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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-4748
SUN INTERNATIONAL NORTH AMERICA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-0763055
(State or other jurisdiction of (I.R.S.Employer
corporation or organization) Identification No.)
1415 E. Sunrise Blvd., Ft. Lauderdale, FL 33304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 954-713-2500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
- continued -
Total Number of Pages 55
Exhibit Index is presented on pages 52 through 53.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) 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 registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
As of February 29, 2000, there were 100 shares of the registrant's common stock
outstanding, all of which were owned by one shareholder. Accordingly there is no
current market for any of such shares.
The registrant meets the conditions set forth in General Instruction I(1)(a) and
(b) of Form 10-K and is therefore filing this Form 10-K with the reduced
disclosure format permitted by that General Instruction.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Sun International North America, Inc. ("SINA") is a holding company which,
through its indirect wholly owned subsidiary, Resorts International Hotel, Inc.
("RIH"), is engaged in the ownership and operation of the Resorts Atlantic City
hotel and casino in Atlantic City, New Jersey ("Resorts Atlantic City"). In
addition, SINA, through its wholly owned subsidiary Sun Cove Limited ("Sun
Cove") has a 50% interest in Trading Cove Associates ("TCA"), a Connecticut
general partnership (see below). SINA also provides management services to
certain affiliated companies and owns a tour operator which wholesales tour
packages and provides reservation services. SINA was known as Griffin Gaming &
Entertainment, Inc. from June 30, 1995 until February 6, 1997. "SINA" is used
herein to refer to the corporation for all periods. SINA was incorporated in
Delaware in 1958. Unless stated otherwise, the term "Company" as used herein
includes SINA and its consolidated subsidiaries.
On December 16, 1996, SINA became a wholly owned subsidiary of Sun
International Hotels Limited ("SIHL"), a corporation organized and existing
under the laws of the Commonwealth of The Bahamas.
The Company owns and operates Resorts Atlantic City, which has
approximately 644 guest rooms, a 70,000 square foot casino, a 5,000 square foot
simulcast pari-mutuel betting area and related facilities, located on the
Boardwalk.
Casino operations in Atlantic City are conducted under a casino license
which is subject to periodic review and renewal by action of the New Jersey
Casino Control Commission (the "Casino Control Commission"). The Company's
current license was renewed in January 2000 through January 31, 2004. See
"Regulation and Gaming Taxes and Fees" under "Narrative Description of Business"
below.
Effective January 1, 1997, SIHL contributed the capital stock of Sun
International Resorts, Inc. ("Sun Resorts"), a wholly owned subsidiary of SIHL,
to SINA. Sun Resorts, along with its subsidiaries, is a tour operator and
wholesaler of tour packages and provides reservation services. In addition, Sun
Resorts provides certain support services for SIHL's operations in The Bahamas.
Effective July 1, 1997, SIHL contributed the capital stock of Sun Cove, a
wholly owned subsidiary of SIHL, to SINA. Sun Cove has a 50% interest in TCA
which, prior to January 1, 2000, held a management agreement (the "Management
Agreement") with the Mohegan Tribal Gaming Authority relating to the development
and management of a casino resort and entertainment complex in the town of
Uncasville, Connecticut (the "Mohegan Sun Casino"). See description of current
agreement below. The Management Agreement provided that TCA was entitled to
receive between 30% and 40% of the net profits, as defined, of the Mohegan Sun
Casino. TCA was obligated to pay certain amounts to its partners or their
affiliates, as priority payments from its management fee income for services
provided. These amounts were paid as TCA received sufficient management fees to
meet the priority distributions.
In February 1998, the Mohegan Tribe of Indians of Connecticut (the "Tribe")
appointed TCA to develop its proposed approximate $800 million expansion of the
Mohegan Sun Casino. In addition, TCA and the Tribe agreed that effective January
1, 2000, TCA would turn over management of the Mohegan Sun Resort complex,
(which comprises the existing operations and the proposed expansion), to the
Tribe. In exchange for relinquishing its rights under its previous agreements,
beginning January 1, 2000, TCA receives annual payments of five percent of the
gross revenues of the Mohegan Sun Resort complex for a 15-year period.
As a result of these transactions, SINA is a holding company through which
SIHL owns and operates its properties and investments in the United States and
provides certain support services for SIHL.
In SINA's Form 10-Q for the quarter ended June 30, 1999 it was reported
that SINA had entered into an Asset and Land Purchase Agreement with Starwood
Hotels and Resorts Worldwide Inc. ("Starwood") pursuant to which the Company
along with SIHL had agreed to acquire the Desert Inn Hotel and Casino in Las
Vegas (the "Desert Inn") for $275 million.
On March 2, 2000, the Company and Starwood announced that they agreed to
terminate their agreement under which the Company was to acquire the Desert Inn.
Starwood intends to continue to seek a purchaser for the property. If the
property is sold for less than the purchase price originally agreed to by the
Company, then the Company will pay to Starwood 50% of such deficit, up to a
maximum of $15 million. In the event that Starwood sells the property for in
excess of the purchase price originally agreed to by the Company, then the
Company will share 50% of such excess. Should the Company be required to pay $15
million of any potential deficit, it would be paid from the $15 million deposit
previously paid to Starwood. The deposit is included in deferred charges and
other assets in the accompanying consolidated balance sheets.
On January 19, 2000, SIHL announced that it has received a proposal from
Sun International Investments Limited ("SIIL") to acquire in a merger
transaction all ordinary shares of SIHL not already owned by SIIL or its
shareholders for $24 per share in cash. SIIL and its stockholders own
approximately 53% of the Company's outstanding ordinary shares.
In response to the proposal, SIHL formed a committee of independent members
of the Board of Directors (the "Special Committee") which has retained its own
financial and legal advisors.
Completion of the proposed transaction will be subject to various
conditions, including approval by the Special Committee, successful completion
of financing on terms satisfactory to SIIL, negotiation and execution of a
definitive agreement containing terms and conditions customary for a transaction
of this nature and approval of the New Jersey Casino Control Commission.
SIIL advised management of SIHL that it and its shareholders will not sell
any SIHL ordinary shares in connection with the proposed transaction and do not
wish to consider or participate in any possible alternative sale of SIHL
ordianry shares.
(b) Financial Information about Industry Segments
Not applicable
(c) Narrative Description of Business
ATLANTIC CITY, NEW JERSEY
Gaming Facilities
- -----------------
Resorts Atlantic City has a 70,000-square foot casino and a simulcast
pari-mutuel betting facility of approximately 5,000 square feet. At December 31,
1999, these gaming areas contained approximately 75 table games that consisted
of 41 blackjack tables, eight roulette tables, eight craps tables, and 18 other
specialty games that included Caribbean Stud, Baccarat, Let It Ride, Three-card
Poker, Pai Gow Poker, Big Six and Pai Gow. There were also 2,183 slot machines
and five betting windows and four customer-operated terminals for simulcast
pari- mutuel betting. Management of Resorts Atlantic City continuously monitors
the configuration of the casino floor and the games it offers to patrons with a
view towards making changes and improvements. As new games have been approved by
the Casino Control Commission, management has integrated such games into its
casino operations to the extent it deems appropriate.
Casino gaming in Atlantic City is highly competitive and is strictly
regulated under the New Jersey Casino Control Act and regulations promulgated
thereunder (the "Casino Control Act"), which affect virtually all aspects of
RIH's casino operations. See "Competition" and "Regulation and Gaming Taxes and
Fees" below.
Resort and Hotel Facilities
- ---------------------------
Resorts Atlantic City commenced operations in May 1978 and was the first
casino/hotel opened in Atlantic City. This was accomplished by the conversion of
the former Haddon Hall Hotel, a classic hotel structure originally built in the
early 1900's, into a casino/hotel. It is situated on approximately seven acres
of land with approximately 310 feet of Boardwalk frontage overlooking the
Atlantic Ocean. Resorts Atlantic City consists of two hotel towers, the 15-story
Ocean Tower and the 9-story Atlantic City Tower. In addition to the casino
facilities described above, the casino/hotel complex includes approximately 644
guest rooms and suites, a 1,400-seat theater, seven restaurants, a VIP slot and
table player lounge, an indoor swimming pool, a public lounge, a health club and
retail stores. The complex also has approximately 50,000 square feet of
convention facilities, including eight large meeting rooms and a 16,000 square
foot ballroom.
RIH owns a garage that is connected to Resorts Atlantic City by a covered
walkway. This garage is used for patrons' self parking and accommodates
approximately 700 vehicles. RIH also owns additional adjacent properties
consisting of approximately 3.5 acres which provide parking for approximately
350 cars. In addition, SINA owns approximately 4.4 acres adjoining Resorts
Atlantic City which acreage currently provides additional uncovered self-parking
for approximately 130 cars and valet parking for approximately 415 cars. This
acreage was previously leased by RIH.
Consistent with industry practice, RIH reserves a portion of its hotel
rooms and suites as complimentary accommodations for high-level casino wagerers.
For 1999, 1998 and 1997 the average occupancy rates, including complimentary
rooms, which were primarily provided to casino patrons, were 82%, 90% and 91%
respectively. The average occupancy rate and weighted average daily room rate,
excluding complimentary rooms, were 27% and $82, respectively, for 1999. This
compares with 36% and $71, respectively, for 1998, and 41% and $62,
respectively, for 1997.
Entertainment
- -------------
Resorts Atlantic City will be offering headline entertainment as part of
its strategy to pursue retail revenue in its theater. Resorts Atlantic City has
entered into contracts with entertainers to perform at Resorts.
Player Development/Casino Hosts/Junkets
- ---------------------------------------
RIH employs junket, player development and Asian marketing representatives
to promote Resorts Atlantic City to prospective gaming patrons. Resorts Atlantic
City has casino hosts who assist patrons on the casino floor, make room and
dinner reservations, encourage Star Card membership (the player identification
card) sign-ups in order to increase Resorts' marketing base and provide general
assistance.
Promotional Activities
- ----------------------
The Star Card constitutes a key element in Resorts Atlantic City's direct
marketing program. Slot machine players are encouraged to register for and
utilize their personalized Star Card to earn various complimentary items based
upon their level of play. The Star Card is inserted during play into a card
reader attached to the slot machine for use in computerized rating systems.
These computer systems record data about the cardholder, including playing
preferences, frequency and denomination of play and the amount of gaming
revenues produced.
Resorts Atlantic City designs promotional offers, conveyed via direct mail
and telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by the
Star Card and on table game wagering by the casino hosts. Promotional activities
include the mailing of vouchers for complimentary slot play.
Resorts Atlantic City conducts slot machine and table game tournaments in
which cash prizes are offered to a select group of players invited to
participate in the tournament based upon their tendency to play. Such players
tend to play at their own expense during "off-hours" of the tournament. At
times, tournament players are also offered special dining and entertainment
privileges that encourage them to remain at Resorts Atlantic City.
Capital Improvements
- --------------------
On June 30, 1999, management completed the renovation of Resorts Atlantic
City. The construction included extensive renovations to the casino floor, hotel
lobby, guestrooms and suites, room corridors, restaurants, the hotel porte
cochere and public areas. In addition, three new restaurants were created,
replacing two older restaurants and a VIP player lounge was constructed. As of
December 31, 1999, RIH had spent $47.3 million on the renovation. In addition,
in 1999 Resorts Atlantic City purchased 343 slot machines and leased 257 slot
machines. Other expenditures consisted of various building improvement projects
and computer upgrades.
Convention Center and Casino/Hotel Expansions
- ---------------------------------------------
In May 1997, the State of New Jersey opened a new convention center. The
new convention center has 500,000 square feet of continuous exhibit space, and
an additional 109,000 square feet of meeting rooms, making it the largest center
from Atlanta to Boston.
