% Senior Secured Notes due 2015 (the “Senior Notes”) issued in connection with our reorganization consummated on May 20, 2005, as discussed more fully below.

We are the successors to Trump Hotels & Casino Resorts, Inc., a Delaware corporation formed in 1995 (“THCR”), and its subsidiaries.

The Company

General. We own and operate three casino hotel properties in Atlantic City, New Jersey: Trump Taj Mahal Casino Resort (“Trump Taj Mahal”), Trump Plaza Hotel and Casino (“Trump Plaza”), and Trump Marina Hotel Casino (“Trump Marina”). Our company is the sole vehicle through which Donald J. Trump, the Chairman of our board of directors (the “Board”) and our largest individual stockholder, conducts gaming activities and strives to provide customers with outstanding casino resort and entertainment experiences consistent with the Donald J. Trump standard of excellence. Our company is separate and distinct from Mr. Trump’s real estate and other holdings.

The following is a summary of our casino properties at December 31, 2005:

 

Casino Property

  

2005 Net
Revenues

(000’s)

   Number of
Rooms /
Suites
   Approximate
Number of
Gaming Tables
  

Approximate
Number of

Slot Machines

Trump Taj Mahal

   $ 477,703    1,250    205    4,269

Trump Plaza

     273,391    906    92    2,703

Trump Marina

     241,127    728    76    2,356
                     

Total

   $ 992,221    2,884    373    9,328
                     

Emergence from Bankruptcy. On May 20, 2005 (the “Effective Date”), we emerged from reorganization proceedings voluntarily commenced by THCR and certain of its subsidiaries (the “Debtors”) on November 21, 2004 under chapter 11 of the United States Bankruptcy Code. On the Effective Date, all material conditions to our plan of reorganization (the “Plan”) were satisfied, and we recapitalized and renamed our company, “Trump Entertainment Resorts, Inc.,” merged and/or dissolved certain of THCR’s subsidiaries, consolidated our indebtedness and substantially reduced our debt service requirements. For a more comprehensive overview of the reorganization, see “Emergence from Bankruptcy” below.

Sale of Trump Indiana. In December 2005, we sold one of our subsidiaries, Trump Indiana, Inc., through which we owned and operated Trump Casino Hotel, a riverboat casino and hotel at Buffington Harbor, in Gary, Indiana (“Trump Indiana”), to The Majestic Star Casino, LLC for a gross purchase price of $253 million, subject to certain adjustments. The sale resulted in approximately $227 million in net proceeds to us after accounting for certain taxes, fees and other closing costs and expenses incurred in conjunction with the sale. The sale also included our 50% interest in all common land-based and waterside operations in support of Trump Indiana, including our interests in a parking garage at the site.

Our consolidated financial statements included in this Report reflect Trump Indiana as a discontinued operation. The consolidated financial statements for prior periods have been restated to be consistent with such presentation.

 

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Investor Information

We are a public company and are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding us and other issuers that file electronically.

Our website address is http://www.trumpcasinos.com. We make available, without charge, through our website, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such reports are filed with or furnished to the SEC. References in this document to our website are not and should not be considered part of this Report, and the information on our website is not incorporated by reference in this Report.

Our Corporate Governance Guidelines, Code of Business Conduct, Code of Ethics for Principal Officers and Directors, and the charters of our Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Executive Committee, are available free of charge on our website under the “Board and Board Committee Charters” link in the “Corporate Information” section.

The certifications of our Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 about the disclosure contained in this Report are attached hereto and available on our website.

Business and Marketing Strategy

General. Following our reorganization in May 2005, we set out to transform our company from an organization struggling to survive to a company poised for growth. As part of this transformation, we have begun several initiatives aimed at improving our physical plant, operating results and changing our corporate culture.

Recruitment of Key Management Personnel. We have reinforced our management team with several key executives with proven success at highly regarded and respected casino companies. These individuals bring a variety of skills to our company, including turnaround management, casino marketing and operations, design and construction and financial acumen.

Jim Perry joined our Board on the Effective Date and was named Chief Executive Officer and President in July 2005. Mr. Perry has had a long and distinguished career in the casino industry including serving as Chief Executive Officer and President of Argosy Gaming Company. While at Argosy, he recruited and led a management team through a period of tremendous growth, resulting in Argosy being recognized as a premier casino operator and Mr. Perry being named “CEO of the Year” in the gaming industry.

Mark Juliano, an internationally recognized casino executive with a lengthy and successful career in the gaming industry, was named Chief Operating Officer in August 2005. Mr. Juliano served as President of Caesar’s Atlantic City from 1994 to 1999, and most recently, as President of Caesars Palace in Las Vegas.

Dale Black joined us in November 2005 as Executive Vice President and Chief Financial Officer, bringing 20 years of public accounting and corporate finance experience. He spent the last 12 years at Argosy Gaming Company, becoming Chief Financial Officer in 1998.

Virginia McDowell was appointed Executive Vice President and Chief Information Officer in October 2005, bringing 25 years of experience in operations, business development, marketing and technology in Atlantic City and, most recently, with Argosy Gaming.

 

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Paul Keller was named Executive Vice President of Design and Construction in October 2005, joining us from a similar position with Argosy Gaming for the last 12 years. He previously held a leadership role with Walt Disney Imagineering where he was involved in the Epcot Center and Tokyo Disneyland projects.

Jim Rigot rejoined us as General Manager of Trump Plaza in September 2005, after opening the property as a Casino Shift Manager in 1984 and later serving as Executive Vice President of Casino Operations. He gained 30 years of gaming industry experience with Harrah’s, Tropicana Casino Resort, Foxwoods Casino Resort and, most recently as Vice President of Table Games at the Borgata Resort Spa and Casino.

Rosalind Krause was named Assistant General Manager of Trump Taj Mahal in September 2005, after serving in a similar position with Paris Las Vegas. She is a veteran gaming executive with experience at Caesars Entertainment and Harrah’s Entertainment in both the Atlantic City and Las Vegas markets.

Increase Capital Spending to Reinvigorate Our Properties and Operations. During the several years leading up to our reorganization, we did not have sufficient capital to keep our properties competitive from a physical standpoint. Our new capital structure coupled with the recent sale of Trump Indiana in December 2005 have given us the necessary capital to reinvest in our properties to enable us to create the feeling of comfort, fun and excitement that our customers expect and to improve the back of house areas for our employees.

In 2005, we renovated nearly all of the standard rooms at our hotels, with the remaining rooms and suites to be completed in 2006. In addition, we are nearing the completion of a $22 million renovation to Trump Plaza’s casino floor, transforming the ambience and level of comfort for our customers.

In December 2005, we announced a $110 million capital plan which will commence in 2006, and is expected to take 18 months to complete. This is the first phase of a multi-year effort to update and improve our three existing properties.

At Trump Plaza, our plans include changes to the entrance and lobby area to enhance the sense of arrival to our property, and to replace the “New Yorker” restaurant with a new $4 million food venue. We also plan to begin a facelift of the original oceanfront façade which faces the neighboring Ocean One Mall which is being renovated and expected to re-open, as the Forum Shops, in 2006.

At Trump Taj Mahal, we plan on completely renovating the entrance corridor from the parking garage into a new retail and restaurant promenade. On the casino floor, we plan on adding a new casino lounge featuring entertainment, a new high-end Asian themed gaming area, a new and enlarged noodle bar, in addition to general renovations of the casino floor. We are also renovating our penthouse suites at the Trump Taj Mahal.

At Trump Marina, we are planning for renovations to the meeting and convention space, improvements to the casino floor, creation of a new direct entrance onto the casino from the parking garage, construction of a new food venue, and new retail offerings.

In addition to the $110 million in renovation capital, we anticipate breaking ground in June 2006 on a new 800-room hotel tower at Trump Taj Mahal. Our current estimate for this project is approximately $250 million, including infrastructure improvements and connections necessary to integrate the new tower with the existing facility. We expect the construction to take two years. We are also exploring a master plan to add room towers at Trump Plaza and Trump Marina over the next several years.

In addition to the physical changes to the properties, we have committed to several technology initiatives over the next two years that we feel will have a profound impact on our operations, including updating and standardizing our casino management systems, implementing a data warehouse and the introduction of yield management and centralized scheduling systems.

Improve Our Operating Results. We have initiated the first steps of a multifaceted plan to improve our operating results. Our goal is to become recognized as a leader in operations in order to increase value for our stockholders and provide a platform for growth.

 

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In 2005, we reduced our management structure at our three properties to create clearer lines of responsibility and accountability, saving over $3 million annually.

We initiated what will be an ongoing process of surveying Atlantic City customers to determine the attributes most important to them in selecting which casinos to visit. We also asked these customers to rank us against our competitors in performance against these attributes. We are using the results of this research to design our operating, marketing and capital plans around the needs of our customers.

The yield management system will insure that we have the proper mix of customers in our hotel rooms at the right times and at the right price. This will help us to improve the cash hotel revenues and increase our gaming revenue.

We also plan to implement a centralized scheduling system at each of our casinos to more efficiently plan our staffing to expected demand and to allow our department managers to spend more time throughout the facility enabling them to better address our customers’ needs.

We will continue to identify ways to improve our operations with a focus on becoming recognized as one of the premier operators in the industry. We plan to introduce new customer service and leadership development programs in 2006 to reward our employees for displaying those attributes that are most important to customers and to provide our managers with the tools necessary to become more dynamic and effective leaders capable of executing our strategies for the future.

Improve Marketing Programs. Our marketing costs as a percentage of revenues are approximately 4% higher than the average of our competitors. We have initiated several steps to improve our marketing expenditures to insure that we are providing the offers that appeal to the desired casino customers and that we are able to measure the profitability of these programs. Our goal is to focus our marketing spending on those programs that have the highest impact on our profitability and to shift our emphasis to attracting the right quality of customer as opposed to the quantity of customers.

One of the biggest changes in this area will be the implementation of data warehouse technology which will allow us much more efficiently to measure the profitability of marketing programs and to tailor those programs most effectively to the needs of specific customer groups.

Capitalize on Our Brand to Grow Our Business. The Trump brand is a tremendous asset. We plan to execute the initiatives above to allow us to take advantage of the Trump brand and expand our asset base. We are continually looking for opportunities to grow our business and diversify our cash flow. We plan to dedicate the necessary resources to identify those opportunities that best match up with our brand and provide the attractive returns for our shareholders.

Casino Properties and Other Ventures

Trump Taj Mahal Casino Resort. Trump Taj Mahal, located on the northern end of Atlantic City’s boardwalk (the “Boardwalk”), covers over 19 acres of land and features 1,250 hotel rooms, including 242 suites, 19 dining and 12 beverage locations, including nine restaurants that can accommodate approximately 3,000 diners at any given time, and approximately 140,000 square feet of ballroom, meeting room and pre-function area space. The property also features approximately 158,500 square feet of gaming space that includes approximately 205 table games (including poker tables), approximately 4,269 slot machines and an approximately 12,000 square-foot Poker, Keno and Race Simulcasting room and an Asian-themed table game area offering popular Asian table games. Trump Taj Mahal also features the following: an approximately 20,000 square foot multi-purpose entertainment complex known as the “Xanadu Theater,” with seating capacity for up to approximately 1,200 people, which can be used as a theater, concert hall, boxing arena or exhibition hall; the Casbah nightclub; the Mark G. Etess Arena, featuring approximately 63,000 square feet of exhibition and

 

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entertainment space which can accommodate over 5,000 people; and a health club, spa and fitness center with an Olympic style indoor pool. Trump Taj Mahal also has a parking garage for approximately 6,950 cars, a 22 bay bus terminal and a roof-top helipad.

Trump Plaza Hotel and Casino. Trump Plaza is located at the center of the Boardwalk at the end of the Atlantic City Expressway (the main highway into the city) with direct access to Boardwalk Hall (an entertainment and sporting venue owned and operated by the New Jersey Sports and Exposition Authority that can accommodate up to approximately 13,000 people). Trump Plaza features approximately 906 hotel rooms, including approximately 114 suites, approximately 96,389 square feet of casino space with approximately 2,703 slot machines and approximately 92 table games. Amenities include approximately 28,000 square feet of conference space, an approximately 800-seat cabaret theater, two cocktail lounges, nine restaurants, one player club, a seasonal beach bar, health spa, an indoor pool, arcade and five retail outlets. Trump Plaza’s parking garage can accommodate 13 buses and approximately 2,700 cars.

Trump Marina Hotel Casino. Trump Marina covers a 14.6 acre tract of land in Atlantic City’s marina district, overlooks the Senator Frank S. Farley State Marina and features a 27-story hotel with 728 guest rooms, including 153 suites, 97 of which are luxury suites. The casino offers approximately 80,000 square feet of gaming space, approximately 2,356 slot machines, approximately 76 table games, a simulcast racetrack facility and approximately 58,000 square feet of convention, ballroom and meeting space. Trump Marina also features an approximately 540-seat cabaret-style theater, a nightclub, two player clubs, two retail stores, seven restaurants, a cocktail lounge, a recreation deck complete with a health spa, outdoor pool, tennis and shuffleboard courts, basketball courts, jogging track and a pool side snack bar. To facilitate access to the property, Trump Marina has a nine-story parking garage capable of accommodating approximately 3,000 cars. Trump Marina also has an 11 bay bus terminal and a roof-top helipad.

Philadelphia Venture. On September 30, 2005, we entered into an options agreement with Hunting Fox Associates I, L.P. relating to an approximately 18-acre parcel of land in the Huntington Park Industrial Area (known as the Budd Commerce Center) in the Nicetown section of Philadelphia, Pennsylvania for the potential development of a gaming facility. Our entry into the options agreement represented our first step in applying for one of only two Category 2 Slot Licenses available pursuant to legislation in the City of Philadelphia and one of only five available in Pennsylvania. We believe the Category 2 Slot Licenses could be issued by the Pennsylvania Gaming Control Board (the “Control Board”) by the end of 2006 and will each initially allow the operation of up to 3,000 slot machines with the ability to apply for an additional 2,000 slot machines. On December 26, 2005, we formed Keystone Redevelopment Partners LLC (“Keystone”) with a group of local investors, including Pat Croce and certain members of the musical group Boyz II Men, to pursue this license and for the purposes of jointly leasing or purchasing the 18-acre parcel of land and to construct, own and operate a gaming and entertainment facility on the property. We also entered into a management agreement pursuant to which we became Keystone’s exclusive agent to manage and operate the facility on its behalf in the event we are awarded one of the licenses. On December 28, 2005, we and Keystone submitted our application for the slot license to the Control Board. Initial hearings on the five applications for the two Philadelphia Category 2 Slot Licenses are currently scheduled by the Control Board to be held from April 10 to 12, 2006 in Philadelphia.

Rhode Island Venture. We are also actively pursuing a potential venture in Johnston, Rhode Island, near Providence. Initiation of casino gaming in Rhode Island would require a change to the state constitution, and for several years, state lawmakers have been negotiating terms and tax rates for an exclusive casino operating licenses with a Native American tribe and its backers. In 2004, legislation to put a proposal on the ballot was derailed by the Rhode Island State Supreme Court.

In February 2006, we began a campaign to persuade Rhode Island legislators to establish terms and tax rates independently, and then allow competitive bidding for any new casino licenses. Recently, we and our development partner, Ajax Gaming Venture LLC, met with the Johnston town council to present plans for a potential $750 million to $1 billion facility that would include a casino, hotel, 30,000 square feet of retail space

 

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and 4,000 to 5,000 square-foot entertainment center on a 112-acre site. Although this project would be several years in the future, we believe it represents a growth opportunity for our company if expanded gaming is approved in Rhode Island.

Competition

Atlantic City Market. The Atlantic City market serves the New York-Philadelphia-Baltimore-Washington, D.C. corridor with nearly 30 million adults living within a three-hour driving radius, and has historically generated consistent growth in gaming revenues. The Atlantic City market is the second largest gaming market in the United States, second only to Las Vegas. In 2005, the 12 casinos in the Atlantic City market generated $5.0 billion in casino revenue. Our three casinos combined have approximately 23.1% of the gaming positions and 19% of the hotel rooms in the Atlantic City market and generate approximately 21.4% of the market gaming revenue.

Competition in Atlantic City is intense and is increasing. At the present time, the 12 casino hotels located in Atlantic City, including each of our properties, compete with each other on the basis of customer service, quality and extent of amenities. For this reason, we and our competitors require substantial capital expenditures to compete effectively.

In the past few years, our competitors in Atlantic City have announced or completed new development and expansion projects. The Borgata Casino Hotel and Spa is in its first expansion phase, expected to be completed in spring 2006, which will include additional restaurants and a nightclub. The Borgata has also announced its second phase, expected to be completed by the end of 2007, which will include a new 800-room hotel tower, resort condominiums, a spa, retail shops, and meeting space.

In June 2005, Harrah’s Entertainment Inc. acquired Caesars Entertainment Inc. In July 2005, Harrah’s Entertainment Inc.’s House of Blues Club opened at Harrah’s Showboat property which is adjacent to the Trump Taj Mahal. This approximately $90 million project added a range of amenities to the property, including a concert hall, nightclub, themed gaming space and a restaurant.

