FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the quarterly period ended June 30, 2006

¨	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 000-32987

COLONY RIH HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

95-4849060

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

RESORTS INTERNATIONAL HOTEL AND CASINO, INC.

(Exact name of registrant as specified in its charter)


DELAWARE		95-4828297
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1133 Boardwalk Atlantic City, NJ		08401
(Address of principal executive offices)		(Zip Code)

Registrants’ telephone number, including area code:

(609) 344-6000

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

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

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

The number of shares outstanding of Colony RIH Holdings, Inc.’s Class A Common Stock, $0.01 par value, was 38,295 and the number of shares outstanding of Colony RIH Holdings, Inc.’s Class B Common Stock, $0.01 par value, was 774,982, each as of August 11, 2006.

The number of shares outstanding of Resorts International Hotel and Casino, Inc.’s Common Stock, $0.01 par value, was 100 as of August 11, 2006.

COLONY RIH HOLDINGS, INC.

AND

RESORTS INTERNATIONAL HOTEL AND CASINO, INC.

INDEX


		PAGE
	PART I-FINANCIAL INFORMATION

PART I.	FINANCIAL INFORMATION

Item 1.	Unaudited Financial Statements	2

	Condensed Consolidated Balance Sheets of Colony RIH Holdings, Inc. at June 30, 2006 and December 31, 2005	2

	Condensed Consolidated Statements of Operations of Colony RIH Holdings, Inc. for the three and six months ended June 30, 2006 and 2005	3

	Condensed Consolidated Statements of Cash Flows of Colony RIH Holdings, Inc. for the six months ended June 30, 2006 and 2005	4

	Notes to Condensed Consolidated Financial Statements of Colony RIH Holdings, Inc.	5

	Condensed Consolidated Balance Sheets of Resorts International Hotel and Casino, Inc. at June 30, 2006 and December 31, 2005	9

	Condensed Consolidated Statements of Operations of Resorts International Hotel and Casino, Inc. for the three and six months ended June 30, 2006 and 2005	10

	Condensed Consolidated Statements of Cash Flows of Resorts International Hotel and Casino, Inc. for the six months ended June 30, 2006 and 2005	11

	Notes to Condensed Consolidated Financial Statements of Resorts International Hotel and Casino, Inc.	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1 A.	Risk Factors	27

Item 2.	Changes in Securities	27

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Submission of Matters to a Vote of Security Holders	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

ITEM 1. FINANCIAL STATEMENTS

COLONY RIH HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands)


	June 30, 2006			December 31, 2005
Assets
Current assets
Cash and cash equivalents	$	19,456		$	25,830
Receivables, net		7,443			6,607
Inventories		2,639			2,467
Prepaid expenses and other current assets		10,820			2,787

Total current assets		40,358			37,691

Property and equipment, net		295,094			298,154
Other assets		17,852			18,363

Total assets	$	353,304		$	354,208

Liabilities and Shareholders’ Equity
Current liabilities
Current maturities of long-term debt	$	12,740		$	5,617
Accounts payable		18,297			8,010
Accrued interest payable		6,812			6,518
Accrued expenses and other current liabilities		22,257			24,110
Due to affiliates, net		1,640			3,107

Total current liabilities		61,746			47,362

Long-term debt, less current portion		231,662			234,224
Redeemable common stock		3,875			3,875

Total liabilities		297,283			285,461

Shareholders’ equity
Common stock:
Class A—$.01 par value, 900,000 shares authorized, 38,295 shares issued and outstanding		—			—
Class B—$.01 par value, 1,600,000 shares authorized, 774,982 shares issued and outstanding		8			8
Capital in excess of par		73,790			73,790
Accumulated deficit		(17,777	)		(5,051	)

Total shareholders’ equity		56,021			68,747

Total liabilities and shareholders’ equity	$	353,304		$	354,208

See accompanying notes

COLONY RIH HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands)


	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
Revenues:
Casino	$	69,438		$	67,290		$	133,879		$	128,547
Lodging		5,320			5,837			10,480			10,395
Food and beverage		7,856			5,936			15,189			10,806
Other		1,404			1,111			2,893			2,468
Less: promotional allowances		(20,354	)		(17,579	)		(40,498	)		(33,277	)

Total net revenue		63,664			62,595			121,943			118,939

Costs and expenses:
Casino		32,082			31,508			63,784			61,892
Lodging		895			855			1,587			1,423
Food and beverage		3,470			2,539			6,277			4,346
Other operating		1,033			948			1,774			1,586
Selling, general, and administrative		19,278			13,352			37,257			29,797
Depreciation and amortization		5,715			4,795			10,872			9,489

Total costs and expenses		62,473			53,997			121,551			108,533

Income from operations		1,191			8,598			392			10,406

Interest income		168			138			366			275
Interest expense		(6,871	)		(6,491	)		(13,308	)		(12,801	)
Other (expense) income, net		(1	)		7			(1	)		28

(Loss) income before income taxes		(5,513	)		2,252			(12,551	)		(2,092	)

Provision (benefit) for income taxes		87			1,030			175			(207	)

Net (loss) income	$	(5,600	)	$	1,222		$	(12,726	)	$	(1,885	)

See accompanying notes.

COLONY RIH HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)


	Six months ended June 30,
	2006			2005
Cash Flows from Operating Activities:
Net loss	$	(12,726	)	$	(1,885	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		10,375			9,088
Amortization of debt premiums, discounts and issuance costs		992			893
Provision for doubtful receivables		95			108
Loss/(gain) on disposal of fixed assets		6			(28	)
Provision for discount on CRDA obligations, net of amortization		497			401
Deferred income tax		—			(572	)
Changes in operating assets and liabilities:
Net decrease in due to affiliates		(1,467	)		(2,472	)
Net increase in receivables		(931	)		(936	)
Net increase in inventories and prepaid expenses and other current assets		(8,205	)		(759	)
Net decrease in deferred charges and other assets		317			188
Net increase in accounts payable and accrued expense		8,336			2,777
Net increase in interest payable		294			70

Net cash (used in) provided by operating activities		(2,417	)		6,873

Cash Flows from Investing Activities:
Releases of cash and cash equivalents - restricted		—			398
Proceeds from sale of fixed assets		77			28
Purchase of property and equipment		(6,664	)		(11,862	)
CRDA deposits and bond purchases		(1,622	)		(1,478	)

Net cash used in investing activities		(8,209	)		(12,914	)

Cash Flows from Financing Activities:
Proceeds of borrowings		7,000			5,000
Payments to secure borrowings		—			(52	)
Debt repayments		(2,748	)		(6,419	)

Net cash provided by (used in) financing activities		4,252			(1,471	)

Net decrease in cash and cash equivalents		(6,374	)		(7,512	)
Cash and cash equivalents at beginning of period		25,830			31,975

Cash and cash equivalents at end of period	$	19,456		$	24,463

Supplemental Cash Flow Disclosures:
Cash paid during the period for:
Interest	$	11,231		$	11,102
Income taxes paid, net	$	935		$	(709	)
Non-cash investment and financing transactions:
Obligations incurred for the purchase of property and equipment	$	—		$	1,404

See accompanying notes.