The convention center was part of a broader plan that included the
expansion of the Atlantic City International Airport, a new 500-room convention
hotel, which opened in November 1997, and the transformation of the main
entryway into Atlantic City into a new corridor. In 1997, this new corridor,
which links the new convention center and hotel with the Boardwalk, was
completed. In all, six blocks were transformed into an expansive park with
extensive landscaping, night-time lighting, and a large fountain and pool with
an 86-foot lighthouse. Officials have commented upon the need for improved
commercial air service into Atlantic City as a factor in the success of the
convention center. See further discussion under "Transportation Facilities"
below.
It is believed that additional hotel rooms are necessary to support the
convention center as well as to allow Atlantic City to become a competitive
destination resort. In November 1997, the new 500-room convention hotel opened.
To further spur construction of new hotel rooms and renovation of substandard
hotel rooms into deluxe accommodations, a total of $175 million has been set
aside by the Casino Reinvestment Development Authority (the "CRDA"), a public
authority, to aid in financing such projects. To date, the CRDA has authorized
financing in the amount of $105 million which has resulted in the construction
of approximately 2,680 new hotel rooms and has reserved funding in the amount of
$70 million to four casinos, including Resorts Atlantic City for the
construction of up to 3,770 additional hotel rooms. RIH's share of the funding
reserved by the CRDA is $27.3 million to construct up to 1,500 rooms. Also,
Mirage Resorts, Inc. ("Mirage"), a Las Vegas, Nevada casino/hotel company, has
been selected to be the developer of an approximate 180-acre tract in the Marina
area of Atlantic City (the "H- Tract"). Mirage previously announced plans to
build a 2,000-room destination resort and entered into an agreement with Boyd
Gaming Corp. to build a $750 million, 1,500-room casino/hotel to be called the
Borgata. Groundbreaking for the Borgata is expected in the third quarter of 2000
with an opening in 2002. Also included in the development of the H-Tract is the
construction of a tunnel and connector road link between the Atlantic City
Expressway and the Marina area, for which infrastructure improvements were
considered requisite to the expansion plans announced for the Marina area. The
groundbreaking for the tunnel construction occurred in November 1998 and is
expected to be completed in 2001. Mirage had indicated that its proposed resort
would open shortly after the roadway is complete. MGM Grand, Inc. ("MGM") had
also announced plans for the construction of a new casino/hotel in the South
Inlet section of Atlantic City, the size and scope of which has yet to be
formally announced. In March 2000, Mirage and MGM announced an agreement
pursuant to which MGM would acquire all of the outstanding shares of Mirage
stock. As a result of the proposed merger, the scope and timing of the Mirage
and MGM developments in Atlantic City is uncertain.
Although these developments are viewed as positive and favorable to the
future prospects of the Atlantic City gaming industry, management of RIH, at
this point, can make no representations as to whether, to what extent or to how
these developments may affect RIH's operations.
Transportation Facilities
- --------------------------
The lack of an adequate transportation infrastructure in the Atlantic City
area continues to negatively affect the industry's ability to attract patrons
from outside a core geographic area. In 1996, the Atlantic City International
Airport (located approximately 12 miles from Atlantic City) was expanded to
double the size of the terminal and add departure gates, to improve the baggage
handling system and provide sheltered walkways connecting the terminal and
planes. However, scheduled service to that airport from major cities by national
air carriers remains extremely limited.
Since the inception of gaming in Atlantic City there has been no
significant change in the industry's marketing base or in the principal means of
transportation to Atlantic City, which continues to be automobile and bus. The
resulting geographic limitations and traffic congestion have restricted Atlantic
City's growth as a major destination resort.
RIH continues to utilize day-trip bus programs. A non-exclusive easement
enables Resorts Atlantic City to utilize a bus tunnel under the adjacent Trump
Taj Mahal Casino Resort (the "Taj Mahal"), which connects Pennsylvania and
Maryland Avenues, and a service road exit from the bus tunnel. This reduces
congestion around the Pennsylvania Avenue bus entrance to Resorts Atlantic City.
To accommodate its bus patrons, Resorts Atlantic City has a waiting facility
which is located indoors adjacent to the casino and offers various amenities.
In conjunction with a street beautification and housing project that was
given approval by the CRDA, that agency has engaged consultants to explore the
feasibility of the beautification and widening of North Carolina Avenue which
would allow for improved traffic flow in a more appealing corridor from Absecon
Boulevard (Route 30) to the main entrance of Resorts Atlantic City. Also, as
noted in "Convention Center and Casino/Hotel Expansions" above, construction of
a tunnel and connector road link between the Atlantic City Expressway and the
Marina area began in November 1998.
Competition
- -----------
Competition in the Atlantic City casino/hotel industry is intense.
Casino/hotels compete primarily on the basis of promotional allowances,
entertainment, advertising, services provided to patrons, caliber of personnel,
attractiveness of the hotel and casino areas and related amenities and parking
facilities. Resorts Atlantic City competes directly with 11 casino/hotels in
Atlantic City which, in the aggregate, contain approximately 1,173,000 square
feet of gaming area, including simulcast betting and poker rooms, and 11,218
hotel rooms. In July 1997, a competitor added approximately 75,000 square feet
of casino space which included approximately 1,766 slot machines and 58 table
games. Also, a competitor added a new hotel tower with 620 rooms and opened
additional casino space in 1998. In October 1999, the Trump Organization closed
and began the demolition of Trump's World Fair. Trump's World's Fair consisted
of approximately 500 rooms and 1,600 slot machines. Most of the slot machines
are anticipated to be relocated to other Trump properties. Significant
additional expansion is expected in the near future due to the previously
discussed expansion projects to be financed by the CRDA, as well as the
construction of new casino/hotels announced for the Marina area and the South
Inlet section.
Resorts Atlantic City is located at the northern end of the Boardwalk
adjacent to the Taj Mahal, which is next to the Showboat Casino Hotel (the
"Showboat"). These three properties have a total of approximately 2,700 hotel
rooms and approximately 325,000 square feet of gaming space in close proximity
to each other. In 1999, the three casino/hotels combined generated approximately
26% of the gross gaming revenue of Atlantic City. A 28-foot wide enclosed
pedestrian bridge between Resorts Atlantic City and the Taj Mahal allows patrons
of both hotels and guests for events being held at Resorts Atlantic City and at
the Taj Mahal to move between the facilities without exposure to the weather. A
similar enclosed pedestrian bridge connects the Showboat to the Taj Mahal,
allowing patrons to walk under cover among all three casino/hotels. The
remaining nine Atlantic City casino/hotels are located approximately one-half
mile to one and one-half miles to the south on the Boardwalk or in the Marina
area of Atlantic City.
In recent years, competition for the gaming patron outside of Atlantic City
has become extremely intense. In 1988, only Nevada and New Jersey had legalized
casino operations. Currently, almost every state in the United States has some
form of legalized gaming. Also, The Bahamas and other destination resorts in the
Caribbean and Canada have increased the competition for gaming revenue. Directly
competing with Atlantic City for the day-trip patron are two gaming properties
on Indian reservations in Connecticut. One is Foxwoods Resort and Casino
("Foxwoods") operated by the Pequot Tribe. Foxwoods currently has more than
5,800 slot machines, and for the year 1999 had slot revenue of approximately
$730 million, which is more than twice the slot revenue of the largest
casino/hotel in Atlantic City. The other, the Mohegan Sun Casino, which opened
in October 1996 and until December 31, 1999 was managed by TCA, has more than
3,000 slot machines and had slot revenue of approximately $490 million in 1999.
The Oneida Indians operate a casino near Syracuse, New York. Other Indian tribes
in the states of New York, Rhode Island and Connecticut are seeking federal
recognition in order to establish gaming operations which would further increase
the competition for day-trip patrons. In addition, three racetracks in the State
of Delaware began operating slot machines.
This rapid expansion of casino gaming, particularly that which has been or
may be introduced into jurisdictions in close proximity to Atlantic City,
adversely affects RIH's operations as well as the Atlantic City gaming industry.
Gaming Credit Policy
- --------------------
Credit is extended to selected gaming customers primarily in order to
compete with other casino/hotels in Atlantic City which also extend credit to
customers. Credit play represented 27% of table game volume at Resorts Atlantic
City in 1999, 17% in 1998 and 18% in 1997. The credit play percentage of table
game volume for the Atlantic City industry was 24% in 1999, 23% in 1998 and 25%
in 1997. RIH's gaming receivables, net of allowance for uncollectible amounts,
were $4.8 million, $3.3 million and $3.4 million as of December 31, 1999, 1998
and 1997, respectively. The collectibility of gaming receivables has an effect
on results of operations, and management believes that overall collections have
been satisfactory. Atlantic City gaming debts are enforceable under the laws of
New Jersey and certain other states, although it is not clear whether other
states will honor this policy or enforce judgments rendered by the courts of New
Jersey with respect to such debts.
Security Controls
- -----------------
Gaming at Resorts Atlantic City is conducted by personnel trained and
supervised by RIH. Prior to employment, all casino personnel must be licensed
under the Casino Control Act. Security checks are made to determine, among other
matters, that job applicants for key positions have had no criminal ties or
associations. RIH employs extensive security and internal controls at its
casino. Security in Resorts Atlantic City utilizes closed circuit video cameras
to monitor the casino floor and money counting areas. The count of moneys from
gaming is observed daily by government representatives.
Seasonal Factors
- ----------------
RIH's business activities are strongly affected by seasonal factors that
influence the New Jersey beach tourist trade. Higher revenues and earnings are
typically realized during the middle third of the year.
Employees
- ---------
RIH had a maximum of approximately 3,300 employees during 1999, and RIH
believes that its employee relations are satisfactory. Approximately 1,400 of
RIH's employees are represented by unions. Of these employees, approximately
1,100 are represented by the Hotel Employees and Restaurant Employees
International Union Local 54, whose contract was renewed in September 1999 for a
term of five years. There are several union contracts covering other union
employees.
All of RIH's casino employees and certain of its hotel employees must be
licensed under the Casino Control Act. Casino employees are those employees
whose work requires access to the casino, the casino simulcasting facility or
restricted casino areas. Casino and certain hotel employees must meet applicable
standards pertaining to such matters as financial responsibility, good
character, ability, casino training and experience and New Jersey residency.
Certain hotel employees are no longer required to be registered with the Casino
Control Commission.
Regulation and Gaming Taxes and Fees
- ------------------------------------
General
-------
RIH's operations in Atlantic City are subject to regulation under the
Casino Control Act, which authorizes the establishment of casinos in Atlantic
City, provides for licensing, regulation and taxation of casinos and created the
Casino Control Commission and the Division of Gaming Enforcement to administer
the Casino Control Act. In general, the provisions of the Casino Control Act
concern: the ability, character and financial stability and integrity of casino
operators, their officers, directors and employees and others financially
interested in a casino; the nature and suitability of hotel and casino
facilities, operating methods and conditions; and financial and accounting
practices. Gaming operations are subject to a number of restrictions relating to
the rules of games, type of games, credit play, size of hotel and casino
operations, hours of operation, persons who may be employed, companies which may
do business with casinos, the maintenance of accounting and cash control
procedures, security and other aspects of the business.