Harrah’s is renovating Ocean One Mall at Caesars Atlantic City into an upscale retail and entertainment complex, which is expected to open in 2006.

Harrah’s Atlantic City has started construction of a major expansion project which is expected to include approximately 172,000 square feet of retail and entertainment space, a spa which is expected to open in 2007 and a 964 room hotel tower which is expected to open in 2008.

In November 2004, Aztar Corp. completed its expansion of its Tropicana Atlantic City property. The expansion included an additional 502 hotel rooms and a 200,000 square foot themed retail, dining and entertainment complex.

In the second quarter of 2004, Resorts Atlantic City completed construction of a 459-room hotel tower with additional gaming space.

In addition, we believe that there are several other sites on the Boardwalk and in the marina district on which casino hotels could be built in the future, and various applications for casino licenses have been filed and announcements with respect thereto have been made from time to time. Proposed and future developments and expansions may have a material adverse effect on our business and operations.

We cannot ascertain at this time the effects that any of the above-mentioned new projects will have on the Atlantic City gaming market. However, the added strength of these competitors and resulting economies-of-scale could further diminish our market share in the market in which we compete.

 

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Meadowlands Racino. During 2003, bills were introduced in the New Jersey Legislature to authorize the New Jersey Lottery Commission to permit the operation of video lottery terminals (“VLTs”) at the at the Meadowlands Racetrack. The Meadowlands is located approximately 125 miles north of Atlantic City and less than ten miles from midtown Manhattan. Slot machines or VLT gaming at the Meadowlands could adversely affect Atlantic City casinos, including our casinos.

Pennsylvania. In July 2004, the Pennsylvania legislature enacted the Race Horse Development and Gaming Act which authorizes the Control Board to permit a total of up to 61,000 slot machines in up to 14 different licensed locations in Pennsylvania, seven at racetracks (each with up to 5,000 slot machines), and five at slot parlors (two in Philadelphia, one in Pittsburgh and two elsewhere, each with up to 5,000 slot machines) and two at established resorts (each with up to 500 slot machines). Twenty-five applications are now pending with the Control Board for these 14 licenses, including our application which is one of five for the two Category 2 Slot Licenses available in the City of Philadelphia. Three of the racetracks and the two Philadelphia slot parlors are located in our market area. It is possible that slot machine operations could commence in late 2006 at the racetracks and that, by 2007, up to 15,000 slot machines could be operating at these locations. Our license application may not be granted by the Control Board and, even if granted, competition from five Philadelphia area slot machine facilities could adversely impact our Atlantic City casinos. For the status of our license application see “Casino Properties and Other Ventures—Philadelphia Venture” above.

New York. Pursuant to legislation enacted in 2001, the Division of the Lottery of the State of New York is authorized to permit the installation of VLTs at various horse racing facilities in New York. During 2004, VLT operations commenced at each of four upstate and western New York racetracks and at a fifth racetrack in Sullivan County, which is considerably closer (approximately 95 miles) to Manhattan. Two additional VLT facilities are presently under construction, one at Aqueduct Racetrack in Queens and the other at Yonkers Raceway in Yonkers, locations less than 15 miles from Manhattan. The Aqueduct facility will be managed by an affiliate of MGM-Mirage and is expected to begin operating 4,500 VLTs in late 2006. The Yonkers facility is expected to begin operating 3,000 VLTs in late 2006 and, within a few months, increase in size to 5,500 VLTs. The 2001 legislation also authorized the Governor of New York to negotiate compacts authorizing the operation of up to six Native American casino facilities including slot machine gaming. A compact negotiated in 2002 authorized three such facilities located in the western part of New York and outside of our primary market area. The remaining three Native American casinos, if developed, are required by law to be located in either Sullivan County or Ulster County, adjoining counties approximately 100 miles northwest of Manhattan. Competition from the VLT facilities now under construction at Aqueduct and Yonkers and from such Native American casinos as may be authorized and operated in Sullivan or Ulster County could adversely impact our casinos.

Native American Tribes. Our properties also face considerable competition from casino facilities operated by federally recognized Native American tribes, such as Foxwoods Resort Casino in Ledyard, Connecticut and Mohegan Sun Casino Resort in Uncasville, Connecticut. Pursuant to the Indian Gaming Regulatory Act (the “IGRA”), which was passed by Congress in 1988, any state that permits casino-style gaming, even if only for limited charity purposes, is required to negotiate gaming compacts with federally recognized Native American tribes. Under the IGRA, Native American tribes enjoy comparative freedom from regulation and taxation of gaming operations, which provides them with an advantage over their competitors, including our properties.

In addition, Native American nations have sought or are seeking federal recognition, land and gaming compacts in New York, Pennsylvania, Connecticut and other states near Atlantic City. If successful, additional casinos built in or near this portion of the United States could have a material adverse effect on the business and operations of our properties.

There could be further competition in our markets as a result of the upgrading or expansion of facilities by existing market participants, the entrance of new gaming participants into a market or legislative changes. We expect each market in which we participate, both current and prospective, to be highly competitive.

 

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Regulatory and Licensing

Gaming Regulation. The gaming industry is highly regulated, and we must maintain our casino licenses and pay gaming taxes to continue our gaming operations. Each of our casinos is subject to extensive regulation under the statutes and regulations of the State of New Jersey. Also, since February 2004, we have been a registered publicly traded corporation with the Nevada Gaming Control Board (the “NGCB”) under the Nevada Gaming Control Act and are subject to the licensing and regulatory control of the Nevada Gaming Commission, the NGCB and the Clark County Liquor and Gaming Licensing Board. These statutes and regulations generally concern the financial stability of the casino licensee, the good character of the owners, managers and employees and of other persons with financial interests in the gaming operations (including those with certain ownership levels of a casino licensee’s securities) and the procedures and controls which govern those gaming operations. A more detailed description of New Jersey and Nevada laws and regulations to which we are subject is contained in Exhibit 99.1 to this Report and is incorporated by reference herein. Gaming operations that we may undertake in the future in other jurisdictions, including but not limited to, Philadelphia, will also subject us and such operations to regulations by such other jurisdictions.

Other Regulation. In addition to gaming regulations, our business is subject to various other federal, state and local laws and regulations, including but not limited to, restrictions and conditions concerning taxation, treasury regulations, building code and land use requirements, environmental matters and local licenses and permits. United States Department of Treasury (“DOT”) regulations require casinos to report currency transactions involving more than $10,000 per patron per gaming day. Treasury Financial Crimes Enforcement Network regulations further require casinos to report certain gaming patron transactions involving suspicious activity. We have established internal control procedures to comply with these DOT regulations, including: (i) computer exception reporting; (ii) review of currency and suspicious activity transactions and reporting by committees comprised of casino operations, marketing and administration executives; (iii) internal audit testing of DOT regulation compliance; (iv) training employees to comply with DOT regulations; and (v) a disciplinary program for employee violations.

We believe that all required licenses, permits and other approvals necessary to conduct our business have been obtained for our operations in the State of New Jersey and elsewhere. Material changes in these laws or regulations or in the interpretation of the same by courts or administrative agencies could adversely affect our company, including its operating results.

Smoking Ban. On January 9, 2006, the New Jersey Legislature adopted the New Jersey Smoke-Free Air Act, which will take effect on April 15, 2006. The law prohibits the smoking of tobacco in structurally enclosed indoor public places and workplaces in New Jersey, including licensed casino hotels. The law permits smoking within the perimeter of casino and casino simulcasting areas, and permits 20% of hotel guest rooms to be designated as smoking rooms. Several bills have been introduced in the New Jersey State Assembly and State Senate to repeal the exemption to the smoking ban for casino and casino simulcasting areas. The New Jersey ban on smoking in indoor public places and, if enacted, a repeal of the exemption for casino and casino simulcasting areas could have a material adverse effect on the Atlantic City gaming market, including our casinos.

Employees and Labor Relations

Number of Employees. The table below sets forth the approximate number of our full-time equivalent employees working at each of our properties as of December 31, 2005:

 

Property

  

Number of Full-Time

Equivalent Employees

Trump Taj Mahal

   3,500

Trump Plaza

   2,200

Trump Marina

   1,800
    

Total

   7,500
    

 

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Collective Bargaining Agreements. Certain of our casino hotel employees are subject to collective bargaining agreements. Approximately 3,163 of our employees are covered by a collective bargaining agreement with Local 54, UNITE-HEREIU (Hotel Employees and Restaurant Employees International Union) which was effective September 15, 2004 and is set to expire on September 14, 2009. Approximately 223 of our employees are covered by a collective bargaining agreement with the International Union of Operating Engineers, Local 68 which was effective May 1, 2001 and expires on April 30, 2006. Approximately 92 of our employees are covered by a collective bargaining agreement with the United Brotherhood of Carpenters and Joiners of America, Local 623 which was effective May 1, 2001 and expires on April 30, 2006. Approximately 28 of our employees are covered by a collective bargaining agreement with the International Union of Painters & Allied Trades, District Council 711 which was effective May 1, 2001 and expires on April 30, 2006. Approximately 14 of our employees are covered by a collective bargaining agreement with the International Alliance of Theatrical Stage Employees, Local 917 which was effective July 1, 2001 and expires on June 30, 2006. Approximately 12 of our employees are covered by a collective bargaining agreement with the International Brotherhood of Teamsters, Local 331 which was effective March 1, 2005 and expires on February 28, 2007. We believe we have established productive and professional relationships with all of our collective bargaining partners as well as our represented and unrepresented employees.

Licensing Requirements. Certain of our employees are required to be licensed by, or registered with the New Jersey Casino Control Commission, depending upon the nature of their employment. Casino employees are subject to more stringent licensing requirements than non-casino employees, and are required to meet applicable standards pertaining to such matters as financial responsibility, good character, ability, casino training, experience and in-state residency. These regulations have resulted in significant competition for eligible employees.

Seasonality

Our cash flows from operating activities are seasonal in nature. Spring and summer are traditionally the peak seasons for our properties, with autumn and winter being non-peak seasons. Consequently, our operating results for the two quarters ending in March and December are not historically as profitable as the two quarters ending in June and September. Any excess cash flow achieved from operations during peak seasons is used to subsidize non-peak seasons. Performance in non-peak seasons is usually dependent on favorable weather and a long-weekend holiday calendar. In the event that we are unable to generate excess cash flows in one or more peak seasons, we may not be able to subsidize non-peak seasons, if necessary.

Emergence from Bankruptcy

On April 5, 2005, the United States Bankruptcy Court for the District of New Jersey entered an order confirming the Plan, which became effective on May 20, 2005. Upon effectiveness, all material conditions to the Plan were satisfied and the Debtors emerged from chapter 11. Pursuant to the Plan, we recapitalized and renamed our company, merged and/or dissolved certain of our subsidiaries, consolidated our indebtedness and substantially reduced our debt service requirements.

Distributions to Holders of THCR Common Stock

As part of the Plan, we implemented a 1,000 for 1 reverse stock split of THCR’s common stock, (which we refer to as “THCR Common Stock”) such that each 1,000 shares of THCR Common Stock immediately prior to the reverse stock split were consolidated into one share of common stock of TER (which we refer to as “TER Common Stock”), rounding up for fractional shares. Following the reverse stock split, holders of THCR Common Stock received an aggregate of approximately 19,944 shares of TER Common Stock (approximately 0.05% on a fully diluted basis for holders other than Mr. Trump). All options to acquire THCR Common Stock were cancelled. Such holders (other than Mr. Trump) also received Class A Warrants to purchase up to

 

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approximately 2,207,260 shares of TER Common Stock (approximately 5.34% on a fully diluted basis) and received an aggregate of $17.5 million in cash. Based on the foregoing, each holder of THCR Common Stock received:

 

    0.001 shares of TER Common Stock for each share of THCR Common Stock beneficially owned by such holder, subject to the disposition of fractional interests following the reverse stock split;

 

    Class A Warrants to purchase up to approximately 0.1106736 shares of TER Common Stock for each share of THCR Common Stock beneficially owned by such holder. The number of shares of a TER Common Stock into which such Class A Warrants are exercisable were rounded up to the nearest whole number; and

 

    approximately $0.88 for each share of THCR Common Stock beneficially owned by such holder.

Under the Plan, the holders of THCR Common Stock are also entitled to receive a pro rata share of the net proceeds from the sale of the former World’s Fair site in Atlantic City, which was sold at auction for a purchase price of $25.15 million in September 2005. The net proceeds of the sale are being held in escrow pending further order of the Bankruptcy Court, and upon release, will be distributed to the former holders (other than Mr. Trump) of THCR Common Stock in connection with the Plan. See “Legal Proceedings” below.

Debt Restructuring

Distributions to Holders of TAC Notes. On the Effective Date, the holders of approximately $1.3 billion aggregate principal amount of 11.25% First Mortgage Notes due 2006 of Trump Atlantic City Associates and Trump Atlantic City Funding, Inc., Trump Atlantic City Funding II, Inc. and Trump Atlantic City Funding III, Inc., which we refer to collectively as the “TAC Notes,” were entitled to receive a pro rata allocation of the Senior Notes and TER Common Stock under the Plan, or could otherwise elect to either maximize the amount of the Senior Notes or TER Common Stock they would receive under the Plan. The following table reflects the various distributions for each $1,000 principal amount of TAC Notes depending on the election by the holders:

 

     Distribution

Election

   Cash    TER Common
Stock
(# shares)
  

Senior Notes

($ principal
amount)

Pro Rata

   $ 53.51    20.250    $ 598

Maximize Senior Notes

   $ 53.51    8.308    $ 773

Maximize TER Common Stock

   $ 53.51    61.212    $ 0

In addition to the foregoing distribution, as of May 22, 2006 (the “Class A Warrant Expiration Date”), the holders of TAC Notes will be entitled to receive, on a pro rata basis, (i) the cash proceeds from the exercise of the Class A Warrants to purchase an aggregate of 3,425,193 shares of TER Common Stock, plus any interest accrued thereon, and (ii) to the extent any of the Class A Warrants are not exercised prior to the Class A Warrant Expiration Date, the shares of TER Common Stock reserved for issuance upon the exercise of such warrants.

 

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Distributions to Holders of TCH First Priority Notes. On the Effective Date, the holders of approximately $435 million aggregate principal amount of 11.625% First Priority Mortgage Notes due 2010 of Trump Casino Holdings, LLC (“TCH”) and Trump Casino Funding, Inc. (“TCF”), which we refer to collectively as the “TCH First Priority Notes,” were entitled to receive a pro rata allocation of cash and TER Common Stock under the Plan, or could otherwise elect to either maximize the amount of cash or TER Common Stock they would receive. The following table reflects the various distributions for each $1,000 principal amount of TCH First Priority Notes depending on the election by the holders:

 

     Distribution

Election

   Cash    TER Common
Stock
(# shares)
  

Senior Notes

($ principal
amount)

Pro Rata

   $ 72.80    1.370    $ 1,000

Maximize Cash

   $ 88.91    0.266    $ 1,000

Maximize TER Common Stock

   $ 22.80    4.795    $ 1,000

Holders of TCH First Priority Notes also received an additional amount of cash equal to the simple interest accrued on $425 million at the annual rate of 12.625% through the Effective Date on the regularly scheduled interest payment dates for the TCH First Priority Notes, provided that interest accrued from the last date through which interest was paid (March 15, 2005) through the Effective Date was distributed in cash on the Effective Date.

Distributions to Holders of TCH Second Priority Notes. On the Effective Date, holders of approximately $54.6 million aggregate principal amount of 17.625% Second Priority Mortgage Notes due 2010 of TCH and TCF, which we refer to as the “TCH Second Priority Notes,” and together with the TCH First Priority Notes, the “TCH Notes” received, for each $1,000 principal amount of TCH Second Priority Notes:

 

    approximately $141.57 in cash;

 

    approximately $874 principal amount of Senior Notes, and

 

    approximately 2.66 shares of TER Common Stock.

Holders of TCH Second Priority Notes also received an additional amount of cash equal to simple interest accrued on (i) $54.6 million at the annual rate of 18.625% from the last scheduled date to which interest was paid (September 15, 2004) with respect to the TCH Second Priority Notes to February 21, 2005, and (ii) approximately $47.7 million at the annual rate of 8.5% from February 22, 2005 through the Effective Date.

Credit Facility and Senior Notes. On the Effective Date, we entered into a $500 million credit facility (the “Credit Facility”) with a syndicate of bank lenders with Morgan Stanley Senior Funding, Inc. as administrative agent. Our obligations under the Credit Facility are guaranteed by each of our direct and indirect restricted subsidiaries, and are secured by a first priority security interest in substantially all of these subsidiaries’ assets. Also on that date, TER Holdings and TER Funding issued the Senior Notes in connection with the Plan. On November 22, 2004, the Debtors had obtained debtor-in-possession financing which provided up to $100 million of borrowings during the Debtors’ chapter 11 cases, secured by a first priority priming lien on substantially all the assets of the Debtors. We used the proceeds from the Credit Facility to repay the debtor-in-possession financing.