COLONY RIH HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Colony RIH Holdings, Inc., a Delaware corporation (“CRH”), owns 100% of the outstanding common stock of Resorts International Hotel and Casino, Inc., a Delaware corporation (“RIHC” or the “Company”). RIHC, through its wholly-owned subsidiary, Resorts International Hotel, Inc., a New Jersey corporation (“RIH”), owns and operates Resorts Atlantic City (“Resorts”), a casino/hotel located in Atlantic City, NJ. On April 1, 2003, Resorts Real Estate Holdings, Inc. (“RREH”), a New Jersey corporation, was formed as a wholly-owned subsidiary of CRH for the purpose of acquiring certain land. RREH had no substantive business operations prior to January 2004 (see Note 2). Colony RIH Holdings, Inc, Resorts International Hotel and Casino, Inc. and Resorts International Hotel, Inc. are referred to collectively as the “Companies”.

CRH was formed at the direction of Colony Investors IV, L.P. (“Colony IV”), a Delaware limited partnership, under the laws of the State of Delaware on March 7, 2001. RIHC was formed at the direction of Colony IV on October 24, 2000.

The condensed consolidated financial statements include the accounts of CRH and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated.

As discussed in Note 2, absent the amendments to the Commerce Facility and the CIT Facility, the Company would not have been in compliance with financial covenants contained in its CIT Facility and Commerce Facility as of December 31, 2005. Management has also renegotiated the financial covenants with CIT and Commerce for periods subsequent to December 31, 2005. The Commerce Facility expires on August 31, 2006. Also, as discussed in Note 2, the Company was not in compliance with financial covenants contained in its CIT Facility and Commerce Facility as of June 30, 2006 and received waivers from CIT and Commerce for the deficiencies. The Company had a working capital deficit of $21.4 million at June 30, 2006. Management believes, based on the information currently available, that the results of its operations may not allow the Company to meet these financial covenants in the future unless the financial covenants are amended. Therefore, the Company continues to explore a number of alternatives including refinancing and/or restructuring some or all long term debt and the related financial covenants. However, there can be no assurances that the Company will be successful in this regard.

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial statements for these interim periods have been included. The results set forth in the condensed consolidated statement of operations for the six months ended June 30, 2006 are not necessarily indicative of the results to be expected for the full year.

For further information, refer to the consolidated financial statements and notes thereto included in CRH’s annual report on Form 10-K for the year ended December 31, 2005.

Certain prior year balances have been reclassified to conform to the current year’s presentation.

New Accounting Pronouncement

In December 2004, the FASB issued Financial Accounting Standards Board Statement No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which requires stock-based employee compensation to be measured based on the grant-date fair value of the award and the cost to be recognized over the period during which, an employee is required to provide service in exchange for the award. SFAS 123(R) eliminates the alternative use of APB No. 25’s intrinsic value method of accounting for stock options granted to employees.

The Company adopted SFAS 123(R) on January 1, 2006 and the effect of adoption was not material.

2. LONG TERM DEBT

On March 22, 2002, RIHC sold $180.0 million aggregate principal amount of First Mortgage Notes (the “First Mortgage Notes”) at a price of 97.686% yielding $175.8 million. Interest on the First Mortgage Notes is payable on March 15 and September 15 of each year, and the First Mortgage Notes are due in full on March 15, 2009. Beginning March 15, 2007, the Company may redeem all or a part of the First Mortgage Notes at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest: March 15, 2007 through March 14, 2008, 106.0%; March 15, 2008 through March 14, 2009, 103.0%; and on or after March 15, 2009, 100.0%.

The First Mortgage Notes contain certain covenants that, among other things, limit RIHC’s ability and the ability of its subsidiaries to pay dividends on, redeem or repurchase its or their capital stock, make investments, incur additional indebtedness, permit payment of or restrict dividends by certain of its subsidiaries, enter into sale leaseback transactions, sell assets, guarantee indebtedness, create certain liens, engage in transactions with affiliates, and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries on a consolidated basis. The First Mortgage Notes also contain cross-default provisions whereby the acceleration of any indebtedness in an aggregate amount of $5 million or more prior to its scheduled maturity constitutes an event of default under the First Mortgage Notes Indenture.

In June 2002, RIH entered into a Thermal Energy Services Agreement (the “Thermal Agreement”). The initial term of the Thermal Agreement is 20 years, renewable at RIH’s option for two additional five-year terms. The Thermal Agreement has three components: a monthly charge for operation and maintenance of the thermal energy facilities; a capital lease component for capital improvements whose value was estimated at $6.5 million on the date the Thermal Agreement was executed, and; a usage fee for steam and chilled water, whose usage and rate will vary by month of the year. The outstanding balance of the capital lease was $5.8 million at June 30, 2006.

In June 2002, RIH entered into a Restated Loan and Security Agreement with CIT Group/Equipment Financing, Inc (“CIT Facility”). The CIT Facility permits RIH to borrow up to $20 million for the purchase of machinery, furniture, or equipment. As amended, the loans pursuant to the CIT Facility are repayable in up to a sixty month amortization period from the date the loan is made. The outstanding loans associated with the CIT Facility bear interest at the rate of LIBOR plus the applicable margin (as defined) which can range from 3.25% to 5.75% based upon operating results. As of June 30, 2006, the interest rate on the CIT Facility was 8.99% per annum. RIH is required to pay an annual fee equal to one-half percent of the unused portion of the CIT Facility. The CIT Facility contains a fixed charge coverage ratio and a senior leverage financial covenant as defined in the Credit Facility. As of June 30, 2006, RIH was not in compliance with the financial covenants contained in the CIT Facility and received a waiver from CIT with respect to such non-compliance. The outstanding balance due to CIT at June 30, 2006 was approximately $13.6 million.

In November 2002, RIH entered into a Loan and Security Agreement with Commerce Bank, N.A (“Commerce Facility”). The Commerce Facility agreement was amended in June 2006 to provide for working capital borrowings and letters of credit up to $15 million. The letter of credit portion of the Commerce Facility allows for a maximum of $7.5 million. However, if the maximum amount for the letters of credit is not used, the unused letter of credit portion is available for borrowings up to a maximum of $10.0 million. The Commerce Facility expires on August 31, 2006. As of June 30, 2006 there were $5.2 million of standby letters of credit issued against the Commerce Facility and borrowings having an aggregate outstanding balance of $7.0 million. The remaining availability of the letter of credit portion of the Commerce Facility at June 30, 2006 was $2.3 million or $2.8 million on the borrowing portion including the unused letter of credit portion. The Company was not in compliance with the Commerce Facility covenants at June 30, 2006 and received a waiver from Commerce for its deficiency.

2. LONG TERM DEBT (continued)

4% from October 2005 through March 2006, 6% from April 2006 through March 2008, and 9% from April 2008 through March 2009. The note payable to KINA is guaranteed by CRH, RIHC and RIH, provided, however that the guarantee of RIHC and RIH does not become effective until either the First Mortgage Notes have been paid in full or the fixed charge coverage ratio of RIHC is at least 2.0 to 1.0. In addition, the amount guaranteed is initially limited to $20 million increasing by $5 million each year. The KINA Note contains cross-default provisions whereby the acceleration of the scheduled maturity of the First Mortgage Notes constitutes an event of default under the KINA Note.

