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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
---------------------------
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 number 33-69716
------------------------------------------------
GB PROPERTY FUNDING CORP.
GB HOLDINGS, INC.
GREATE BAY HOTEL AND CASINO, INC.
- --------------------------------------------------------------------------------
(Exact name of each Registrant as specified in its charter)
DELAWARE 75-2502290
DELAWARE 75-2502293
NEW JERSEY 22-2242014
------------------------------ ---------------------
(States or other jurisdictions of (I.R.S. Employer
incorporation or organization) Identification No.'s)
c/o Sands Hotel & Casino
Indiana Avenue & Brighton Park
Atlantic City, New Jersey 08401
- -------------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
(Registrants" telephone number, including area code): (609) 441-4517
--------------------------
(Not Applicable)
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if
changed since last report.)
Indicate by check mark whether each of the Registrants (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
Registrants were 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 whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
Registrant Class Outstanding at November 8, 2002
- --------------------------------------- --------------------------------- --------------------------------
GB Property Funding Corp. Common stock, $1.00 par value 100 shares
GB Holdings, Inc. Common stock, $.01 par value 10,000,000 shares
Greate Bay Hotel and Casino, Inc. Common stock, no par value 100 shares
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2002 2001
--------------- ---------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 50,037,000 $ 57,369,000
Accounts receivable, net of allowances
of $12,406,000 and $14,406,000, respectively 5,371,000 8,911,000
Inventories 2,003,000 2,431,000
Income tax deposits 1,144,000 759,000
Prepaid expenses and other current assets 4,018,000 2,266,000
--------------- ---------------
Total current assets 62,573,000 71,736,000
--------------- ---------------
Property and Equipment:
Land 54,814,000 54,814,000
Buildings and improvements 91,720,000 84,890,000
Equipment 42,595,000 27,321,000
Construction in progress 5,724,000 17,003,000
--------------- ---------------
194,853,000 184,028,000
Less - accumulated depreciation and
amortization (21,940,000) (13,016,000)
--------------- ---------------
Property and equipment, net 172,913,000 171,012,000
--------------- ---------------
Other Assets:
Obligatory investments, net of allowances of
$9,941,000 and $9,290,000, respectively 9,979,000 9,302,000
Other assets 3,307,000 3,872,000
--------------- ---------------
Total other assets 13,286,000 13,174,000
--------------- ---------------
$ 248,772,000 $ 255,922,000
=============== ===============
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
2
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31,
2002 2001
--------------- ----------------
(Unaudited)
Current Liabilities
Current maturities of long-term debt $ 22,000 $ 19,000
Accounts payable 4,627,000 6,843,000
Accrued liabilities -
Salaries and wages 3,526,000 4,144,000
Interest 67,000 3,092,000
Insurance 1,766,000 1,670,000
Other 5,012,000 5,421,000
Other current liabilities 3,239,000 3,873,000
--------------- ----------------
Total current liabilities 18,259,000 25,062,000
--------------- ----------------
Long-Term Debt 110,336,000 110,352,000
--------------- ----------------
Other Noncurrent Liabilities 3,374,000 3,839,000
--------------- ----------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value per share;
5,000,000 shares authorized; 0 shares outstanding - -
Common Stock, $.01 par value per share;
20,000,000 shares authorized;
10,000,000 shares outstanding 100,000 100,000
Additional paid-in capital 124,900,000 124,900,000
Accumulated deficit (8,197,000) (8,331,000)
--------------- ----------------
Total shareholders' equity 116,803,000 116,669,000
--------------- ----------------
$ 248,772,000 $ 255,922,000
=============== ================
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
3
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
---------------------------------
2002 2001
-------------- --------------
(Unaudited) (Unaudited)
Revenues:
Casino $ 53,921,000 $ 65,667,000
Rooms 2,870,000 3,302,000
Food and beverage 6,083,000 7,961,000
Other 897,000 1,338,000
-------------- --------------
63,771,000 78,268,000
Less - promotional allowances (13,974,000) (17,283,000)
-------------- --------------
Net revenues 49,797,000 60,985,000
Expenses:
Casino 36,859,000 43,916,000
Rooms 377,000 742,000
Food and beverage 3,184,000 2,765,000
Other 651,000 761,000
General and administrative 2,988,000 2,755,000
Depreciation and amortization 3,776,000 2,836,000
-------------- --------------
Total expenses 47,835,000 53,775,000
-------------- --------------
Income from operations 1,962,000 7,210,000
-------------- --------------
Non-operating income (expense):
Interest income 308,000 743,000
Interest expense (net of capitalized interest of
$144,000, for the three months ended
September 30, 2002) (2,959,000) (3,136,000)
Loss on asset disposal (24,000) (23,000)
-------------- --------------
Total non-operating expense, net (2,675,000) (2,416,000)
-------------- --------------
Income (loss) before income taxes (713,000) 4,794,000
Income tax provision (193,000) (1,708,000)
-------------- --------------
Net income (loss) $ (906,000) $ 3,086,000
============== ==============
Basic/diluted income (loss) per common share $ (0.09) $ 0.31
============== ==============
Basic/diluted weighted average common shares outstanding 10,000,000 10,000,000
============== ==============
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
4
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30,
---------------------------------
2002 2001
-------------- --------------
(Unaudited) (Unaudited)
Revenues:
Casino $ 161,445,000 $ 180,832,000
Rooms 8,665,000 8,903,000
Food and beverage 18,300,000 22,525,000
Other 2,875,000 3,644,000
-------------- --------------
191,285,000 215,904,000
Less - promotional allowances (38,662,000) (49,430,000)
-------------- --------------
Net revenues 152,623,000 166,474,000
-------------- --------------
Expenses:
Casino 108,982,000 126,933,000
Rooms 2,497,000 2,657,000
Food and beverage 8,496,000 7,424,000
Other 2,059,000 2,520,000
General and administrative 9,932,000 9,679,000
Depreciation and amortization 10,641,000 8,652,000
Loss on impairment of fixed assets 1,282,000 -
-------------- --------------
Total expenses 143,889,000 157,865,000
-------------- --------------
Income from operations 8,734,000 8,609,000
-------------- --------------
Non-operating income (expense):
Interest income 838,000 2,293,000
Interest expense (net of capitalized interest of
$676,000 for the nine months ended
September 30, 2002) (8,641,000) (9,373,000)
Gain (loss) on asset disposal 28,000 (17,000)
-------------- --------------
Total non-operating expense, net (7,775,000) (7,097,000)
-------------- --------------
Income before income taxes 959,000 1,512,000
Income tax benefit (825,000) (645,000)
-------------- --------------
Net income $ 134,000 $ 867,000
============== ==============
Basic/diluted income per common share $ 0.01 $ 0.09
============== ==============
Basic/diluted weighted average common shares outstanding 10,000,000 10,000,000
============== ==============
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
5
GB HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
---------------------------------
2002 2001
-------------- --------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net income $ 134,000 $ 867,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,641,000 8,652,000
Loss on impairment of fixed assets 1,282,000 -
(Gain) loss on asset disposal (28,000) 17,000
Provision for doubtful accounts 1,253,000 2,624,000
Increase in income tax deposits (385,000) -
Decrease (increase) in accounts receivable 2,287,000 (2,994,000)
Decrease in accounts payable
and accrued liabilities (6,172,000) (113,000)
Net change in other current assets and liabilities (2,328,000) 1,300,000
Net change in other noncurrent assets and liabilities 429,000 149,000
-------------- --------------
Net cash provided by operating activities 7,113,000 10,502,000
-------------- --------------
INVESTING ACTIVITIES:
Purchase of property and equipment (12,729,000) (14,487,000)
Proceeds from disposition of assets 79,000 7,000
Proceeds from sale of investments 213,000 114,000
Purchase of obligatory investments (1,995,000) (2,019,000)
-------------- --------------
Net cash used in investing activities (14,432,000) (16,385,000)
-------------- --------------
FINANCING ACTIVITIES:
Repayments of long-term debt (13,000) (462,000)
-------------- --------------
Net cash used in financing activities (13,000) (462,000)
-------------- --------------
Net decrease in cash and cash equivalents (7,332,000) (6,345,000)
Cash and cash equivalents at beginning of period 57,369,000 77,903,000
-------------- --------------
Cash and cash equivalents at end of period $ 50,037,000 $ 71,558,000
============== ==============
The accompanying notes to consolidated financial
statements are an integral part of these consolidated financial statements.