Equity Capitalization

Immediately following the Effective Date, TER Common Stock was owned as set forth below, on a fully diluted basis, assuming the following:

 

    the exercise of an aggregate of 3,425,193 Class A Warrants with an exercise price of $14.60 per share of TER Common Stock (consisting of 2,207,260 Class A Warrants issued to holders other than Mr. Trump and 1,217,933 Class A Warrants issued to Mr. Trump);

 

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    the exercise of an aggregate of 1,446,706 ten-year warrants issued to Mr. Trump having an exercise price of $21.90 per share of TER Common Stock; and

 

    the exchange of Mr. Trump’s limited partnership interests in TER Holdings for an aggregate of 9,377,484 shares of TER Common Stock.

 

Beneficial Owner(s)

  

Approximate
Percentage Ownership

as of Effective Date

 

Former TAC Noteholders

   63.69 %

Donald J. Trump

   29.15 %

Other Stockholders (excluding Mr. Trump)

   5.39 %

Former TCH First Priority Noteholders

   1.41 %

Former TCH Second Priority Noteholders (excluding Mr. Trump)

   0.35 %
      

Total

   100.00 %

 

Item 1A. Risk Factors

Our business is subject to a number of risks. You should carefully consider the following risk factors, together with all of the other information included or incorporated by reference in this annual report, before you decide whether to purchase TER securities. The risks set out below are not the only risks we face. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the trading price of TER securities could decline, and you may lose all or part of your investment.

We remain highly leveraged and our ability to generate cash depends on many factors beyond our control.

Although we have consolidated our long-term indebtedness and significantly reduced our debt service obligations through our reorganization, we remain a highly-leveraged company. Our aggregate long-term indebtedness totaled approximately $1.5 billion as of December 31, 2005. TER is a holding company and TER Holdings conducts substantially all of its operations through its subsidiaries. As a result, our ability to meet our debt service obligations, including debt service obligations on the Senior Notes and the Credit Facility, substantially depends on our properties’ ability to generate sufficient cash flow. This ability is, however, subject to general economic, financial, competitive, legislative, regulatory and other factors that may be unforeseeable and/or are beyond our control. This risk is highlighted by the fact that all of our current operations are concentrated in one market and any downturn in the Atlantic City market or any region from which we draw patrons may adversely impact our business, operations, results of operations and financial condition.

We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Credit Facility in an amount sufficient to enable us to pay our indebtedness or that future borrowings will be available to us under the Credit Facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

We need to increase capital expenditures to compete effectively and the terms of our indebtedness restrict our operating flexibility.

The gaming industry market is highly competitive and is expected to become more competitive in the future. Many of our competitors in Atlantic City have recently completed or announced significant development projects. Capital expenditures, such as room refurbishments, amenity upgrades and new gaming equipment, are necessary from time to time to enhance the competitiveness of our properties. While we have formulated and have begun to implement a strategic capital expenditure plan at each of our properties, including the construction of a hotel tower at Trump Taj Mahal to be commenced in June 2006, the Senior Notes and the Credit Facility limit our ability to:

 

    incur additional debt;

 

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    raise capital;

 

    pay dividends or make other distributions;

 

    make investments;

 

    sell assets;

 

    engage in mergers or consolidations;

 

    enter into affiliate transactions; or

 

    grant liens, among other things.

Should any new projects fail to generate projected cash flows, our operating performance, revenues and earnings may be materially adversely affected. In addition, the Credit Facility imposes certain financial covenants that require us to comply with specified financial ratios and tests based on our cash flows and leverage position. These covenants restrict, to a certain degree, our financial and operating flexibility. Any failure to comply with any of these obligations could result in an event of default under the Senior Notes and our Credit Facility which, if not cured or waived, could result in the acceleration of the Senior Notes and amounts due under our Credit Facility then outstanding.

Our recently announced capital improvements are susceptible to delays, cost overages, business interruptions and other uncertainties, which could have an adverse effect on our business, financial condition and results of operations.

We have recently announced a series of capital improvements for all three of our properties, including the construction of an 800-room hotel tower at Trump Taj Mahal expected to commence in June 2006. Such development and capital improvement projects are susceptible to various risks and uncertainties, including, but not limited to the following:

 

    favorable market conditions and consumer demand for the completed project;

 

    general construction risks, such as cost overages, plan changes or specification modifications, shortages of equipment, materials or skilled labor, labor disputes, unforeseen environmental, engineering or geological problems, work stoppages, fire and other natural disasters, construction scheduling problems and weather interferences;

 

    changes and concessions required by governmental or regulatory authorities;

 

    delays in obtaining, or the inability to obtain, all licenses, permits and authorizations required to complete the project; and

 

    disruption of our existing operations.

Any failure or delay to complete any new development or expansion project as planned, within budget or in a manner that generates anticipated revenue, could have an adverse effect on our business, financial condition and results of operations.

Gaming is a regulated industry and changes in the law could have a material adverse effect on our operations.

Gaming in New Jersey is regulated extensively by federal and state regulatory bodies, including the New Jersey Casino Control Commission and state and federal taxing, law enforcement and liquor control agencies. We and various of our officers and other qualifiers have received the licenses, permits and authorizations required to operate our properties. Failure to maintain or obtain the requisite casino licenses would have a material adverse effect on our business.

The Casino Control Commission consolidated and renewed our licenses to operate Trump Taj Mahal, Trump Plaza and Trump Marina until June 2007.

 

13


If new gaming regulations are adopted in the jurisdictions in which we operate, such regulations could impose restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals have been introduced by the legislatures of New Jersey that, if enacted, could adversely affect the tax, regulatory, operations or other aspects of the gaming industry and our financial performance. Legislation of this type may be enacted in the future.

Pennsylvania and New York have enacted gaming legislation that may harm us, and other states may do so in the future.

In 2004, the Pennsylvania legislature enacted the Race Horse Development and Gaming Act. It authorizes the operation of slot machines in up to fourteen licensed locations in Pennsylvania, seven at racetracks (each with up to 5,000 slot machines), five at slot parlors (two in Philadelphia, one in Pittsburgh and two elsewhere, each with up to 5,000 slot machines) and two at established resorts (each with up to 500 slot machines). Twenty-five applications, including ours, are now pending for the fourteen licenses. Three of the racetrack sites, Pocono Downs, Philadelphia Park and Chester Downs, and the two Philadelphia slot parlors are located in our market area. Operations could commence at one or more of these five Philadelphia area locations in late 2006. By 2007, up to 15,000 slot machines could be operating there.

In 2001, the New York Legislature authorized the installation of VLTs at various horse racing facilities in the State. VLT facilities are presently under construction at Aqueduct Racetrack and Yonkers Raceway, locations less than fifteen miles from Manhattan. Aqueduct expects to begin operating 4,500 VLTs in late 2006. Yonkers expects to begin operating 3,000 VLTs in late 2006 and, within a few months, increase to 5,500 VLTs. The 2001 legislation also authorized the Governor of New York to negotiate compacts to allow up to six Native American casinos in the State including slot machines. Three have now been located in the western part of New York and outside of our primary market area but the remaining three, if approved and developed, are required by law to be located in either Sullivan or Ulster County, areas approximately 100 miles northwest of Manhattan.

In addition, other states near New Jersey, including Maryland, are currently contemplating gaming legislation. The net effect of gaming facilities in such other states, when operational, on the Atlantic City gaming market, including our properties, cannot be predicted. Since our market is primarily a drive-in market, legalized gaming in one or more states neighboring or within close proximity to New Jersey could have a material adverse effect on the Atlantic City gaming market overall, including our properties.

We might not be successful in pursuing additional gaming ventures in existing or emerging gaming markets, including Philadelphia.

We are continuously looking to grow our business and diversify our cash flow by actively pursuing opportunities to take advantage of the Trump brand and expand our asset base in additional gaming markets. In September 2005, one of our subsidiaries entered into an options agreement to lease or purchase land in Philadelphia for the possible development of a gaming facility in connection with our application for one of only two Category 2 Slot Licenses anticipated to be made available in Philadelphia and one of only five such licenses available in the Commonwealth of Pennsylvania. Competition for this slot license, as well as other gaming opportunities that are or are expected to become available in additional jurisdictions, is expected to be intense, and many of our known or anticipated competitors for available gaming licenses have greater resources and economies of scale than we do. We can not assure you that we will be successful in pursuing additional gaming ventures or developing additional gaming facilities, or procuring a slot license in Philadelphia.

Even if we were successful in gaining entry into any new gaming jurisdiction, including Philadelphia, our Credit Facility and the indenture governing the Senior Notes contain certain operating and financial restrictions which would prevent us from developing gaming facilities other than by entering into a joint venture arrangement or other arrangement with one or more third parties, such as we have entered into in connection with our Philadelphia slot license application, whereby we would co-develop or manage the facility.

 

14


Our business is subject to a variety of other risks and uncertainties.

In addition to the risk factors described above, our financial condition and results of operations could be affected by many events that are beyond our control, such as:

 

    capital market conditions that could affect our ability to raise capital and access capital markets and raise our financing costs in connection with refinancing debt or pursuing other alternatives;

 

    war, future acts of terrorism and their impact on capital markets, the economy, consumer behavior and operating expenses;

 

    competition from existing and potential new competitors in Atlantic City and other markets (including online gaming), which is likely to increase over the next several years;

 

    regulatory changes;

 

    state tax law changes that increase our tax liability; and

 

    other risks described from time to time in periodic reports filed by us with the SEC.

Occurrence of any of these risks would materially adversely affect our operations and financial condition.

 

Item 1B. Unresolved Staff Comments

Not applicable.

 

15


Item 2. Properties

See “Business—Casino Properties and Other Ventures” for a brief description of the location and general character of each of our properties.

General. Substantially all of the real and personal property (other than cash) of each of our properties, including their respective hotel and casino facilities and the parcels of land on which they are situated, secure our indebtedness under the Credit Facility and Senior Notes on a first and second priority basis, respectively. Each of our properties has financed or leased and, from time to time, will finance or lease its acquisition of furniture, fixtures and equipment, including slot machines. The lien in favor of any such lender or lessor may be superior to the liens securing the indebtedness owing under the Credit Facility and the Senior Notes.

Each of our properties leases space to various retailers and food and beverage outlets in their respective facilities.

Trump Taj Mahal. We currently own the approximately 39.4 acres of land that comprise the Trump Taj Mahal site, including the 19.25 acres on which the facility is situated, and 5.2 acres of land suitable for development. The Trump Taj Mahal site also includes the Steel Pier comprised of approximately 3.5 acres and related property located on the opposite side of the Boardwalk from Trump Taj Mahal. We currently lease the Steel Pier to an amusement park operator pursuant to a lease agreement which we and the operator have mutually agreed to terminate effective in December 2006.

Trump Plaza. We own and lease several parcels of land in and around Atlantic City, including four parcels of land on which Trump Plaza is situated. We also lease one of the four parcels of land on which Trump Plaza is situated from Plaza Hotel Management Company (“PHMC”) pursuant to a non-renewable ground lease expiring in December 2078 (the “PHMC Lease”). We are responsible for the payment of fixed rent, as well as all other costs and expenses with respect to the use, operation and ownership of the leased tract and the improvements now, or which may in the future be, located thereon, including, but not limited to, all maintenance and repair costs, insurance premiums, real estate taxes, assessments and utility charges. The improvements located on the leased tract are owned by us through the duration of the term of the PHMC Lease, and upon the expiration of the term of the PHMC Lease (for any reason), ownership of such improvements will then shift to PHMC. We have the option to purchase the leased parcel at certain times during the term of such PHMC Lease under certain circumstances.

We also lease, pursuant to the PHMC Lease, an approximately 11,800 square foot parcel of land located near the intersection of Mississippi and Pacific Avenues and own a 5,750 square foot parcel of land adjacent to it.

We also own five parcels of land, aggregating approximately 43,300 square feet, and lease one parcel consisting of approximately 3,125 square feet. All of such parcels are contiguous and are located along Atlantic Avenue, on the same block as Trump Plaza’s garage. These parcels of land are used for signage and surface parking and are encumbered by the Senior Notes.

Trump Marina. We own Trump Marina’s hotel and casino facility and the 14.6 acre triangular-shaped parcel of land on which it is situated and an adjacent 1.5 acre of land suitable for development. We also own an employee parking lot located on Route 30, approximately two miles from Trump Marina, which can accommodate approximately 1,000 cars.

Trump Tower, New York. We lease office space in Trump Tower located in New York, New York for general, executive and administrative purposes pursuant to a lease, dated November 1, 1996, as amended, with Trump Tower Commercial, LLC, an entity owned by Donald J. Trump. The Trump Tower lease expires on August 31, 2010. The annual rent, payable in equal monthly installments, during the three-year period from September 1, 2003 to August 31, 2006 is $68,459, and the annual rent from September 1, 2006 to August 31, 2010 will be $72,262, plus property taxes.

 

16


Item 3. Legal Proceedings

Chapter 11 Cases. In connection with our reorganization consummated in May 2005, we are still in the process of resolving various claims and other litigation matters 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. We are uncertain whether or not the movants’ will appeal the Bankruptcy Court’s ruling.

DLJ Merchant Banking Partners III, LP (“DLJMB”) had filed proofs of claims in the Debtors’ chapter 11 cases in which DLJMB alleged that it was due in excess of $26 million for fees and expenses in connection with a proposed recapitalization of our company that we had pursued in 2004. We disputed the validity of the claims. On October 6, 2005, we commenced proceedings in the Bankruptcy Court to seek, among other relief, entry of an order disallowing and expunging the claims. On or about March 8, 2006, we and DLJMB entered into an agreement to settle the claims.

Pequot Tribe Litigation. On May 28, 2003, one of our indirect subsidiaries, Trump Entertainment Resorts Development Company, LLC (“TER Development”), filed a complaint against, among others, the Paucatuck Eastern Pequot Indian Tribal Nation (the “Pequot Tribe”) and Eastern Capital Development, Inc. (“ECD”) in the Superior Court of New London, Connecticut. In that complaint, TER Development alleged fraud, breach of contract, conspiracy, violation of the Connecticut Unfair Trade Practices Act and intentional interference with contractual relations by ECD in connection with certain contractual arrangements between our subsidiary and the Pequot Tribe. Pursuant to such arrangements, TER Development had agreed, among other things, to support the efforts of the Pequot Tribe to obtain federal recognition, and together they had agreed to exercise commercially reasonable efforts to pursue the operation of a tribal gaming facility to be managed by our subsidiary. In the complaint, TER Development seeks, among other things, compensatory and punitive damages, attorney fees and a finding by the court that ECD has interfered with TER Development’s business relationship with the tribe and that certain members of the Pequot Tribe Tribal Counsel are in default under the aforementioned contractual arrangements in the sum of approximately $10 million. The Pequot Tribe filed a motion to dismiss most aspects of the case. However, this motion was recently denied by the Superior Court. The Pequot Tribe has appealed this decision, and discovery has commenced with respect to the case. On October 12, 2005, the Bureau of Indian Affairs, U.S. Department of Interior (BIA) denied the application of the Pequot Tribe for federal recognition, a prerequisite for developing a gaming facility. The parties are engaged in mediation as it is uncertain how the BIA decision will affect this lawsuit.

Power Plant Litigation. On December 30, 2004, TER Development filed a complaint against Richard T. Fields, Coastal Development, LLC, Power Plant Entertainment, LLC, Native American Development, LLC, Joseph S. Weinberg and The Cordish Company (collectively, the “Power Plant Group”) in the Circuit Court of the 17th Judicial District for Broward County, Florida, in which TER Development alleged that Power Plant Entertainment, LLC improperly obtained certain agreements with the Seminole Tribe of Florida. TER Development asserts claims for fraud, breach of fiduciary duty, conspiracy, violation of the Florida Deceptive and Unfair Trade Practices Act and interference with prospective business relationship as a result of the Power Plant Group’s actions. We have commenced discovery and are scheduling depositions in connection with this case. At this time, we cannot predict the outcome of such litigation.

 

17


401(k) Plan Participant Litigation. On February 8, 2005, certain individuals filed a complaint in the United States District Court for the District of New Jersey, Camden Division, against certain persons and organizations that included members of the Trump Capital Accumulation Plan Administrative Committee. In their complaint, the plaintiffs alleged, among other things, that such persons and organizations, who were responsible for managing the Trump Capital Accumulation Plan, breached their fiduciary duties owed to the plan participants when THCR Common Stock held in employee accounts was allegedly sold without participant authorization if the participant did not willingly sell such shares by a specified date in accordance with the Plan. The plaintiffs brought this suit under the Employee Retirement Income Security Act of 1974 on behalf of themselves and certain other plan participants and beneficiaries and sought to have the court certify their claims as a class action. In their complaint, the plaintiffs also sought, among other things, damages for losses suffered by certain accounts of affected plan participants as a result of such allegedly improper sale of THCR Common Stock and reasonable costs and attorneys’ fees. The parties have conducted limited discovery and are currently engaged in nonbinding mediation. If the parties are unable to resolve the matter through mediation, full discovery is anticipated to commence in February 2006. At this time, we cannot predict the outcome of such litigation or its effect on our business.