3. REDEEMABLE COMMON STOCK

The proceeds from the sale of 1,915 shares of Class A Common Stock and 38,750 shares of Class B Common Stock have been classified separately from shareholders’ equity as “Redeemable Common Stock” in the balance sheet to reflect the rights granted to a shareholder to require CRH to repurchase his shares under certain circumstances.

4. INCOME TAXES

The provision for income taxes for the three and six months ended June 30, 2006 is different than the amount computed at the United States statutory rate due to certain non-deductible items and state income taxes, which are calculated under an alternative minimum assessment of a percentage of gross revenues.

On June 30, 2003, the State of New Jersey amended the New Jersey Casino Control Act, effective July 1, 2003, to impose or increase certain taxes and fees, including a tax at the rate of 7.5% on the adjusted net income of casino licensees in calendar year 2002, payable in the state’s fiscal years 2005 through 2006. This tax expired June 30, 2006, the state’s fiscal year-end. The amount of this tax for each licensee is limited to a maximum of $10.0 million annually and a minimum of $175,000 and $350,000 for the years 2006 and 2005, respectively. In connection with this tax, the Company recorded provisions for income taxes of $87,000 and $175,000, respectively, in each of the three and six month periods ended June 30, 2006.

On July 3, 2002, the State of New Jersey passed the New Jersey Business Tax Reform Act which, among other things, requires the suspension of the use of the New Jersey net operating loss carryforwards through 2006 and the introduction of a new alternative minimum assessment (“NJAMA”) under the New Jersey corporate business tax based on gross receipts or gross profits, as defined. The Tax Act was retroactive to January 1, 2002 and expires at December 31, 2007. Since amounts paid under the alternative minimum assessment have an unlimited expiration date to offset state taxable income upon suspension of the NJAMA, the Company has a tax credit recorded on the balance sheet at June 30, 2006 for the cumulative amount of the future tax credits related to payments under the NJAMA since the inception of the NJAMA.

5. STOCK OPTIONS

Under the Colony RIH Holdings, Inc. 2001 Omnibus Stock Incentive Plan (the “Plan”), awards denominated or payable in shares or options to purchase shares of CRH’s common stock may be granted to officers and other key employees and consultants of CRH and its subsidiaries. The Plan permits the granting of up to 2,131 shares of Class A Common Stock and 43,122 shares of Class B Common Stock. The Board of Directors has sole discretion concerning administration of the Plan, including the determination of award goals, individuals to receive awards, types of awards, the terms and conditions of awards, and the time at which awards will be granted. The Board of Directors may terminate the Plan at any time. The exercise price in each instance is 100% of the estimated fair market value of CRH’s stock on the date of the grant.

Except for 555 Class A options and 11,188 Class B options which were granted to an independent contractor in 2001 and were immediately vested, the options have various vesting periods ranging from three to five years. As of June 30, 2006, 1,259 Class A options had been granted and were outstanding, of which 1,228 options have vested and are fully exercisable. Also as of June 30, 2006, 25,480 Class B options had been granted and were outstanding, of which 24,858 options have vested and are fully exercisable.

6. RELATED PARTY TRANSACTIONS

As of June 30, 2006 and December 31, 2005, the Company owed affiliates approximately $1.6 million and $3.1 million, respectively, for fees and expenses incurred by affiliates of Colony Capital, the Company’s principal shareholder.

In June 2004, RIHC and RIH entered into agreements with Colony Resorts LVH Acquisitions, LLC (“LVH”) which owns and operates the Las Vegas Hilton. Under the terms of the agreements, if either company incurs costs in excess of its direct share or any expenses which are directly allocable to or incurred on behalf of the other company, such excess costs will be reimbursed. In April 2005, this agreement was amended to include Resorts International Holdings, LLC (“RIH LLC”), which owns and operates Resorts East Chicago, Resorts Tunica, Bally’s Tunica, and Atlantic City Hilton.

The charges pursuant to the agreements are discretionary in nature and are agreed to by the parties to the agreements. During the six months ended June 30, 2006, the Company charged to its affiliates $2.8 million as a result of these agreements and had a receivable due from affiliates of $7.0 million at June 30, 2006. Additionally, during the six months ended June 30, 2006, the Company incurred charges of $8.8 million from its affiliates as a result of these agreements. These charges from affiliates include charges in the amount of $5.2 million for medical and other insurance costs related to employees of the Company under a self-insured program managed by an affiliate. At June 30, 2006, the Company owed $8.6 million to its affiliates. The operating results of the Company could be different if the Company operated autonomously and without these transactions with its affiliates.

RESORTS INTERNATIONAL HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands)


	June 30, 2006			December 31, 2005
Assets
Current assets
Cash and cash equivalents	$	18,646		$	25,280
Receivables, net		7,443			6,607
Inventories		2,639			2,467
Prepaid expenses and other current assets		10,820			3,137

Total current assets		39,548			37,491

Property and equipment, net		253,636			256,696
Other assets		17,761			18,319

Total assets	$	310,945		$	312,506

Liabilities and Shareholder’s Equity
Current liabilities
Current maturities of long-term debt	$	12,740		$	5,617
Accounts payable		18,297			8,010
Accrued interest payable		6,146			6,050
Accrued expenses and other current liabilities		21,456			23,659
Due to affiliates		1,640			3,107

Total current liabilities		60,279			46,443

Long-term debt, less current portion		191,662			194,224

Total liabilities		251,941			240,667

Shareholder’s equity
Common stock - $0.01 par value, 10,000 shares authorized, 100 shares issued and outstanding		—			—
Capital in excess of par		77,673			77,673
Accumulated deficit		(18,669	)		(5,834	)

Total shareholder’s equity		59,004			71,839

Total liabilities and shareholder’s equity	$	310,945		$	312,506

See accompanying notes

RESORTS INTERNATIONAL HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands)


	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
Revenues:
Casino	$	69,438		$	67,290		$	133,879		$	128,547
Lodging		5,320			5,837			10,480			10,395
Food and beverage		7,856			5,936			15,189			10,806
Other		1,404			1,111			2,893			2,468
Less: promotional allowances		(20,354	)		(17,579	)		(40,498	)		(33,277	)

Total net revenue		63,664			62,595			121,943			118,939

Costs and expenses:
Casino		32,082			31,508			63,784			61,892
Lodging		895			855			1,587			1,423
Food and beverage		3,470			2,538			6,277			4,345
Other operating		1,033			949			1,774			1,587
Selling, general, and administrative		19,885			13,815			38,355			30,722
Depreciation and amortization		5,715			4,795			10,872			9,489

Total costs and expenses		63,080			54,460			122,649			109,458

Income (loss) from operations		584			8,135			(706	)		9,481

Interest income		168			138			366			275
Interest expense		(6,205	)		(6,091	)		(12,319	)		(12,001	)
Other (expense) income, net		(1	)		7			(1	)		28

(Loss) income before income taxes		(5,454	)		2,189			(12,660	)		(2,217	)

Provision (benefit) for income taxes		88			1,030			175			(207	)

Net (loss) income	$	(5,542	)	$	1,159		$	(12,835	)	$	(2,010	)

See accompanying notes

RESORTS INTERNATIONAL HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)


