<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
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 00028230
--------------------
PLANET HOLLYWOOD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-3283783
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization) Identification No.)
7380 SAND LAKE ROAD, SUITE 600, ORLANDO, FLORIDA 32819
(Address of principal executive office, including zip code)
(407) 363-7827
(Registrant's telephone number, including area code)
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
----- -----
As of November 11, 1996, there were 95,972,565 shares of the registrant's
Common Stock outstanding.
================================================================================
<PAGE> 2
PLANET HOLLYWOOD INTERNATIONAL, INC.
INDEX
<TABLE>
<S> <C> <C>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 29, 1996 and December 31, 1995
Condensed Consolidated Statements of Operations -
Thirteen Weeks and Thirty-Nine Weeks ended September 29,
1996 and October 1, 1995
Condensed Consolidated Statements of Cash Flows -
Thirty-Nine Weeks ended September 29, 1996 and
October 1, 1995
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signature Page
</TABLE>
<PAGE> 3
Part I - Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
Stated in thousands of U.S. Dollars
<TABLE>
<CAPTION>
September 29, December 31,
1996 1995
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 63,342 $ 14,923
Accounts receivable 13,329 7,093
Inventories 15,431 12,769
Prepaid expenses 7,996 3,701
Other current assets 15,781 17,369
-------- --------
Total current assets 115,879 55,855
Property and equipment, net 222,404 169,997
Investment in affiliated entities 8,683 5,574
Other assets, net 28,927 8,759
-------- --------
$375,893 $240,185
======== ========
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 45,098 $ 39,619
Notes payable - current 173 708
-------- --------
Total current liabilities 45,271 40,327
Deferred rentals 10,041 6,502
Notes payable and other 4,323 51,995
Notes payable to shareholders - 70,750
Deferred credits 19,800 17,000
-------- --------
Total liabilities 79,435 186,574
-------- --------
Minority interests - 10,466
-------- --------
Redeemable warrants - 15,000
-------- --------
Shareholders' equity:
Common stock - Class A 942 801
Common stock - Class B 115 -
Capital in excess of par value 252,106 7,807
Deferred compensation (586) (770)
Retained earnings 44,228 20,727
Cumulative currency translation adjustment (347) (420)
-------- --------
Total shareholders' equity 296,458 28,145
-------- --------
$375,893 $240,185
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Stated in thousands of U.S. Dollars, except per share amounts
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------ ------------------------
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
1996 1995 1996 1995
------------------------ ------------------------
<S> <C> <C> <C> <C>
Revenues $111,840 $78,060 $274,231 $195,609
Costs and expenses:
Cost of sales 27,705 22,155 70,318 55,281
Operating expenses 44,492 32,755 114,340 81,595
General and administrative expenses 4,555 5,861 13,846 13,789
Depreciation and amortization 6,875 5,444 20,770 15,539
Equity in unconsolidated affiliates (1,603) (526) (3,008) (566)
------------------------ ------------------------
82,024 65,689 216,266 165,638
Income from operations 29,816 12,371 57,965 29,971
Other expenses:
Interest, net (783) 3,606 3,508 6,737
Gain on sale of subsidiary interests - (611) - (611)
Minority interests - 1,128 1,037 2,874
------------------------ ------------------------
Income before income taxes 30,599 8,248 53,420 20,971
Provision for income taxes 11,169 495 19,498 495
------------------------ ------------------------
Income before extraordinary item 19,430 7,753 33,922 20,476
Extraordinary item, net (A) - - 10,421 -
------------------------ ------------------------
Net income $19,430 $7,753 $23,501 $20,476
======================== ========================
Earnings per share:
Income before extraordinary item $0.18 $0.09 $0.34 $0.24
======================== ========================
Net income $0.18 $0.09 $0.23 $0.24
======================== ========================
Weighted average shares outstanding 110,317 86,814 100,625 86,814
======================== ========================
Supplemental pro forma earnings per share:
Earnings per share before extraordinary item $0.35
========
Earnings per share -- net income $0.25
========
Weighted average shares outstanding 104,460
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Stated in thousands of U.S. Dollars
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
--------------------------
Sept. 29, Oct. 1,
1996 1995
----------- ----------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 47,878 $ 26,555
Cash flows from investing activities:
Additions to property and equipment (56,647) (59,914)
Proceeds from sale of transportation equipment - 6,450
Investment in affiliated entities - (2,973)
Proceeds from sale of subsidiary interest - 900
Other (417) (182)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (57,064) (55,719)
--------- --------
Cash flows from financing activities:
Change in restricted cash and investments 610 (4,436)
Proceeds from issuance of senior subordinated notes - 60,000
Distributions to minority interests (271) (1,950)
Deferred financing costs - (3,750)
Proceeds from issuance of common stock 196,581 -
IPO costs and financing costs capitalized (3,810) -
Proceeds from notes and advances from shareholders 639 20,000
Proceeds from issuance of notes - 839
Repayment of shareholder notes payable (70,750) (15,611)
Repayment of notes payable (65,394) (8,944)
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 57,605 46,148
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 48,419 16,984
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,923 5,024
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 63,342 $ 22,008
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
PLANET HOLLYWOOD INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Planet Hollywood International, Inc. have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission.