Federal Income Tax Examination. Three of our subsidiaries, Trump Taj Mahal Associates, LLC Trump Plaza Associates, LLC and Trump Marina Associates, LLC are currently involved in examinations with the Internal Revenue Service concerning their federal partnership income tax returns for the tax years 2002 and 2003. While any adjustments resulting from this examination could affect their specific state income tax returns, we do not believe that adjustments, if any, will have a material adverse effect on their financial condition or results of operations.

Other Litigation. In addition to the foregoing, we and certain of our employees are involved from time to time in other legal proceedings arising in the ordinary course of our business. While any proceeding or litigation contains an element of uncertainty, we believe 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 our employees 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.

 

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Item 4. Submission of Matters to a Vote of Security Holders

All matters submitted to a vote of stockholders during the quarter ended December 31, 2005 were submitted by our Board at our 2005 Annual Meeting of Stockholders held on October 6, 2005. Each of the matters voted on at the 2005 Annual Meeting was carried and received the following votes:

Number of Shares

Proposal 1: Election of Three (3) Class I Directors:

 

     For    Withheld

Wallace B. Askins

   23,911,913    6,839,186

Edward H. D’Alelio

   30,704,465    46,634

James J. Florio

   30,698,391    52,708

Proposal 2: Approval of the Trump Entertainment Resorts, Inc. 2005 Incentive Award Plan:

 

For

   23,635,058

Against

   1,955,812

Abstentions

   5,120,229

Proposal 3: Ratification of Ernst & Young LLP, as independent auditors for the year ended December 31, 2005:

 

For

   22,425,939

Against

   2,172,201

Abstentions

   12,195

Broker non-votes

   6,140,764

 

19


PART II

 

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

THCR Common Stock. From THCR’s initial public offering on June 12, 1995 to September 27, 2004, the THCR Common Stock was listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “DJT.” From September 28, 2004 to the Effective Date, THCR Common Stock traded on the Over-the-Counter (the “OTC”) Bulletin Board. On the Effective Date and in connection with the Plan described elsewhere in this Report, THCR Common Stock was cancelled following a 1,000 for one reverse stock split and the issuance of TER Common Stock.

TER Common Stock. From the Effective Date to September 19, 2005, TER Common Stock traded on the OTC Bulletin Board under the ticker symbol “DJTCQ.OB.” Since September 20, 2005, TER Common Stock has been trading on the Nasdaq National Market System under the ticker symbol “TRMP.”

The following table reflects the high and low sales prices, or high and low bid prices, as applicable, rounded to the nearest penny, of the THCR Common Stock as reported by the NYSE and the OTC Bulletin Board for each quarterly period in 2004 and 2005 (through May 19, 2005). OTC market quotations reflect inter-dealer quotations and do not include retail markups, markdowns or commissions and may not necessarily represent actual transactions.

 

     High    Low

2004

     

First Quarter

   $ 3.65    $ 2.05

Second Quarter

   $ 2.69    $ 1.55

Third Quarter

   $ 2.63    $ 0.17

Fourth Quarter

   $ 2.15    $ 0.48

2005

     

First Quarter

   $ 2.04    $ 0.65

Second Quarter (through May 19, 2005)

   $ 1.82    $ 1.42

The following table reflects the high and low sales prices, or high and low bid prices, as applicable, rounded to the nearest penny, of TER Common Stock as reported by the OTC Bulletin Board and the Nasdaq National Market System, as applicable, for each quarterly period in 2005 (beginning on the Effective Date when TER Common Stock was issued) and the subsequent interim quarterly period (through March 6, 2006). OTC market quotations reflect inter-dealer quotations and do not include retail markups, markdowns or commissions and may not necessarily represent actual transactions.

 

     High    Low

2005

     

Second Quarter (beginning May 20, 2005)

   $ 14.50    $ 10.00

Third Quarter

   $ 21.50    $ 13.50

Fourth Quarter

   $ 21.98    $ 15.75

2006

     

First Quarter (through March 6, 2006)

   $ 21.38    $ 17.18

Holders. As of March 6, 2006, there were 360 holders of record of TER Common Stock.

Nine hundred shares of our class B common stock are also issued and outstanding, all of which are owned by Donald J. Trump. No established trading market exists for our class B common stock and our class B common

 

20


stock is not permitted to receive any dividends or distributions (other than certain distributions upon liquidation) with respect to our equity. The issued and outstanding 900 shares of class B common stock held by Mr. Trump have the voting equivalency of 9,377,484 shares of TER Common Stock and represent the shares of TER Common Stock issuable upon the conversion of Mr. Trump’s limited partnership interest in TER Holdings. The shares of class B common stock are redeemable at par to the extent the limited partnership interests in TER Holdings are converted by Mr. Trump.

We currently beneficially own an approximately 76.5% profits interest in TER Holdings, as both a general and limited partners of TER Holdings, and Mr. Trump owns directly and indirectly an approximately 23.5% profits interest in TER Holdings, as a limited partner.

Dividends. We have never paid a dividend on TER Common Stock and do not anticipate paying one in the foreseeable future. The payment of any future dividends will be at the discretion of our Board and will depend upon, among other things, our financial condition and capital needs, legal restrictions on the payment of dividends, contractual restrictions in financing agreements and on other factors deemed pertinent by our Board. It is the current policy of our Board to retain earnings, if any, for use in our properties’ operations. Pursuant to the terms of the Credit Facility and Senior Notes, TER Holdings and its subsidiaries are restricted from paying dividends and making distributions.

 

21


Item 6. Selected Financial Data

The following table sets forth certain of our historical financial information for the period from May 20, 2005 to December 31, 2005 (Reorganized Company) and for the period from January 1, 2005 to May 19, 2005 and the years ended December 31, 2004, 2003, 2002 and 2001 (Predecessor Company).    All financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto referenced elsewhere in this Report.

 

    Reorganized
Company
    Predecessor
Company
 
   

May 20, 2005

through

December 31, 2005

   

January 1, 2005

through

May 19, 2005

    Years Ended December 31,  
       
        2004     2003     2002     2001  

Revenues:

           

Gaming

  $ 663,140     $ 398,409     $ 1,069,463     $ 1,083,467     $ 1,147,554     $ 1,115,919  

Rooms

    48,257       26,360       75,996       75,660       78,421       77,919  

Food and beverage

    77,806       44,198       127,348       122,285       125,114       127,485  

Other

    26,833       12,809       42,608       36,448       38,065       36,177  
                                               
    816,036       481,776       1,315,415       1,317,860       1,389,154       1,357,500  

Less promotional allowances

    (188,254 )     (117,337 )     (312,477 )     (288,750 )     (286,831 )     (302,112 )
                                               

Net revenues

    627,782       364,439       1,002,938       1,029,110       1,102,323       1,055,388  

Costs and expenses:

           

Gaming

    307,384       186,545       498,449       502,490       515,738       523,355  

Rooms

    17,922       9,805       27,040       28,355       30,280       28,516  

Food and beverage

    26,592       13,767       41,887       42,158       42,221       40,123  

General and administrative

    176,763       92,957       247,793       243,347       248,009       230,595  

General and administrative—related party

    9,819       775       2,733       2,096       6,339       4,952  

Depreciation and amortization

    37,434       35,753       95,091       87,118       77,484       67,564  

Reorganization expense (income) and related costs

    9,058       (25,967 )     59,281       —         —         —    

Debt renegotiation costs

    —         —         2,857       2,951       2,998       —    
                                               
    584,972       313,635       975,131       908,515       923,069       895,105  
                                               

Income from operations

    42,810       50,804       27,807       120,595       179,254       160,283  

Non-operating income (expense):

           

Interest income

    2,151       836       1,105       1,101       1,398       2,999  

Interest expense

    (79,602 )     (85,678 )     (225,119 )     (224,683 )     (215,373 )     (216,396 )

Gain on debt refinancing, net

    —         —         —         2,892       —         —    

Interest expense—related party

    —         (1,184 )     (2,941 )     (2,654 )     (1,683 )     (572 )

Other non-operating income, net

    97       —         1,076       45       743       320  
                                               
    (77,354 )     (86,026 )     (225,879 )     (223,299 )     (214,915 )     (213,649 )
                                               

Loss before income taxes, discontinued operations, extraordinary item, and minority interest

    (34,544 )     (35,222 )     (198,072 )     (102,704 )     (35,661 )     (53,366 )

Provision for income taxes

    (11,421 )     (2,074 )     (5,697 )     (5,305 )     (4,968 )     —    

Minority interest

    9,631       —         —         10,786       14,858       19,516  
                                               

Loss from continuing operations

    (36,334 )     (37,296 )     (203,769 )     (97,223 )     (25,771 )     (33,850 )
                                               

Income from discontinued operations:

           

Trump Indiana

    15,658       142,959       20,857       12,374       23,090       13,611  

Provision for income taxes

    (2,839 )     (24,211 )     (21,858 )     —         —         (150 )

Minority interest

    (3,013 )     —         —         (4,525 )     (8,444 )     (4,923 )
                                               

Trump Indiana, net of income taxes and minority interest

    9,806       118,748       (1,001 )     7,849       14,646       8,538  

Trump 29

    —         —         7,480       3,283       (1,330 )     —    

Gain of termination of Trump 29 management contract

    —         —         6,000       —         —         —    

Minority interest

    —         —         —         (1,200 )     486       —    
                                               

Income from discontinued operations

    9,806       118,748       12,479       9,932       13,802       8,538  
                                               

(Loss) income before extraordinary item

    (26,528 )     81,452       (191,290 )     (87,291 )     (11,969 )     (25,312 )

Extraordinary gain on extinguishment of debt,

    —         196,932       —         —         —         —    
                                               

Net (loss) income

  $ (26,528 )   $ 278,384     $ (191,290 )   $ (87,291 )   $ (11,969 )   $ (25,312 )
                                               

 

22


    Reorganized
Company
    Predecessor
Company
 
   

May 20, 2005

through

December 31, 2005

   

January 1, 2005

through

May 19, 2005

    Years Ended December 31,  
       
        2004     2003     2002     2001  

Continuing operations

  $ (1.19 )   $ (1.25 )   $ (6.82 )   $ (3.77 )   $ (1.17 )   $ (1.54 )

Discontinued operations

    0.32       3.97       0.42       0.38       0.63       0.39  

Extraordinary gain on extinguishment of debt

    —         6.59       —         —         —         —    
                                               

Basic net income per share

  $ (0.87 )   $ 9.31     $ (6.40 )   $ (3.39 )   $ (0.54 )   $ (1.15 )
                                               

Continuing operations

  $ (1.19 )   $ (1.25 )   $ (6.82 )   $ (3.77 )   $ (1.17 )   $ (1.54 )

Discontinued operations

    0.32       3.97       0.42       0.38       0.63       0.39  

Extraordinary gain on extinguishment of debt

    —         6.59       —         —         —         —    
                                               

Diluted net income per share

  $ (0.87 )   $ 9.31     $ (6.40 )   $ (3.39 )   $ (0.54 )   $ (1.15 )
                                               

Weighted Average Shares Outstanding:

           

Basic

    30,533,041       29,904,764       29,904,764       25,773,545       22,010,027       22,010,027  

Diluted

    30,533,041       29,904,764       29,904,764       25,773,545       22,010,027       22,010,027  

Balance Sheet Data (at end of period):

           

Cash and cash equivalents

  $ 228,554       $ 105,266     $ 95,672     $ 116,072     $ 119,173  

Property and equipment

    1,463,142         1,700,311       1,737,813       1,786,056       1,797,489  

Total assets

    2,329,763         1,983,755       2,031,433       2,196,129       2,219,119  

Total long-term debt, net of current maturities

    1,407,952         1,827,743       1,796,923       1,913,026       1,827,023  

Minority interest

    129,708         —         —         5,061       26,897  

Total stockholders’ equity (deficit)

    427,158         (185,713 )     5,577       77,273       115,149  

 

23


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Annual Report contains statements that we believe are, or may be considered to be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report regarding the prospects of our industry or our prospects, plans, financial position or business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plans,” “forecasts,” “continue” or “could” or the negatives of these terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC, or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions, that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause actual results to differ include, but are not limited to, those discussed in the section entitled “Risk Factors” beginning on page [12] of this Report. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.

Overview

We own and operate Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino and Trump Marina Hotel Casino in Atlantic City, New Jersey.

The year 2005 marked one of significant events. Effective May 20, 2005 we emerged from bankruptcy resulting in $400 million less debt, a 400 basis point reduction interest costs and a more flexible capital structure. In July we began a series of management changes and embarked on a series of operational, physical and cultural changes that we believe will improve our operations.

In December we sold our riverboat casino which operated in Gary, Indiana for approximately $227 million in net proceeds.

In 2006 we plan to begin a $110 million capital program to reinvigorate and renovate our casino properties in Atlantic City. In addition we anticipate beginning construction on a new $250 million, 800 room expansion of the Trump Taj Mahal in June of 2006.

Basis of Presentation

For the purposes of management’s discussion and analysis of financial condition and results of operations, we have combined the period from January 1, 2005 to May 19, 2005 (Predecessor Company) and the period from May 20, 2005 to December 31, 2005 (Reorganized Company) into the year ended December 31, 2005. This combination was performed as we believe it provides for the best comparison of our operating performance for the respective periods. Differences occurring in the periods which were caused by the financial statements being prepared on different bases of accounting are indicated in the following discussion of our financial condition and results of operations.

 

24


Financial Condition

Liquidity and Capital Resources

General. Cash flows from the operating activities of our casino properties along with borrowings under our revolving credit facility generally constitute our primary source of liquidity. Our cash flows have generally been sufficient to fund operations and make interest payments when due. Nonetheless, our core businesses have historically not generated cash flows necessary to reinvest in the maintenance or expansion of our casino properties at levels consistent with those of our competitors. Due to this constrained liquidity position, we have historically been unable to refurbish our properties to desired levels or to pursue various capital expenditures, such as the addition of more hotel rooms, or undertake significant new business initiatives.

We achieved a significant increase in financial flexibility and a meaningful reduction in interest expense as a result of our May 20, 2005, debt restructuring and emergence from bankruptcy. Our management has also implemented programs to obtain cash flow savings and will continue to attempt to implement such programs in the upcoming years. These programs include, among others, labor savings through a more efficient management structure and employee scheduling, changes to our marketing programs and better management of our hotel room blocks. However, we cannot assure you that these programs will be successful or sustainable.

During 2005, we used $26.1 million in cash flows for operating activities compared to providing $44.2 million during 2004. Cash flows from operations for 2004 included a $73.9 million source due to an overall increase in accrued interest payable due to the suspension of certain interest payments during the period of reorganization. Following our reorganization, we have been current in our payment of interest on our long-term debt, thereby utilizing more operating cash flows during 2005.

During 2005, our cash flows provided by investing activities included $227.5 million in proceeds from the sale of Trump Indiana. Following our sale of Trump Indiana, $45.0 million of the proceeds were deposited in a cash escrow account pending the finalization of certain adjustments under the sale agreement. Excluding the sale of Trump Indiana, net of the restricted cash, our use of cash flows used in investing activities increased by $73.0 million primarily as a result of increases in our capital expenditures.

During 2005, we generated $78.0 million from financing activities compared to $3.6 million in 2004. The overall increase in cash flow from financing activities is primarily a result of a $55.0 million capital contribution by Mr. Trump. These cash flows from financing sources were used to fund our operations and capital expenditures.

At December 31, 2005, we had approximately $228.5 million in cash and cash equivalents. Our cash and cash equivalents do not include the $45.0 million in restricted cash from the sale of Trump Indiana.

At December 31, 2005, we had no outstanding borrowings under our Senior Secured Line of Credit and a $149.2 million outstanding term loan on our Credit Facility, and $1,250 million of Senior Notes. At December 31, 2005, we had outstanding letters of credit of $50.0 million. As of March 13, 2006, subject to the limitations imposed by our debt incurrence covenant, availability under the Credit Facility was approximately $200.0 million.

 

25


In order to increase the competitiveness of our casino properties, we plan to make significant capital expenditures to renovate, re-theme and expand our casinos. For example, we recently announced a $110 million capital improvement program to re-theme and update our three casino properties over the next two years. In addition, we plan to begin an approximately $250 million new 800-room hotel tower and connecting structure to expand our existing facility at the Trump Taj Mahal beginning in June 2006. Completion of this new hotel tower is expected approximately two years after the commencement of construction. Additionally, we have embarked on a recurring maintenance capital program. Capital expenditures toward these projects in 2006 are expected to be as follows:

 

Re-theming and updating capital

   $75 to $85 million

New Taj Mahal tower

   $25 to $30 million

Maintenance capital

   $55 to $65 million
    

2006 estimated range

   $155 to $180 million
    

In addition, we seek investment opportunities from time to time to expand our business beyond our existing properties. For instance, in December 2005, we, together with a joint venture partner, applied for a casino slot license at a site in Philadelphia, Pennsylvania. Should we be successful, our current plans are to build a casino project at a cost of approximately $350 million.