	Six months ended June 30,
	2006			2005
Cash Flows from Operating Activities:
Net loss	$	(12,835	)	$	(2,010	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		10,375			9,088
Amortization of debt premiums, discounts and issuance costs		992			893
Provision for doubtful receivables		95			108
Loss/(gain) on disposal of fixed assets		6			(28	)
Provision for discount on CRDA obligations, net of amortization		497			401
Deferred income tax		—			(572	)
Changes in operating assets and liabilities:
Net decrease in due to affiliates		(1,467	)		(2,472	)
Net increase in receivables		(931	)		(936	)
Net increase in inventories, prepaid expenses and other current assets		(7,855	)		(1,109	)
Net decrease in deferred charges and other assets		364			648
Net increase in accounts payable and accrued expense		7,986			2,778
Net increase in interest payable		96			6

Net cash (used in) provided by operating activities		(2,677	)		6,795

Cash Flows from Investing Activities:
Releases of cash and cash equivalents - restricted		—			398
Proceeds from sale of fixed assets		77			28
Purchase of property and equipment		(6,664	)		(11,862	)
CRDA deposits		(1,622	)		(1,478	)

Net cash used in investing activities		(8,209	)		(12,914	)

Cash Flows from Financing Activities:
Proceeds of borrowings		7,000			5,000
Payments to secure borrowings					(52	)
Debt repayments		(2,748	)		(6,419	)

Net cash provided by (used in) financing activities		4,252			(1,471	)

Net decrease in cash and cash equivalents		(6,634	)		(7,590	)
Cash and cash equivalents at beginning of period		25,280			31,512

Cash and cash equivalents at end of period	$	18,646		$	23,922

Supplemental Cash Flow Disclosures:
Cash paid during the period for:

Interest	$	11,231		$	11,102
Income taxes paid, net	$	935		$	(709	)
Non-cash investment and financing transactions:
Obligations incurred for the purchase of property and equipment	$	—		$	1,404

See accompanying notes.

RESORTS INTERNATIONAL HOTEL AND CASINO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

RIHC, Kerzner International North America, Inc., a Delaware corporation (“KINA”), formerly Sun International North America, Inc., and GGRI, Inc., a Delaware corporation (“GGRI”), entered into a purchase agreement, dated October 30, 2000, as amended (the “Purchase Agreement”). Pursuant to the Purchase Agreement, RIHC acquired all of the capital stock of RIH, the Warehouse Assets (as defined in the Purchase Agreement) and all of the capital stock of New Pier Operating Company, Inc. (“New Pier”), a New Jersey corporation (collectively, the “Acquisition”) on April 25, 2001 for approximately $144.8 million.

The condensed consolidated financial statements include the accounts of RIHC and its wholly owned subsidiary. All significant inter-company accounts and transactions have been eliminated.

As discussed in Note 2, absent the amendments to the Commerce Facility and the CIT Facility, the Company would not have been in compliance with financial covenants contained in its CIT Facility and Commerce Facility as of December 31, 2005. Management has also renegotiated the financial covenants with CIT and Commerce for periods subsequent to December 31, 2005. The Commerce Facility expires on August 31, 2006. Also, as discussed in Note 2, the Company was not in compliance with financial covenants contained in its CIT Facility and Commerce Facility as of June 30, 2006 and received waivers from CIT and Commerce for the deficiencies. The Company had a working capital deficit of $20.7 million at June 30, 2006. Management believes, based on the information currently available, that the results of its operations may not allow the Company to meet these financial covenants in the future unless the financial covenants are amended.. Therefore, the Company continues to explore a number of alternatives, including refinancing and/or restructuring some or all long term debt and the related financial covenants. However, there can be no assurances that the Company will be successful in this regard.

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial statements for these interim periods have been included. The results set forth in the condensed consolidated statement of operations for the three months ended June 30, 2006 are not necessarily indicative of the results to be expected for the full year.

For further information, refer to the consolidated financial statements and notes thereto included in RIHC’s annual report on Form 10-K for the year ended December 31, 2005.

Certain prior year balances have been reclassified to conform to the current year’s presentation.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

New Accounting Pronouncement

In December 2004, the FASB issued Financial Accounting Standards Board Statement No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which requires stock-based employee compensation to be measured based on the grant-date fair value of the award and the cost to be recognized over the period during which an employee is required to provide service in exchange for the award. SFAS 123(R) eliminates the alternative use of APB No. 25’s intrinsic value method of accounting for stock options granted to employees.

The Company adopted SFAS 123(R) on January 1, 2006 and the effect of adoption was not material.

2. LONG TERM DEBT

2. LONG TERM DEBT (continued)

During 2004, RREH purchased from KINA approximately 8.0 acres of land adjacent to and nearby the Resorts site. The land was acquired in exchange for the issuance of a $40 million note by RREH to KINA. This $40 million note will mature immediately following the maturity, acceleration or refinancing (other than permitted refinancing) of the First Mortgage Notes, which are due March 15, 2009. Interest on the $40 million note is payable semi-annually and is calculated at the following annual rates: 0% through September 2005, 4% from October 2005 through March 2006, 6% from April 2006 through March 2008, and 9% from April 2008 through March 2009. The note payable to KINA is guaranteed by CRH, RIHC and RIH, provided, however, that the guarantee of RIHC and RIH does not become effective until either the First Mortgage Notes have been paid in full or the fixed charge coverage ratio of RIHC is at least 2.0 to 1.0. In addition, the amount guaranteed is initially limited to $20 million increasing by $5 million each year. The KINA Note contains cross-default provisions whereby the acceleration of the scheduled maturity of the First Mortgage Notes constitutes an event of default under the KINA Note.

3. INCOME TAXES

The provision for income taxes for the six months ended June 30, 2006 is different than the amount computed at the United States statutory rate due to certain non-deductible items and state income taxes, which are calculated under an alternative minimum assessment of a percentage of gross revenues.

On June 30, 2003, the State of New Jersey amended the New Jersey Casino Control Act, effective July 1, 2003, to impose or increase certain taxes and fees, including a tax at the rate of 7.5% on the adjusted net income of casino licensees in calendar year 2002, payable in the state’s fiscal years 2005 through 2006. This tax expired June 30, 2006, the state’s fiscal year-end. The amount of this tax for each licensee is limited to a maximum of $10.0 million annually and a minimum of $175,000 and $350,000 for the years 2006 and 2005, respectively. In connection with this tax, the Company recorded provisions for income taxes of $88,000 and $175,000, respectively, in each of the three and six month periods ended June 30, 2006 and 2005.

On July 3, 2002, the State of New Jersey passed the New Jersey Business Tax Reform Act which, among other things, requires the suspension of the use of the New Jersey net operating loss carry forwards through 2006 and the introduction of a new alternative minimum assessment (“NJAMA”) under the New Jersey corporate business tax based on gross receipts or gross profits, as defined. The Tax Act was retroactive to January 1, 2002 and expires at December 31, 2007. Since amounts paid under the alternative minimum assessment have an unlimited expiration date to offset state taxable income upon suspension of the NJAMA, the Company has a tax credit recorded on the balance sheet at June 30, 2006 for the cumulative amount of the future tax credits related to payments under the NJAMA since the inception of the NJAMA.