There were significant regulatory changes in recent years. In addition to
the approval of new games, the Casino Control Act was amended to allow casinos
to expand their casino floors before building the requisite number of hotel
rooms, subject to approval of the Casino Control Commission. This amendment was
designed to encourage hotel room construction by giving casino licensees an
incentive and an added ability to generate cash flow to finance hotel
construction. Previous law only allowed for casino expansion if a casino built
new hotel rooms first. In addition, the minimum casino square footage has been
increased from 50,000 square feet to 60,000 square feet for the first 500
qualifying rooms and allows for an additional 10,000 square feet for each
additional 100 qualifying rooms over 500, up to a maximum of 200,000 square
feet. Future costs of regulation have been reduced as new legislation (i) no
longer requires hotel employees to be registered, (ii) extends the term for
casino and casino key employee license renewals from two years to four years and
(iii) allows greater efficiency by either reducing or eliminating the time
permitted the Casino Control Commission to approve internal controls, patron
complimentary programs and the movement of gaming equipment.
Casino License
--------------
A casino license is initially issued for a term of one year and must be
renewed annually by action of the Casino Control Commission for the first two
renewal periods succeeding the initial issuance of a casino license. The Casino
Control Commission may renew a casino license for a period of four years,
although the Casino Control Commission may reopen licensing hearings at any
time. A license is not transferable and may be conditioned, revoked or suspended
at any time upon proper action by the Casino Control Commission. The Casino
Control Act also requires an operations certificate which, in effect, has a term
coextensive with that of a casino license.
On February 26, 1979, the Casino Control Commission granted a casino
license to RIH for the operation of Resorts Atlantic City. In January 2000,
RIH's license was renewed until January 31, 2004.
Restrictions on Ownership of Equity and Debt Securities
--------------------------------------------------------
The Casino Control Act imposes certain restrictions upon the ownership of
securities issued by a corporation which holds a casino license or is a holding,
intermediary or subsidiary company of a corporate licensee (collectively,
"holding company"). Among other restrictions, the sale, assignment, transfer,
pledge or other disposition of any security issued by a corporation which holds
a casino license is conditional and shall be ineffective if disapproved by the
Casino Control Commission. If the Casino Control Commission finds that an
individual owner or holder of any securities of a corporate licensee or its
holding company must be qualified and is not qualified under the Casino Control
Act, the Casino Control Commission has the right to propose any necessary
remedial action. In the case of corporate holding companies and affiliates whose
securities are publicly traded, the Casino Control Commission may require
divestiture of the security held by any disqualified holder who is required to
be qualified under the Casino Control Act.
In the event that entities or persons required to be qualified refuse or
fail to qualify and fail to divest themselves of such security interest, the
Casino Control Commission has the right to take any necessary action, including
the revocation or suspension of the casino license. If any security holder of
the licensee or its holding company or affiliate who is required to be qualified
is found disqualified, it will be unlawful for the security holder to (i)
receive any dividends or interest upon any such securities, (ii) exercise,
directly or through any trustee or nominee, any right conferred by such
securities or (iii) receive any remuneration in any form from the corporate
licensee for services rendered or otherwise. The Amended and Restated
Certificate of Incorporation of SINA provides that all securities of SINA are
held subject to the condition that if the holder thereof is found to be
disqualified by the Casino Control Commission pursuant to provisions of the
Casino Control Act, then that holder must dispose of his or her interest in the
securities.
Remedies
--------
In the event that it is determined that a licensee has violated the Casino
Control Act, or if a security holder of the licensee required to be qualified is
found disqualified but does not dispose of his securities in the licensee or
holding company, under certain circumstances the licensee could be subject to
fines or have its license suspended or revoked.
The Casino Control Act provides for the mandatory appointment of a
conservator to operate the casino and hotel facility if a license is revoked or
not renewed and permits the appointment of a conservator if a license is
suspended for a period in excess of 120 days. If a conservator is appointed, the
suspended or former licensee is entitled to a "fair rate of return out of net
earnings, if any, during the period of the conservatorship, taking into
consideration that which amounts to a fair rate of return in the casino or hotel
industry."
Under certain circumstances, upon the revocation of a license or failure to
renew, the conservator, after approval by the Casino Control Commission and
consultation with the former licensee, may sell, assign, convey or otherwise
dispose of all of the property of the casino/hotel. In such cases, the former
licensee is entitled to a summary review of such proposed sale by the Casino
Control Commission and creditors of the former licensee and other parties in
interest are entitled to prior written notice of sale.
License Fees, Taxes and Investment Obligations
----------------------------------------------
The Casino Control Act provides for casino license renewal fees, other fees
based upon the cost of maintaining control and regulatory activities and various
license fees for the various classes of employees. In addition, a casino
licensee is subject annually to a tax of 8% of "gross revenue" (defined under
the Casino Control Act as casino win, less provision for uncollectible accounts
up to 4% of casino win) and license fees of $500 on each slot machine. Also, the
Casino Control Act has been amended to create an Atlantic City fund (the "AC
Fund") for economic development projects other than the construction and
renovation of casino/hotels. Thereafter, beginning with fiscal year 1999/2000
and for the following three fiscal years, an amount equal to the average paid
into the AC Fund for the previous four fiscal years shall be contributed to the
AC Fund. Each licensee's share of the amount to be contributed to the AC Fund is
based upon its percentage of the total industry gross revenue for the relevant
fiscal year. After eight years, the casino licensee's requirement to contribute
to this fund ceases.
The following table summarizes, for the periods shown, the fees, taxes and
contributions assessed upon RIH by the Casino Control Commission.
For the Year Ended December 31,
1999 1998 1997
Gaming tax $17,701,000 $18,785,000 $19,581,000
License, investigation,
inspection and
other fees 3,603,000 3,733,000 3,453,000
Contribution to AC Fund 307,000 496,000 392,000
$21,611,000 $23,014,000 $23,426,000
The Casino Control Act, as originally adopted, required a licensee to make
investments equal to 2% of the licensee's gross revenue (the "investment
obligation") for each calendar year, commencing in 1979, in which such gross
revenue exceeded its "cumulative investments" (as defined in the Casino Control
Act). A licensee had five years from the end of each calendar year to satisfy
this investment obligation or become liable for an "alternative tax" in the same
amount. In 1984 the New Jersey legislature amended the Casino Control Act so
that these provisions now apply only to investment obligations for the years
1979 through 1983.
Effective for 1984 and subsequent years, the amended Casino Control Act
requires a licensee to satisfy its investment obligation by purchasing bonds to
be issued by the CRDA or by making other investments authorized by the CRDA, in
an amount equal to 1.25% of a licensee's gross revenue. If the investment
obligation is not satisfied, then the licensee will be subject to an investment
alternative tax of 2.5% of gross revenue. Licensees are required to make
quarterly deposits with the CRDA against their current year investment
obligations. RIH's investment obligations for the years 1999, 1998, and 1997
amounted to $2.8 million, $2.9 million and $3.1 million, respectively, and, have
been satisfied by deposits made with the CRDA. At December 31, 1999, RIH held
$8.2 million face amount of bonds issued by the CRDA and had $18.2 million on
deposit with the CRDA. The CRDA bonds issued through 1999 have interest rates
ranging from 3.6% to 7.0% and have repayment terms of between 20 and 50 years.
In February 1999, the Company and various Atlantic City casinos entered
into agreements with the CRDA to invest in a project the CRDA and the New Jersey
Sports and Exposition Authority are planning, to renovate the existing Atlantic
City Boardwalk Convention Center into a 10,000 to 14,000 seat special events
center (the "Project").
The Project will be funded in phases through direct investments from
various Atlantic City casinos, including the Company. Of the total budgeted
cost, the Company has agreed to invest $8.7 million in cash which will be paid
from funds the Company has or will have deposited with the CRDA to meet its
investment obligations as described above. As of December 31, 1999, $1.8 million
of the total amount deposited with the CRDA by the Company had been allocated to
the Project. As the CRDA allocates funds deposited by the Company to the
Project, the Company will receive an investment credit reducing its obligation
to purchase CRDA bonds in an equal amount.
Other Properties
- ----------------
The Company owns approximately 15 acres of land adjacent to
Resorts Atlantic City and an additional nine acres at various sites in
Atlantic City that the Company intends to develop or are available for
sale. See "ITEM 2. PROPERTIES."
CONNECTICUT
-----------
Sun Cove has a 50% interest in, and is a managing partner of, TCA, a
Connecticut general partnership, that developed and, until December 31, 1999,
managed the Mohegan Sun Casino, a casino and entertainment complex in
Uncasville, Connecticut. TCA managed the Mohegan Sun Casino pursuant to the
Management Agreement. The Management Agreement provided that TCA was entitled to
receive between 30% and 40% of the net profits, as defined, of the Mohegan Sun
Casino.
The Tribe appointed TCA to develop its proposed $800 million expansion of
the Mohegan Sun Casino. The expansion includes an additional 120,000 square foot
casino, a 1,200-room hotel, an arena and additional retail space. It is
anticipated that the new casino will open in the fourth quarter of 2001 with the
hotel opening in the second quarter of 2002. In addition, TCA and the Tribe
agreed that effective January 1, 2000, TCA would turn over management of the
Mohegan Sun Resort complex, (which comprises the existing operations and the
proposed expansion), to the Tribe. In exchange for relinquishing its rights
under its previous agreements, beginning January 1, 2000, TCA receives annual
payments of five percent of the gross revenues of the Mohegan Sun Resort complex
for a 15-year period.
The Mohegan Sun Casino has a Native American theme that is conveyed through
architectural features and the use of natural design elements such as timber,
stone and water. Guests enter the Mohegan Sun Casino through one of four major
entrances, each of which is distinguished by a separate seasonal theme; winter,
spring, summer and fall, emphasizing the importance of the seasonal changes to
tribal life. The Mohegan Sun Casino currently includes approximately 150,000
square feet of gaming space and features more than 3,000 slot machines, 152
table games, 42 poker tables and parking for 7,200 cars. The site for the
Mohegan Sun Casino is located approximately one mile from the interchange of
Interstate 395 and Connecticut Route 2A, which is a four-lane expressway. A
four-lane access road from Route 2A (with its own exit) gives patrons of the
Mohegan Sun Casino direct access to Interstate 395, which is connected to
Interstate 95, the main highway linking Boston, Providence and New York. This
road system allows customers to drive directly into the property from the
interstate highway system without encountering any traffic light.
Sun Cove is one of two managing partners of TCA. All decisions of the
managing partners require the concurrence of Sun Cove and the other managing
partner, Waterford Gaming, L.L.C. In the event of deadlock there are mutual
buy-out provisions.
FLORIDA
-------
Sun Resorts, together with its subsidiaries based in Florida, provides
general and administrative support services, marketing services, travel
reservations and wholesale tour services for SIHL's properties in The Bahamas.
NEW YORK
--------
In early 1998, SINA leased office space in New York City and opened a
corporate marketing and public relations office which provides services to SINA
and its affiliated companies.
(d) Financial Information about Foreign and Domestic Operations
and Export Sales
Not applicable
ITEM 2. PROPERTIES
Casino, Hotel and Related Properties
- ------------------------------------
The Company's core real estate assets consist of approximately 26 acres of
developed land and land available for development in Atlantic City.
Land used in the operation of the casino/hotel consists of approximately 12
acres and is owned in fee simple, except for approximately 1.2 acres of the
Resorts Atlantic City site which are leased pursuant to ground leases expiring
from 2056 through 2067. The 12 acres includes approximately seven acres under
the Resorts Atlantic City building complex, approximately 3.5 acres of parking
lots available for future expansion and the approximate one acre in front of the
casino/hotel which is utilized for patron valet and related services.
The Company also owns in fee simple approximately 15 acres of real property
immediately adjacent to its existing casino hotel in Atlantic City. These
properties are zoned for casino hotel use and available for future expansion.