We believe that cash on hand, available borrowing capacity and cash flows from operations will be sufficient to fund our operating, capital expenditure and debt service obligations. While we believe that our sources of liquidity are sufficient to meet our cash obligations during the next 12 months, our ability to meet our operating and debt service obligations depends on a number of factors, including our existing cash on hand, cash flows generated by our operating subsidiaries and compliance with our debt covenants. In addition, if we decide to pursue additional capital projects or if we are successful in obtaining a gaming license in Philadelphia, we will need to obtain additional financing in the future.

Failure to achieve profitability or maintain or achieve various other financial performance levels could diminish our ability to sustain operations, meet financial covenants, obtain additional funds or make required payments on our indebtedness. In addition, given the restrictions on incurring additional indebtedness imposed under the Credit Facility and the indenture governing the Senior Notes, we cannot assure you that other sources of funds will be available to us, or if available, at terms favorable to us.

TER has minimal operations, except for its ownership of TER Holdings and its subsidiaries. TER depends on the receipt of sufficient funds from its subsidiaries to meet its financial obligations. In addition, the terms of TER’s subsidiaries’ indebtedness limit the payment of dividends and other distributions to TER under many circumstances. The ability of our subsidiaries to make payments to TER Holdings may also be restricted by the New Jersey Casino Control Commission.

Under the terms of the Credit Facility, we are subject to certain affirmative and negative covenants, including limitations on liens, incurrence of indebtedness, mergers, sales of assets, investments, restricted payments, capital expenditures, agreements with affiliates, our activities and amendment of the indenture governing the Senior Notes, among other limitations. In addition, we must comply with certain financial covenants, including the ratio of consolidated indebtedness to EBITDA, consolidated first lien debt to EBITDA and EBITDA to cash interest expense. We were in compliance with such covenants as of December 31, 2005.

 

26


Contractual obligations, as of December 31, 2005, mature as follows (in thousands):

 

     One year
and less
   2-3 years    3-5 years    After 5
years
   Total

Long-term debt

   $ 1,500    $ 3,000    $ 3,000    $ 1,391,750    $ 1,399,250

Interest on long-term debt (1)

     116,897      233,472      233,042      482,470      1,065,881

Capital leases

     31,477      10,608      14      —        42,099

Operating leases

     5,042      6,368      3,885      79,773      95,068
                                  

Totals

   $ 154,916    $ 253,448    $ 239,941    $ 1,953,993    $ 2,602,298
                                  

(1) Estimated interest payments on long-term debt are based on principal amounts outstanding, required principal repayments and interest rates at December 31, 2005.

Off Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interest, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us.

Results of Operations: Operating Revenues and Expenses

Our primary business activities are conducted by Trump Taj Mahal, Trump Plaza and Trump Marina.

The following tables include selected data of the Trump casino properties (in millions).

 

     Year Ended December 31,  
     2005     2004     2003  

Gaming revenues

      

Trump Taj Mahal

   $ 512.8     $ 496.3     $ 511.9  

Trump Plaza

     299.6       312.9       313.2  

Trump Marina

     249.1       260.3       258.4  
                        

Total

   $ 1,061.5     $ 1,069.5     $ 1,083.5  
                        

Net revenues

      

Trump Taj Mahal

   $ 477.7     $ 470.0     $ 487.3  

Trump Plaza

     273.4       284.8       291.4  

Trump Marina

     241.1       248.1       250.4  
                        

Total

   $ 992.2     $ 1,002.9     $ 1,029.1  
                        

Income (loss) from operations

      

Trump Taj Mahal

   $ 173.4     $ 58.5     $ 76.1  

Trump Plaza

     32.2       15.6       37.4  

Trump Marina

     (11.2 )     17.7       26.0  

Corporate and other

     (100.8 )     (64.0 )     (18.9 )
                        

Total

   $ 93.6     $ 27.8     $ 120.6  
                        

Depreciation and amortization (1)

      

Trump Taj Mahal

   $ 38.5     $ 49.3     $ 44.4  

Trump Plaza

     18.7       23.5       20.1  

Trump Marina

     15.7       22.2       22.5  

Corporate and other

     0.2       0.1       0.1  
                        

Total

   $ 73.1     $ 95.1     $ 87.1  
                        

Reorganization expense (income) and other related expenses

      

Trump Taj Mahal

   $ (104.5 )   $ 2.7     $ —    

Trump Plaza

     (17.4 )     1.8       —    

Trump Marina

     42.1       10.7       —    

Corporate and other

     62.9       44.1       —    
                        
   $ (16.9 )   $ 59.3     $ —    
                        

(1) Depreciation and amortization for the year ended December 31, 2005, reflects an overall reduction due to the write-down of property and equipment to its appraised value in conjunction with our fresh-start accounting.

 

27


Results of Operations for the Years Ended December 31, 2005 and 2004

A discussion of each of our properties’ operating results:

Trump Taj Mahal—Net revenues increased by $7.7 million, or 1.6%, to $477.7 million as a result of increased casino revenues of $16.5 million offset by reductions in room, food, beverage and other revenues of $4.5 million and increases in promotional allowances of $4.2 million. This increase in casino revenues was primarily due to an increase in the table game revenues of $20.4 million, offset by a reduction in slot revenues of $4.0 million. Before consideration of the fresh-start accounting benefit of $104.8 million recorded in 2005 and the $2.4 million decrease in 2005 over 2004 reorganization expenses, costs and expenses increased by $0.1 million, comprised of an increase in general and administrative costs of $11.0 million due primarily to increased utility costs of $4.6 million and other general increases in contract entertainment, maintenance expenses and severance provisions for terminated employees, offset by a $10.7 million reduction in depreciation due to the write-down of net fixed assets by $49.4 million to reflect fresh-start accounting.

Trump Plaza—A decrease in casino revenues of $13.2 million, or 4.2%, resulted in a decrease in net revenues of $11.4 million to $273.4 million. This decrease in casino revenues is due primarily to a decrease in slot revenues as a result of a more competitive marketplace, anticipated disruptions from renovations to the casino and the impact of planned reductions in slot coin marketing offers. Before consideration of the fresh-start accounting benefit of $17.5 million recorded in 2005 and a $1.7 million decrease in 2005 over 2004 reorganization expenses, costs and expenses decreased by $8.7 million, comprised primarily of a $4.8 million reduction in depreciation due to the write-down of net fixed assets by $40.2 million to reflect fresh-start accounting and a decrease in general and administrative costs of $3.4 million due primarily to 2004 general and administrative expenses including expense for an $8.0 million real estate tax receivable reserve offset by increased utility expenses during 2005.

Trump Marina—A decrease in casino revenues of $11.1 million, or 4.3%, and a decrease in food and beverage revenues of $3.0 million were offset by a decrease in promotional allowances of $8.2 million resulting in a reduction in net revenues of $7.0 million, or 2.8%, to $241.1 million. The decrease in gaming revenues is due primarily to a decrease in slot revenues as a result of a more competitive marketplace and the impact of planned reductions in slot coin marketing offers. Before consideration of fresh-start accounting expense of $42.0 million recorded in 2005 and a $10.6 million decrease in 2005 over 2004 reorganization expenses, costs and expenses decreased by $9.5 million, comprised primarily of a $6.5 million reduction in depreciation due to the write-down of net fixed assets by $119.9 million to reflect fresh-start accounting and a decrease in gaming costs of $4.4 million, or 3.7%, relating to the decrease in casino revenues.

Corporate and Other Expenses—Before consideration of fresh-start accounting expenses of $4.9 million, a $8.4 million decrease in 2005 over 2004 reorganization expense and a $19.4 decrease in debt renegotiation costs in 2005 over 2004, corporate and other expenses increased by approximately $20.9 million. This increase is due primarily to $8.0 million for 10-year warrants issued to Mr. Trump in connection with a services agreement, $4.9 million associated with our proposed Philadelphia project, $2.7 million associated with our stock award plan and $2.3 million in executive recruiting, relocation and severance costs.

Interest Expense—Interest expenses decreased by approximately $59.8 million, or 27.0%, from the comparable period in 2004. The decrease in interest expenses was due to our reorganization of our long-term debt which resulted in lower principal amounts due and the associated significantly reduced interest rates.

Minority Interest—Following reorganization, minority interest for the reorganized company represents the 23.5% limited partnership interest in TER Holdings owned directly and indirectly by Mr. Trump. Our minority interest expense reflects an expense or benefit for the proportionate share of income or loss.

Provision for Income Taxes—Our provision for income taxes on continuing operations reflects an expense for income taxes of $13.5 million. This provision consists of state income taxes of $4.8 million and a charge in lieu of taxes of $8.7 million.

 

28


Discontinued Operations—Income from discontinued operations includes income from our Trump Indiana riverboat casino sold in December 2005. This pretax income of $158.6 million for 2005 includes a fresh-start benefit of $134.7 million. This pretax income is reduced by a provision for income taxes of $27.0 million and a minority interest expense of $3.0 million.

Extraordinary Gain on Extinguishment of Debt—This gain of $196.9 million is a result of the extinguishment of debt in connection with our reorganization.

Results of Operations for the Years Ended December 31, 2004 and 2003

Trump Taj Mahal—Net revenues decreased by $17.3 million, or 3.5%, to $470.0 million as a result of decreased casino revenues of $15.5 million and increases in promotional allowances of $5.8 million offset by increases in food, beverage and other revenues of $4.4 million and increases in promotional allowances of $5.8 million. This decrease in casino revenues was primarily due to decreased table game revenues, which was principally caused by the loss of market share due to the opening of the Borgata in July 2003. Overall costs and expenses decreased $2.3 million due to increased depreciation and amortization of $4.9 million as a result of purchases of new slot machines, offset by a $4.7 million reduction in gaming expenses relating to the overall decline in gaming revenues, a reduction in rooms expense of $1.0 million and reduction in other expenses.

Trump Plaza—While competing with the opening of the Borgata in July 2003, an increase in promotional allowances of $11.4 million resulted in a $0.3 million decrease in gaming revenues and an increase in rooms, food beverage and other revenues of $5.1 million. As a result, net revenues for 2004 declined by $6.6 million. Overall costs and expenses increased by $13.4 million due primarily to the recording in general and administrative expense of a reserve for a real estate tax receivable of $8.0 million, and increased gaming costs of $2.7 million, food and beverage costs of $0.8 million and in depreciation and amortization of $3.3 million due to purchases of new slot machines.

Trump Marina—An increase in casino revenues of $1.9 million, or 0.7%, along with increases in rooms, food, beverage and other revenues of $2.4 million were offset by increases in promotional allowances of $6.5 million resulting in a decrease in net revenues of $2.3 million. Before consideration of reorganization expenses of $10.7 million, costs and expenses decreased by $4.7 million due primarily to a $2.0 million reduction in gaming costs as a result of decreased payroll costs and a $2.0 million reduction in general and administrative expenses.

Corporate and Other Expense—Overall corporate and other expenses increased $45.0 million due to reorganization expenses and debt renegotiation costs in 2004 of $44.1 million and $2.8 million, respectively.

Interest Expense—Our interest expense remained relatively unchanged at $225.1 million compared to $224.7 million.

Gain on Debt Refinancing, net—In connection with a notes offering in March 2003, we recognized a net gain of $2.9 million.

Other Non-operating Income—Our other non-operating income for 2004 includes a $2.1 million gain on the settlement of an insurance claim and the $0.7 million loss on the sale of property.

Minority Interest—No minority interest provision was recorded in 2004 due to the cumulative deficit exceeding our investments in subsidiaries during 2003.

Provision for Income Taxes—Our provision for income taxes reflects an expense for state income taxes.

Discontinued Operations—Income from discontinued operations includes income from our Trump Indiana riverboat casino sold in December 2005 and the Trump 29 management contract which was terminated as a part of our reorganization. Trump 29 results also include a $6.0 million termination fee in connection with the termination of the Trump 29 management agreement.

 

29


Critical Accounting Estimates

General—Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which requires our management to make estimates and assumptions about the effects of matters that are inherently uncertain. Of our accounting estimates, we believe the following may involve a higher degree of judgment and complexity.

Goodwill—We have approximately $238.0 million of goodwill recorded on our balance sheet at December 31, 2005. We regularly evaluate our businesses for potential impairment indicators. Additionally, we perform impairment testing at least annually. Our judgments regarding the existence of impairment indicators are based on, among other things, the regulatory and competitive status and operational performance of each of our businesses. Future events, such as the failure to meet or exceed our operating plans, increased competition or the enactment of increased gaming or tax rates, could significantly impact our judgments and any resulting impairment loss could have a material adverse impact on our financial condition and results of operations.

Property and Equipment—Our operations are capital intensive and we make capital investments at each of our properties in the form of maintenance capital and, from time to time, expansion and product enhancement capital. At December 31, 2005, we have approximately $1,463.1 million of net property and equipment recorded on our balance sheet. We depreciate our assets on a straight-line basis over their estimated useful lives. The estimates of the useful lives are based on the nature of the assets as well as our current operating strategy. Future events, such as property expansions, new competition and new regulations, could result in a change in the manner in which we use certain assets requiring a change in the estimated useful lives of such assets. In assessing the recoverability of the carrying value of property and equipment, we must make assumptions regarding estimated future cash flows and other factors. If these estimates or the related assumptions change in the future, we may be required to record impairment charges for these assets.

Insurance Accruals—Our insurance policies for employee health, workers’ compensation and general patron liabilities have significant deductible levels on an individual claim basis. We accrue a liability for known workers’ compensation and general patron liabilities based upon a review of individual claims. Additionally, we accrue an amount for incurred but not reported claims based on our historical experience and other factors. Our employee health insurance benefit accrual is based on our historical claims experience rate including an estimated lag factor. These accruals involve complex estimates and could be significantly affected should current claims vary from historical levels. Management reviews our insurance accruals for adequacy at the end of each reporting period.

Income Taxes—We are subject to income taxes in the United States and in several states. We account for income taxes in accordance with SFAS Statement 109, “Accounting for Income Taxes.” Our income tax returns are subject to examination by various taxing authorities. We regularly assess the potential outcomes of these examinations in determining the adequacy of our provision for income taxes and our income tax liabilities. Inherent on our determination of any necessary reserves are assumptions based on past experiences and judgments about potential actions by taxing authorities. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We believe we have adequately provided for any reasonable and foreseeable outcome related to uncertain tax matters. When actual results of tax examinations differ from our estimates, we adjust the income tax provision in the period in which the examination issues are settled.

Inflation

There was no significant impact on operations as a result of inflation during 2005, 2004 or 2003.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The market risk inherent in our financial instruments is the potential loss in fair value arising from adverse changes in interest rates. The following table provides information about our debt obligations that are sensitive to changes in interest rates. The following table presents principal cash flows and related weighted average interest rates by expected maturity dates and estimated fair value of our debt obligations.

 

     2006     2007     2008     2009     2010     Thereafter     Total

Fixed rate debt maturities

   $ —       $ —       $ —       $ —       $ —       $ 1,250,000     $ 1,250,000

Average interest rate

     8.50 %     8.50 %     8.50 %     8.50 %     8.50 %     8.50 %  

Variable rate debt maturities

   $ 1,500     $ 1,500     $ 1,500     $ 1,500     $ 1,500     $ 141,750     $ 149,250

Average interest rate

     7.17 %     7.17 %     7.17 %     7.17 %     7.17 %     7.17 %  

 

30


Item 8. Financial Statements and Supplementary Data

An index to financial statements and required financial statements schedules is set forth in Item 15 of this Report.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

 

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of December 31, 2005, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were sufficiently effective to ensure that the information required to be disclosed by us in this Report was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions for Form 10-K.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2005, our internal control over financial reporting is effective based on these criteria. Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our assessment of our internal control over financial reporting, which is included in Item 8.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal controls over financial reporting during the quarter ended December 31, 2005, that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

 

Item 9B. Other Information

Not applicable.

 

31


PART III

 

Item 10. Directors and Executive Officers of the Registrants

The information required by Item 10 is incorporated herein by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A of the Exchange Act in connection with our 2006 Annual Stockholders’ Meeting (the “Proxy Statement”).

 

Item 11. Executive Compensation

The information required by Item 11 is incorporated herein by reference from our Proxy Statement.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management

Equity Compensation Plan Information

The following table summarizes information regarding our equity compensation plans as of December 31, 2005. All outstanding awards relate to TER Common Stock.

 

     Equity Compensation Plan Information  

Plan Category

   Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
    Weighted-average
exercise price of
outstanding options,
warrants and rights
   Number of
securities remaining
available for future
issuance under equity
compensation plans
 

Equity compensation plans approved by security holders

   300,000 (1)   $ 17.75    3,440,000 (2)

Equity compensation plans not approved by security holders

   —         —      —    
                   

Total

   300,000     $ 17.75    3,440,000  
                   

(1) Options granted under our 2005 Incentive Award Plan.
(2) Excludes 300,000 securities to be issued upon the exercise of outstanding options and 260,000 shares of restricted stock granted pursuant to our 2005 Incentive Award Plan.

The information required by Item 13 under the caption “Present Beneficial Ownership of Common Stock” is incorporated herein by reference from our Proxy Statement.