4. STOCK OPTIONS

4. STOCK OPTIONS (continued)

5. RELATED PARTY TRANSACTIONS

In June 2004, RIHC and RIH entered into agreements with Colony Resorts LVH Acquisitions, LLC (“LVH”), which owns and operates the Las Vegas Hilton. Under the terms of the agreements, if either company incurs costs in excess of its direct share or any expenses which are directly allocable to or incurred on behalf of the other company, such excess costs will be reimbursed. In April 2005, this agreement was amended to include Resorts International Holdings, LLC (“RIH LLC”), which owns and operates Resorts East Chicago, Resorts Tunica, Bally’s Tunica, and Atlantic City Hilton.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis of the Company’s financial condition and results of operations are based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management’s estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The following discussion and analysis as well as the associated tables are based on the financial statements of RIHC. The financial statements of CRH and RIHC are materially similar with certain differences related to the following:

•

the financial statements of CRH include the financial statements of RREH, which acquired the Option Land on March 18, 2004 and issued a $40 million note to KINA in payment thereof; and

•

the financial statements of CRH classify certain equity instruments separately from shareholders’ equity as redeemable common stock in the balance sheet to reflect the rights granted to a shareholder to require CRH to repurchase his shares under certain circumstances.

•

the financial statements of RIHC include intercompany rent for the Option Land properties that RIHC pays to RREH. The intercompany rent is eliminated in the consolidations of RIHC and RREH into CRH’s financial statements.

A reconciliation of selected financial information between RIHC and CRH is as follows:

Assets


	June 30, 2006		December 31, 2005
	($ in thousands)
Total assets of RIHC	$	310,945	$	312,506
Basis of Option Land acquired		41,458		41,458
Other assets of RREH		901		244

Total assets of CRH	$	353,304	$	354,208

Liabilities


	June 30, 2006		December 31, 2005
	($ in thousands)
Total liabilities of RIHC	$	251,941	$	240,667
Note payable, plus accrued interest		40,666		40,468
Other accrued expenses		801		451
Redeemable common stock		3,875		3,875

Total liabilities of CRH	$	297,283	$	285,461

Equity


	June 30, 2006			December 31, 2005
	($ in thousands)
Total shareholder’s equity of RIHC	$	59,004		$	71,839
Redeemable common stock		(3,875	)		(3,875	)
Intercompany rent		4,410			3,312
Interest expense		(3,157	)		(2,168	)
Income tax expense		(361	)		(361	)

Total shareholders’ equity of CRH	$	56,021		$	68,747

Net Loss


	Six months ended June 30,
	2006			2005
	($ in thousands)
Net loss of RIHC	$	(12,835	)	$	(2,010	)
Intercompany rent		1,098			925
Interest expense		(989	)		(800	)
Income tax expense		—

Net loss of CRH	$	(12,726	)	$	(1,885	)

Executive Overview

CRH was formed at the direction of Colony Investors IV, L.P. (“Colony IV”), an affiliate of Colony Capital, LLC (“Colony Capital”) of Los Angeles, California, on March 7, 2001. CRH is owned by Colony IV, Colony RIH Voteco, LLC (“Voteco”), another affiliate of Colony Capital, and Nicholas L. Ribis, a director and executive officer of CRH, RIHC and RREH. RIHC and RREH are wholly-owned subsidiaries of CRH and were formed at the direction of Colony IV on October 24, 2000 and April 1, 2003, respectively. RIH is RIHC’s wholly-owned subsidiary. RIH owns and operates Resorts Atlantic City, a casino hotel in Atlantic City.

In December 2004, the FASB issued Financial Accounting Standards Board Statement No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which requires stock-based employee compensation to be measured based on the grant-date fair value of the award and the cost to be recognized over the period during which an employee is required to provide service in exchange for the award. SFAS 123(R) eliminates the alternative use of APB No. 25’s intrinsic value method of accounting for stock options granted to employees. The Company adopted SFAS 123(R) on January 1, 2006 and the effect of adoption was not material.

Key Performance Indicators

RIHC generates the majority of its net revenues from gaming operations, therefore many of the key performance indicators that management uses to manage its business are related to the casino. The key indicators related to gaming revenue are as follows:

•

Table games drop (the dollar amount of chips purchased) and slot handle (the dollar amounts wagered in slot machines), which are indicators of volume;

•

The hold percentage (the percentage of win to drop or handle); Resorts typical table games hold percentage is in the 15% range and its typical slot hold percentage is in the 8% range.

Key performance indicators related to non-gaming revenues include hotel occupancy, an indicator of volume in the hotel, and restaurant covers (number of meals served), also a volume indicator.

RIHC also considers “EBITDA” to be a key indicator of its performance. EBITDA, as further defined in the First Mortgage Notes indenture (the “Indenture”), represents RIHC’s earnings before interest expense, taxes, depreciation and amortization costs, pre-opening costs incurred in connection with the New Tower, and other non-cash items. Management believes that EBITDA is a commonly used measure of performance in the gaming industry, and uses it as the primary measurement in evaluating management’s operating performance. EBITDA should not be considered as an alternative to operating income (as determined in accordance with generally accepted accounting principles, or “GAAP”) as an indicator of operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity, or to other consolidated income or cash flow statement data, as are determined in accordance with GAAP. Not all companies calculate EBITDA in the same manner. The following table reflects a reconciliation of EBITDA, as defined in the Indenture, to net income as determined in accordance with GAAP for the periods noted:


	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
	($ in thousands)
Net (loss) income	$	(5,542	)	$	1,159		$	(12,835	)	$	(2,010	)
Add: Interest expense		6,205			6,091			12,319			12,001
Provision (benefit) for income taxes		88			1,030			175			(207	)
Depreciation and amortization		5,715			4,795			10,872			9,489
Other non-operating expense (income)		1			(7	)		1			(28	)

EBITDA	$	6,467		$	13,068		$	10,532		$	19,245

Operating Results

Various events have had a significant impact on Resorts’ operations over the last two years. The most notable of these are as follows:

•

Continued construction on the retail corridor which connects the new lobby with the Ocean Tower and which opened in January 2006.

•

Certain regional and national events, including increased energy costs, interest rates, and general economic conditions.

•

Increased costs in the areas of property insurance premiums and medical insurance and benefits expenses.

Revenues

The following table presents the detail of RIHC’s net revenues for the periods noted:


	Three months ended June 30,								Six months ended June 30,
	2006			% change		2005			2006			% change		2005
	($ in thousands)
Casino revenues:
Slots	$	51,738		3.4	%	$	50,033		$	100,525		6.9	%	$	94,077
Table games		17,146		2.4	%		16,749			32,276		(4.6	)%		33,844
Other		554		9.1	%		508			1,078		72.2	%		626

Total casino revenues		69,438		3.2	%		67,290			133,879		4.1	%		128,547

Non-casino revenue:
Lodging		5,320		(8.9	)%		5,837			10,480		0.8	%		10,395
Food and beverage		7,856		32.3	%		5,936			15,189		40.6	%		10,806
Entertainment, retail and other		1,404		26.4	%		1,111			2,893		17.2	%		2,468

Total non-casino revenues		14,580		13.2	%		12,884			28,562		20.7	%		23,669

Less: promotional allowances		(20,354	)	15.8	%		(17,579	)		(40,498	)	21.7	%		(33,277	)

Total net revenues	$	63,664		1.7	%	$	62,595		$	121,943		2.5	%	$	118,939

Three months ended June 30, 2006 and 2005

The increase in slot revenues for the three months ended June 30, 2006 was due to a 0.3 percentage point increase in slot hold percentage to 8.6% from 8.3% for the same period of 2005, partially offset by a slot handle decrease to $609.8 million from $612.2 in the same period of 2005. The increase in slot hold percentage was a direct result of the increased popularity of lower denomination slots that generally have a higher hold percentage.