6
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) Organization, Business and Basis of Presentation
GB Holdings, Inc. ("Holdings") is a Delaware corporation and was a
wholly owned subsidiary of Pratt Casino Corporation ("PCC") through December 31,
1998. PCC, a Delaware corporation, was incorporated in September 1993 and was
wholly owned by PPI Corporation ("PPI"), a New Jersey corporation and a wholly
owned subsidiary of Greate Bay Casino Corporation ("GBCC"). Effective after
December 31, 1998, PCC transferred 21% of the stock ownership in Holdings to
PBV, Inc. ("PBV"), a newly formed entity controlled by certain stockholders of
GBCC. As a result of a certain confirmed plan of reorganization of PCC and
others in October 1999, the remaining 79% stock interest of PCC in Holdings was
transferred to Greate Bay Holdings, LLC ("GBLLC"), whose sole member as a result
of the same reorganization was PPI. In February 1994, Holdings acquired Greate
Bay Hotel and Casino, Inc. ("GBHC"), a New Jersey corporation, through a capital
contribution by its then parent. GBHC's only business activity is its ownership
of the Sands Hotel and Casino located in Atlantic City, New Jersey (the
"Sands"). GB Property Funding Corp. ("GB Property Funding"), a Delaware
corporation and a wholly owned subsidiary of Holdings, was incorporated in
September 1993 as a special purpose subsidiary of Holdings for the purpose of
borrowing funds for the benefit of GBHC. Holdings has no operating activities
and its only significant assets are its investment in GBHC and cash and cash
equivalents of $33.7 million and $37.9 million as of September 30, 2002 and
December 31, 2001, respectively. Effective September 2, 1998, GBHC acquired the
membership interests in Lieber Check Cashing LLC ("Lieber"), a New Jersey
limited liability company that owned a land parcel adjacent to GBHC.
The accompanying consolidated financial statements include the accounts
and operations of Holdings and its subsidiaries (Holdings, GBHC and GB Property
Funding, collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated. Throughout this document, references to Notes
refer to the Notes to Consolidated Financial Statements contained herein.
On January 5, 1998, the Company filed petitions for relief under Chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the District of New Jersey (the "Bankruptcy Court").
On August 14, 2000, the Bankruptcy Court entered an order (the "Confirmation
Order") confirming the Modified Fifth Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code Proposed by the Official Committee of
Unsecured Creditors and High River Limited Partnership and its Affiliates (the
"Plan") for the Company. High River Limited Partnership ("High River") is an
entity controlled by Carl C. Icahn. On September 13, 2000, the New Jersey Casino
Control Commission (the "Commission") approved the Plan. On September 29, 2000,
the Plan became effective (the "Effective Date"). All material conditions
precedent to the Plan becoming effective were satisfied on or before September
29, 2000.
A significant amount of the Company's revenues are derived from patrons
living in northern New Jersey, southeastern Pennsylvania and metropolitan New
York City. Competition in the Atlantic City gaming market is intense and
management believes that this competition will continue or intensify in the
future.
7
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 consolidated financial statements have been prepared in accordance
with the accounting policies described in the Company's 2001 Annual Report on
Form 10-K. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, the Company suggests these
consolidated financial statements be read in conjunction with the notes to the
consolidated financial statements which appear in that report. In the opinion of
management, the accompanying consolidated financial statements include all
adjustments (consisting only of a normal recurring nature), which are necessary
for a fair presentation of the results for the interim periods presented.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission. Interim results are not necessarily
indicative of results to be expected for any future interim period or for the
entire fiscal year. Certain reclassifications have been made to prior year's
consolidated financial statements to conform to the current year's consolidated
financial statement presentation.
(2) Long-Term Debt
Long-term debt is comprised of the following:
September 30, December 31,
2002 2001
----------------- -----------------
11% notes, due 2005 $ 110,000,000 $ 110,000,000
Other 358,000 371,000
----------------- -----------------
Total 110,358,000 110,371,000
Less - current maturities (22,000) (19,000)
----------------- -----------------
Total long-term debt $ 110,336,000 $ 110,352,000
================= =================
As a result of the Confirmation Order and the occurrence of the
Effective Date and under the terms of the Plan, GB Property Funding issued
$110,000,000 of 11% notes due 2005 (the "New Notes"). Interest on the New Notes
is payable on March 29 and September 29, beginning March 29, 2001. The
outstanding principal is due on September 29, 2005. The New Notes are
unconditionally guaranteed, on a joint and several basis, by both Holdings and
GBHC, and are secured by substantially all of the assets, as of the Effective
Date, other than cash and gaming receivables of Holdings and GBHC.
The original indenture for the New Notes contained various provisions,
which, among other things, restricted the ability of Holdings, and GBHC to incur
certain senior secured indebtedness beyond certain limitations and contained
certain other limitations on the ability to merge, consolidate, or to sell
substantially all of their assets, to make certain restricted payments, to incur
certain additional senior liens, and to enter into certain sale-leaseback
transactions.
8
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In a Consent Solicitation Statement and Consent Form dated September 14,
2001, GB Property Funding sought the consent of holders of the New Notes to make
certain changes to the original indenture (the "Modifications"). The
Modifications included, but were not limited to, a deletion of, or changes to,
certain provisions the result of which would be (i) to permit Holdings and its
subsidiaries to incur any additional indebtedness without restriction, to issue
preferred stock without restriction, to make distributions in respect of
preferred stock and to prepay indebtedness without restriction, to incur liens
without restriction and to enter into sale-leaseback transactions without
restriction, (ii) to add additional exclusions to the definition of "asset
sales" to exclude from the restrictions on "asset sales" sale-leaseback
transactions, conveyances or contributions to any entity in which Holdings or
its subsidiaries has or obtains equity or debt interests, and transactions
(including the granting of liens) made in accordance with another provision of
the Modifications relating to collateral release and subordination or any
documents entered into in connection with an "approved project" (a new
definition included as part of the Modifications which includes, if approved by
the Board of Directors of Holdings, incurrence of indebtedness or the transfer
of assets to any person if Holdings or any of its subsidiaries has or obtain
debt or equity interests in the transferee or any similar, related or associated
event, transaction or activity) in which a release or subordination of
collateral has occurred including, without limitation, any sale or other
disposition resulting from any default or foreclosure, (iii) to exclude from the
operation of covenants related to certain losses to collateral any assets and
any proceeds thereof, which have been subject to the release or subordination
provisions of the Modifications, (iv) to permit the sale or other conveyances of
Casino Reinvestment Development Authority investments in accordance with the
terms of a permitted security interest whether or not such sale was made at fair
value, (v) to exclude from the operation of covenants related to the deposit
into a collateral account of certain proceeds of "asset sales" or losses to
collateral any assets and any proceeds thereof, which have been subject to the
release or subordination provisions of the Modifications, (vi) to add new
provisions authorizing the release or subordination of the collateral securing
the New Notes in connection with, in anticipation of, as a result of, or in
relation to, an "approved project", and (vii) various provisions conforming the
text of the original indenture to the intent of the preceding summary of the
Modifications.