 

Item 13. Certain Relationships and Related Transactions

The information required by Item 13 is incorporated herein by reference from our Proxy Statement.

 

Item 14. Principal Accounting Fees and Services

The information required by Item 14 is incorporated herein by reference from our Proxy Statement.

 

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PART IV

 

Item 15. Exhibits and Financial Statement Schedules

The following documents are filled as part of this Form 10-K.

(a) Consolidated financial statements filed as part of this report are listed under Part II, Item 8.

(b) The exhibits listed on the “Index to Exhibits” are filed with this report or incorporated by reference as set forth below.

INDEX TO EXHIBITS

 

Exhibit
No.
  

Description of Exhibit

  

Incorporated by Reference

  2.1   

Second Amended Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code, dated March 30, 2005, as amended

  

Filed as Exhibit T3E-2 to our Application for Qualification for Indenture on Form T-3, filed with the SEC on April 8, 2005

  2.2   

Order Confirming Amended Joint Plan of Reorganization

  

Filed as Exhibit 2.2 to our Current Report on Form 8-K field on April 11, 2005

  2.3   

Amended Order Confirming Second Amended Joint Plan of Reorganization

  

Filed as Exhibit 2.3 to our Current Report on Form 8-K field on April 11, 2005

  2.4   

Stipulation, dated as of April 8, 2005

  

Filed as Exhibit 2.4 to our Current Report on Form 8-K field on April 11, 2005

  3.1   

Restated Certificate of Incorporation of Trump Entertainment Resorts, Inc.

  

Filed as Exhibit 3.1 to our Current Report on Form 8-K filed on May 26, 2005

  3.2   

Amended and Restated Bylaws of Trump Entertainment Resorts, Inc.

  

Filed as Exhibit 3.2 to our Current Report on Form 8-K filed on May 26, 2005

  3.3   

Certificate of Limited Partnership of Trump Entertainment Resorts Holdings, L.P. (formerly known as Trump Hotels & Casino Resorts, Inc.)

  

  3.4   

Fourth Amended and Restated Partnership Agreement of Trump Entertainment Resorts Holdings, L.P., dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Donald J. Trump, Trump Casinos, Inc. and TCI 2 Holdings, LLC.

  

Filed as Exhibit 10.4 to our Current Report on Form 8-K filed on May 26, 2005

  3.5   

Restated Certificate of Incorporation of Trump Entertainment Resorts Funding, Inc.

  

  4.1   

Form of Trump Entertainment Resorts, Inc.’s common stock

  

  4.2   

Form of Trump Entertainment Resorts, Inc.’s class B common stock

  

  4.3   

Indenture, dated as of May 20, 2005, by and among Trump Entertainment Resorts Holdings, L.P. and Trump Entertainment Resorts Funding, Inc., as issuers, the guarantors named therein, and U.S. Bank National Association, as indenture trustee.

  

Filed as Exhibit 10.2 to our Current Report on Form 8-K filed on May 26, 2005

 

33


Exhibit
No.
  

Description of Exhibit

  

Incorporated by Reference

10.1   

+Limited Liability Company Agreement by and between TER Keystone Development, LLC and the General Members, dated December 26, 2005

  

10.2   

+Management Agreement by and between TER Management Co., LLC and Keystone Redevelopment Partners, LLC, dated December 26, 2005

  

10.3   

Stock Purchase Agreement, dated as of November 3, 2005, by and among The Majestic Star Casino, LLC and Trump Entertainment Resorts Holdings, L.P.

  

Filed as Exhibit 10.1 to Current Report on Form 8-K, filed on November 9, 2005

10.4*   

Form of Restricted Stock Award Agreement

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on October 11, 2005

10.5+   

Options Agreement, dated as of September 30, 2005, by and between Hunting Fox Associates I, L.P. and TER Keystone Development, LLC (portions of this exhibit have been omitted pursuant to a request for confidential treatment on file with the SEC)

  

Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005

10.6+   

Form of Ground Lease by and between Hunting Fox Associates I, L.P. and TER Keystone Development, LLC (portions of this exhibit have been omitted pursuant to a request for confidential treatment on file with the SEC)

  

Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005

10.7*   

Trump Entertainment Resorts, Inc. 2005 Incentive Award Plan.

  

Filed as Annex A to our Definitive Proxy Statement filed on September 9, 2005

10.8   

Credit Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts Holdings, L.P., as borrower, Trump Entertainment Resorts, Inc., as general partner, Morgan Stanley & Co. Incorporated, as collateral agent, Morgan Stanley Senior Funding, Inc., as administrative agent, UBS Securities LLC, as syndication agent, Merrill Lynch Capital and Wells Fargo Foothill, Inc., as documentation agents, and Morgan Stanley Senior Funding, Inc. and UBS Securities, LLC, as joint lead arrangers and joint book-runners.

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on May 26, 2005

10.9   

Amended and Restated Investment Agreement, dated as of May 20, 2005, by and among Trump Hotels & Casino Resorts, Inc., Trump Hotels & Casino Resorts Holdings, L.P. and Donald J. Trump

  

Filed as Exhibit 10.3 to our Current Report on Form 8-K filed on May 26, 2005

10.10   

Third Amended and Restated Exchange and Registration Rights Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Entertainment Resorts Holdings, L.P., Donald J. Trump and Trump Casinos, Inc.

  

Filed as Exhibit 10.5 to our Current Report on Form 8-K filed on May 26, 2005

 

34


Exhibit
No.
  

Description of Exhibit

  

Incorporated by Reference

10.11   

Services Agreement, dated as of May 20, 2005, by and among Donald J. Trump, Trump Entertainment Resorts, Inc. and Trump Entertainment Resorts Holdings, L.P.

  

Filed as Exhibit 10.6 to our Current Report on Form 8-K filed on May 26, 2005

10.12   

Amended and Restated Trademark License Agreement, dated as of May 20, 2005, by and among Donald J. Trump, Trump Entertainment Resorts Holdings, L.P., Trump Entertainment Resorts, Inc., Trump Taj Mahal Associates, LLC, Trump Plaza Associates, LLC, Trump Marina Associates, LLC and Trump Indiana, Inc.

  

Filed as Exhibit 10.7 to our Current Report on Form 8-K filed on May 26, 2005

10.13   

Amended and Restated Trademark Security Agreement, dated as of May 20, 2005, between Donald J. Trump and Trump Entertainment Resorts Holdings, L.P.

  

Filed as Exhibit 10.8 to our Current Report on Form 8-K filed on May 26, 2005

10.14   

Right of First Offer Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Entertainment Resorts Holdings, L.P. and Trump Organization LLC.

  

Filed as Exhibit 10.9 to our Current Report on Form 8-K filed on May 26, 2005

10.15   

Voting Agreement, dated as of May 20, 2005, by and between Trump Entertainment Resorts, Inc. and Donald J. Trump.

  

Filed as Exhibit 10.10 to our Current Report on Form 8-K filed on May 26, 2005

10.16   

DJT Warrant Agreement, dated as of May 20, 2005, between Trump Entertainment Resorts, Inc. and Donald J. Trump.

  

Filed as Exhibit 10.11 to our Current Report on Form 8-K filed on May 26, 2005

10.17   

DJT Class A Warrant Agreement, dated as of May 20, 2005, between Trump Entertainment Resorts, Inc. and Donald J. Trump.

  

Filed as Exhibit 10.12 to our Current Report on Form 8-K filed on May 26, 2005

10.18   

Assignment and Assumption of Interest in Miss Universe Pageant Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts Holdings, L.P., Trump Pageants, Inc. and Donald J. Trump.

  

Filed as Exhibit 10.13 to our Current Report on Form 8-K filed on May 26, 2005

10.19   

Class 11 Class A Warrant Agreement, dated as of May 20, 2005, between Trump Entertainment Resorts, Inc. and Continental Stock Transfer & Trust Company.

  

Filed as Exhibit 10.14 to our Current Report on Form 8-K filed on May 26, 2005

10.20   

Registration Rights Agreement, dated as of May 20, 2005, of Trump Entertainment Resorts, Inc.

  

Filed as Exhibit 10.15 to our Current Report on Form 8-K filed on May 26, 2005

10.21   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and Donald J. Trump.

  

Filed as Exhibit 10.17 to our Current Report on Form 8-K filed on May 26, 2005

 

35


Exhibit
No.
  

Description of Exhibit

  

Incorporated by Reference

10.22   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and Wallace B. Askins.

  

Filed as Exhibit 10.18 to our Current Report on Form 8-K filed on May 26, 2005

10.23   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and Edward H. D’Alelio.

  

Filed as Exhibit 10.19 to our Current Report on Form 8-K filed on May 26, 2005

10.24   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and Don M. Thomas.

  

Filed as Exhibit 10.20 to our Current Report on Form 8-K filed on May 26, 2005

10.25   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and James J. Florio.

  

Filed as Exhibit 10.21 to Current Report on Form 8-K filed on May 26, 2005

10.26   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and Cezar M. Froelich.

  

Filed as Exhibit 10.22 to our Current Report on Form 8-K filed on May 26, 2005

10.27   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and Morton E. Handel.

  

Filed as Exhibit 10.23 to our Current Report on Form 8-K filed on May 26, 2005

10.28   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and Michael Kramer.

  

Filed as Exhibit 10.24 to Current Report on Form 8-K filed on May 26, 2005

10.29   

Indemnity Agreement, dated as of May 20, 2005, by and among Trump Entertainment Resorts, Inc., Trump Plaza Associates, LLC, Trump Taj Mahal Associates, LLC, Trump Marina Associates, LLC, Trump Indiana, Inc. and James B. Perry.

  

Filed as Exhibit 10.25 to our Current Report on Form 8-K filed on May 26, 2005

 

36


Exhibit
No.
  

Description of Exhibit

  

Incorporated by Reference

10.30   

Settlement Agreement, dated March 23, 2005, between the Indiana Department of Revenue and Trump Indiana, Inc.

  

Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005

10.31   

Second Amended and Restated Casino Services Agreement, dated January 1, 1998, among Trump Plaza Associates, Trump Taj Mahal Associates, Trump Marina Associates, L.P., Trump Indiana, Inc. and Trump Casino Services, LLC

  

Filed as Exhibit 10.28 to our Annual Report on Form 10-K for the year ended December 31, 2003

10.32*    Consulting Agreement, dated December 16, 2005, of Scott C. Butera   
10.33*   

Employment Agreement, dated November 14, 2005, of Dale R. Black

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 21, 2005

10.34*    Employment Agreement, dated September 27, 2005, of Virginia McDowell   
10.35*   

Employment Agreement, dated September 14, 2005, of Rosalind Krause

  

Filed as Exhibit 10.2 to our Current Report on Form 8-K filed on September 23, 2005

10.36*   

Employment Agreement, dated September 12, 2005, of James Rigot

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 23, 2005

10.37*    Employment Agreement, dated September 12, 2005, of Paul Keller   
10.38*   

Employment Agreement, dated July 19, 2005, of Mark Juliano

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on July 20, 2005

10.39*   

Employment Agreement, dated July 6, 2005, of James B. Perry

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on July 11, 2005

10.40*   

Amendment, dated January 9, 2003, to Joseph A. Fusco’s Employment Agreement, dated April 17, 2000

  

Filed as Exhibit 10.38 to our Annual Report on Form 10-K for the year ended December 31, 2002

10.41*   

Amendment, dated January 9, 2003, to Robert M. Pickus’ Employment Agreement, dated April 17, 2000

  

Filed as Exhibit 10.34 to our Annual Report on Form 10-K for the year ended December 31, 2002

10.42*   

Employment Agreement, dated April 17, 2000, of Joseph A. Fusco

  

Filed as Exhibit 10.75 to our Annual Report on Form 10-K for the year ended December 31, 2000

10.43*   

Employment Agreement, dated April 17, 2000, of Robert M. Pickus

  

Filed as Exhibit 10.73 to our Annual Report on Form 10-K for the year ended December 31, 2000

10.44   

Restructuring Support Agreement, dated October 20, 2004, by and among Trump Hotels and Casino Resorts, Inc., Trump Atlantic City Associates, each of the TAC Co-Issuers (as defined therein), Trump Casino Holdings, LLC, Trump Casino Funding, Inc., Donald J. Trump, and each of the holders of TAC Notes and/or TCH Notes signatory thereto.

  

Filed as Exhibit 99.1 to our Current Report on Form 8-K filed on October 21, 2004

 

37


Exhibit
No.
  

Description of Exhibit

  

Incorporated by Reference

10.45   

Commitment Letter, dated December 17, 2004, between Trump Hotels & Casino Resorts, Inc., Trump Atlantic City Associates and Trump Casino Holdings, LLC, and Morgan Stanley Senior Funding, Inc., UBS Securities LLC and UBS Loan Finance LLC

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on December 23, 2004

10.46   

Loan and Security Agreement, dated November 22, 2004, by and between Trump Hotels & Casino Resorts, Inc. and certain of its subsidiaries and Beal Bank, S.S.B., as administrative agent for the lenders thereto.

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 24, 2004

10.47   

Memorandum of Understanding, dated as of December 20, 2004, among THCR Management Services, LLC, Trump Hotels & Casino Resorts Development Company, LLC, the Twenty-Nine Palms Band of Luiseno Mission Indians of California and the Twenty-Nine Palms Enterprises Corporation

  

Filed as Exhibit 99.1 to our Current Report on Form 8-K filed on December 28, 2004

10.48   

Investment Agreement, dated January 25, 2005, by and between Trump Hotels & Casino Resorts, Inc. and Trump Hotels & Casino Resorts Holdings, L.P. and Donald J. Trump

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on January 31, 2005

10.49   

Stock Purchase Agreement, dated as of November 3, 2005, by and among The Majestic Star Casino, LLC, Indiana Limited Liability Company, and Trump Entertainment Resorts Holdings, L.P.

  

Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 3, 2005

10.50   

Non-Employee Director Compensation

  

—  

21.1   

List of Subsidiaries of Trump Entertainment Resorts, Inc.

  

—  

23   

Consent of Independent Registered Public Accounting Firm

  

—  

24   

Powers of Attorney of directors

  

—  

31.1   

Certification by the Chief Executive Officer of Trump Entertainment Resorts, Inc. pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as Amended

  

—  

31.2   

Certification by the Chief Financial Officer of Trump Hotels & Casino Resorts, Inc. pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as Amended

  

—  

32.1   

Certification of the Chief Executive Officer of Trump Entertainment Resorts, Inc. pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  

—  

32.2   

Certification of the Chief Financial Officer of Trump Entertainment Resorts, Inc. pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  

—  

 

38


Exhibit
No.
  

Description of Exhibit

  

Incorporated by Reference

99.1   

Description of Certain Governmental and Gaming Regulations

  

—  


* Management contract or compensatory plan or arrangement.
+ We have applied to the SEC for confidential treatment with respect to portions of this Exhibit. An unredacted version of this Exhibit has been submitted separately to the SEC.

(c) Financial Statement Schedules. See “Financial Statements and Supplementary Data” for a list of the financial statement schedules included in this Report.

 

39


SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, each of the Registrants has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on the 14th day of March 2006.

 

TRUMP ENTERTAINMENT RESORTS, INC.
By:   /S/    JAMES B. PERRY        
Name:   James B. Perry
Title:   Chief Executive Officer and President
TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.
By:   /S/    JAMES B. PERRY        
Name:   James B. Perry
Title:   Chief Executive Officer and President
TRUMP ENTERTAINMENT RESORTS FUNDING, INC.
By:   /S/    JAMES B. PERRY        
Name:   James B. Perry
Title:   Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities and on the date indicated.

 

Signature

  

Title

 

Date

/S/    JAMES B. PERRY        

James B. Perry

  

Director, Chief Executive Officer and President

(Principal Executive Officer)

  March 14, 2006

/S/    DALE R. BLACK        

Dale R. Black

  

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

  March 14, 2006

*

Donald J. Trump

   Chairman of the Board   March 14, 2006

*

Wallace B. Askins

   Director   March 14, 2006

*

Edward H. D’Alelio

   Director   March 14, 2006

*

James J. Florio

   Director   March 14, 2006

*

Cezar M. Froelich

   Director   March 14, 2006

 

40


Signature

  

Title

 

Date

*

Morton E. Handel

   Director   March 14, 2006

*

Michael A. Kramer

   Director   March 14, 2006

*

Don M. Thomas

   Director   March 14, 2006

* Dale R. Black, by signing his name hererto, does sign this document on behalf of the above-named individuals, pursuant to the powers of attorney duly executed by such individuals, which have been filed as an exhibit to this Report.

 

/s/    DALE R. BLACK        

Dale R. Black

Attorney-in-Fact

 

41


TRUMP ENTERTAINMENT RESORTS, INC.

TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.

AND

TRUMP ENTERTAINMENT RESORTS FUNDING, INC.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

 

     Page No.