The increase in table games revenues for the three months ended June 30, 2006 was due to a 1.0 percentage point increase in table hold percentage to 14.9% for the three months ended June 30, 2006 from 13.9% in 2005, partially offset by a table games drop decrease to $114.5 million from $120.2 in same period of 2005. The 2006 table game hold percentage is more representative of average results than the lower than normal hold percentage of 2005. The decrease in table game drop is primarily due to an increase in the number of table games in the Atlantic City market.

The decrease in lodging revenues for the three months ended June 30, 2006 was due to a lower average room rate in 2006. The number of rooms occupied during the three months ended June 30, 2006 increased 7.0% over 2005 levels, while the average daily room rate decreased to $75.28 in 2006 from $88.33 in 2005.

The increase in food and beverage revenues in 2006 was due to an increase in the total number of restaurant covers (meals served) by 23.6% to 380,305 in 2006 from 307,616 in 2005, primarily due to the buffet being open daily in 2006 versus on weekends only for the second quarter of 2005 and marketing programs in 2006 that included coupons for the buffet for certain customer segments to attract increased volume and visits. Also contributing to the increase in beverage revenues was the recognition of complimentary casino beverages to conform to industry practice, which had no impact on net revenues.

The increase in entertainment, retail, and other revenue in 2006 was primarily due to higher entertainment revenues as a result of increased headliner entertainment scheduled to promote mid-week business and select weekends.

Promotional allowances are expenses incurred by Resorts for complimentary services (goods and services, including rooms, food, beverage and admission, provided free of charge to gaming patrons) and cash incentives given to gaming patrons. The increase in promotional allowances was primarily due to increases in casino beverage, direct mail cash promotions, food and beverage coupons and entertainment complimentaries.

Six months ended June 30, 2006 and 2005

The increase in slot revenues for the six months ended June 30, 2006 was due to a $32 million increase in slot handle to $1,201 million from $1,169 million for the same period of 2005. The increase in slot handle was due to the addition of new themed slot machines and improved slot technologies, including “coinless” slots as well as increased cash incentives.

The decrease in table games revenues for the six months ended June 30, 2006 was due to a 0.6 percentage point decrease in table hold percentage to 14.5% for the six months ended June 30, 2006 from 15.1% in 2005, while table drop was flat year to year. The decrease in table hold percentage was due to increased play in baccarat which typically has a lower hold percentage than the overall table game average.

The increase in lodging revenues in 2006 was a result of the increase in the number of occupied hotel rooms by 12.0% over prior year levels, which was offset by the decreased average daily room rate in 2006 to $79.78, from $88.64 in 2005.

The increase in food and beverage revenues in 2006 was due to an increase in the total number of restaurant covers (meals served) by 31.5% to 729,984 in 2006 from 555,068 in 2005, primarily due to the buffet having limited hours of operation for most of the first half of 2005 and marketing programs in 2006 that included coupons for the buffet for certain customer segments to attract increased volume and visits. Also contributing to the increase in beverage revenues was the recognition of complimentary casino beverages to conform to industry practice, which had no impact on net revenues.

Promotional allowances are expenses incurred by Resorts for complimentary services (goods and services, including rooms, food, beverage and admission, provided free of charge to gaming patrons) and cash incentives given to gaming patrons. The increase in promotional allowances was primarily due to an increase in cash incentives of approximately $3.2 million, casino beverage of approximately $2.8 million and food and beverage coupons of approximately $1.7 million, which are a direct result of marketing programs and increased gaming volumes.

Operating Results

The following table presents the detail of RIHC’s operating results for the periods noted:


	Three months ended June 30,						Six months ended June 30,
	2006		% change		2005		2006			% change		2005
	($ in thousands)
Total net revenues	$	63,664	1.71	%	$	62,595	$	121,943		2.53	%	$	118,939
Costs and expenses:
Casino and hotel operations		37,480	4.55	%		35,850		73,422		6.03	%		69,247
Selling, general and administrative		19,885	43.94	%		13,815		38,355		24.85	%		30,722
Depreciation and amortization		5,715	19.19	%		4,795		10,872		14.57	%		9,489

Total costs and expenses		63,080	15.83	%		54,460		122,649		12.05	%		109,458

Income (loss) from operations	$	584	(92.82	)%	$	8,135	$	(706	)	(107.45	)%	$	9,481

Three months ended June 30, 2006 and 2005

The increase in Casino and Hotel operations expense is primarily due to increased costs in the food and beverage operations of approximately $932,000. Food and beverage costs increased due to increased customer volumes, which directly impacted cost of sales ($700,000), payroll and related costs ($184,000) and operating supplies ($104,000). Casino costs increased approximately $574,000 primarily due to increased air charters ($333,000) as a result of increased flights and fuel costs and increased gaming equipment rental ($213,000) resulting from more rented slot units. Other operating costs were negatively impacted due to increased production costs ($140,000) associated with a review show that was originally scheduled to run through the summer but closed in May due to poor attendance.

The increase in selling, general and administrative expenses in 2006 was approximately $6.1 million and resulted from increased payroll and related costs ($4.0 million) primarily due to a prior year allocation of executive salaries to affiliates involved in the acquisition of gaming properties on behalf of CRH affiliates ($1.7 million), increased health care benefits ($613,000), adjustments to retirement benefits expense ($698,000) and union benefits ($900,000), which expenses were accrued in the second quarter 2006 but whose comparable prior year expense was not calculable until the third quarter 2005. Also contributing to the increased selling, general and administrative expenses were increased insurance costs ($610,000) primarily due to increased premiums in the insurance market since the hurricane disasters of 2005, increased professional services ($501,000) for increased legal, consulting and accounting services, and increased regulatory fees ($495,000).

The increase in depreciation and amortization expense for 2006 was due to continued investment in slot machines and information technology as well as the retail corridor connector improvements.

Six months ended June 30, 2006 and 2005

The increase in Casino and Hotel operations expense is primarily due to increased costs in the casino operation of approximately $1.9 million and in the food and beverage operations of approximately $1.9 million. Casino costs increased primarily due to increased payroll and related costs ($735,000) as a result of increased health care and retirement benefits, increased gaming taxes ($408,000) directly related to the increase in gaming revenues, increased air charters ($351,000) as a result of increased flights and fuel costs and increased gaming equipment rental ($328,000) resulting from more rented slot units. Food and beverage costs increased due to increased customer volumes, which directly impacted cost of sales ($1.5 million) and payroll and related costs ($917,000). Lodging costs increased approximately $165,000 primarily due to increased labor and supplies as a result of the increased occupancy. Other operating costs were negatively impacted due to increased production costs ($140,000) associated with a review show that was originally scheduled to run through the summer but closed in May due to poor attendance.