Some of the properties are currently utilized as surface parking lots and others
are vacant lots. Among these properties is an approximate 5.5 acre Atlantic
Ocean pier site, two acres of which contained the former Steeplechase Pier. The
pier has been removed and the Company has current Federal and State permits to
construct a new pier on two acres of the 5.5-acre site, although no decision has
been made at this time to develop this location. Atlantic City amended its
zoning ordinances to permit casinos, hotel rooms and ancillary amusements on
five of the City's pier sites, including the Steeplechase Pier site. State
environmental regulations are currently under review as a result of the City's
recent zoning changes.
Other Properties
- ----------------
The Company also owns in fee simple real estate at several different
locations in Atlantic City consisting of approximately 11 acres. Among these are
an approximate six acres of land adjacent to Delaware Avenue in Atlantic City, a
portion of which is utilized by the Company for a warehouse operation servicing
Resorts Atlantic City, and an approximate four acres of real estate in the
Southeast Inlet section of Atlantic City.
In 1999 the Company sold approximately 400 acres of wetlands located on the
Blackhorse Pike in Atlantic City to the South Jersey Transportation Authority.
The Company currently owns in fee simple approximately 45 acres of property
located in Atlantic City on Blackhorse Pike, a portion of which may be
considered to be wetlands.
ITEM 3. LEGAL PROCEEDINGS
U.S. Bankruptcy Court Action - Nathan Rogers v. Merv Griffin, et al.
- --------------------------------------------------------------------
On September 25, 1995, Nathan Rogers, then a shareholder of SINA, filed a
Complaint in Adversary Proceeding in the Bankruptcy Court for the District of
New Jersey (the "NJ Bankruptcy Court"), which Court approved the Company's 1990
plan of reorganization. The complaint alleges that the Company did not comply
with its 1990 plan of reorganization in relation to the repayment by Merv
Griffin of his $11 million promissory note. The complaint further alleges that
the Company violated the court order approving the 1990 plan of reorganization
by filing a pre-packaged plan of reorganization in another district. The
complaint seeks to have a trustee appointed for the Company and to have the
issuance of SINA common stock to Merv Griffin pursuant to the 1990 plan of
reorganization voided. The Company's Motion For Summary Judgment dismissing the
complaint in its entirety was granted by the NJ Bankruptcy Court on September
16, 1997. Rogers subsequently appealed the NJ Bankruptcy Court decision to the
US District Court of New Jersey. In September, 1998, the US District Court
entered an order upholding the NJ Bankruptcy Court's decision dismissing Rogers'
claim. Rogers did not appeal the US District Court decision and, therefore, the
litigation is concluded.
US District Court Action - SINA v. Lowenschuss
- ----------------------------------------------
As previously reported, in September 1989 SINA filed an action in the US
District Court for the Eastern District of Pennsylvania to recover certain sums
paid to the defendant, as trustee for two Individual Retirement Accounts and the
Fred Lowenschuss Associates Pension Plan (the "Pension Plan"), for SINA stock in
a 1988 merger, in which SINA was acquired by Merv Griffin. This action was
transferred to the NJ Bankruptcy Court in connection with the Company's former
bankruptcy case commenced there in 1989.
In February 1992, the NJ Bankruptcy Court issued an opinion granting
partial summary judgment in favor of SINA on one of its six causes of action.
The NJ Bankruptcy Court reserved the issue of remedies for trial.
In August 1992, Fred Lowenschuss filed for Chapter 11 reorganization in the
US Bankruptcy Court for the District of Nevada (the "Nevada Bankruptcy Court").
As a result, the NJ Bankruptcy Court stayed SINA's action against Lowenschuss.
The Nevada Bankruptcy Court confirmed Fred Lowenschuss' plan of
reorganization in October 1993. SINA appealed certain portions of the
confirmation order and other orders of the Nevada Bankruptcy Court. In June
1994, the US District Court for the District of Nevada (the "Nevada District
Court") granted SINA's appeal in all respects. In October 1995, the US Court of
Appeals for the Ninth Circuit affirmed the Nevada District Court's ruling in all
respects, and in November 1995, the Court of Appeals denied Fred Lowenschuss'
petition for rehearing. On June 10, 1996, the United States Supreme Court denied
Fred Lowenschuss' petition for a writ of certiorari.
All interested parties, including SINA, filed motions with the Nevada
Bankruptcy Court about their respective claims and priority rights under the US
Bankruptcy Code. The Nevada Bankruptcy Court ruled on these motions, and SINA
and other parties appealed, first to the Nevada District Court and then to the
Court of Appeals for the Ninth Circuit. At the time that the United States
Supreme Court denied SINA's petition for a writ of certiorari, on November
29,1999 (see discussion below), SINA had three appeals pending, one in the Court
of Appeals and two in the Nevada District Court. SINA voluntarily dismissed all
three appeals and simultaneously withdrew its proofs of claim in Lowenschuss'
bankruptcy case.
On November 2 and 3, 1995, the NJ Bankruptcy Court held a trial on the
merits of SINA's claims against the trustee of the Pension Plan. On April 22,
1997, the NJ Bankruptcy Court issued a final opinion in SINA's favor, and on May
20, 1997 entered a judgment in SINA's favor finding that the trustee for the two
Individual Retirement Accounts and the Pension Plan committed fraud against SINA
and that SINA was entitled to restitution. The NJ Bankruptcy Court awarded SINA
$3.8 million plus prejudgment interest and $250,000 punitive damages, for a
total award of approximately $5.7 million. On July 7, 1997 the NJ Bankruptcy
Court amended the judgment to apportion the damages between the Pension Plan and
the Individual Retirement Accounts. The NJ Bankruptcy Court also denied
Defendant's request for a stay of enforcement of the judgment. Subsequently, the
Defendants filed an appeal of the NJ Bankruptcy Court's decision in the US
District Court for the District of New Jersey (the "New Jersey District Court").
On March 26, 1998, The New Jersey District Court reversed the judgment of the NJ
Bankruptcy Court. SINA filed an appeal of the New Jersey District Court's
decision with the US Court of Appeals for the Third Circuit (the "Circuit
Court"). On June 30, 1999, the Circuit Court issued an opinion affirming the New
Jersey District Court's decision. SINA's subsequent petition for a writ of
certiorari to the United States Supreme Court was denied on November 29, 1999,
thereby concluding this litigation.
On March 8, 1996, Fred Lowenschuss, as trustee of various Lowenschuss
children's trusts (the "Trusts"), and Laurance Lowenschuss, as trustee for the
Pension Plan, filed a counterclaim and a third party claim against SINA and
First Interstate Trust Company in the NJ Bankruptcy Court alleging that the
Pension Plan and the Trusts timely surrendered certain securities for exchange
under the Company's 1990 plan of reorganization and that those securities were
wrongfully dishonored and returned. The Company replied to the counterclaims in
April 1996 and denied the allegations. Since 1996, the parties have voluntarily
stayed this litigation, pending the resolution of Lowenschuss' bankruptcy case
in Nevada.
In connection with that litigation, Laurance Lowenschuss, as trustee for
the Pension Plan, and Fred Lowenschuss, as trustee of the Trusts and as
custodian, filed an action in May 1996 against SINA for preliminary and
permanent injunctive relief. The Lowenschusses sought an order from the US
Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court")
to extend the post-confirmation bar date of the Plan and to secure the return of
certain escrowed distributions to holders of Old Series Notes (as defined in the
Plan).
On May 9, 1996, the Delaware Bankruptcy Court entered an order, to which
the parties had stipulated, extending the Lowenschuss' date of surrender for Old
Series Notes through November 10, 1996. By further stipulations, the date of
surrender has been further extended through May 12, 2000, during which time any
funds held in escrow under the Plan will not be distributed.
The foregoing litigation and bankruptcy proceedings have spawned additional
and related litigation, including the following: (a) an injunction action
brought by Fred Lowenschuss, wherein the Nevada Bankruptcy Court enjoined SINA
from proceeding against Fred Lowenschuss individually; the Nevada District Court
dismissed appeals by both SINA and Fred Lowenschuss, and the Ninth Circuit, on
March 6, 1997, affirmed the District Court's dismissal of Fred Lowenschuss'
appeal; (b) a malicious prosecution action brought by Fred Lowenschuss against
SINA and its counsel that was dismissed by the Nevada Bankruptcy Court and the
Nevada District Court; on March 6, 1997, the Ninth Circuit affirmed the District
Court's dismissal of Lowenschuss' appeal and awarded SINA monetary sanctions,
finding that the Lowenschuss' appeal was frivolous; and (c) an action filed by
Laurance Lowenschuss, as trustee of the Pension Plan, in the Nevada District
Court against SINA, which was transferred to the NJ District Court; in January,
1996, the NJ District Court referred the matter to the NJ Bankruptcy Court. This
action has been dormant since 1996.
David Goldkrantz vs. Merv Griffin, Sun International Hotels Limited, et.al;
- ---------------------------------------------------------------------------
A complaint was filed in December 1997 in the US District Court for the
Southern District of New York (the "District Court " on behalf of David
Goldkrantz and a purported class of Company shareholders against SIHL, the
Company and various affiliates, certain directors and officers of SIHL and the
Company (the "Goldkrantz Case"). The complaint alleged that the Proxy Statement
and Prospectus issued by SIHL and the Company in November 1996, in connection
with their merger, was false and misleading with regard to statements made about
a license and service agreement entered into between GGE and The Griffin Group.
In September 1998, the Company filed a Motion for Summary Judgment to dispose of
the claim. On April 6, 1999 The District Court granted the Company's motion for
Summary Judgment dismissing the Goldkrantz Case in its entirety. Goldkrantz
subsequently filed an appeal with The United States Court of Appeals for the
Second Circuit (the "Circuit Court") which appeal was denied by the Circuit
Court on December 13, 1999. Goldkrantz has not filed a Request for
Reconsideration with the Circuit Court nor a Petition for Certiorari with the
United States Supreme Court, and, therefore, the litigation is concluded.
Philip Goldberg Family Trust vs. Resorts International Hotel, Inc.
- ------------------------------------------------------------------
On June 25, 1998 Betsy Peck, as Trustee for the Philip Goldberg Family
Trust (the "Trust"), filed suit against RIH in the Superior Court of New Jersey,
Chancery Division, Atlantic County. The complaint involves a quarter of an acre
parcel of land that lies under the parking garage adjacent to RIH (the "Lot").
The Lot is owned by the Trust and by way of an assignment in 1978, RIH is a
leasee under a lease which was entered into in 1956 for purposes of using the
site to construct improvements that would be tied into a motel which was located
on a contiguous lot (the "Lease"). In 1980 RIH demolished the motel and the
improvements on the Lot and in 1981 RIH completed construction of a parking
garage on four parcels of land, which included the Lot and three parcels which
are owned by RIH.
The complaint alleges that the Lease requires any improvements on the Lot to be
freestanding and detached or detachable from improvements or uses on the
contiguous lots. Based upon this interpretation of the Lease, the Trust argues
that when the parking garage was constructed approximately twenty years ago, the
construction violated the Lease. The Trust is seeking damages based upon this
alleged violation of the Lease.
On June 26, 1998 RIH filed a complaint against the Trust in the same court.
The RIH complaint sought declaratory relief that RIH was within its rights in
demolishing the improvements on the Lot and constructing the parking garage on
the Lot and the three contiguous lots. RIH has also taken the position that the
demolition of the improvements and construction of the parking garage was done
with the notice, knowledge and/or consent of Mr. and Mrs. Goldberg and for this,
and other related reasons, the Trust is prohibited from obtaining relief against
RIH under various equitable principles.
On August 27, 1998 the matters were consolidated and the parties have been
engaged in pretrial discovery. Discovery ends in mid-April and the case will be
pretried shortly thereafter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The disclosure required by Item 4 has been omitted pursuant to General
Instruction I of Form 10-K.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
There is no trading market for SINA common stock, all of which is owned by
SIHL.