Report of Independent Registered Public Accounting Firm

   F-2

Consolidated Balance Sheets of Trump Entertainment Resorts, Inc. as of December 31, 2005 (Reorganized Company) and December 31, 2004 (Predecessor Company)

   F-5

Consolidated Statements of Operations of Trump Entertainment Resorts, Inc. for the period from May 20, 2005 to December 31, 2005 (Reorganized Company) and for the period from January 1, 2005 to May 19, 2005 and the Years Ended December 31, 2004 and 2003 (Predecessor Company)

   F-6

Consolidated Statements of Stockholders’ Equity (Deficit) of Trump Entertainment Resorts, Inc. for the period from May 20, 2005 to December 31, 2005 (Reorganized Company) and for the period from January 1, 2005 to May 19, 2005 and the Years Ended December 31, 2004 and 2003 (Predecessor Company)

   F-7

Consolidated Statements of Cash Flows of Trump Entertainment Resorts, Inc. for the period from May 20, 2005 to December 31, 2005 (Reorganized Company) and for the period from January 1, 2005 to May 19, 2005 and the Years Ended December 31, 2004 and 2003 (Predecessor Company)

   F-8

Consolidated Balance Sheets of Trump Entertainment Resorts Holdings, L.P. as of December 31, 2005 (Reorganized Company) and December 31, 2004 (Predecessor Company)

   F-9

Consolidated Statements of Operations of Trump Entertainment Resorts Holdings, L.P. for the period from May 20, 2005 to December 31, 2005 (Reorganized Company) and for the period from January 1, 2005 to May 19, 2005 and the Years Ended December 31, 2004 and 2003 (Predecessor Company)

   F-10

Consolidated Statements of Partners’ Capital (Deficit) of Trump Entertainment Resorts Holdings, L.P. for the period from May 20, 2005 to December 31, 2005 (Reorganized Company) and for the period from January 1, 2005 to May 19, 2005 and the Years Ended December 31, 2004 and 2003 (Predecessor Company)

   F-11

Consolidated Statements of Cash Flows of Trump Entertainment Resorts Holdings, L.P. for the period from May 20, 2005 to December 31, 2005 (Reorganized Company) and for the period from January 1, 2005 to May 19, 2005 and the Years Ended December 31, 2004 and 2003 (Predecessor Company)

   F-12

Notes to Consolidated Financial Statements

   F-13

Financial Statement Schedule

  

Schedule II—Trump Entertainment Resorts, Inc. and Trump Entertainment Resorts Holdings, L.P. Valuation and Qualifying Accounts for the period from May 20, 2005 to December 31, 2005 (Reorganized Company) and for the period from January 1, 2005 to May 19, 2005 and the Years Ended December 31, 2004 and 2003 (Predecessor Company)

   S-1

 

F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Trump Entertainment Resorts, Inc.:

We have audited the accompanying consolidated balance sheets of Trump Entertainment Resorts, Inc. as of December 31, 2005 (Reorganized Company) and December 31, 2004 (Predecessor Company), and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the period from May 20 to December 31, 2005 (Reorganized Company), the period from January 1, 2005 to May 19, 2005 (Predecessor Company), and for the years ended December 31, 2004 and 2003 (Predecessor Company). Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trump Entertainment Resorts, Inc. at December 31, 2005 (Reorganized Company) and December 31, 2004 (Predecessor Company), and the consolidated results of its operations and its cash flows for the period from May 20 to December 31, 2005 (Reorganized Company), the period from January 1, 2005 to May 19, 2005 (Predecessor Company), and for the years ended December 31, 2004 and 2003 (Predecessor Company), in conformity with U. S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Trump Entertainment Resorts, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2006, expressed an unqualified opinion thereon.

As discussed in Note 1 to the consolidated financial statements, effective May 20, 2005, the Company received final clearance of all significant contingencies related to the implementation of its plan of reorganization, which had been confirmed on April 5, 2005, by the United States Bankruptcy Court. The Company officially emerged from bankruptcy as of May 20, 2005. In connection with its reorganization, the Company applied fresh-start reporting as of May 20, 2005. As more fully discussed in Note 2, the accompanying consolidated balance sheet of the Reorganized Company at December 31, 2005 and the consolidated results of operations of the Reorganized Company for the period from May 20, 2005 to December 31, 2005 reflect the impact of the adjustments required under fresh-start reporting. As a result, the consolidated financial statements of the Reorganized Company are presented on a basis different from those of the Predecessor Company and therefore are not comparable to prior periods.

As discussed in Note 2 to the consolidated financial statements, in connection with the application of fresh- start reporting as of May 20, 2005, the Reorganized Company early adopted Financial Accounting Standards Board Statement No. 123R, Share-Based Payment.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

March 13, 2006

 

F-2


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Partners

Trump Entertainment Holdings L.P.:

We have audited the accompanying consolidated balance sheets of Trump Entertainment Holdings L.P. as of December 31, 2005 (Reorganized Company) and December 31, 2004 (Predecessor Company), and the related consolidated statements of operations, partners’ capital (deficit) and cash flows for the period from May 20 to December 31, 2005 (Reorganized Company), the period from January 1, 2005 to May 19, 2005 (Predecessor Company), and for the years ended December 31, 2004 and 2003 (Predecessor Company). Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trump Entertainment Holdings L.P. at December 31, 2005 (Reorganized Company) and December 31, 2004 (Predecessor Company), and the consolidated results of its operations and its cash flows for the period from May 20 to December 31, 2005 (Reorganized Company), the period from January 1, 2005 to May 19, 2005 (Predecessor Company), and for the years ended December 31, 2004 and 2003 (Predecessor Company), in conformity with U. S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective May 20, 2005, the Company received final clearance of all significant contingencies related to the implementation of its plan of reorganization, which had been confirmed on April 5, 2005, by the United States Bankruptcy Court. The Company officially emerged from bankruptcy as of May 20, 2005. In connection with its reorganization, the Company applied fresh-start reporting as of May 20, 2005. As more fully discussed in Note 2, the accompanying consolidated balance sheet of the Reorganized Company at December 31, 2005 and the consolidated results of operations of the Reorganized Company for the period from May 20, 2005 to December 31, 2005 reflect the impact of the adjustments required under fresh-start reporting. As a result, the consolidated financial statements of the Reorganized Company are presented on a basis different from those of the Predecessor Company and therefore are not comparable to prior periods.

As discussed in Note 2 to the consolidated financial statements, in connection with the application of fresh- start reporting as of May 20, 2005, the Reorganized Company early adopted Financial Accounting Standards Board Statement No. 123R, Share-Based Payment.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

March 13, 2006

 

F-3


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Trump Entertainment Resorts, Inc.

We have audited management’s assessment, included in Management’s Report on Internal Control over Financial Reporting and appearing in the accompanying Item 9A Controls and Procedures, that Trump Entertainment Resorts, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Trump Entertainment Resorts, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Trump Entertainment Resorts, Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Trump Entertainment Resorts, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Trump Entertainment Resorts, Inc. as of December 31, 2005 (Reorganized Company) and December 31, 2004 (Predecessor Company), and the related consolidated statements of operations, stockholders’ equity(deficit) and cash flows for the period from May 20, 2005 to December 31, 2005 (Reorganized Company), the period from January 1, 2005 to May 19, 2005 (Predecessor Company), and for the years ended December 31, 2004 and 2003 (Predecessor Company) and our report dated March 13, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

March 13, 2006

 

F-4


TRUMP ENTERTAINMENT RESORTS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

     Reorganized
Company
    Predecessor
Company
 
     December 31,
2005
    December 31,
2004
 

Current assets:

    

Cash and cash equivalents

   $ 228,554     $ 105,266  

Restricted cash

     45,005       —    

Accounts receivable, net of allowance for doubtful accounts of $14,153 and $18,219, respectively

     36,024       28,697  

Accounts receivable, other

     9,716       12,915  

Inventories

     10,716       11,575  

Deferred income taxes

     2,289       —    

Prepaid expenses and other current assets

     12,178       12,337  
                

Total current assets

     344,482       170,790  
                

Net property and equipment

     1,463,142       1,700,311  

Other assets:

    

Intangible assets, net of accumulated amortization of $1,172 and $—, respectively

     206,345       —    

Goodwill

     238,045       —    

Deferred financing costs, net of accumulated amortization of $1,648 and $—, respectively

     20,725       8,895  

Other assets, net of reserve of $31,856 and $27,801, respectively

     57,024       103,759  
                

Total other assets

     522,139       112,654  
                

Total assets

   $ 2,329,763     $ 1,983,755  
                

Current liabilities:

    

Accounts payable

   $ 38,739     $ 21,695  

Accrued payroll and related expenses

     26,553       25,469  

Income taxes payable

     36,765       35,438  

Due to affiliate, net

     —         3,305  

Partnership distribution payable

     3,041       —    

Accrued interest payable

     11,517       —    

Accrued interest payable, subject to compromise

     —         103,912  

Self-insurance reserves

     12,398       11,027  

Other current liabilities

     43,145       49,565  

Current maturities of long-term debt

     30,007       67,692  
                

Total current liabilities

     202,165       318,103  
                

Long-term debt, net of current maturities

     1,407,952       31,821  

Long-term debt, subject to comprise

     —         1,779,555  

Long-term debt, related parties, subject to comprise

     —         16,367  

Deferred income taxes

     144,352       —    

Other long-term liabilities

     18,428       23,622  

Minority Interest

     129,708       —    

Stockholders’ equity (deficit):

    

Preferred stock, $1 par value; 1,000,000 shares authorized, -0- shares issued and outstanding

     —         —    

Common stock, $.001 and $.01 par value, respectively; 75,000,000 shares authorized at December 31, 2005 and 2004, 27,177,696 issued and outstanding at December 31, 2005, and 32,101,493 issued and 29,904,764 outstanding at December 31, 2004

     27       321  

Class B Common stock, $0.001 and $0.01 par value, respectively; 1,000 shares authorized, 900 and 1,000 shares issued and outstanding, respectively

     —         —    

Additional paid-in capital

     453,659       470,566  

Accumulated deficit

     (26,528 )     (636,400 )

Less treasury stock at cost, 2,196,729 shares at December 31, 2004

     —         (20,200 )
                

Total stockholders’ equity (deficit)

     427,158       (185,713 )
                

Total liabilities and stockholders’ equity (deficit)

   $ 2,329,763     $ 1,983,755  
                

See accompanying notes to consolidated financial statements.

 

F-5


TRUMP ENTERTAINMENT RESORTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

 

    Reorganized
Company
    Predecessor
Company
 
   

May 20, 2005
through

December 31, 2005

   

January 1, 2005
through

May 19, 2005

    Years Ended
December 31,
 
        2004     2003  

Revenues:

       

Gaming

  $ 663,140     $ 398,409     $ 1,069,463     $ 1,083,467  

Rooms

    48,257       26,360       75,996       75,660  

Food and beverage

    77,806       44,198       127,348       122,285  

Other

    26,833       12,809       42,608       36,448  
                               
    816,036       481,776       1,315,415       1,317,860  

Less promotional allowances

    (188,254 )     (117,337 )     (312,477 )     (288,750 )
                               

Net revenues

    627,782       364,439       1,002,938       1,029,110  

Costs and expenses:

       

Gaming

    307,384       186,545       498,449       502,490  

Rooms

    17,922       9,805       27,040       28,355  

Food and beverage

    26,592       13,767       41,887       42,158  

General and administrative

    176,763       92,957       247,793       243,347  

General and administrative—related party

    9,819       775       2,733       2,096  

Depreciation and amortization

    37,434       35,753       95,091       87,118  

Reorganization expense (income) and related costs

    9,058       (25,967 )     59,281       —    

Debt renegotiation costs

    —         —         2,857       2,951  
                               
    584,972       313,635       975,131       908,515  
                               

Income from operations

    42,810       50,804       27,807       120,595  

Non-operating income (expense):

       

Interest income

    2,151       836       1,105       1,101  

Interest expense

    (79,602 )     (85,678 )     (225,119 )     (224,683 )

Gain on debt refinancing, net

    —         —         —         2,892  

Interest expense—related party

    —         (1,184 )     (2,941 )     (2,654 )

Other non-operating income, net

    97       —         1,076       45  
                               
    (77,354 )     (86,026 )     (225,879 )     (223,299 )
                               

Loss before income taxes, discontinued operations, extraordinary item and minority interest

    (34,544 )     (35,222 )     (198,072 )     (102,704 )

Provision for income taxes

    (11,421 )     (2,074 )     (5,697 )     (5,305 )

Minority interest

    9,631       —         —         10,786  
                               

Loss from continuing operations

    (36,334 )     (37,296 )     (203,769 )     (97,223 )
                               

Income from discontinued operations:

       

Trump Indiana

    15,658       142,959       20,857       12,374  

Provision for income taxes

    (2,839 )     (24,211 )     (21,858 )     —    

Minority interest

    (3,013 )     —         —         (4,525 )
                               

Trump Indiana, net of income taxes and minority interest

    9,806       118,748       (1,001 )     7,849  

Trump 29, net of minority interest of $1,200 in 2003

    —         —         7,480       2,083  

Gain on termination of Trump 29 management contract

    —         —         6,000       —    
                               

Income from discontinued operations

    9,806       118,748       12,479       9,932  
                               

(Loss) income before extraordinary item

    (26,528 )     81,452       (191,290 )     (87,291 )

Extraordinary gain on extinguishment of debt

    —         196,932       —         —    
                               

Net (loss) income

  $ (26,528 )   $ 278,384     $ (191,290 )   $ (87,291 )
                               

Continuing operations

  $ (1.19 )   $ (1.25 )   $ (6.82 )   $ (3.77 )

Discontinued operations

    0.32       3.97       0.42       0.38  

Extraordinary gain on extinguishment of debt

    —         6.59       —         —    
                               

Basic net (loss) income per share

  $ (0.87 )   $ 9.31     $ (6.40 )   $ (3.39 )
                               

Continuing operations

  $ (1.19 )   $ (1.25 )   $ (6.82 )   $ (3.77 )

Discontinued operations

    0.32       3.97       0.42       0.38  

Extraordinary gain on extinguishment of debt

    —         6.59       —         —    
                               

Diluted net (loss) income per share

  $ (0.87 )   $ 9.31     $ (6.40 )   $ (3.39 )
                               

Weighted average shares outstanding:

       

Basic

    30,533,041       29,904,764       29,904,764       25,773,545  

Diluted

    30,533,041       29,904,764       29,904,764       25,773,545  

See accompanying notes to consolidated financial statements.

 

F-6


TRUMP ENTERTAINMENT RESORTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands except share data)

 

     Shares    Common
Stock
   Shares    Class B
Common
Stock
   Additional
Paid-in
Capital
   Accumulated
(Deficit)
    Accumulated
Other
Comprehensive
Income (Loss)
    Treasury
Stock
    Total
Stockholders’
Equity
(Deficit)
 

Predecessor Company:

                       

Balance, December 31, 2002

   24,206,756    $ 242    1,000    $    $ 455,645    $ (357,819 )   $ (595 )   $ (20,200 )   $ 77,273  

Contributed capital

   7,894,737      79              14,921            15,000  

Comprehensive loss:

                       

Other comprehensive (loss)—termination of interest rate swaps

        —      —             —        —         595       —         595  

Net (loss)

        —      —             —        (87,291 )     —         —         (87,291 )
                                                               

Comprehensive (loss)

                          (86,696 )

Balance, December 31, 2003

   32,101,493      321    1,000           470,566      (445,110 )     —         (20,200 )     5,577  

Comprehensive loss:

                       

Net (loss)

        —      —             —        (191,290 )     —         —         (191,290 )
                                                               

Comprehensive (loss)

                          (191,290 )

Balance, December 31, 2004

   32,101,493      321    1,000           470,566      (636,400 )     —         (20,200 )     (185,713 )

Comprehensive loss:

                       

Net income

   —        —      —             —        278,384       —         —         278,384  
                                                               

Comprehensive income

                          278,384  

Balance, May 19, 2005

   32,101,493    $ 321    1,000    $    $ 470,566    $ (358,016 )   $ —       $ (20,200 )   $ 92,671  
                                                               
                       

Reorganized Company:

                       

Capitalization on May 20, 2005

   27,089,849    $ 27    900    $    $ 445,432    $ —       $ —       $ —       $ 445,459  

Compensatory stock warrants expense net of minority interest of $1,879

   —        —      —             6,121      —         —         —         6,121  

Warrants converted

   52,847      —      —             —        —         —         —         —    

Restricted stock compensation expense net of minority interest of $647

   —        —      —             2,106      —         —         —         2,106  

Issuance of restricted stock

   35,000      —      —             —        —         —         —         —    

Comprehensive loss:

                       

Net (loss)

   —        —      —             —        (26,528 )     —         —         (26,528 )
                                                               

Comprehensive (loss)

                          (26,528 )

Balance, December 31, 2005

   27,177,696    $ 27    900    $    $ 453,659    $ (26,528 )   $ —       $ —       $ 427,158  
                                                               

See accompanying notes to consolidated financial statements.