The information furnished herein reflects all adjustments (consisting
of only normal recurring accruals and adjustments) which are, in the
opinion of management, necessary to fairly state the operating results
for the respective periods. Certain information and footnote
disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The notes to the
condensed consolidated financial statements should be read in
conjunction with the notes to the consolidated financial statements
contained in the April 18, 1996 Form S-1. Company management believes
that the disclosures are sufficient for interim financial reporting
purposes.
2. Stock Offering and Extraordinary Charge
In April 1996, the Company completed an initial public offering of
12,406,452 shares of common stock at an offering price of $18.00 per
share, including 1,618,233 shares from the exercise of the
Underwriters' over allotment option. The Company received net
proceeds of approximately $196.6 million after the payment of
approximately $12.5 million in related underwriting discount and
offering costs.
The Company incurred a one-time extraordinary charge of $10.4 million,
net of $5.9 million in taxes, as a result of the early extinguishment
of the Senior Subordinated Notes.
3. Earnings Per Share
Earnings per share is based on the weighted average number of shares
outstanding during the period increased by common equivalent shares
(stock options) determined using the treasury stock method.
Supplemental pro forma earnings per share gives effect to the
repayment of certain indebtedness by application of a portion of the
net proceeds from the initial public offering, as if the prepayment
had occurred at the beginning of the fiscal year.
<PAGE> 7
4. Acquisitions
The Company acquired the remaining minority interests in All Star
Cafe, Inc. and PH London and the minority interests in the Company's
subsidiaries that operate Planet Hollywood units in Maui, Washington
D.C. and New York. These acquisitions were accounted for using the
purchase method of accounting.
The following unaudited pro forma information has been prepared
assuming that these acquisitions took place at the beginning of fiscal
1996. The unaudited pro forma financial information does not purport
to be indicative of the results of operations had the transaction been
effected on the assumed dates, nor to project results for any future
period:
<TABLE>
<CAPTION>
(dollars in thousands, except per share amounts)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
September 29, 1996 September 29, 1996
--------------------- ------------------------
<S> <C> <C>
Revenues $111,840 $274,231
Income before extraordinary item 19,430 34,342
Net income 19,430 23,921
Earnings per share before extraordinary item $ 0.18 $ 0.32
Earnings per share - net income $ 0.18 $ 0.22
</TABLE>
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Three months ended September 29, 1996 compared to three months ended October 1,
1995
Revenues. Total revenues increased 43.3% from $78.0 million for the
three months ended October 1, 1995 to $111.8 million for the three months ended
September 29, 1996.
Direct revenues increased 32.5% from $77.6 million for the three
months ended October 1, 1995 to $102.8 million for the three months ended
September 29, 1996, due primarily to the opening of nine Company-owned units
after the third quarter of fiscal 1995 with two units opening in the three
months ended September 29, 1996. Direct revenues on a same unit basis (14
units) increased 1.4% from $54.0 million for the three months ended October 1,
1995 to $54.7 million for the three months ended September 29, 1996. As a
percentage of Direct Revenues, merchandise sales for all Company-owned units
decreased from 39.5% for the three months ended October 1, 1995 to 37.9% for
the three months ended September 29, 1996 due primarily to the European
expansion since the third quarter of 1995. Franchise fees were zero for the
three months ended October 1, 1995 and $7.7 million for the period ending
September 29, 1996. Royalties increased from $0.5 million for the three months
ended October 1, 1995 to $1.4 million for the three months ended September 29,
1996, due primarily to the opening of the Official All Star Cafe in Cancun in
the first quarter of 1996 and the opening of eight franchised Planet Hollywood
units after the third quarter of fiscal 1995.