No dividends were paid on SINA common stock during the last two fiscal years.
The indentures for certain of SINA's indebtedness contain certain restrictions
as to the payment of dividends by SINA.
ITEM 6. SELECTED FINANCIAL DATA
The disclosure required by Item 6 has been omitted pursuant to General
Instruction I of Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Comparison of Years Ended December 31, 1999 and 1998
- ----------------------------------------------------
Revenues
- --------
Gaming and Resort Revenues
--------------------------
For the year 1999, gaming revenues were lower than the previous year by $13.7
million (5.8%). This decrease consisted of a reduction in slot revenues
partially offset by an increase in table games revenues.
Slot revenues decreased by $15.7 million (9.2%) mainly due to a decrease in
slot handle (dollar amounts wagered) of $138.9 million (7.6%). Commencing in
February 1999, the Company had taken out of service and/or removed from the
floor as many as 800 slot units at a time during the renovation of Resorts
Atlantic City described below. As a result, there was an average of 2,033 slot
machines in service during the year 1999 compared to 2,253 in 1998.
Table games revenues increased by $2.2 million (3.6%) over the previous year.
This was primarily due to an increase in table games drop (the dollar amount of
chips purchased) of $39.2 million (9.4%) which was partially offset by a
reduction in hold percentage to 14.1% in 1999 from 14.9% in 1998.
RIH also experienced slight decreases in rooms and food and beverage
revenues for the year ended 1999 as a result of the renovation. Throughout the
year, in order to complete the renovation of its existing hotel rooms, RIH took
out of service an average of 45 rooms of its existing inventory of 658. Upon
completion of the renovation, the number of available rooms decreased to 644
compared to 662 in 1998.
Other casino hotel revenues decreased by $3.4 million in 1999 compared to
the previous year. This decrease was primarily due to lower complimentary
entertainment revenues. With the availability of "Club 1133", an entertainment
lounge which offers free admission to patrons, there were fewer headliner shows
in the main theater.
On June 30, 1999, management completed the renovation of Resorts Atlantic
City. The construction included extensive renovations to the casino floor, hotel
lobby, guestrooms and suites, room corridors, restaurants, the hotel porte
cochere and public areas. In addition, three new restaurants were created,
replacing two older restaurants and a VIP player lounge was constructed. As of
December 31, 1999, RIH had spent $47.3 million on the renovation. In addition,
in 1999 Resorts Atlantic City purchased 343 slot machines and leased 257 slot
machines. Other expenditures consisted of various building improvement projects
and computer upgrades.
Tour Operations
---------------
Revenues from tour operations for the year 1999 increased by $10.0 million
(72.7%) compared to the previous year. This increase was the result of the
Company's tour operator subsidiary significantly expanding its operations in
response to the expansion of the resort operations of a subsidiary of SIHL
located in The Bahamas.
Management Fees and Other Income
--------------------------------
Management fees and other income in 1999 increased by $11.2 million over
the previous year. The Company earned $6.7 million of development fees from TCA
in 1999, while management fees from TCA increased slightly in 1999 over 1998. No
development fees were earned in 1998. In addition, management fees earned from a
subsidiary of SIHL which operates in The Bahamas, increased by $4.3 million as a
result of changes in the management services agreement.
Expenses
Gaming Expense
--------------
While gaming revenues were down for the year 1999, gaming expense increased
by $5.5 million. This was primarily due to increased promotional costs which
more than offset a decrease in casino win tax which is based on a percentage of
casino win. As explained above, the effect of fewer slot machines on the floor
and lower hold percentage on table games had an unfavorable impact on casino
revenues. Therefore, RIH was not able to fully realize the effects of the
increased promotional costs.
Income Taxes
------------
See Note 11 of Notes to Consolidated Financial Statements for a discussion
of the Company's income taxes for the years 1999 and 1998.
Other Matters
-------------
Year 2000 Compliance
--------------------
In order to address the impact of the date change in the year 2000 ("Y2K")
on its computer programs, resort facilities and third party suppliers, SIHL
established a dedicated Year 2000 Program Office and contracted with independent
consultants to coordinate the compliance efforts and ensure that the project
status was monitored and reported throughout the organization. As a result of
these efforts, the Company did not experience any significant negative impact
from Y2K.
New Accounting Pronouncements
-----------------------------
In the first quarter of 1999, the Company adopted Statement of Position
98-5 which states that all start up costs, including pre-opening expenses will
be charged to expense as incurred. Adoption of this Statement of Position did
not have a material impact on the consolidated financial statements.
Forward Looking Statements
--------------------------
Certain information included in this Form 10-K filing contains
forward-looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements are based on current expectations,
estimates, projections, management's beliefs and assumptions made by management.
Words such as "expects", "anticipates", "intends", "plans", "believes",
"estimates" and variations of such words and similar expressions are intended to
identify such forward-looking statements. Such statements include information
relating to plans for future expansion and other business development activities
as well as other capital spending, financing sources and the effects of
regulation (including gaming and tax regulation) and competition. Such
forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and accordingly,
such results may differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are not limited to,
those relating to development and construction activities, dependence on
existing management, leverage and debt service (including sensitivity to
fluctuations in interest rates), availability of financing, democratic or global
economic conditions, pending litigation, changes in tax laws or the
administration of such laws and changes in gaming laws or regulations (including
the legalization of gaming in certain jurisdictions).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are presented on the
following pages:
Page
Financial Statements Reference
Report of Independent Public Accountants 26
Consolidated Balance Sheets at December 31,
1999 and 1998 27
Consolidated Statements of Operations for the
years ended December 31, 1999, 1998 and 1997 29
Consolidated Statements of Changes in
Shareholder's Equity for the years ended
December 31, 1999, 1998 and 1997 30
Consolidated Statements of Cash Flows for the
years ended December 31, 1999, 1998 and 1997 31
Notes to Consolidated Financial Statements 33
Financial Statement Schedule:
Schedule II: Valuation and Qualifying
Accounts for the years
ended December 31, 1999,
1998 and 1997 47
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Sun International North America, Inc.:
We have audited the accompanying consolidated balance sheets of Sun
International North America, Inc. (a Delaware corporation) and subsidiaries as
of December 31, 1999 and 1998, and the related consolidated statements of
operations, changes in shareholder's equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
the schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sun International North
America, Inc. and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 18, 2000
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
December 31,
Assets 1999 1998
--------- ---------
Current assets:
Cash (including cash equivalents
of $6,678 and $12,212) $ 22,669 $ 25,160
Receivables, net 8,542 8,088
Inventories 2,500 1,523
Prepaid expenses 2,742 2,091
Due from affiliates 7,829 10,096
-------- --------
Total current assets 44,282 46,958
-------- --------
Land held for investment,
development or resale 61,308 56,839
-------- --------
Property and equipment:
Land and land rights 111,907 111,907
Land improvements 1,001 1,001
Hotels and other buildings 166,512 123,837
Furniture, machinery and equipment 45,588 31,344
Construction in progress 4,997 17,448
-------- --------
330,005 285,537
Less accumulated depreciation (35,035) (22,843)
-------- --------
Net property and equipment 294,970 262,694
-------- --------
Deferred charges and other assets, net 40,591 22,604
Goodwill, net 93,855 96,871
-------- --------
$535,006 $485,966
======== ========
- Continued -
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, except share data)
December 31,
Liabilities and Shareholder's Equity 1999 1998
--------- ----------
Current liabilities:
Current maturities of long-term debt $ 944 $ 2,235
Accounts payable and accrued
liabilities 51,633 46,385
Due to affiliates 4,518 -
-------- --------
Total current liabilities 57,095 48,620
-------- --------
Long-term debt, net of unamortized
premiums and discounts 272,374 205,940
-------- --------
Deferred income taxes 42,223 42,253
-------- --------
Commitments and contingencies
Shareholder's equity:
Common stock - 100 shares
outstanding - $.01 par value - -
Capital in excess of par 192,635 193,008
Accumulated deficit (29,321) (3,855)
-------- --------
Total shareholder's equity 163,314 189,153
-------- --------
$535,006 $485,966
======== ========
See Notes to Consolidated Financial Statements.
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars)
For the Year Ended December 31,
1999 1998 1997
Revenues:
Gaming $221,015 $234,736 $244,156
Rooms 15,160 16,148 16,514
Food and beverage 25,512 26,692 27,085
Other resort revenues 8,076 11,460 11,344
-------- -------- --------
269,763 289,036 299,099
Less promotional allowances (26,632) (28,295) (28,465)
-------- -------- --------
Net gaming and resort revenues 243,131 260,741 270,634
Tour operations 23,766 13,758 15,403
Management fees and other 22,000 10,791 8,107
Real estate related - 754 8,987
-------- -------- --------
288,897 286,044 303,131
-------- -------- --------
Expenses:
Gaming 152,661 147,141 154,554
Rooms 2,929 3,454 3,036
Food and beverage 15,401 16,638 15,973
Other resort expenses 28,762 30,509 33,019
Tour operations 22,543 12,583 14,193
Selling, general and
administrative 45,715 44,687 38,835
Depreciation and amortization 18,219 15,529 14,372
Pre-opening expenses 5,398 - -
-------- -------- --------
291,628 270,541 273,982
-------- -------- --------
Operating income (loss) (2,731) 15,503 29,149
Other income (expenses):
Interest income 1,839 3,602 3,539
Interest expense, net of
capitalized interest (20,571) (20,466) (27,515)
Amortization of debt premiums,
discounts and issue costs (429) (511) (211)
Other, net (729) - 314
-------- -------- --------
Earnings (loss) before benefit
(provision)for income taxes and
extraordinary item (22,621) (1,872) 5,276
Benefit (provision) for income taxes (2,845) 38 (4,340)
-------- -------- --------
Earnings (loss) before
extraordinary item (25,466) (1,834) 936
Extraordinary item-loss on
extinguishment of debt (net of
income tax benefit of $2,043) - - (2,957)
-------- -------- --------
Net loss $(25,466) $ (1,834) $ (2,021)
======== ======== ========
See Notes to Consolidated Financial Statements.
SUN INTERNATIONAL NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(In Thousands of Dollars)
Capital
Common in excess Accumulated
stock of par deficit Total
------- --------- ----------- ---------
Balance at December 31, 1996 $ - $193,000 $ - $193,000
Contribution of Sun Resorts - 368 - 368
Contribution of Sun Cove - (360) - (360)
Net loss for year 1997 - (2,021) (2,021)
----- -------- -------- --------
Balance at December 31, 1997 - 193,008 (2,021) 190,987
Net loss for year 1998 - - (1,834) (1,834)
----- -------- -------- --------
Balance at December 31, 1998 - 193,008 (3,855) 189,153
Shares canceled - (373) - (373)
Net loss for year 1999 - - (25,466) (25,466)
----- -------- -------- --------
Balance at December 31, 1999 $ - $192,635 $(29,321) $163,314
===== ======== ======== ========
See Notes to Consolidated Financial Statements.