 

F-7


TRUMP ENTERTAINMENT RESORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Reorganized
Company
    Predecessor
Company
 
     May 20, 2005
through
December 31, 2005
   

January 1, 2005
through

May 19, 2005

    Years Ended
December 31,
 
         2004     2003  

CASH FLOWS FROM OPERATING ACTIVITIES:

        

Net (loss) income

   $ (26,528 )   $ 278,384     $ (191,290 )   $ (87,291 )

Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:

        

Non-cash reorganization (income) expense, net

     —         (210,117 )     39,533       —    

Deferred income taxes

     8,687       —         —         —    

Minority interest in net income

     (6,618 )     —         —         (5,061 )

Extraordinary gain on extinguishment of debt

     —         (196,932 )     —         —    

Gain on debt refinancing, net

     —         —         —         (2,892 )

Depreciation and amortization

     40,071       38,486       102,705       94,406  

Amortization of deferred financing costs

     1,519       665       5,740       6,870  

Loss on sale of assets

     —         —         717       —    

Provisions for losses on receivables

     2,330       1,445       5,473       6,465  

Accretion of discounts on mortgage notes

     —         —         2,354       3,811  

Issuance of debt in satisfaction of accrued interest

     —         —         4,089       10,478  

Stock-based compensation expense

     2,753       —         —         —    

Compensatory stock warrants

     8,000       —         —         —    

Other

     2,097       2,512       15,071       5,412  

Changes in operating assets and liabilities:

        

(Increase) decrease in receivables

     (9,505 )     546       (9,043 )     (6,712 )

Decrease (increase) in inventories

     1,219       (485 )     174       173  

Decrease (increase) in other current assets

     1,427       (2,143 )     (918 )     1,262  

Decrease (increase) in other assets

     2,097       (842 )     (6,560 )     (2,206 )

(Decrease) increase in due to affiliates, net

     (2,767 )     (538 )     1,075       2,567  

(Decrease) increase in accounts payable, accrued expenses and other current liabilities

     (16,327 )     60,847       795       18,363  

(Decrease) increase in accrued interest payable

     (73,012 )     68,866       73,872       1,180  

(Decrease) increase in other long-term liabilities

     (6,026 )     3,835       390       (1,593 )
                                

Net cash flows (used in) provided by operating activities including discontinued operations

     (70,583 )     44,529       44,177       45,232  
                                

CASH FLOWS FROM INVESTING ACTIVITIES:

        

Purchase of property and equipment, net

     (58,752 )     (39,033 )     (24,585 )     (26,323 )

Cash proceeds from sale of Trump Indiana

     227,526       —         —         —    

Increase in restricted cash

     (45,005 )     —         —         —    

Other

     (7,307 )     (6,115 )     (13,581 )     (12,849 )
                                

Net cash flows provided by (used in) investing activities

     116,462       (45,148 )     (38,166 )     (39,172 )
                                

CASH FLOWS FROM FINANCING ACTIVITIES:

        

Borrowings from revolving credit facility, net

     —         —         —         —    

Borrowings from term loan

     150,000       —         —         —    

Repayments of term loan

     (750 )     —         —         —    

Borrowings from (repayments of) DIP facility, net

     (53,958 )     18,172       35,786       —    

Repayment of other long-term debt

     (21,873 )     —         —         —    

Proceeds from long-term debt

     —         —         —         468,036  

Repayment of long-term debt, subject to compromise

     —         (13,439 )     (32,203 )     (487,819 )

Payment of deferred financing costs

     (11,078 )     (2,926 )     —         (21,677 )

Contributed capital from reorganization

     55,000       —         —         15,000  

Cash distributions to noteholders and stockholders

     (41,120 )     —         —         —    
                                

Net cash flows provided by (used in) financing activities

     76,221       1,807       3,583       (26,460 )
                                

Net increase (decrease) in cash and cash equivalents

     122,100       1,188       9,594       (20,400 )

Cash and cash equivalents at beginning of period

     106,454       105,266       95,672       116,072  
                                

Cash and cash equivalents at end of period

   $ 228,554     $ 106,454     $ 105,266     $ 95,672  
                                

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

        

Cash paid for interest

   $ 153,264     $ 16,129     $ 142,485     $ 211,288  

Cash paid for income taxes

     19,486       6,014       1,050       732  

Equipment purchased under capital leases

     10,468       122       40,221       37,267  

Debt of Reorganized Company issued in exchange for debt and accrued interest of Predecessor Company

     1,250,000       —         —         —    

Stock and minority interest of Reorganized Company issued in exchange for debt and accrued interest of Predecessor Company

     527,300       —         —         —    

Accumulated other comprehensive gain

     —         —         —         595  

See accompanying notes to consolidated financial statements.

 

F-8


TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     Reorganized
Company
    Predecessor
Company
 
     December 31,
2005
    December 31,
2004
 

Current assets:

      

Cash and cash equivalents

   $ 228,550     $ 105,262  

Restricted cash

     45,005       —    

Accounts receivable, net of allowance for doubtful accounts of $14,153 and $18,219, respectively

     36,024       28,697  

Accounts receivable, other

     9,716       12,915  

Inventories

     10,716       11,575  

Deferred income taxes

     904       —    

Prepaid expenses and other current assets

     12,178       12,337  
                

Total current assets

     343,093       170,786  
                

Net property and equipment

     1,463,142       1,700,311  
 

Other assets:

      

Intangible assets, net of accumulated amortization of $1,172 and $—, respectively

     206,345       —    

Goodwill

     139,289       —    

Deferred financing costs, net of accumulated amortization of $1,648 and $—, respectively

     20,725       8,895  

Other assets, net of reserve of $31,856 and $27,801, respectively

     57,024       103,759  
                

Total other assets

     423,383       112,654  
                

Total assets

   $ 2,229,618     $ 1,983,751  
                

Current liabilities:

      

Accounts payable

   $ 38,739     $ 21,695  

Accrued payroll and related expenses

     26,553       25,469  

Income taxes payable

     36,765       35,438  

Due to affiliate, net

     —         3,305  

Accrued partner distributions

     3,041       —    

Accrued interest payable

     11,517       —    

Accrued interest payable, subject to compromise

     —         103,912  

Self-insurance reserves

     12,398       11,027  

Other current liabilities

     43,145       49,222  

Current maturities of long-term debt

     30,007       67,692  
                

Total current liabilities

     202,165       317,760  
                

Long-term debt, net of current maturities

     1,407,952       31,821  

Long-term debt, subject to comprise

     —         1,779,555  

Long-term debt, related parties, subject to comprise

     —         16,367  

Deferred income taxes

     39,224       —    

Other long-term liabilities

     18,424       23,622  
 

Partners’ capital (deficit)

      

Partners’ capital

     590,012       647,303  

Accumulated deficit

     (28,159 )     (832,677 )
                

Total partners’ capital (deficit)

     561,853       (185,374 )
                

Total liabilities and partners’ capital (deficit)

   $ 2,229,618     $ 1,983,751  
                

See accompanying notes to consolidated financial statements.

 

F-9


TRUMP ENTERTAINMENT RESORTS, HOLDINGS, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

 

     Reorganized
Company
    Predecessor
Company
 
     May 20, 2005
through
December 31, 2005
    January 1, 2005
through
May 19, 2005
    Years Ended
December 31,
 
        
         2004     2003  

Revenues:

        

Gaming

   $ 663,140     $ 398,409     $ 1,069,463     $ 1,083,467  

Rooms

     48,257       26,360       75,996       75,660  

Food and beverage

     77,806       44,198       127,348       122,285  

Other

     26,833       12,809       42,608       36,448  
                                
     816,036       481,776       1,315,415       1,317,860  

Less promotional allowances

     (188,254 )     (117,337 )     (312,477 )     (288,750 )
                                

Net revenues

     627,782       364,439       1,002,938       1,029,110  

Costs and expenses:

        

Gaming

     307,384       186,545       498,449       502,490  

Rooms

     17,922       9,805       27,040       28,355  

Food and beverage

     26,592       13,767       41,887       42,158  

General and administrative

     176,763       92,957       247,793       243,347  

General and administrative—related party

     9,819       775       2,733       2,096  

Depreciation and amortization

     37,434       35,753       95,091       87,118  

Reorganization expense (income) and related costs

     9,058       (25,967 )     59,281       —    

Debt renegotiation costs

     —         —         2,857       2,951  
                                
     584,972       313,635       975,131       908,515  
                                

Income from operations

     42,810       50,804       27,807       120,595  

Non-operating income (expense):

        

Interest income

     2,151       836       1,105       1,101  

Interest expense

     (79,602 )     (85,678 )     (225,119 )     (224,683 )

Interest expense—related party

     —         (1,184 )     (2,941 )     (2,654 )

Gain on debt refinancing, net

     —         —         —         2,892  

Other non-operating income, net

     97       —         1,076       45  
                                
     (77,354 )     (86,026 )     (225,879 )     (223,299 )
                                

Loss before income taxes, discontinued operations and extraordinary item

     (34,544 )     (35,222 )     (198,072 )     (102,704 )

Provision for income taxes

     (6,434 )     (2,074 )     (5,697 )     (5,305 )
                                

Loss from continuing operations

     (40,978 )     (37,296 )     (203,769 )     (108,009 )
                                

Income (loss) from discontinued operations:

        

Trump Indiana

     15,658       142,959       20,857       12,374  

Less provision for income taxes

     (2,839 )     (24,211 )     (21,858 )     —    
                                

Trump Indiana, net of income taxes

     12,819       118,748       (1,001 )     12,374  

Trump 29

     —         —         7,480       3,283  

Gain on termination of Trump 29 management contract

     —         —         6,000       —    
                                

Income from discontinued operations

     12,819       118,748       12,479       15,657  
                                

(Loss) income before extraordinary item

     (28,159 )     81,452       (191,290 )     (92,352 )

Extraordinary gain on extinguishment of debt

     —         196,932       —         —    
                                

Net (loss) income

   $ (28,159 )   $ 278,384     $ (191,290 )   $ (92,352 )
                                

See accompanying notes to consolidated financial statements.

 

F-10


TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (DEFICIT)

(In thousands)

 

     Partners’
Capital
    Accumulated
(Deficit)
    Accumulated
Other
Comprehensive
Income (Loss)
    Treasury
Stock
    Total
Partners’
Equity
(Deficit)
 

Predecessor Company:

          

Balance, December 31, 2002

   $ 652,503     $ (549,035 )   $ (938 )   $ (20,200 )   $ 82,330  

Contributed capital

     15,000             15,000  

Comprehensive loss:

          

Other comprehensive (loss)—termination of interest rate swaps

     —         —         938       —         938  

Net (loss)

     —         (92,352 )     —         —         (92,352 )
                                        

Comprehensive (loss)

             (91,414 )

Balance, December 31, 2003

     667,503       (641,387 )     —         (20,200 )     5,916  

Comprehensive loss:

          

Net (loss)

     —         (191,290 )     —         —         (191,290 )
                                        

Comprehensive (loss)

             (191,290 )

Balance, December 31, 2004

     667,503       (832,677 )     —         (20,200 )     (185,374 )

Comprehensive loss:

          

Net income

     —         278,384       —         —         278,384  
                                        

Comprehensive income

             278,384  

Balance, May 19, 2005

   $ 667,503     $ (554,293 )   $ —       $ (20,200 )   $ 93,010  
                                        
           

Reorganized Company:

          

Capitalization of partnership on May 20, 2005

   $ 582,300     $ —       $ —       $ —       $ 582,300  

Restricted stock compensation expense

     2,753       —         —         —         2,753  

Compensatory stock warrants

     8,000       —         —         —         8,000  

Partnership distributions

     (3,041 )     —         —         —         (3,041 )

Comprehensive loss:

          

Net loss

     —         (28,159 )     —         —         (28,159 )
                                        

Comprehensive (loss)

             (28,159 )

Balance, December 31, 2005

   $ 590,012     $ (28,159 )   $ —       $ —       $ 561,853  
                                        

See accompanying notes to consolidated financial statements.

 

F-11


TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

   

Reorganized

Company

    Predecessor
Company
 
   

May 20, 2005

through
December 31, 2005

   

January 1, 2005

through

May 19, 2005

   

Years Ended

December 31,

 
        2004     2003  

CASH FLOWS FROM OPERATING ACTIVITIES:

       

Net (loss) income

  $ (28,159 )   $ 278,384     $ (191,290 )   $ (92,352 )

Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:

       

Non-cash reorganization (income) expense net

    —         (210,117 )     39,533       —    

Deferred income taxes

    3,700       —         —         —    

Extraordinary gain on extinguishment of debt

    —         (196,932 )     —         —    

Gain on debt refinancing, net

    —         —         —         (2,892 )

Depreciation and amortization

    40,071       38,486       102,705       94,406  

Amortization of deferred financing costs

    1,519       665       5,740       6,870  

Loss on sale of assets

    —         —         717       —    

Provisions for losses on receivables

    2,330       1,445       5,473       6,465  

Accretion of discounts on mortgage notes

    —         —         2,354       3,811  

Issuance of debt in satisfaction of accrued interest

    —         —         4,089       10,478  

Stock-based compensation expense

    2,753       —         —         —    

Compensatory stock warrants

    8,000       —         —         —    

Other

    2,097       2,512       15,071       5,412  

Changes in operating assets and liabilities:

       

(Increase) decrease in receivables

    (9,505 )     546       (9,043 )     (6,712 )

Decrease (increase) in inventories

    1,219       (485 )     174       173  

Decrease (increase) in other current assets

    1,427       (2,143 )     (918 )     1,262  

Decrease (increase) in other assets

    2,097       (842 )     (6,560 )     (2,206 )

(Decrease) increase in due to affiliates, net

    (2,767 )     (538 )     1,075       2,567  

(Decrease) increase in accounts payable, accrued expenses and other current liabilities

    (16,323 )     60,847       795       18,363  

(Decrease) increase in accrued interest payable

    (73,012 )     68,866       73,872       1,180  

(Decrease) increase in other long-term liabilities

    (6,030 )     3,835       390       (1,593 )
                               

Net cash flows (used in) provided by operating activities including discontinued operations

    (70,583 )     44,529       44,177       45,232  
                               

CASH FLOWS FROM INVESTING ACTIVITIES:

       

Purchase of property and equipment, net

    (58,752 )     (39,033 )     (24,585 )     (26,323 )

Cash proceeds from sale of Trump Indiana

    227,526        

Increase in restricted cash

    (45,005 )      

Other

    (7,307 )     (6,115 )     (13,581 )     (12,849 )
                               

Net cash flows provided by (used in) investing activities

    116,462       (45,148 )     (38,166 )     (39,172 )
                               

CASH FLOWS FROM FINANCING ACTIVITIES:

       

Borrowings from revolving credit facility, net

    —         —         —         —    

Borrowings from term loan

    150,000       —         —         —    

Repayments of term loan

    (750 )     —         —         —    

Borrowings from (repayments of) DIP facility, net

    (53,958 )     18,172       35,786       —    

Repayment of other long-term debt

    (21,873 )     —         —         —    

Proceeds from long-term debt

    —         —         —         468,036  

Repayment of long-term debt, subject to compromise

    —         (13,439 )     (32,203 )     (487,819 )

Payment of deferred financing costs

    (11,078 )     (2,926 )     —         (21,677 )

Contributed capital from reorganization

    55,000       —         —         15,000  

Cash distributions to noteholders and stockholders

    (41,120 )     —         —         —    
                               

Net cash flows provided by (used in) financing activities

    76,221       1,807       3,583       (26,460 )
                               

Net increase (decrease) in cash and cash equivalents

    122,100       1,188       9,594       (20,400 )

Cash and cash equivalents at beginning of period

    106,450       105,262       95,668       116,068  
                               

Cash and cash equivalents at end of period

  $ 228,550     $ 106,450     $ 105,262     $ 95,668  
                               

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

       

Cash paid for interest

  $ 153,264     $ 16,129     $ 142,485     $ 211,288  

Cash paid for income taxes

    19,486       6,014       1,050       732  

Equipment purchased under capital leases

    10,468       122       40,221       37,267  

Debt of Reorganized Company issued in exchange for debt of Predecessor Partnership

    1,250,000       —         —         —    

Partnership interests in Reorganized Partnership issued in exchange for debt and accrued interest of Predecessor Partnership

    527,300       —         —         —    

Accumulated other comprehensive gain

    —         —         —         938  

See accompanying notes to consolidated financial statements.

 

F-12


TRUMP ENTERTAINMENT RESORTS HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

 

(1) Organization and Reorganization and Emergence from Chapter 11

Organization—The accompanying consolidated financial statements include those of Trump Entertainment Resorts, Inc. (formerly known as Trump Hotels & Casino Resorts, Inc.), a Delaware corporation (“TER” or the “Company”) and our subsidiaries. Except where otherwise noted, the words “we,” “us,” “our” and similar terms, as well as “Company,” refer to Trump Entertainment Resorts, Inc. and all of its subsidiaries. Our majority-owned subsidiary, Trump Entertainment Resorts Holdings, L.P. (formerly known as Trump Hotels & Casino Resorts Holdings, L.P.), a Delaware limited partnership and its respective subsidiaries is referred to as “TER Holdings.” 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”) in Atlantic City, New Jersey. Until December 21, 2005, we also owned and operated a riverboat casino in Gary, Indiana. See Note 13 for additional information regarding this discontinued operation. 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 17.

TER currently beneficially owns an approximately 76.5% profits interest in TER Hold