Holders representing approximately 98% in principal amount of the New
Notes provided consents to the Modifications. Under the terms of the original
indenture, the consent of holders representing a majority in principal amount of
New Notes was a necessary condition to the Modifications. Accordingly, GB
Property Funding, as issuer, and Holdings and GBHC, as guarantors, and Wells
Fargo Bank Minnesota, National Association, as Trustee, entered into an Amended
and Restated Indenture dated as of October 12, 2001, containing the
Modifications to the original indenture described in the Consent Solicitation
Statement (the "Amended and Restated Indenture"). In accordance with the terms
of the Consent Solicitation Statement, holders of New Notes, who consented to
the Modifications and who did not revoke their consents ("Consenting
Noteholders"), were entitled to $17.50 per $1,000 in principal amount of New
Notes, subject to certain conditions including entry into the Amended and
Restated Indenture. Upon entry into the Amended and Restated Indenture on
October 12, 2001, the Company transferred approximately $1.9 million to the
Trustee for distribution to Consenting Noteholders.
9
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Total scheduled maturities of long-term debt as of September 30, 2002,
are set forth below:
2002 (three months) $ 6,000
2003 21,000
2004 23,000
2005 110,026,000
2006 28,000
Thereafter 254,000
----------------
Total $ 110,358,000
================
At September 30, 2002 and December 31, 2001, accrued interest on the New
Notes was $67,000 and $3,092,000, respectively.
(3) Income Taxes
The components of the benefit (provision) for income taxes are as
follows:
Nine Months Ending
September 30,
------------------------------
2002 2001
------------- ------------
Federal income tax provision:
Current $ (215,000) $ (645,000)
Deferred - -
State income tax provision:
Current (610,000) -
Deferred - -
------------- ------------
$ (825,000) $ (645,000)
============= ============
Prior to 1997, the Company was included in the consolidated federal
income tax return of Hollywood Casino Corporation ("HCC"). The Company's
operations were included in GBCC's consolidated federal income tax returns for
the years ended December 31, 1998 and 1997, but GBCC agreed to allow the Company
to become deconsolidated from the GBCC group effective after December 31, 1998.
In accordance therewith, PCC transferred 21% of the stock ownership in Holdings
to PBV, effecting the deconsolidation of the Company from the GBCC group for
federal income tax purposes (the "Deconsolidation"). Accordingly, beginning in
1999, the Company's provision for federal income taxes has been calculated and
paid on a consolidated basis.
10
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
At September 30, 2002, the Company had deferred tax assets including
State net operating losses, Federal credit carryforwards and temporary
differences. The enactment of the New Jersey Business Tax Reform Act ("BTR") on
July 2, 2002 deferred the State net operating losses ("State NOL's"), set to
begin expiring in 2003, for a two year period. A portion of the credit
carryforwards, if not utilized, will begin to expire each year through 2004. The
remaining credit carryforwards expire through the year 2019. In addition, as
part of a certain settlement agreement, GBCC may utilize Federal net operating
losses ("Federal NOL's") of the Company through December 31, 1998 to offset
federal taxable income of GBCC and other members of its consolidated tax group.
The Company has utilized the balance of its Federal NOL's in its 1999 (amended)
and 2000 consolidated Federal tax returns. Statement of Financial Accounting
Standards No. 109 ("FAS 109") requires that the tax benefit of NOL's and
deferred tax assets resulting from temporary differences be recorded as an asset
and, to the extent that management can not assess that the utilization of all or
a portion of such NOL's and deferred tax assets is more likely than not,
requires the recording of a valuation allowance. Due to various uncertainties,
management is unable to determine that realization of the Company's deferred tax
asset is more likely than not and, thus, has provided a valuation allowance for
the entire amount at September 30, 2002 and December 31, 2001.
The Internal Revenue Service has examined the consolidated federal
income tax returns of HCC for the years 1995 and 1996 and the consolidated
federal income tax returns for GBCC for the years 1997 and 1998 in which the
Company was included (the "Audit"). GBCC management has disclosed in its annual
SEC Form 10-K, filed for the year ended December 31, 2001, that the Audit is
substantially complete and has resulted in adjustments to GBCC's Federal NOL's
and deferred tax assets. The Company is dependent on HCC and was dependent on
GBCC for information as to their operations including their affiliates and the
impact of those operations on the former HCC and GBCC consolidated groups'
Federal NOL's. The Company has not yet received information regarding the
details of the Audit adjustments and, therefore, is unable to estimate their
impact on the Company's financial position or results of operations. In
addition, GBCC filed a petition for relief in the United States Bankruptcy Court
for the District of Delaware in 2001 and a plan was confirmed in 2002. GBCC's
Plan provided for the liquidation of GBCC, and GBHC was notified that the Plan
became effective in July 2002.
The State of New Jersey is examining the state corporate business tax
return of GBHC for the years 1996, 1997 and 1998. It is management's position
that any claims by the State of New Jersey against GBHC attributable to anytime
prior to January 5, 1998 are barred by applicable provisions of the Bankruptcy
Code. Management is presently unable to estimate the impact of New Jersey's tax
audit on the financial position or results of operations of GBHC.
Federal and State income tax benefits or provisions are based upon the
results of operations for the current period and the estimated adjustments for
income tax purposes of certain nondeductible expenses. The Federal income tax
provision of $215,000 for the nine months ended September 30, 2002 is a result
of applying the statutory Federal income tax rate of 35% to the pretax income
after adjustments for income tax purposes.
11
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
On July 2, 2002, the BTR was signed into law. The BTR revises and
updates the New Jersey corporation business tax and establishes filing fees for
certain returns. Included in the BTR is a deferral on the use of State NOL's
until tax year 2005. Those State NOL's that would have been utilized in tax
years 2002 and 2003 will be granted a two year extension of their expiration
period. Additionally, the BTR imposes an alternative minimum assessment ("AMA")
based on gross receipts or gross profits. The taxpayer pays the greater of the
AMA or the regular corporate business tax (CBT). The AMA provision is
discontinued after 2006 and any portion of the AMA in excess of the regular CBT
is allowed as a non-expiring future credit carryforward. Due to various
uncertainties, management is unable to determine that realization of the future
credit carryforward is more likely than not and, thus, has provided a valuation
allowance for the entire amount at September 30, 2002.
The State income tax provision of $610,000 for the three and nine months
ended September 30, 2002 is a result of retroactively applying the statutory AMA
rate of .4% to gross receipts, as defined in the BTR. Since the BTR was enacted
in the third quarter of 2002, its entire impact is included in the State income
tax provision of the consolidated statements of operations for both the three
and nine months ended September 30, 2002.
(4) Transactions with Related Parties
GBHC's rights to the trade name "Sands" (the "Trade Name") were derived
from a license agreement between GBCC and an unaffiliated third party. Amounts
payable by the Sands for these rights were equal to the amounts paid to the
unaffiliated third party. As a result of the Confirmation Order and the
occurrence of the Effective Date and under the terms of the Plan, GBHC was
assigned by High River the rights under a certain agreement with the owner of
the Trade Name to use the Trade Name as of the Effective Date through May 19,
2086 subject to termination rights for a fee after a certain minimum term. High
River received no payments for its assignment of these rights. Payment is made
directly to the owner of the Trade Name. The calculation of the license fee is
the same as under the previous agreement. Such charges amounted to $212,000 and
$207,000, respectively, for the nine months ended September 30, 2002 and 2001.
During the three and nine months ended September 30, 2002, GBHC borrowed
$4.5 million from Holdings. This borrowing is eliminated in the consolidation
of, and has no impact on, the accompanying consolidated financial statements.
(5) Legal Proceedings
The Company filed tax appeals with the New Jersey Tax Court challenging
the amount of its real property assessment for calendar years 1996 through 2001,
inclusive, and filed an appeal for calendar year 2002 with the Atlantic County
Tax Board. The City of Atlantic City also appealed the amount of the assessments
for the years 1996 through 2001, inclusive, and filed a cross-petition with the
Atlantic County Tax Board for calendar year 2002.
The Company discovered certain failures relating to currency transaction
reporting and self-reported the situation to the applicable regulatory agencies.
The Company conducted an internal examination of the matter and the New Jersey
Division of Gaming Enforcement conducted a separate review. The Company has
revised internal control processes and taken other measures to address the
situation. The Company may be subjected to regulatory sanctions, which may
include cash penalties. However, the potential cash penalties cannot be
estimated at this time.