SUN INTERNATIONAL NORTH AMERICA, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
For the Year Ended December 31,
1999 1998 1997
----------- ----------- -----------
Cash flows from operating activities:
Net loss ........................................................ $ (25,466) $ (1,834) $ (2,021)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Extraordinary item ............................................ -- -- 2,957
Depreciation and amortization ................................. 18,648 16,041 15,173
(Gain) loss on disposition of assets .......................... 729 -- (607)
Utilization of tax benefits acquired in merger ................ -- 1,887 4,085
Provision for doubtful receivables ............................ 1,543 708 830
Provision for discount on CRDA obligations, net ............... 587 572 987
Net change in working capital accounts:
Receivables ................................................. (1,131) (105) (1,117)
Due from affiliates ......................................... (7,443) -- 4,559
Inventories and prepaid expenses ............................ (1,628) 77 (48)
Accounts payable and accrued liabilities .................... 2,945 472 (3,325)
Net change in deferred charges ................................ (288) 322 1,980
Net change in deferred tax liability .......................... (30) (3,747) --
-------- -------- --------
Net cash provided by (used in)
operating activities ..................................... (11,534) 14,393 23,453
-------- -------- --------
Cash flows from investing activities:
Payments for operating capital expenditures ..................... (11,408) (20,786) (10,595)
Acquisition of other fixed assets ............................... (44,376) (11,727) (21,721)
Desert Inn acquisition costs .................................... (16,117) -- --
Proceeds from the sale of assets ................................ 5,052 110,256 7,950
Payments for expenses of merger ................................. -- (745) (8,057)
CRDA deposits and bond purchases ................................ (2,746) (2,955) (3,122)
Sun Resorts cash and equivalents at date
of contribution ................................................ -- -- 1,159
-------- ------- -------
Net cash provided by (used in)
investing activities ......................................... (69,595) 74,043 (34,386)
-------- ------- --------
-continued-
SUN INTERNATIONAL NORTH AMERICA, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
For the Year Ended December 31,
1999 1998 1997
----------- ----------- -----------
Cash flows from financing activities:
Borrowings ..................................................... 73,000 -- 199,084
Debt repayments ................................................ (8,710) (108,480) (154,355)
Debt issuance costs ............................................ -- -- (6,460)
Advances from (repayments to) affiliates ....................... 14,348 (5,610) (10,327)
--------- --------- ---------
Net cash provided by (used in) financing
activities .................................................. 78,638 (114,090) 27,942
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents ...................................................... (2,491) (25,654) 17,009
Cash and cash equivalents at beginning of period .................. 25,160 50,814 33,805
--------- --------- ---------
Cash and cash equivalents at end of period ........................ $ 22,669 $ 25,160 $ 50,814
========= ========= =========
See Notes to Consolidated Financial Statements
SUN INTERNATIONAL NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
Basis of Accounting
- -------------------
Sun International North America, Inc.("SINA") is a holding company
principally engaged in the operation of resort and casino properties. Through
its indirect wholly owned subsidiary, Resorts International Hotel, Inc. ("RIH"),
SINA owns and operates Resorts Atlantic City, a casino hotel in Atlantic City,
New Jersey . In addition, SINA, through its wholly owned subsidiary Sun Cove
Limited ("Sun Cove") has a 50% interest in Trading Cove Associates ("TCA"), a
Connecticut general partnership (see below). SINA also provides management
services to certain of its affiliated companies and owns a tour operator which
wholesales tour packages and provides reservation services. In December 1996,
pursuant to a merger agreement, SINA became a wholly owned subsidiary of Sun
International Hotels Limited ("SIHL"). The term "Company" as used herein
includes SINA and its subsidiaries.
Contributed Companies
- ---------------------
Effective January 1, 1997, SIHL contributed the capital stock of Sun
International Resorts, Inc. ("Sun Resorts"), a wholly owned subsidiary of SIHL,
to SINA. Sun Resorts, along with its subsidiaries, is a tour operator and
wholesaler of tour packages and provides reservation services. In addition, Sun
Resorts provides certain support services for SIHL's resort and casino
operations in The Bahamas. As of January 1, 1997, Sun Resorts' consolidated
assets, liabilities and shareholder's equity amounted to $6.1 million, $5.7
million and $368,000, respectively.
Effective July 1, 1997, SIHL contributed the capital stock of Sun Cove, a
wholly owned subsidiary of SIHL, to SINA. Sun Cove has a 50% interest in TCA,
which, until December 31, 1999, held a management agreement (the "Management
Agreement") with the Mohegan Tribal Gaming Authority relating to the development
and management of a casino resort and entertainment complex (the "Mohegan Sun
Casino"). The Management Agreement provided that TCA was entitled to receive
between 30% and 40% of the net profits, as defined, of the Mohegan Sun Casino.
TCA was obligated to pay certain amounts to its partners and certain of their
affiliates, as priority payments from its management fee income for services
provided by those entities. In addition, TCA was obligated to pay certain
amounts to its partners, as priority payments from its management fee income,
for certain capital contributions to TCA. These amounts were paid as TCA
received sufficient management fees to meet the priority distributions. As of
July 1, 1997, Sun Cove's assets, liabilities and shareholder's deficit amounted
to $7.9 million, $8.3 million and $360,000, respectively. Sun Cove's revenues
and net loss for the six months ended June 30, 1997 were $0 and $360,000,
respectively.
The contributions of Sun Resorts and Sun Cove were recorded based upon
their respective carrying values by SIHL.
In February 1998, The Mohegan Tribe of Indians of Connecticut (the "Tribe")
announced that it had appointed TCA to develop its proposed expansion of the
Mohegan Sun Casino which is currently expected to cost approximately $800.0
million. In addition, TCA and the Tribe agreed that effective January 1, 2000,
TCA would turn over management of the Mohegan Sun Resort complex, (which
comprises the existing operations and the proposed expansion), to the Tribe. In
exchange for relinquishing its rights under its existing agreements, beginning
January 1, 2000, TCA receives annual payments of five percent of the gross
revenues of the Mohegan Sun Resort complex for a 15-year period.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of SINA and its
subsidiaries. All significant intercompany transactions and balances have been
eliminated in consolidation.
Reclassifications
- -----------------
Certain balances in the accompanying consolidated financial statements for
1998 and 1997 have been reclassified to conform with the current year
presentation.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The Company provides allowances for doubtful accounts arising from casino,
hotel and other services, which are based upon a specific review of certain
outstanding receivables. In determining the amounts of the allowances, the
Company is required to make certain estimates and assumptions and actual results
may differ from those estimates and assumptions.
Revenue Recognition
- -------------------
The Company recognizes the net win from casino gaming activities (the
difference between gaming wins and losses) as gaming revenues. Revenues from
hotel and related services are recognized at the time the related service is
performed. Management fees and other operating revenues include fees charged to
unconsolidated affiliates primarily for executive management services. Revenues
are recorded at the time the service is performed.
Promotional Allowances
- ----------------------
The retail value of accommodations, food, beverage and other services
provided to customers without charge is included in gross revenues and deducted
as promotional allowances. The estimated departmental costs of providing such
promotional allowances for the years ended December 31 are included in gaming
costs and expenses as follows:
(In Thousands of Dollars) 1999 1998 1997
Rooms $ 5,536 $ 5,655 $ 5,092
Food and beverage 14,634 13,448 15,042
Other 6,704 5,570 5,192
26,874 $24,673 $25,326
Pre-Opening Expenses
- --------------------
In the first quarter of 1999, the Company adopted Statement of Position
98-5 which states that all pre-opening costs will be charged to expense as
incurred. Pre-opening costs in 1999 related to the opening of a renovation
completed at Resorts Atlantic City.
Cash Equivalents
- ----------------
The Company considers all of its short-term money market securities
purchased with original maturities of three months or less to be cash
equivalents.
Inventories
- -----------
Inventories of provisions, supplies and spare parts are carried at the
lower of cost (first-in, first-out) or market.
Property and Equipment
- ----------------------
Property and equipment are stated at cost and are depreciated over the
estimated useful lives reported below using the straight-line method for
financial reporting purposes.
Land improvements 14 years
Hotels and other buildings 40 years
Furniture, machinery and equipment 2-5 years
Deferred Charges and Other Assets
- ---------------------------------
Debt issuance costs are amortized over the terms of the related
indebtedness.
Goodwill
- --------
Goodwill is amortized on a straight line basis over 40 years. Amortization
expense included in the accompanying consolidated statements of operations
related to goodwill was $2.6 million, $2.7 million and $2.4 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
Capitalized Interest
- --------------------
Interest is capitalized on construction expenditures and land under
development at the weighted average interest rate of the Company's long-term
debt.
Casino Reinvestment Development Authority ("CRDA") Obligations
- --------------------------------------------------------------
Under the New Jersey Casino Control Act ("Casino Control Act"), the Company
is obligated to purchase CRDA bonds, which will bear a below-market interest
rate, or make an alternative qualifying investment. The Company charges to
expense an estimated discount related to CRDA investment obligations as of the
date the obligation arises based on fair market interest rates of similar
quality bonds in existence as of that date. On the date the Company actually
purchases the CRDA bond, the estimated discount previously recorded is adjusted
to reflect the actual terms of the bonds issued and the then existing fair
market interest rate for similar quality bonds.
The discount on CRDA bonds purchased is amortized to interest income over
the life of the bonds using the effective interest rate method.
Long Lived Assets
- -----------------
The Company reviews its long lived assets and certain related intangibles
for impairment whenever changes in circumstances indicate that the carrying
amount of an asset may not be fully recoverable. As a result of its review, the
Company does not believe that any asset impairment exists in the recoverability
of its long lived assets.
Income Taxes
- ------------
SINA and all of its subsidiaries file consolidated United States federal
income tax returns.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under
this standard, deferred tax assets and liabilities are determined based on the
difference between the financial reporting and tax bases of assets and
liabilities at enacted tax rates which will be in effect for the years in which
the differences are expected to reverse. A valuation allowance is recognized
based on an estimate of the likelihood that some portion or all of the deferred
tax asset will not be realized.
Comprehensive Income
- ---------------------
Comprehensive income is equal to net loss for all periods presented.
NOTE 3 - CASH EQUIVALENTS
Cash equivalents at December 31, 1999 and 1998 included reverse repurchase
agreements (federal government securities purchased under agreements to resell
those securities) under which the Company had not taken delivery of the
underlying securities and investments in a money market fund which invests
exclusively in United States Treasury obligations. At December 31, 1999, the
Company held reverse repurchase agreements of $.5 million, all of which matured
January 3, 2000.
NOTE 4 - RECEIVABLES
Components of receivables at December 31 were as follows:
(In Thousands of Dollars) 1999 1998
Gaming $ 7,439 $ 5,700
Less allowance for doubtful accounts (2,606) (2,401)
4,833 3,299
Other 3,811 4,824
Less allowance for doubtful accounts (102) (35)
3,709 4,789
$ 8,542 $ 8,088
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Components of accounts payable and accrued liabilities at December 31 were
as follows:
(In Thousands of Dollars) 1999 1998
Accrued payroll and related taxes and
benefits $ 9,956 $10,621
Trade payables 12,768 11,710
Customer deposits and unearned revenues 5,965 4,127
Accrued interest 5,799 5,483
Accrued gaming taxes, fees and related
assessments 1,828 2,494
Accrued professional fees 2,380 2,503
Other accrued liabilities 12,937 9,447
$51,633 $46,385
NOTE 6 - LONG-TERM DEBT
Components of long-term debt at December 31 were as follows:
(In Thousands of Dollars) 1999 1998
9% Senior Notes $200,000 $200,000
Unamortized discount (738) (807)
199,262 199,193
Revolving Credit Facility 73,000 -
11% Mortgage Notes due 2003 - 5,352
Unamortized premium - 246
- 5,598
11.375% Junior Mortgage Notes
due 2004 - 1,095
Unamortized premium - 54
- 1,149
Other 1,056 2,235
273,318 208,175
Less current maturities ( 944) (2,235)
$272,374 $205,940
9% Senior Notes
- ---------------
The 9% senior subordinated unsecured notes due 2007 (the "9% Senior
Notes"), are unconditionally guaranteed by certain subsidiaries of SINA.