The increase in selling, general and administrative expenses in 2006 was approximately $7.6 million and resulted from increased payroll and related costs ($4.9 million) primarily due to a prior year allocation of executive salaries to affiliates involved in the acquisition of gaming properties on behalf of CRH affiliates ($1.7 million), increased health care costs ($608,000), retirement benefits ($679,000) and union benefits ($1.1 million) of which $900,000 in expenses were accrued in the second quarter 2006 but whose comparable prior year expense was not calculable until the third quarter 2005. Also contributing to the increased selling, general and administrative expenses were increased insurance costs ($720,000) primarily due to increased premiums in the insurance market for casinos since the hurricane disasters on the gulf coast in 2005, increased utilities costs ($513,000) primarily due to the increase in energy rates, increased professional services ($419,000) for legal, consulting and accounting services, and increased regulatory fees ($401,000).

The increase in depreciation and amortization expense for 2006 was due to continued investment in slot machines and information technology as well as the retail corridor connector improvements

Non-Operating Results

The following table presents information related to RIHC’s non-operating income and expenses for the periods noted:


	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
	($ in thousands)
Interest income	$	168		$	138		$	366		$	275
Interest expense	$	(6,205	)	$	(6,091	)	$	(12,319	)	$	(12,001	)
Other (expense) income, net	$	(1	)	$	7		$	(1	)	$	28

The increase in interest income in 2006 is related to the increase in Resorts’ interest yielding cash balances year-to-year, as well as a slight increase in interest rates compared to the prior year.

The increase in total interest cost in 2006 is due to increased borrowings on the Commerce Facility and increased interest rates under the equipment credit facility.

Income Taxes

The following table presents information related to RIHC’s income tax expense for the periods noted:


	Three months ended June 30,				Six months ended June 30,
	2006		2005		2006		2005
	($ in thousands)
Federal income tax expense (benefit)	$	—		942	$	—	$	(382	)
NJ Casino net profits tax		88		88		175		175

Total income tax expense (benefit)	$	88	$	1,030	$	175	$	(207	)

On June 30, 2003, the State of New Jersey amended the New Jersey Casino Control Act, effective July 1, 2003, to impose or increase certain taxes and fees, including a tax at the rate of 7.5% on the adjusted net income of casino licensees in calendar year 2002, payable in the state’s fiscal years 2005 through 2006. This tax expired June 30, 2006, the state’s fiscal year-end. The amount of this tax for each licensee is limited to a maximum of $10.0 million annually and a minimum of $175,000 and $350,000 for the years 2006 and 2005, respectively. In connection with this tax, the Company recorded provisions for income taxes of $88,000 and $175,000, respectively, in each of the three and six month periods ended June 30, 2006 and 2005.

Liquidity and Capital Resources

RIHC’s cash flows consisted of the following:


	Six months ended June 30,
	2006			2005
	($ in thousands)
Net cash (used in) provided by operating activities	$	(2,677	)	$	6,795

Cash flows from investing activities:
Purchases of property and equipment		(6,664	)		(11,862	)
Releases of restricted cash		—			398
Proceeds from sale of fixed assets		77			28
CRDA deposits, net		(1,622	)		(1,478	)

Net cash used in investing activities		(8,209	)		(12,914	)

Cash flows from financing activities:
Proceeds of borrowings		7,000			5,000
Debt repayments		(2,748	)		(6,419	)
Other		—			(52	)

Net cash provided by (used in) financing activities		4,252			(1,471	)

Net decrease in cash and cash equivalents	$	(6,634	)	$	(7,590	)

Cash flows from Operating Activities

Net cash used in operations for the first quarter of 2006 reflects an unfavorable variance from the same period of 2005 primarily due to unfavorable operating results related to increased property insurance premiums since the hurricane disasters of 2005, continuing increased energy costs and increased affiliate charges related to shared medical insurance and benefits costs.

At June 30, 2006, RIHC has cash and cash equivalents of $18.6 million as compared to $25.3 million at December 31, 2005. Included in these balances at June 30, 2006 and December 31, 2005 is approximately $15.0 million and $18.0 million, respectively, representing cash on hand, which is needed to operate the business.

Cash Flows from Investing Activities

During the six months ended June 30, 2006, the Company expended $6.7 million for the purchase of property and equipment, which includes the purchase of new slot machines and related equipment, computer upgrades, and other facility improvements.

The CRDA agreed to reimburse certain costs associated with the hotel tower construction, totaling approximately $13.1 million through 2008. Approximately $10.0 million of these reimbursements has been received by RIHC as of June 30, 2006.

Cash Flows from Financing Activities

During the six months ended June 30, 2006, RIHC borrowed $7.0 million against the Commerce Facility, which was the balance due as of June 30, 2006. Debt repayments during the first half of 2006 primarily represent payments to CIT on loans outstanding under the equipment credit facility.

Other Factors Affecting Liquidity

In November 2002, RIH entered into a Loan and Security Agreement with Commerce Bank, N.A. (“Commerce Facility”). The Commerce Facility agreement was amended in June 2006 to provide for working capital borrowings and letters of credit up to $15 million. The letter of credit portion of the Commerce Facility allows for a maximum of $7.5 million. However, if the maximum amount for the letters of credit is not used, the unused letter of credit portion is available for borrowings up to a maximum of $10.0 million. The Commerce Facility expires on August 31, 2006. As of June 30, 2006 there were $5.2 million of standby letters of credit issued against the Commerce Facility and borrowings having an aggregate outstanding balance of $7.0 million. The remaining availability of the letter of credit portion of the Commerce Facility at June 30, 2006 was $2.3 million or $2.8 million on the borrowing portion including the unused letter of credit portion. The Company was not in compliance with the Commerce Facility covenants at June 30, 2006 and received a waiver from Commerce for its deficiency.

As discussed in Note 2, absent the amendments to the Commerce Facility and the CIT Facility, the Company would not have been in compliance with financial covenants contained in its CIT Facility and Commerce Facility as of December 31, 2005. Management has also renegotiated the financial covenants with CIT and Commerce for periods subsequent to December 31, 2005. The Commerce Facility expires on August 31, 2006. Also, as discussed in Note 2, the Company was not in compliance with financial covenants contained in its CIT Facility and Commerce Facility as of June 30, 2006 and received waivers from CIT and Commerce for the deficiencies. The Company had a working capital deficit of $20.7 million at June 30, 2006. Management believes, based on the information currently available, that the results of its operations will not allow the Company to meet these financial covenants in the future unless the financial covenants are amended. Therefore, the Company continues to explore a number of alternatives, including refinancing and/or restructuring some or all long term debt and the related financial covenants. However, there can be no assurances that the Company will be successful in this regard.

The charges pursuant to the agreements are discretionary in nature and are agreed to by the parties to the agreements. During the six months ended June 30, 2006, the Company charged to its affiliates $2.8 million as a result of these agreements and had a receivable due from affiliates of $7.0 million at June 30, 2006. Additionally, during the six months ended June 30, 2006, the Company incurred charges of $8.8 million from its affiliates as a result of these agreements. These charges from affiliates include charges for medical and other insurance costs related to employees of the Company under a self-insured program managed by an affiliate which was $5.2 million. At June 30, 2006, the Company owed $8.6 million to its affiliates. The operating results of the Company could be different if the Company operated autonomously and without these transactions with its affiliates.