12
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company is a party in various legal proceedings with respect to the
conduct of casino and hotel operations and has received employment related
claims. Although a possible range of losses cannot be estimated, in the opinion
of management, based upon the advice of counsel, the Company does not expect
settlement or resolution of these proceedings or claims to have a material
adverse impact upon the consolidated financial position or results of operations
of the Company, but the outcome of litigation and the resolution of claims is
subject to uncertainties and no assurances can be given. The accompanying
consolidated financial statements do not include any adjustments that might
result from these uncertainties.
(6) Income (Loss) Per Share
Statement of Financial Accounting Standards No. 128: "Earnings Per
Share", requires, among other things, the disclosure of basic and diluted
earnings per share for public companies. Since the capital structure of the
Company is simple, in that no potentially dilutive securities were outstanding
during the periods presented, basic and diluted income (loss) per share are the
same. Basic income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding.
(7) Supplemental Cash Flow Information
Cash paid for interest and income taxes during the nine months ended
September 30, 2002 and 2001 are set
forth below:
Nine Months Ended
September 30,
-------------------------------
2002 2001
--------------- --------------
Interest paid $ 12,127,000 $ 6,096,000
=============== ==============
Income taxes paid $ 1,566,000 $ 55,000
=============== ==============
(8) New Accounting Pronouncement
In 2001, the Emerging Issues Task Force (the "EITF") reached a consensus
on Issue No. 01-09: "Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor's Products)" ("EITF 01-09"). For a
sales incentive offered voluntarily by a vendor to its patrons, EITF 01-09
requires the vendor to recognize the cost of the sales incentive at the later of
the date at which the related revenue is recorded by the vendor, or the date at
which the sales incentive is offered. Application of EITF 01-09 is required in
annual or interim financial statements for periods beginning after December 15,
2001. EITF 01-09 requires, among other things, that cash or other consideration
provided to customers as part of a transaction is presumed to be a reduction in
revenue unless the vendor is able to establish both that it received or will
receive a separate identifiable benefit and the fair value of the benefit can be
reasonably estimated. The Company offers cash inducements to encourage
visitation and play at the casino and, as the Company was unable to meet the
criteria as discussed in EITF 01-09, these costs have been classified as
promotional allowances on the accompanying consolidated statements of
operations.
13
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
With the adoption of the new standards, the prior year periods presented
have been reclassified to conform to the new presentation. This resulted in a
$5.8 million and $16.7 million increase in promotional allowances (and a
corresponding reduction in casino expenses) for the three and nine months ended
September 30, 2001, respectively. Application of the requirements of EITF 01-09
do not have an impact on previously reported operating income or net income and
have no impact on the previously reported consolidated financial statements
other than the reclassifications noted above.
In 2001, the Financial Accounting Standards Board ("FASB") issued FASB
Statements Nos. 141 and 142 ("FAS 141" and "FAS 142"): "Business Combinations"
and "Goodwill and Other Intangible Assets," respectively. FAS 141 replaces APB
16 and eliminates pooling-of-interests accounting prospectively. It also
provides guidance on purchase accounting related to the recognition of
intangible assets and accounting for negative goodwill. FAS 142 changes the
accounting for goodwill from an amortization method to an impairment-only
approach. Under FAS 142, goodwill will be tested annually and whenever events or
circumstances occur indicating that goodwill might be impaired. FAS 141 is
effective for all business combinations completed after June 30, 2001. Upon
adoption of FAS 142, amortization of goodwill recorded for business combinations
consummated prior to July 1, 2001 will cease, and intangible assets acquired
prior to July 1, 2001 that do not meet the criteria for recognition under FAS
141 will be reclassified to goodwill. Companies are required to adopt FAS 142
for fiscal years beginning after December 15, 2001, but early adoption is
permitted. The adoption of these standards did not have any impact on the
Company's results of operations or financial position, as the Company does not
have intangible assets or goodwill.
In 2001, the FASB issued FASB Statement No. 143, which addresses
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. This
statement is effective for fiscal years beginning after June 15, 2002.
Management is currently assessing the impact of this new standard.
In 2002, the Company adopted FASB Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("FAS No. 144"), which excludes
from the definition of long-lived assets goodwill and other intangibles that are
not amortized in accordance with FAS No. 142. FAS No. 144 requires that
long-lived assets to be disposed of by sale be measured at the lower of carrying
amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. FAS No. 144 also expands the reporting
of discontinued operations to include components of an entity that have been or
will be disposed of rather than limiting such discontinuance to a segment of a
business. The adoption of FAS No. 144 did not have a material impact on the
Company's consolidated financial statements.
14
GB HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In June 2002, FASB issued FASB Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("FAS 146"). FAS 146 nullifies EITF
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)" ("EITF 94-3") and requires that a liability for a cost
associated with an exit or disposal activity be recognized and measured
initially at fair value in the period in which the liability is incurred. Under
EITF 94-3, a liability for an exit cost was recognized at the date of an
entity's commitment to an exit plan. The adoption of FAS 146 is expected to
result in delayed recognition for certain types of costs as compared to the
provisions of EITF 94-3. FAS 146 is effective for new exit or disposal
activities that are initiated after December 31, 2002. FAS 146 will affect the
types and timing of costs included in future restructuring programs, if any, but
is not expected to have a material impact on the Company's financial position or
results of operations.
(9) Common Stock Listing
The Company was contacted orally by a representative of the American
Stock Exchange (the "Exchange") regarding the continued listing of its common
stock. The Exchange representative initially advised that the Company might fail
to meet the minimum requirements for continued listing on the Exchange. A
representative of the Exchange later advised the Company in another call that
the Exchange would not move to delist the Company's securities at this time.
15
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
about the business, financial condition and prospects of the Company. The actual
results could differ materially from those indicated by the forward-looking
statements because of various risks and uncertainties. Such risks and
uncertainties are beyond management's ability to control and, in many cases,
cannot be predicted by management. When used in this Quarterly Report on Form
10-Q, the words "believes", "estimates", "anticipates", "expects", "intends" and
similar expressions as they relate to the Company or its management are intended
to identify forward-looking statements (see "Private Securities Litigation
Reform Act" below).
LIQUIDITY AND CAPITAL RESOURCES
On January 5, 1998, the Company filed petitions for relief under Chapter
11 of the Bankruptcy Code in the Bankruptcy Court. On August 14, 2000, the
Bankruptcy Court entered the Confirmation Order confirming the Plan for the
Company. On September 13, 2000, the Commission approved the Plan. The Effective
Date of the Plan was September 29, 2000. All material conditions precedent to
the Plan becoming effective were satisfied on or before September 29, 2000.
On the Effective Date, GB Property Funding's existing debt securities,
consisting of its 10 7/8% First Mortgage Notes due January 15, 2004 (the "Old
Notes") and all of Holdings' issued and outstanding shares of common stock owned
by PBV and GBLLC (the "Old Common Stock") were cancelled. As of the Effective
Date, an aggregate of 10,000,000 shares of new common stock of Holdings (the
"Common Stock") were issued and outstanding, and $110,000,000 of New Notes were
issued. Holders of the Old Notes received a distribution of their pro rata
shares of (i) the New Notes and (ii) 5,375,000 shares of the Common Stock (the
"Stock Distribution").