Interest on the 9% Senior Notes is payable on March 15 and September 15 each
year. The Indenture for the 9% Senior Notes contains certain covenants,
including limitations on the ability of the issuers and the guarantors to, among
other things: (i) incur additional indebtedness, (ii) incur certain liens, (iii)
engage in certain transactions with affiliates and (iv) pay dividends and make
certain other payments.
Revolving Credit Facility
- -------------------------
SINA is a co-borrower along with SIHL and Sun International Bahamas
Limited, an unconsolidated affiliated company, under a facility (the "Revolving
Credit Facility") with a syndicate of banks led by The Bank of Nova Scotia and
Societe Generale to allow for borrowings up to $625.0 million. Loans under the
Revolving Credit Facility bear interest at (i) the higher of (a) the Bank of
Nova Scotia's base rate or (b) the Federal Funds rate, in either case plus an
additional 0.750% to 1.625% based on a debt to earnings ratio of SIHL during the
period, as defined (the "Debt Ratio") or (ii) the Bank of Nova Scotia's
reserve-adjusted LIBOR rate plus 1.50% to 2.25% based on the Debt Ratio. Loans
under the Revolving Credit Facility may be prepaid and reborrowed at any time
and are due in full on August 12, 2002. Commitment fees are calculated at per
annum rates ranging from 0.375% to 0.500%, based on the Debt Ratio, applied to
the undrawn amount of the Revolving Credit Facility and are due, along with
accrued interest, quarterly.
The Revolving Credit Facility contains restrictive covenants that include:
(a) restrictions on the payment of dividends by SIHL, (b) minimum levels of
earnings before interest expense, income taxes, depreciation and amortization
("EBITDA") of SIHL and (c) a minimum relationship between SIHL EBITDA and
interest expense and debt.
Co-obligation
- -------------
The Company is a co-obligator, with SIHL, on $100 million senior
subordinated, unsecured notes due December 2007 (the "8.625% Notes"). Interest
on the 8.625% Notes is payable on June 15 and December 15 each year. The cash
was drawn down by and the debt is reflected in the consolidated financials of
SIHL.
NOTE 7 - SHAREHOLDER'S EQUITY
SINA is authorized to issue 100 million shares of SINA common stock,
120,000 shares of Class B Stock and 10 million shares of preferred stock. The
only shares of SINA stock outstanding are 100 shares of SINA common stock, all
of which are owned by SIHL. 7,502 shares of stock were canceled pursuant to a
court order by the United States Bankruptcy Court District of Delaware related
to SINA's plan of reorganization in May 1994.
NOTE 8 - RELATED PARTY TRANSACTIONS
Due from Affiliates
- -------------------
At December 31, 1999, amounts due from affiliates represent fees due for
development and management services related to the Mohegan Sun Casino. At
December 31, 1998, amounts due from affiliates represent non-interest bearing
due on demand advances.
Due to Affiliates
- -----------------
At December 31, 1999, amounts due to affiliates represent non-interest
bearing due on demand advances received from affiliates.
Management and Other Fees
- -------------------------
Effective January 1, 1998, the Company entered into an agreement to provide
management services to certain unconsolidated affiliated companies. For the
years ended December 31, 1999 and 1998, such fees amounted to $14.1 million and
$9.8 million, respectively.
A subsidiary of SINA earned $1.2 million and $1.0 million in priority
payments from TCA related to the Mohegan Sun Casino for the years ended 1999 and
1998, respectively. Development fees earned in 1999 related to the Mohegan Sun
Casino amounted to $6.7 million.
NOTE 9 - SHOWBOAT LEASE
Prior to January 1998, the Company leased to a subsidiary of Showboat,
Inc., a resort and casino operator, 10 acres of land under the Showboat Casino
Hotel in Atlantic City, New Jersey (included in land held for investment,
development or resale in the accompanying Consolidated Balance Sheets). The
lease payments were $754,000 and $9.0 million for the years 1998 and 1997,
respectively. The Company sold this land and the Showboat Lease in January 1998.
NOTE 10 - EMPLOYEE BENEFIT PLANS
SINA and certain of its subsidiaries participate in a defined contribution
plan covering substantially all of their non-union employees. The Company makes
contributions to this plan based on a percentage of eligible employee
contributions. Total pension expense for this plan was $844,000, $869,000 and
$810,000 in 1999, 1998 and 1997, respectively.
In addition to the plan described above, union and certain other employees
of RIH and certain former subsidiaries of SINA are covered by multi-employer
defined benefit pension plans to which the subsidiaries make, or made,
contributions. The Company's pension expense for these plans totaled $1.3
million, $1.1 million and $1.0 million in 1999, 1998, and 1997, respectively.
Certain of the Company's employees participate in SIHL's stock option plans
(the "Plans") whereby options to purchase shares of SIHL's capital stock (the
"Ordinary Shares") are granted. Pursuant to the Plans, the option prices are
equal to the market value per share of the Ordinary Shares on the date of grant.
The Plans provide for options to become exercisable either one year or two years
after the grant date in respect of 20% of such options, and thereafter in
installments of 20% per year over a four-year period. The options have a term of
ten years from the date of grant. As of December 31, 1999, the Company had
2,120,000 options outstanding, 479,000 of which were exercisable. The required
proforma disclosures related to Statement of Financial Accounting Standards No.
123 "Accounting for Stock Based Compensation" on such options did not have a
material impact on the company's consolidated financial statement.
Included in the options above, certain employees held options to purchase
SINA common stock when the Company was acquired by SIHL. All such shares were
converted to options to purchase Ordinary Shares and became exercisable as of
the acquisition date.
NOTE 11 - INCOME TAXES
The Company recorded income tax provisions (benefits) as follows from
continuing operations:
(In Thousands of Dollars) 1999 1998 1997
Current:
Federal $2,718 $ 3,430 $3,726
State 157 279 614
2,875 3,709 4,340
Deferred:
Federal (30) (3,747) -
$2,845 $ (38) $4,340
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The components of the deferred tax assets and liabilities at December 31
were as follows:
(In Thousands of Dollars) 1999 1998
Deferred tax liabilities:
Basis differences on land held for
investment, development or resale $ (6,100) $ (6,200)
Basis differences on property and
equipment (44,400) (44,300)
Other (2,402) (2,100)
Total deferred tax liabilities (52,902) (52,600)
Deferred tax assets:
NOL carryforwards 196,700 187,300
Book reserves not yet deductible
for tax return purposes 14,000 15,800
Basis difference on debt - 400
Tax credit carryforwards 2,700 2,800
Other 5,700 6,000
Total deferred tax assets 219,100 212,300
Valuation allowance for deferred
tax assets (208,421) (201,953)
Deferred tax assets, net of
valuation allowance 10,679 10,347
Net deferred tax liabilities $(42,223) $ (42,253)
A valuation allowance has been recorded against the portion of those
deferred tax assets that the Company believes will more likely than not remain
unrealized. If such deferred tax assets were to be realized, the corresponding
reduction to the valuation allowance would reduce the carrying value of
goodwill. During 1999, the Company experienced an increase to its valuation
allowance aggregating $6.5 million.
The effective income tax rate on earnings (loss) before extraordinary item
varies from the statutory federal income tax rate as a result of the following
factors:
1999 1998 1997
Statutory federal income tax
rate (35.0%) (35.0%) 35.0%
State tax costs .7% 14.9% 11.6%
NOLs and temporary differences
for which no taxes were provided
or benefits recognized 39.9% (100.8%) -
Nondeductible expenses, including
amortization of goodwill 3.8% 87.6% 25.3%
Other 2.5% 31.3% 10.3%
Effective income tax rate 11.9% (2.0%) 82.2%
For federal income tax purposes, the Company had NOL carryforwards of $562
million however, due to the change of ownership of SINA in 1996, $423 million of
these NOL carryforwards (the "Pre-Change NOLs") are limited in their
availability to offset future taxable income of the Company. As a result of
these limitations, approximately $11.3 million of Pre-Change NOLs will become
available for use each year through the year 2008; an additional $8.4 million
will be available in 2009. An additional $13 million of these Pre-Change NOLs
would be available to offset gains on sales of assets owned at the date of
change in ownership of the Company which are sold within five years of that
date. The remaining Pre-Change NOLs are expected to expire unutilized.
The restricted NOLs which the Company believes may become available to the
Company for utilization in spite of the limitations expire as follows: $50
million in 2005, $23 million in 2006, $28 million in 2007, $1 million in 2009
and $8 million in 2011. The unrestricted NOLs which the Company believes may be
used to offset future income expire as follows: $2 million in 2007, $57 million
in 2008,$57 million in 2012, and $23 million in 2019.
NOTE 12 - SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid, net of amounts capitalized, was $20.8 million, $24.4 million
and $26.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively. Income taxes refunded (paid) amounted to $188,000, $(2.1) million
and $87,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Non-cash investing and financing activities were as follows:
(In Thousands of Dollars) 1999 1998 1997
Increase (decrease) for valuation adjustments:
Goodwill - - $ 6,950
Land held for investment,
development or resale - - $ (5,000)
Accounts payable and accrued
liabilities - - $ 1,950
Exchange of real estate in Atlantic
City for reduction in CRDA
obligation - - $ 2,200
Refinancing of capital lease
obligations $1,444 - -
Property and equipment acquired
under capital lease obligations $ 938 $5,098 -
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Casino License
- --------------
The operation of a casino in Atlantic City is subject to regulatory
controls. A casino license must be obtained by the operator and the license must
be periodically renewed and is subject to revocation at any time. In the event
that the Company is not able to maintain its license, management believes that
the Company would still realize the carrying value of its related assets.
CRDA Obligations
- ----------------
The Casino Control Act, as amended, requires RIH to purchase bonds issued
by the CRDA, or to make other investments authorized by the CRDA, in an amount
equal to 1.25% of its gross gaming revenues, as defined. The CRDA bonds have
interest rates ranging from 3.6% to 7.0% and have repayment terms of between 20
and 50 years.
At December 31, 1999, RIH had $8.2 million face value of bonds issued by
the CRDA and had $18.2 million on deposit with the CRDA. These bonds and
deposits, net of an estimated discount to reflect the below-market interest
rates payable on the bonds, are included in deferred charges and other assets in
the accompanying consolidated balance sheets.
In February 1999, the Company and various Atlantic City casinos entered
into agreements with the CRDA to invest in a project the CRDA and the New Jersey
Sports and Exposition Authority are planning, to renovate the existing Atlantic
City Boardwalk Convention Center into a 10,000 to 14,000 seat special events
center (the "Project").
The Project will be funded in phases through direct investments from
various Atlantic City casinos, including the Company. Of the total budgeted
cost, the Company has agreed to invest $8.7 million in cash which will be paid
from funds the Company has or will have deposited with the CRDA to meet its
investment obligations as described above. As of December 31, 1999, $1.8 million
of the total amount deposited with the CRDA by the Company had been allocated to
the Project. As the CRDA allocates funds deposited by the Company to the
Project, the Company will receive an investment credit reducing its obligation
to purchase CRDA bonds in an equal amount.
Litigation
- ----------
SINA and certain of its subsidiaries are defendants in certain litigation.
In the opinion of management, based upon advice of counsel, the aggregate
liability, if any, arising from such litigation will not have a material adverse
effect on the accompanying consolidated financial statements.
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. The assumptions used
have a significant effect on the estimated amounts reported.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments: (a) Cash and cash
equivalents, receivables, other current assets, accounts payable, accrued
liabilities and variable rate debt: The amounts reported in the accompanying
consolidated balance sheets approximate fair value; (b) Fixed-rate debt: Fixed
rate debt is valued based upon published market quotations, as applicable. The
carrying amount of remaining fixed-rate debt approximates fair value.