During 2004, RREH purchased from KINA approximately 8.0 acres of land adjacent to and nearby the Resorts site. The land was acquired in exchange for the issuance of a $40 million note by RREH to KINA. This $40 million note will mature immediately following the maturity, acceleration or refinancing (other than permitted refinancing) of the First Mortgage Notes which are due March 15, 2009. Interest on the $40 million note is payable semi-annually, and is calculated at the following annual rates: 0% through September 2005, 4% from October 2005 through March 2006, 6% from April 2006 through March 2008, and 9% from April 2008 through March 2009. The note payable to KINA is guaranteed by CRH, RIHC and RIH, provided, however that the guarantee of RIHC and RIH does not become effective until either the First Mortgage Notes have been paid in full or the fixed charge coverage ratio of RIHC is at least 2.0 to 1.0. In addition, the amount guaranteed is initially limited to $20 million increasing by $5 million each year. The KINA Note contains cross-default provisions whereby the acceleration of the scheduled maturity of the First Mortgage Notes constitutes an event of default under the KINA Note.

In conjunction with the option land purchase transaction, the Option Agreement between RIHC and KINA was terminated. With the termination of the Option Agreement, the lease agreement between KINA and RIH converted to a month-to-month fair market value lease. As part of the option land purchase transaction, the lease was amended to be a triple-net lease and was assigned by KINA to RREH. The amended agreement calls for the following payments: $1.3 million security deposit paid upon closing, offset against lease payments of $205,000 per month through September 2005; $135,833 per month from October 2005 through March 2006; $202,500 per month from April 2006 through March 2008; $302,500 per month from April 2008 through March 2009 and $402,500 per month thereafter. The lease agreement may be terminated by either party upon 30 days notice, with any security deposit remaining upon termination to be refunded to RIH.

During May 2006, RIHC renewed its general property insurance policies in the amount of approximately $7.4 million for the policy years ending April 2007 compared with approximately $1.8 million for policy years ended April 2006. Principal payments in the amount of approximately $2.4 million were made during June 2006 and a current liability was recorded for the balance of the general property insurance premiums due of approximately $5.0 million, including $140,000 in finance charges. The insurance premiums are due in equal monthly installments of $557,000 through March 2007. As of June 30, 2006 RIHC had recorded approximately $6.2 million in prepaid insurance and $1.2 million in insurance expense related to the general property insurance policies for the period of coverage May 2006 through April 2007. These increased premiums are prevalent throughout the insurance market for casino hotels since the hurricane disasters on the gulf coast in 2005.

In July 2006, due to a budget impasse in the New Jersey legislature, the governor of the State of New Jersey ordered a shutdown of non-essential state services, which included regulatory inspection of the Atlantic City casino industry. This mandatory shutdown resulted in the closing of casino operations for all Atlantic City casinos from essentially July 5^th through July 7^th. The three day shutdown of casino operations had a negative impact on the Company’s results of operations for July and also its liquidity.

Off Balance Sheet Arrangements

RIHC does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on RIHC’s financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

The Company has exposure to interest rate risk from its short-term and long-term debt. In general, the majority of the Company’s long-term debt bears a fixed interest rate. The Company believes that the market risk from changes in interest rates would not be material to the fair value of these financial instruments, or the related cash flows, or future results of operations of the Company.

ITEM 4. CONTROLS AND PROCEDURES.

Within the 90 day period prior to the filing of this report, the Companies’ management, including the Chief Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of the Companies’ disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in the periodic reports to be filed with the Securities and Exchange Commission is made known to them in a timely fashion. There have been no significant changes in internal controls or in factors that could significantly affect internal controls, subsequent to the date of this evaluation.

During the six months ended June 30, 2006, there were no changes in the Companies’ internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Companies’ internal controls over financial reporting.

CAUTIONARY STATEMENT FOR PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

This document includes various ‘forward-looking statements’ within the meaning of Section 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represent the Companies’ expectations or beliefs concerning future events. Statements containing expressions such as ‘believes’, ‘anticipates’, or ‘expects’ used in the Companies’ press releases and periodic reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission are intended to identify forward-looking statements. All forward-looking statements involve risks and uncertainties. Although the Companies believe their expectations are based upon reasonable assumptions within the bounds of their knowledge of their business and operations, there can be no assurances that actual results will not materially differ from expected results. The Companies caution that these and similar statements included in this report and in previously filed periodic reports, including reports filed on Forms 10-K and 10-Q, are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, without limitation, the following: increased competition in existing markets or the opening of new gaming jurisdictions; a decline in the public acceptance of gaming; the limitation, conditioning or suspension of any of the Companies’ gaming licenses; increases in or new taxes imposed on gaming revenues or gaming devices; a finding of unsuitability by regulatory authorities with respect to the Companies’ officers, directors or key employees; loss or retirement of key executives; significant increases in fuel or transportation prices; adverse economic conditions in the Companies’ key markets; severe and unusual weather in the Companies’ key markets; adverse results of significant litigation matters. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The Companies undertake no obligation to publicly release any revision to such forward-looking statements to reflect events or circumstances after the date thereof.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 1A. RISK FACTORS

None.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meetings of shareholders for CRH and RIHC were each held on May 16, 2006. The matters voted on at the meeting were: (1) to elect three directors for both CRH and RIHC to one-year terms until the 2007 Annual Meeting or until their successors are duly elected and qualified and (2) to ratify the appointment of Ernst & Young LLP as independent auditors of both CRH and RIHC for the fiscal year ending December 31, 2006.

Thomas J. Barrack, Jr., Nicholas L. Ribis, and Mark M. Hedstrom were elected as directors of CRH and RIHC until the 2007 Annual Meeting of Shareholders, with the following results of voting as follows:


	CRH		RIHC
	For	Withheld	For	Withheld
Thomas J. Barrack, Jr.	38,295	0	100	0
Nicholas L. Ribis	38,295	0	100	0
Mark M. Hedstrom	38,295	0	100	0

The appointment of Ernst & Young LLP as independent auditors of CRH and RIHC was ratified, with the results of voting as follows:


	CRH	RIHC
For	38,295	100
Against	0	0
Abstain	0	0

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

A. EXHIBITS


Exhibit Number		Exhibit
31.1		Certification of Anthony Rodio, President and Principal Executive Officer of CRH, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Anthony Rodio, President and Principal Executive Officer of RIHC, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.3		Certification of Francis X. McCarthy, Executive Vice President Finance/CFO and Principal Financial Officer of CRH, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.4		Certification of Francis X. McCarthy, Executive Vice President Finance/CFO and Principal Financial Officer of RIHC, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Anthony Rodio, President and Principal Executive Officer of CRH and RIHC, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Francis X. McCarthy, Executive Vice President Finance/CFO and Principal Financial Officer of CRH and RIHC, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

August 14, 2006


COLONY RIH HOLDINGS, INC.

By:		/s/ FRANCIS X. MCCARTHY
Name:		Francis X. McCarthy
Title:		Executive Vice President Finance/CFO (Duly Authorized Officer and Principal Financial Officer)

RESORTS INTERNATIONAL HOTEL AND CASINO, INC.

By:		/s/ FRANCIS X. MCCARTHY
Name:		Francis X. McCarthy
Title:		Executive Vice President Finance/CFO (Duly Authorized Officer and Principal Financial Officer)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

COLONY RIH HOLDINGS INC 10-Q