In a Consent Solicitation Statement and Consent Form dated September
14, 2001, GB Property Funding sought the consent of holders of the New Notes to
make certain changes to the original indenture (the "Modifications"). The
Modifications included, but were not limited to, a deletion of, or changes to,
certain provisions the result of which would be (i) to permit Holdings and its
subsidiaries to incur any additional indebtedness without restriction, to issue
preferred stock without restriction, to make distributions in respect of
preferred stock and to prepay indebtedness without restriction, to incur liens
without restriction and to enter into sale-leaseback transactions without
restriction, (ii) to add additional exclusions to the definition of "asset
sales" to exclude from the restrictions on "asset sales" sale-leaseback
transactions, conveyances or contributions to any entity in which Holdings or
its subsidiaries has or obtains equity or debt interests, and transactions
(including the granting of liens) made in accordance with another provision of
the Modifications relating to collateral release and subordination or any
documents entered into in connection with an "approved project" (a new
definition included as part of the Modifications which includes, if approved by
the Board of Directors of Holdings, incurrence of indebtedness or the transfer
of assets to any person if Holdings or any of its subsidiaries has or obtain
debt or equity interests in the transferee or any similar, related or associated
event, transaction or activity) in which a release or subordination of
collateral has occurred including, without limitation, any sale or other
disposition resulting from any default or foreclosure, (iii) to exclude from the
operation of covenants related to certain losses to collateral any assets and
any proceeds thereof, which have been subject to the release or subordination
provisions of the Modifications, (iv) to permit the sale or other conveyances of
Casino Reinvestment Development Authority investments in accordance with the
terms of a permitted security interest whether or not such sale was made at fair
value, (v) to exclude from the operation of covenants related to the deposit
into a collateral account of certain proceeds of "asset sales" or losses to
collateral any assets and any proceeds thereof, which have been subject to the
release or subordination provisions of the Modifications, (vi) to add new
provisions authorizing the release or subordination of the collateral securing
the New Notes in connection with, in anticipation of, as a result of, or in
relation to, an "approved project", and (vii) various provisions conforming the
text of the original indenture to the intent of the preceding summary of the
Modifications.
16
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Holders representing approximately 98% in principal amount of the New
Notes provided consents to the Modifications. Under the terms of the original
indenture, the consent of holders representing a majority in principal amount of
New Notes was a necessary condition to the Modifications. Accordingly, GB
Property Funding, as issuer, and Holdings and GBHC, as guarantors, and Wells
Fargo Bank Minnesota, National Association, as Trustee, entered into an Amended
and Restated Indenture dated as of October 12, 2001, containing the
Modifications to the original indenture described in the Consent Solicitation
Statement (the "Amended and Restated Indenture"). In accordance with the terms
of the Consent Solicitation Statement, holders of New Notes, who consented to
the Modifications and who did not revoke their consents ("Consenting
Noteholders"), were entitled to $17.50 per $1,000 in principal amount of New
Notes, subject to certain conditions including entry into the Amended and
Restated Indenture. Upon entry into the Amended and Restated Indenture on
October 12, 2001, the Company transferred approximately $1.9 million to the
Trustee for distribution to Consenting Noteholders.
Operating Activities
At September 30, 2002, the Company had cash and cash equivalents of
$50.0 million. The Company generated $7.1 million of net cash from operations
during the nine months ended September 30, 2002 compared to $10.5 million during
the same prior year period. During the second quarter of 2002, based upon a
periodic review of long-lived assets for impairment in conjunction with a review
of the Company's marketing programs and product mix, certain expenditures
incurred for property expansion plans, that were included in construction in
progress, were determined to be unusable and resulted in a loss on asset
impairment in the amount of $1.3 million.
Financing Activities
The Sands entered into a long-term lease of the Madison House Hotel (the
"Madison House"). The initial lease period is from December 2000 to December
2012 with lease payments ranging from $1.8 million per year to $2.2 million per
year. The Madison House is physically connected at two floors to the existing
Sands casino-hotel complex. The Sands recently completed renovations to upgrade
and combine the rooms of the Madison House into a total of 113 suites and 13
single rooms. It is the intention of the Sands to maintain and operate the
Madison House at the same quality level as the Sands.
17
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Total scheduled maturities of long term debt as of September 30, 2002
are set forth below:
2002 (three months) $ 6,000
2003 21,000
2004 23,000
2005 110,026,000
2006 28,000
Thereafter 254,000
----------------
Total $ 110,358,000
================
Investing Activities
Capital expenditures at the Sands for the nine months ended September
30, 2002 amounted to approximately $12.7 million. In order to enhance its
competitive position in the market place, the Sands may determine to incur
additional substantial costs and expenses to maintain, improve and expand its
facilities and operations. The Company may require additional financing in
connection with those activities.
In 2000, GBHC also entered into an agreement with the entities
controlling the Claridge, subject to Bankruptcy Court approval, to acquire the
Claridge Administration Building ("CAB"), which was situated between GBHC's
existing main entrance and the new Pacific Avenue entrance completed in June
2000. The purchase price was $3.5 million, consisting of $1.5 million in cash at
closing with the remaining $2.0 million consideration tendered through the
elimination for 40 months of a $50,000 monthly license fee paid by the Claridge
to GBHC under an agreement between the Claridge and GBHC governing the
development and operation of the "People Mover" leading from the Boardwalk to
the Sands and Claridge (the "PM Agreement"). GBHC and the Claridge also obtained
Bankruptcy Court approval of the assumption of the PM Agreement, as modified
above, and by the reduction of the monthly license fee to $20,000 a month after
the 40 months elimination of the license fee. In April 2000, closing took place
on the CAB and the existing structure was subsequently demolished.
The Sands is required by the Casino Act to make certain quarterly
deposits based on gross revenue with the Casino Reinvestment Development
Authority ("CRDA") in lieu of a certain investment alternative tax. Deposits for
the three and nine months ended September 30, 2002 amounted to $738,000 and $2.0
million, respectively. The Sands has agreed to contribute certain of its future
investment obligations to the CRDA in connection with the renovation related to
the Atlantic City Boardwalk Convention Center. The projected total contribution
will amount to $7.0 million, which will be paid through 2011 based on an
estimate of certain of the Sands' future CRDA deposit obligations.
18
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Summary
Management believes that cash flows generated from operations during 2002, as
well as available cash reserves, will be sufficient to meet its operating plan
and provide for scheduled capital expenditures. However, any significant other
capital expenditures may require additional financing.
Critical Accounting Policies and Estimates
The Company's discussion and analysis of its results of operations and
financial condition are based upon its consolidated financial statements that
have been prepared in accordance with generally accepted accounting principles
in the United States of America ("US GAAP"). The preparation of financial
statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, and the disclosure of contingent assets and liabilities. Estimates
and assumptions are evaluated on an ongoing basis and are based on historical
and other factors believed to be reasonable under the circumstances. The results
of these estimates may form the basis of the carrying value of certain assets
and liabilities and may not be readily apparent from other sources. Actual
results, under conditions and circumstances different from those assumed, may
differ from estimates. The impact and any associated risks related to estimates,
assumptions, and accounting policies are discussed within Management's
Discussion and Analysis of Results of Operations and Financial Condition, as
well as in the Notes to the Consolidated Financial Statements, if applicable,
where such estimates, assumptions, and accounting policies affect the Company's
reported and expected financial results.
The Company believes the following accounting policies are critical to
its business operations and the understanding of results of operations and
affect the more significant judgments and estimates used in the preparation of
its consolidated financial statements:
Allowance for Doubtful Accounts - The Company maintains accounts
receivable allowances for estimated losses resulting from the inability of its
customers to make required payments. Additional allowances may be required if
the financial condition of the Company's customers deteriorates.
Commitments and Contingencies - Litigation - On an ongoing basis, the
Company assesses the potential liabilities related to any lawsuits or claims
brought against the Company. While it is typically very difficult to determine
the timing and ultimate outcome of such actions, the Company uses its best
judgment to determine if it is probable that it will incur an expense related to
the settlement or final adjudication of such matters and whether a reasonable
estimation of such probable loss, if any, can be made. In assessing probable
losses, the Company makes estimates of the amount of insurance recoveries, if
any. The Company accrues a liability when it believes a loss is probable and the
amount of loss can be reasonably estimated. Due to the inherent uncertainties
related to the eventual outcome of litigation and potential insurance recovery,
it is possible that certain matters may be resolved for amounts materially
different from any provisions or disclosures that the Company has previously
made.
19
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Impairment of Long-Lived Assets - The Company periodically reviews
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Assumptions and estimates used in the determination of impairment losses, such
as future cash flows and disposition costs, may affect the carrying value of
long-lived assets and possible impairment expense in the Company's consolidated
financial statements.