Costs and expenses. Food and beverage costs decreased from 23.7% of
food and beverage revenues for the three months ended October 1, 1995 to 22.8%
for the three months ended September 29, 1996, primarily as a result of
improved buying power and efficiencies from the greater unit base, allowing for
favorable negotiations with suppliers. Merchandise costs decreased from 35.9%
of merchandise revenues for the three months ended October 1, 1995 to 33.7% for
the three months ended October 1, 1996 primarily as a result of improved buying
power and favorable negotiation with suppliers. Operating expenses, which
consist primarily of labor, occupancy and other direct unit operating costs,
increased from 42.2% of Direct Revenues for the three months ended October 1,
1995 to 43.3% for the three months ended September 29, 1996, primarily due to
the effect of the opening of Company-owned units in Europe, which generally
have higher operating costs, since the third quarter of 1995.
General and administrative expenses decreased from $5.9 million for
the three months ended October 1, 1995 to $4.6 million for the three months
ended September 29, 1996, due primarily to substantial legal fees in connection
with a lawsuit settled in the third quarter of 1995. As a percent of total
revenues, general and administrative expenses decreased from 7.5% for the three
months ended October 1, 1995 to 4.1% for the three months ended September 29,
1996, as a result of the larger number of units in operation during the third
quarter of fiscal 1996. Depreciation and amortization increased 26.3% from
$5.4 million for the three months ended October 1, 1995 to $6.9 million for the
three months ended September 29, 1996, due primarily to the larger number of
units in operation during the third quarter of fiscal 1996. As a percent of
total revenues, depreciation and amortization costs were 7.0% for the three
months ended October 1, 1995 and 6.1% for the three months ended September 29,
1996. Equity in income of unconsolidated affiliates increased from $0.5
million for the three months ended
<PAGE> 9
October 1, 1995 to $1.6 million for the three months ended September 29, 1996,
which was attributable to various unit openings by the Company's minority
investments in ECE and PH Asia.
Interest, net. Net interest decreased from $3.6 million of net
interest expense for the three months ended October 1, 1995 to net interest
income of $0.8 million for the three months ended September 29, 1996. As a
result of repayment of Company debt in the second quarter of 1996 with the
proceeds from the IPO, the Company realized net interest income by investing
the excess cash on hand.
Other. Minority interests decreased from $1.1 million for the three
months ended October 1, 1995 to zero for the three months ended September 29,
1996, due to the acquisition by the Company of all minority interests in the
second quarter of 1996. In the third quarter of 1995, the Company realized a
$0.6 million gain on the sale of a portion of its interest in the entity that
owned the Washington D.C. Planet Hollywood unit.
Provision for Income Taxes. The provision for income taxes was $11.2
million for the three months ended September 29, 1996. For the three months
ended October 1, 1995, the Company recorded a provision for income taxes of
only $0.5 million due to a reversal of a portion of the Company's deferred tax
valuation allowance.
Nine months ended September 29, 1996 compared to nine months ended October 1,
1995
Revenues. Total revenues increased 40.2% from $195.6 million for the
nine months ended October 1, 1995 to $274.2 million for the nine months ended
September 29, 1996.
Direct revenues increased 34.9% from $192.8 million for the nine
months ended October 1, 1995 to $260.1 million for the nine months ended
September 29, 1996, due primarily to the opening of nine Company-owned units
after the third quarter of fiscal 1995, which was partially offset by the sale
of the Planet Hollywood unit in Cancun in fiscal 1995. Direct revenues on a
same unit basis (9 units) decreased 2.8% from $79.0 million for the nine months
ended October 1, 1995 to $76.7 million for the nine months ended September 29,
1996. As a percentage of Direct Revenues, merchandise sales for all
Company-owned units decreased from 39.7% for the nine months ended October 1,
1995 to 37.3% for the nine months ended September 29, 1996. Franchise fees
were $10.7 million for the nine months ended September 29, 1996, as compared to
$2.0 million in 1995. Royalties increased from $0.8 million for the nine months
ended October 1, 1995 to $3.5 million for the nine months ended September 29,
1996, due primarily to the opening of the Official All Star Cafe in Cancun in
the first quarter of 1996, the opening of eight franchised Planet Hollywood
units after the third quarter of fiscal 1995 and the sale of the Planet
Hollywood unit in Cancun to a franchisee in fiscal 1995.
Costs and expenses. Food and beverage costs decreased from 23.9% of
food and beverage revenues for the nine months ended October 1, 1995 to 22.7%
for the nine months ended September 29, 1996, primarily as a result of improved
buying power and efficiencies from the greater unit base, allowing for
favorable negotiations with suppliers. Merchandise costs decreased from 35.9%
of
<PAGE> 10
merchandise revenues for the nine months ended October 1, 1995 to 34.3% for the
nine months ended September 29, 1996 primarily as a result of improved buying
power and favorable negotiation with suppliers. Operating expenses, which
consist primarily of labor, occupancy and other direct unit operating costs,
increased from 42.3% of Direct Revenues for the nine months ended October 1,
1995 to 44.0% for the nine months ended September 29, 1996, primarily due to
the effect of the opening of Company-owned units in Europe, which generally
have higher operating costs, since the third quarter of 1995 and the lower
operating costs of the Planet Hollywood unit in Cancun included in the first
and second quarters of 1995.