NOTE 15 - SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION
The Company operates in one industry segment in the United States.
NOTE 16 - SUBSEQUENT EVENTS
Termination of Desert Inn Asset and Land Purchase Agreement
- -----------------------------------------------------------
In SINA's Form 10-Q for the quarter ended June 30, 1999 it was reported
that SINA had entered into an Asset and Land Purchase Agreement with Starwood
Hotels and Resorts Worldwide Inc. ("Starwood") pursuant to which the Company
along with SIHL had agreed to acquire the Desert Inn Hotel and Casino in Las
Vegas (the "Desert Inn") for $275 million.
On March 2, 2000, the Company and Starwood announced that they agreed to
terminate their agreement under which the Company was to acquire the Desert Inn.
Starwood intends to continue to seek a purchaser for the property. If the
property is sold for less than the purchase price originally agreed to by the
Company, then the Company will pay to Starwood 50% of such deficit, up to a
maximum of $15 million. In the event that Starwood sells the property for in
excess of the purchase price originally agreed to by the Company, then the
Company will share 50% of such excess. Should the Company be required to pay $15
million of any potential deficit, it would be paid from the $15 million deposit
previously paid to Starwood. The deposit is included in deferred charges and
other assets in the accompanying consolidated balance sheets.
Proposed Acquisition of SIHL Ordinary Shares
- --------------------------------------------
On January 19, 2000, SIHL announced that it has received a proposal from
Sun International Investments Limited ("SIIL") to acquire in a merger
transaction all ordinary shares of SIHL not already owned by SIIL or its
shareholders for $24 per share in cash. SIIL and its stockholders own
approximately 53% of the Company's outstanding ordinary shares.
In response to the proposal, SIHL formed a committee of independent members
of the Board of Directors (the "Special Committee") which has retained its own
financial and legal advisors. Completion of the proposed transaction will be
subject to various conditions, including approval by the Special Committee,
successful completion of financing on terms satisfactory to SIIL, negotiation
and execution of a definitive agreement containing terms and conditions
customary for a transaction of this nature and approval of the New Jersey Casino
Control Commission.
SIIL advised management of SIHL that it and its shareholders will not sell
any SIHL ordinary shares in connection with the proposed transaction and do not
wish to consider or participate in any possible alternative sale of SIHL
ordianry shares.
SCHEDULE II
SUN INTERNATIONAL NORTH AMERICA, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands of Dollars)
Balance at Additions Balance at
beginning charged to Deductions end of
of period expenses (a) period
For the year ended December 31, 1999:
Allowance for doubtful receivables:
Gaming $2,401 $1,452 $(1,247) $2,606
Other 35 91 (24) 102
$2,436 $1,543 $(1,271) $2,708
For the year ended December 31, 1998:
Allowance for doubtful receivables:
Gaming $3,011 $ 644 $(1,254) $2,401
Other 63 64 (92) 35
$3,074 $ 708 $(1,346) $2,436
For the year ended December 31, 1997:
Allowance for doubtful receivables:
Gaming $3,626 $ 836 $(1,451) $3,011
Other 132 (6) (63) 63
$3,758 $ 830 $(1,514) $3,074
(a) Write-off of uncollectible accounts, net of recoveries.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
The following Items have been omitted pursuant to General
Instruction I of Form 10-K: ITEM 6. SELECTED FINANCIAL DATA; ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; ITEM 11. EXECUTIVE
COMPENSATION; ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT and ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Documents Filed as Part of This Report
1. The financial statement index required herein is incorporated by reference
to "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
2. The index of financial statement schedules required herein is incorporated
by reference to "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
Financial statement schedules not included have been omitted because they
are either not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
3. The following exhibits are filed herewith or incorporated by reference:
Exhibit
Numbers Exhibit
- ------- ---------
(3)(a)(1) Restated Certificate of Incorporation of SINA. (Incorporated by
reference to Exhibit (3)(a) to Registrant's Form 10-Q Quarterly Report
for the quarter ended June 30, 1996, in File No. 1-4748.)
(3)(a)(2) Certificate of Amendment of Restated Certificate of Incorporation of
SINA. (Incorporated by reference to Exhibit (3)(a)(2) to Registrant's
Form 10-K Annual Report for the fiscal year ended December 31, 1996,
in File No. 1-4748).
(3)(b) Amended and Restated By-Laws of SINA. (Incorporated by reference to
Exhibit (3)(b) to Registrant's Form 10-Q Quarterly Report for the
quarter ended June 30, 1996, in File No. 1-4748.)
(4)(a) See Exhibits (3)(a)(1), (3)(a)(2) and (3)(b) as to the rights of
holders of Registrant's common stock.
(4)(b)(1) Form of Purchase Agreement for $200,000,000 principal amount of 9%
Senior Subordinated Notes due 2007 dated March 5, 1997, among SIHL and
SINA, as issuers, Bear, Stearns & Co. Inc., Societe Generale
Securities Corporation and Scotia Capital Markets (USA) Inc., as
purchasers, and various subsidiaries of SIHL, including RIH and GGRI,
as guarantors. (Incorporated by reference to Exhibit (4)(e)(1) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1996, in File No. 1-4748.)
(4)(b)(2) Form of Indenture dated as of March 10, 1997, between SIHL and SINA,
as issuers, various subsidiaries of SIHL, including RIH and GGRI, as
guarantors, and The Bank of New York, as trustee, with respect to
$200,000,000 principal amount of 9% Senior Subordinated Notes due
2007, and exhibits thereto. (Incorporated by reference to Exhibit
(4)(e)(2) to Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1996, in File No. 1-4748.)
(4)(b)(3) Form of Registration Rights Agreement dated as of March 5, 1997, by
and among SIHL and SINA, as issuers, various subsidiaries of SIHL,
including RIH and GGRI, as guarantors, and Bear, Stearns & Co. Inc.,
Societe Generale Securities Corporation and Scotia Capital Markets
(USA) Inc., as purchasers. (Incorporated by reference to Exhibit
(4)(e)(3) to Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1996, in File No. 1-4748.)
(4)(b)(4) Form of Inter-Borrower Agreement dated as of March 10, 1997, between
SIHL and SINA. (Incorporated by reference to Exhibit (4)(e)(4) to
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1996, in File No. 1-4748.)
(10)(a)* Resorts Retirement Savings Plan. (Incorporated by reference to Exhibit
(10)(c)(2) to registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1991, in File No.
1-4748.)
(10)(b) Termination Agreement among Sheraton Desert Inn Corporation, Starwood,
Sheraton Gaming Corporation, SIHL and Sun International Nevada, Inc.
dated as of February 29, 2000, terminating the Asset and Land Purchase
Agreement among the parties, dated as of May 17, 1999. (Incorporated
by reference ro Exhibit 2 to SIHL's Form 6-K Current Report dated
March 17, 2000, in File No. 0-22794).
(10)(c)(1)Amended and Restated Partnership Agreement of Trading Cove
Associates dated as of August 29, 1995, among Sun Cove
Limited, RJH Development Corp., Leisure Resort Technology,
Inc., Slavik Suites, Inc. and LMW Investments, Inc.
(Incorporated by reference to Exhibit 10.7 of Registration
Statement No. 33-80477 of the registrant on Form F-3.)
(10)(c)(2)Relinquishment Agreement dated February 7, 1998, between the Mohegan
Tribal Gaming Authority and Trading Cove Associates. (Incorporated by
reference to Exhibit 2.2 to SIHL's Form 20-F Annual Report for the
fiscal year ended December 31, 1997, in File No. 0-22794.)
(21) Subsidiaries of the registrant.
(27)(a) Financial data schedule for the year ended December 31, 1999.
(27)(b) Restated financial data schedule for the year ended December 31, 1998.
* Management contract or compensatory plan.
Registrant agrees to file with the Securities and Exchange Commission, upon
request, copies of any instrument defining the rights of the holders of its
consolidated long-term debt.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the fourth quarter of
1999. No amendments to previously filed Forms 8-K were filed during the fourth
quarter of 1999.
(c) Exhibits Required by Item 601 of Regulation S-K
The exhibits listed in Item 14(a)3. of this report, and not incorporated by
reference to a separate file, follow "SIGNATURES."
(d) Financial Statement Schedules Required by Regulation S-X
The financial statement schedules required by Regulation S-X are
incorporated by reference to "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA."
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SUN INTERNATIONAL NORTH AMERICA, INC.
(Registrant)
Date: March 30, 2000 By /s/ John R. Allison
John R. Allison
Executive Vice President - Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Howard B. Kerzner March 30, 2000
Howard B. Kerzner
Director
By /s/ Charles D. Adamo March 30, 2000
Charles D. Adamo
Director
Form 10-K for the fiscal year
ended December 31, 1998
EXHIBIT INDEX
Reference to previous
Exhibit filing or this
Number Exhibit Form 10-K
(3)(a)(1) Restated Certificate of Incorporated by reference to
Incorporation of SINA. Exhibit (3)(a) to
Registrant's Form 10-Q
Quarterly Report for the
quarter ended June 30, 1996,
in File No. 1-4748.
(3)(a)(2) Certificate of Amendment of Incorporated by reference to Restated
Certificate of Exhibit (3)(a)(2) to
Incorporation of SINA. Registrant's Form 10-K Annual Report.
(3)(b) Amended and Restated By-Laws Incorporated by reference to
of SINA. Exhibit (3)(b) to
Registrant's Form 10-Q
Quarterly Report for the
quarter ended June 30, 1996,
in File No. 1-4748.
(4)(a) See Exhibits (3)(a)(1),
(3)(a)(2) and (3)(b) as to
the rights of holders of
Registrant's common stock.
(4)(b)(3) Form of Registration Rights Incorporated by reference to Agreement
dated as of March Exhibit (4)(e)(3) to
5, 1997, by and among SIHL registrant's Form 10-K Annual Report
and SINA, as issuers, for the fiscal year ended December 31,
various subsidiaries of 1996, in File No. 1-4748.
SIHL, including RIH and
GGRI, as guarantors, and
Bear, Stearns & Co. Inc.,
Societe Generale Securities
Corporation and Scotia
Capital Markets (USA) Inc.,
as purchasers.
(4)(b)(4) Form of Inter-Borrower Incorporated by reference to
Agreement dated as of March Exhibit (4)(e)(4) to
10, 1997, between SIHL and registrant's Form 10-K Annual Report
SINA. for the fiscal year ended December
31, 1996, in File No. 1-4748.
(10)(a) Resorts Retirement Savings Incorporated by reference to
Plan. Exhibit (10)(c)(2) to
registrant's Form 10-K Annual Report
for the fiscal year
ended December 31, 1991, in
File No. 1-4748.
(10)(b) Termination Agreement among Incorporated by reference toK
Sheraton Desert Inn Exhibit 2 to SIHL's Form 6-Kh
Corporation, Starwood, Current Report dated March 17, 2000,
Sheraton Gaming Corporation, in File No. 0-22794.
SIHL and Sun International
Nevada, Inc. dated as of
February 29, 2000,
terminating the Asset and
Land Purchase Agreement
among the parties, dated as
of May 17, 1999.
(10)(c)(1) Amended and Restated Incorporated by reference to
Partnership Agreement of Exhibit 10.7 of Registration
Trading Cove Associates Statement No. 33-80477 of the
dated as of August 29, 1995, registrant on Form F-3.
among Sun Cove Limited, RJH
Development Corp., Leisure
Resort Technology, Inc.,
Slavik Suites, Inc. and LMW
Investments, Inc.
(27)(a) Financial data schedule for
the year ended December 31, 54
1999.
(27)(b) Restated financial data
schedule for the year ended
December 31, 1998. 55