Self-Insurance - The Company retains the obligation for certain losses
related to customer's claims of personal injuries incurred while on the Company
property. The Company accrues for outstanding reported claims, claims that have
been incurred but not reported and projected claims based upon management's
estimates of the aggregate liability for uninsured claims using historical
experience, an adjusting company's estimates and the estimated trends in claim
values. Although management believes it has the ability to adequately project
and record estimated claim payments, it is possible that actual results could
differ significantly from the recorded liabilities.
Allowance for Obligatory Investments - The Company maintains obligatory
investment allowances for its investments made in satisfaction of its CRDA
obligation. The obligatory investments may ultimately take the form of CRDA
issued bonds, which bear a below market rate of interest, direct investments or
donations. Management bases its reserves on the type of investments the
obligation has taken or is expected to take. CRDA bonds bear interest at
approximately one-third below market rates. Donations of the Sands' quarterly
deposits to the CRDA have historically yielded a 51% future credit or refund of
obligations. Therefore, management has reserved the predominant balance of its
obligatory investments at between 33% and 49%.
20
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
Gaming Operations
Information contained herein, regarding Atlantic City casinos other than
the Sands, was obtained from reports filed with the Commission.
The following table sets forth certain unaudited financial and operating
data relating to the Sands' and all other Atlantic City casinos' capacities,
volumes of play, hold percentages and revenues:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -----------------------------
2002 2001 2002 2001
------------ ------------- ------------ -------------
(Dollars in Thousands) (Dollars in Thousands)
Units: (at quarter end)
Table Games - Sands 26 71 26 71
- Atlantic City (ex. Sands) 1,062 1,073 1,062 1,073
Slot Machines - Sands 2,434 2,056 2,434 2,056
- Atlantic City (ex. Sands) 35,810 35,640 35,810 35,640
Gross Wagering (1)
Table Games - Sands $ 43,826 $ 124,326 $ 203,175 $ 353,332
- Atlantic City (ex. Sands) 1,863,754 1,832,300 5,087,418 5,139,111
Slot Machines - Sands 588,045 638,296 1,728,627 1,793,286
- Atlantic City (ex. Sands) 10,738,490 10,123,514 29,403,374 27,996,054
Hold Percentages (2) (3)
Table Games - Sands 14.3% 16.2% 14.8% 15.2%
- Atlantic City (ex. Sands) 15.5% 16.1% 15.8% 15.7%
Slot Machines - Sands 8.2% 7.0% 7.7% 7.0%
- Atlantic City (ex. Sands) 8.1% 8.1% 8.1% 8.1%
Revenues (2)
Table Games - Sands $ 6,286 $ 20,161 $ 30,089 $ 53,845
- Atlantic City (ex. Sands) 289,817 295,112 807,234 804,458
Slot Machines - Sands 48,466 44,904 133,046 125,013
- Atlantic City (ex. Sands) 862,679 819,589 2,379,205 2,264,479
Other (3) - Sands 193 602 1,205 1,974
- Atlantic City (ex. Sands) N/A N/A N/A N/A
- -------------------------------
(1) Gross wagering consists of the total value of chips purchased for table
games (excluding poker) and keno wagering (the "Drop") and coins wagered
in slot machines (the "Handle").
(2) Casino revenues consist of the portion of gross wagering that a casino
retains and, as a percentage of gross wagering, is referred to as the
"hold percentage." The Sands' hold percentages and revenues are
reflected on an accrual basis. Comparable accrual basis data for the
remainder of the Atlantic City gaming industry as a whole is not
available; consequently, industry hold percentages and revenues are
based on information available from the Commission and are possibly
higher than if computed on the accrual basis.
21
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
(3) Consists of revenues from poker and simulcast horse racing wagering.
Comparable information for the remainder of the Atlantic City gaming
industry is not available.
Patron Gaming Volume
Information contained herein, regarding Atlantic City casinos other than
the Sands, was obtained from reports filed with the Commission.
Table game drop decreased by $80.5 million (64.8%) during the three
months ended September 30, 2002 compared with the same prior year period. By
comparison, according to Commission reports, table game drop at all other
Atlantic City casinos during the same period increased 1.7%. For the nine months
ended September 30, 2002, the Sands table game drop decreased $150.2 million
(42.5%) compared with the same prior year period. The decrease in table game
drop is attributable to the reduction of the number of table games from 71 in
2001 to 26 by the end of the third quarter 2002. The decrease in the number of
table games was necessary in order to make room on the casino floor for the
installation of four hundred new slot machines. During the second quarter of
2002, there was considerable disruption of the casino floor related to the
removal of table games and their replacement with slot machines. Table game hold
percentage decreased 2.0 percentage points to 14.3% for the three months ended
September 30, 2002 compared to the same period last year. For the nine months
ended September 30, 2002, the table game hold percentage decreased 0.4
percentage points to 14.8% compared to the same prior year period. Aggregate
gaming space at all other Atlantic City casinos increased by approximately
26,000 square feet (2.2%) at September 30, 2002 compared to September 30, 2001.
The amount of gaming space at the Sands increased approximately 2,000 square
feet (2.2%) between periods.
Slot machine handle decreased $80.3 million (12.6%) and $64.7 million
(3.6%) during the three and nine months ended September 30, 2002, respectively,
compared with the same periods of 2001. By comparison, the percentage increase
in slot machine handle for all other Atlantic City casinos in the third quarter
and first nine months of 2002 vs. the same periods in 2001 was 6.1% and 5.0%,
respectively. The decreased Sands slot handle during 2002 can be attributed to
the disruption of the gaming floor during the reconfiguration and installation
of four hundred new slot machines as well as a change in marketing strategy that
no longer emphasized the "loosest slots" philosophy. This marketing strategy was
evident in the change in the denominational mix of slot machines from higher
denomination, lower hold percentage machines, toward lower denomination, higher
hold percentage machines. The number of slot machines increased 18.4% at the
Sands to 2,434 at September 30, 2002 compared to September 30, 2001. On an
industry-wide basis, the number of slot machines increased 0.5% in the third
quarter of 2002 compared to the third quarter of 2001. Additionally, during
2002, the Company's marketing direction focused on continued elimination of
marketing programs and other promotional activities that were deemed to be less
profitable and a continued focus on, and development of, the segments of play
that create more value with less expense. Certain marketing programs have been
revised to reflect this change. For example, the total cash incentive programs
component of promotional allowances for the period has been reduced from $29.2
million in the comparative 2001 period, to $23.4 million, a 20.1% reduction.
These types of marketing program changes have a direct impact upon both gross
slot wagering and slot revenue.
22
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The following table sets forth the changes in operating revenues and
expenses (unaudited) for the three and nine month periods ended September 30,
2002 and 2001:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------------- -----------------------------------------------
Increase (Decrease) Increase (Decrease)
2002 2001 $ % 2002 2001 $ %
-------- -------- ---------- -------- ---------- --------- --------- --------
(Dollars In Thousands)
Revenues:
Casino $ 53,921 $ 65,667 $ (11,746) (17.89) $ 161,445 $ 180,832 $ (19,387) (10.72)
Rooms 2,870 3,302 (432) (13.08) 8,665 8,903 (238) (2.67)
Food and Beverage 6,083 7,961 (1,878) (23.59) 18,300 22,525 (4,225) (18.76)
Other 897 1,338 (441) (32.96) 2,875 3,644 (769) (21.10)
Promotional Allowances 13,974 17,283 (3,309) (19.15) 38,662 49,430 (10,768) (21.78)
Expenses:
Casino 36,859 43,916 (7,057) (16.07) 108,982 126,933 (17,951) (14.14)
Rooms 377 742 (365) (49.19) 2,497 2,657 (160) (6.02)
Food and Beverage 3,184 2,765 419 15.15 8,496 7,424 1,072 14.44
Other 651 761 (110) (14.45) 2,059 2,520 (461) (18.29)
General and Administrative 2,988 2,755 233 8.46 9,932 9,679 253 2.61
Depreciation and Amortization 3,776 2,836 940 33.15 10,641 8,652 1,989 22.99
Loss on impairment of fixed assets - - - - 1,282 - 1,282 -
Income/(loss) from Operations 1,962 7,210 (5,248) (72.79) 8,734 8,609 125 1.45
Non-operating items, net 2,675 2,416 (259) (10.68) 7,775 7,097 (678) (9.55)
Income Tax (Provision) Benefit (193) (1,708) 1,515 88.70 (825) (645) (180) 27.91
Revenues
Overall casino revenues decreased $11.7 million and $19.4 million,
respectively, for the three and nine months ended September 30, 2002 compared to
the same prior year periods. The decrease in revenue is primarily attributable
to the reduction in table games and the disruption of gaming operations during
the reconfiguration and installation of new slot machines.