General and administrative expenses remained flat at $13.8 million for
the nine months ended October 1, 1995 and for the nine months ended September
29, 1996, due primarily to cost-cutting efforts. As a percent of total
revenues, general and administrative expenses decreased from 7.0% for the nine
months ended October 1, 1995 to 5.0% for the nine months ended September 29,
1996, as a result of the larger number of units in operation during the nine
months ended September 29, 1996. Depreciation and amortization increased 33.7%
from $15.5 million for the nine months ended October 1, 1995 to $20.8 million
for the nine months ended September 29, 1996, due primarily to the larger
number of units in operation during the nine months ended September 29, 1996.
As a percent of total revenues, depreciation and amortization costs were 7.9%
for the nine months ended October 1, 1995 and were 7.6% for the nine months
ended September 29, 1996. Equity in income of unconsolidated affiliates
increased from $0.6 million for the nine months ended October 1, 1995 to $3.0
million for the nine months ended September 29, 1996, which was attributable to
the various unit openings by the Company's minority investments in ECE and PH
Asia.
Interest expense, net. Net interest expense decreased from $6.7
million for the nine months ended October 1, 1995 to $3.5 million for the nine
months ended September 29, 1996, as a result of repayment of Company debt in
the second quarter of 1996 with the proceeds from the IPO.
Other. Minority interests decreased from $2.9 million for the nine
months ended October 1, 1995 to $1.0 million for the nine months ended
September 29, 1996, due to the acquisition by the Company of all minority
interests in the second quarter of 1996. In the third quarter of 1995, the
Company realized a $0.6 million gain on the sale of a portion of its interest
in the entity that owned the Washington D.C. Planet Hollywood unit.
Provision for Income Taxes. The provision for income taxes was $19.5
million for the nine months ended September 29, 1996. For the nine months
ended October 1, 1995, the Company recorded a provision for income taxes of
only $0.5 million due to a reversal of a portion of the Company's deferred tax
valuation allowance.
Extraordinary item, net. The Company incurred an extraordinary
charge in the second quarter of 1996 of $10.4 million, net of $5.9 million in
taxes, as a result of the early extinguishment of long-term notes payable.
LIQUIDITY AND CAPITAL RESOURCES.
During the quarter ended June 30, 1996, the Company completed an
initial public offering and received approximately $197.0 million in net
proceeds. The Company used a portion of these
<PAGE> 11
proceeds to pay certain indebtedness of approximately $66.0 million of notes
payable to an affiliate of a director of the Company, $60.0 million of Senior
Subordinated Notes held by institutional investors and notes payable totaling
$4.5 million to the President and Chairman of the Company. The remaining of
such net proceeds will be used for general corporate purposes, including the
development and construction of new units during 1996.
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
Exhibit 27 Financial Data Schedule (FOR SEC USE ONLY)
(B) Reports on Form 8-K
No report on Form 8-K was filed during the period
covered by this report
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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.
PLANET HOLLYWOOD INTERNATIONAL, INC.
(Registrant)
Date: November 12, 1996 By: /s/ ROBERT EARL
----------------------------------
Robert Earl
President and Chief Executive
Officer
Date: November 12, 1996 By: /s/ THOMAS AVALLONE
----------------------------------
Thomas Avallone
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PLANET HOLLYWOOD FOR THE NINE MONTHS ENDED SEPTEMBER 29,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 63,342
<SECURITIES> 0
<RECEIVABLES> 13,329
<ALLOWANCES> 0
<INVENTORY> 15,431
<CURRENT-ASSETS> 115,879
<PP&E> 243,981
<DEPRECIATION> 21,577
<TOTAL-ASSETS> 375,893
<CURRENT-LIABILITIES> 45,271
<BONDS> 0
0
0
<COMMON> 1,057
<OTHER-SE> 295,401
<TOTAL-LIABILITY-AND-EQUITY> 375,893
<SALES> 260,060
<TOTAL-REVENUES> 274,231
<CGS> 70,318
<TOTAL-COSTS> 216,266
<OTHER-EXPENSES> 1,037
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,508
<INCOME-PRETAX> 53,420
<INCOME-TAX> 19,498
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 10,421
<CHANGES> 0
<NET-INCOME> 23,501
<EPS-PRIMARY> .23
<EPS-DILUTED> 0
</TABLE>