Rooms revenue decreased $433,000 and $238,000, respectively, for the
three and nine months ended September 30, 2002 compared to the same prior year
periods as a result of a combination of decreased occupancy and a decrease in
the average daily room rate. The decrease in occupancy and average daily room
rate was primarily a result of marketing programs that focused on the casino
customer database.
23
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Food and beverage revenues decreased $1.9 million and $4.2 million,
respectively, for the three and nine months ended September 30, 2002 compared to
the same prior year periods due to a decrease in complimentary food and beverage
sales.
Other revenues decreased $441,000 and $769,000, respectively, for the
three and nine months ended September 30, 2002 compared to the same prior year
periods as a result of a decrease in entertainment revenue.
Promotional Allowances
Promotional allowances are comprised of (i) the estimated retail value
of goods and services provided free of charge to casino customers under various
marketing programs, (ii) the cash value of redeemable points earned under a
customer loyalty program based on the amount of slot play and (iii) coin and
cash coupons and discounts. As a percentage of casino revenues, promotional
allowances decreased to 24.0% during the nine months ended September 30, 2002
from 27.3% during the same period of 2001. The decrease is primarily
attributable to the elimination of marketing programs and other promotional
activities that were deemed less profitable and a continued focus on, and
development of, the segments of play that created more volume with less expense.
Departmental Expenses
Casino expenses at the Sands decreased by $7.1 million and $18.0
million, respectively, for the three and nine months ended September 30, 2002
compared to the same prior year periods. The decrease in casino expenses is
primarily due to the reduction of complimentary costs associated with food and
beverage provided free of charge. Casino payroll expenses decreased due to the
reduction in table games. The decrease in the provision for doubtful accounts
expense was caused by a reduction in credit issuance due to lower table game
activity. Lower costs for customer transportation were a result of reduced
volume in air travel and ground transportation. Reductions in advertising
expense and gaming revenue tax also contributed significantly to the decreases
in casino expenses in 2002.
Rooms expenses decreased $365,000 and $160,000, respectively for the
three and nine months ended September 30, 2002 compared to the same prior year
periods. The decreases were due to a decrease in housekeeping supplies expense,
amenity package costs, linen and uniform usage and outside maintenance
contracts. The decrease in room's expenses during the three months ended
September 30, 2002, was also attributed to a larger share of costs allocated to
casino expenses as a result of increased room complimentaries generated by
casino operations.
Food and beverage expenses increased $419,000 and $1.1 million,
respectively, for the three and nine months ended September 30, 2002 compared to
the same prior year periods. The increases were due to a smaller share of costs
allocated to casino expense as a result of a decrease in food and beverage
complimentaries generated by casino operations. These were offset slightly by
decreases in payroll, benefits and food and beverage cost of sales as a result
of the lower volume.
24
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Other expenses decreased $110,000 and $461,000 for the three and nine
months ended September 30, 2002, respectively, compared to the same prior year
periods as a result of lower entertainment expense and payroll and benefit
costs.
General and Administrative Expenses
General and administrative expenses increased $233,000 and $253,000 for
the three and nine months ended September 30, 2002, respectively, compared to
the same periods last year due to the costs associated with severance packages
primarily arising from layoffs in a reorganization of casino operations during
the second quarter of 2002, as well as increased costs for property taxes and
insurance.
Depreciation and Amortization
Depreciation and amortization expense increased $940,000 and $2.0
million for the three and nine month periods ended September 30, 2002,
respectively, compared to the same prior year periods as a result of the
continued investment in infrastructure and equipment during the preceding year.
Interest Income and Expense
Interest income decreased by $435,000 and $1.5 million during the three
and nine month periods ended September 30, 2002, respectively, compared to the
same periods in 2001. The decrease was due to earnings on decreased cash
reserves and lower interest rates.
Interest expense decreased $177,000 and $732,000 during the three and
nine month periods ended September 30, 2002, respectively, compared to the same
periods in 2001. The decrease is due to the accrual of capitalized interest in
2002 with no similar accrual in 2001. It is the Company's policy to capitalize
interest on construction projects in excess of $250,000.
Income Tax Benefit (Provision)
Prior to 1997, the Company was included in the consolidated federal
income tax return of Hollywood Casino Corporation ("HCC"). The Company's
operations were included in GBCC's consolidated federal income tax returns for
the years ended December 31, 1998 and 1997, but GBCC agreed to allow the Company
to become deconsolidated from the GBCC group effective after December 31, 1998.
In accordance therewith, PCC transferred 21% of the stock ownership in Holdings
to PBV, effecting the deconsolidation of the Company from the GBCC group for
federal income tax purposes (the "Deconsolidation"). Accordingly, beginning in
1999, the Company's provision for federal income taxes has been calculated and
paid on a consolidated basis.
25
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
At September 30, 2002, the Company had deferred tax assets including
State net operating losses, Federal credit carryforwards and temporary
differences. The enactment of the New Jersey Business Tax Reform Act ("BTR") on
July 2, 2002 deferred the State net operating losses ("State NOL's"), set to
begin expiring in 2003, for a two year period. A portion of the credit
carryforwards, if not utilized, will begin to expire each year through 2004. The
remaining credit carryforwards expire through the year 2019. In addition, as
part of a certain settlement agreement, GBCC may utilize Federal net operating
losses ("Federal NOL's") of the Company through December 31, 1998 to offset
federal taxable income of GBCC and other members of its consolidated tax group.
The Company has utilized the balance of its Federal NOL's in its 1999 (amended)
and 2000 consolidated Federal tax returns. Statement of Financial Accounting
Standards No. 109 ("FAS 109") requires that the tax benefit of NOL's and
deferred tax assets resulting from temporary differences be recorded as an asset
and, to the extent that management can not assess that the utilization of all or
a portion of such NOL's and deferred tax assets is more likely than not,
requires the recording of a valuation allowance. Due to various uncertainties,
management is unable to determine that realization of the Company's deferred tax
asset is more likely than not and, thus, has provided a valuation allowance for
the entire amount at September 30, 2002 and December 31, 2001.
The Internal Revenue Service has examined the consolidated federal
income tax returns of HCC for the years 1995 and 1996 and the consolidated
federal income tax returns for GBCC for the years 1997 and 1998 in which the
Company was included (the "Audit"). GBCC management has disclosed in its annual
SEC Form 10-K, filed for the year ended December 31, 2001, that the Audit is
substantially complete and has resulted in adjustments to GBCC's Federal NOL's
and deferred tax assets. The Company is dependent on HCC and was dependent on
GBCC for information as to their operations including their affiliates and the
impact of those operations on the former HCC and GBCC consolidated groups'
Federal NOL's. The Company has not yet received information regarding the
details of the Audit adjustments and, therefore, is unable to estimate their
impact on the Company's financial position or results of operations. In
addition, GBCC filed a petition for relief in the United States Bankruptcy Court
for the District of Delaware in 2001 and a plan was confirmed in 2002. GBCC's
Plan provided for the liquidation of GBCC, and GBHC was notified that the Plan
became effective in July 2002.
The State of New Jersey is examining the state corporate business tax
return of GBHC for the years 1996, 1997 and 1998. It is management's position
that any claims by the State of New Jersey against GBHC attributable to anytime
prior to January 5, 1998 are barred by applicable provisions of the Bankruptcy
Code. Management is presently unable to estimate the impact of New Jersey's tax
audit on the financial position or results of operations of GBHC.
Federal and State income tax benefits or provisions are based upon the
results of operations for the current period and the estimated adjustments for
income tax purposes of certain nondeductible expenses. The Federal income tax
provision of $215,000 for the nine months ended September 30, 2002 is a result
of applying the statutory Federal income tax rate of 35% to the pretax income
after adjustments for income tax purposes.
On July 2, 2002, BTR was signed into law. The BTR revises and updates
the New Jersey corporation business tax and establishes filing fees for certain
returns. Included in the BTR is a deferral on the use of State NOL's until tax
year 2005. Those State NOL's that would have been utilized in tax years 2002 and
2003 will be granted a two year extension of their expiration period.
Additionally, the BTR imposes an alternative minimum assessment ("AMA") based on
gross receipts or gross profits. The taxpayer pays the greater of the AMA or the
regular corporate business tax (CBT). The AMA provision is discontinued after
2006 and any portion of the AMA in excess of the regular CBT is allowed as a
non-expiring future credit carryforward. Due to various uncertainties,
management is unable to determine that realization of the future credit
carryforward is more likely than not and, thus, has provided a valuation
allowance for the entire amount at September 30, 2002
26
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The State income tax provision of $610,000 for the three and nine months
ended September 30, 2002 is a result of retroactively applying the statutory AMA
rate of .4% to gross receipts, as defined in the BTR. Since the BTR was enacted
in the third quarter of 2002, its entire impact is included in the State income
tax provision of the consolidated statements of operations for both the three
and nine months ended September 30, 2002.
Inflation
Management believes that, in the near term, modest inflation and
increased competition within the gaming industry for qualified and experienced
personnel will continue to cause increases in operating expenses, particularly
labor and employee benefits costs.
Seasonality
Historically, the Sands' operations have been highly seasonal in nature,
with the peak activity occurring from May to September. Consequently, the
results of operations for the first and fourth quarters are traditionally less
profitable than the other quarters of the fiscal year. In addition, the Sands'
operations may fluctuate significantly due to a number of factors, including
chance. Such seasonality and fluctuations may materially affect casino revenues
and profitability.
Private Securities Litigation Reform Act
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-Q and other materials filed or to be filed by Holdings, GB Property
Funding or GBHC with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made by such
companies) contains statements that are forward-looking, such as statements
relating to future expansion plans, future construction costs and other business
development activities including other capital spending, economic conditions,
financing sources, competition and the effects of tax regulation and state
regulations applicable to the gaming industry in general or Holdings, GB
Property Funding and GBHC in particular. 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 by or on behalf of
Holdings, GB Property Funding or GBHC. 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), domestic or global
economic conditions, activities of competitors and the presence of new or
additional competition, fluctuations and changes in customer preference and
attitudes, changes in federal or state tax laws or the administration of such
laws and changes in gaming laws or regulations (including the legalization of
gaming in certain jurisdictions).
27
GB HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Common Stock Listing
The Company was contacted orally by a representative of the American
Stock Exchange (the "Exchange") regarding the continued listing of its common
stock. The Exchange representative initially advised that the Company might fail
to meet the minimum requirements for continued listing on the Exchange. A
representative of the Exchange later advised the Company in another call that
the Exchange would not move to delist the Company's securities at this time.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from changes in market rates and
prices, such as interest rates and foreign currency exchange rates. The Company
does not have securities subject to interest rate fluctuations and has not
invested in derivative-based financial instruments.
Item 4. Controls and Procedures
Within the 90 days prior to the filing of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Rule 13a-15 of the
Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.
28
PART II: OTHER INFORMATION
Item 6.(a) Exhibits
Item 6.(b) Reports on Form 8-K
SIGNATURES
Pursuant to the requirements of the 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, in the
City of Atlantic City, State of New Jersey on November 14, 2002.
GB HOLDINGS, INC.
GB PROPERTY FUNDING CORP.
GREATE BAY HOTEL AND CASINO, INC.
--------------------------------
Registrants
Date: November 14, 2002 By: /s/ Timothy A. Ebling
--------------------- --------------------------------
Timothy A. Ebling
Chief Financial Officer
29
CERTIFICATIONS
Certification of Chief Executive Officer
Pursuant to 13a-14
of the Securities Exchange Act of 1934, as amended (the "Act")
I, Richard Brown, Chief Executive Officer of GB Holdings, Inc., GB Property
Funding Corp. and Greate Bay Hotel and Casino, Inc. certify that:
(1) I have reviewed the Registrant's Quarterly Report on Form 10-Q for
the period ended September 30, 2002 of the Registrant (the "Report");
(2) Based on my knowledge, the Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by the Report; and
(3) Based on my knowledge, the financial statements, and other
financial information included in the Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in the Report.
(4) The other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as such term is
defined in Section 13a-14(c) of the Act) for the issuer and have:
(i) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the periodic reports are being prepared;
(ii) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this Report (the "Evaluation Date"); and
(iii) presented in the Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
(5) The other certifying officer(s) and I have disclosed, based on our
most recent evaluation, to the issuer's auditors and the audit committee of the
board of directors (or persons fulfilling the equivalent function):
(i) all significant deficiencies in the design or operation
of internal controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
(ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Registrant's
internal controls; and
(6) The other certifying officer(s) and I have indicated in the report
whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of their most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Richard Brown
- ------------------------------
Name: Richard Brown
Date: November 14, 2002
30
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
I, Richard Brown, Chief Executive Officer of GB Holdings, Inc., GB Property
Funding Corp., and Greate Bay Hotel and Casino, Inc. (collectively, the
"Registrant") certify that to the best of my knowledge, based upon a review of
the Quarterly Report on Form 10-Q for the period ended September 30, 2002 of the
Registrant (the "Report"):
(1) The Report fully complies with the requirements of Section 13
(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Registrant.
/s/ Richard Brown
- -------------------------------------
Name: Richard Brown
Date: November 14, 2002
31
Certification of Chief Financial Officer
Pursuant to 13a-14
of the Securities Exchange Act of 1934, as amended (the "Act")
I, Timothy A. Ebling, Chief Financial Officer of GB Holdings, Inc., GB Property
Funding Corp. and Greate Bay Hotel and Casino, Inc. certify that:
(1) I have reviewed the Registrant's Quarterly Report on Form 10-Q for
the period ended September 30, 2002 of the Registrant (the "Report");
(2) Based on my knowledge, the Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by the Report; and
(3) Based on my knowledge, the financial statements, and other
financial information included in the Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in the Report.
(4) The other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as such term is
defined in Section 13a-14(c) of the Act) for the issuer and have:
(i) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the periodic reports are being prepared;
(ii) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this Report (the "Evaluation Date"); and
(iii) presented in the Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
(5) The other certifying officer(s) and I have disclosed, based on our
most recent evaluation, to the issuer's auditors and the audit committee of the
board of directors (or persons fulfilling the equivalent function):
(iii) all significant deficiencies in the design or operation
of internal controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
(iv) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Registrant's
internal controls; and
(6) The other certifying officer(s) and I have indicated in the report
whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of their most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Timothy A. Ebling
- --------------------------------
Name: Timothy A. Ebling
Date: November 14, 2002
32
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
I, Timothy A. Ebling, Chief Financial Officer of GB Holdings, Inc., GB Property
Funding Corp., and Greate Bay Hotel and Casino, Inc. (collectively, the
"Registrant") certify that to the best of my knowledge, based upon a review of
the Quarterly Report on Form 10-Q for the period ended September 30, 2002 of the
Registrant (the "Report"):
(1) The Report fully complies with the requirements of Section 13
(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Registrant.
/s/ Timothy A. Ebling
- -----------------------------------------
Name: Timothy A. Ebling
Date: November 14, 2002
33