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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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<S> <S>
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM --------------- TO
---------------
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COMMISSION FILE NUMBER 00028230
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PLANET HOLLYWOOD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 59-3283783
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization) Identification No.)
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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 May 9, 1997, there were 97,019,563 shares of the registrant's Common
Stock outstanding.
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PLANET HOLLYWOOD INTERNATIONAL, INC.
INDEX
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<S> <C> <C> <C>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
Condensed Consolidated Balance Sheets -- March 30, 1997 and
December 29, 1996........................................... 3
Condensed Consolidated Statements of Operations -- Thirteen
weeks
ended March 30, 1997 and March 31, 1996..................... 4
Condensed Consolidated Statements of Cash Flows -- Thirteen
weeks
ended March 30, 1997 and March 31, 1996..................... 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and
Results of Operations....................................... 7
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 9
Signature Page.............................................. 10
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2
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
STATED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
MARCH 30, DECEMBER 29,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 24,895 $ 49,831
Accounts receivable....................................... 27,199 22,697
Inventories............................................... 21,029 20,604
Prepaid expenses.......................................... 7,062 5,479
Other current assets...................................... 14,676 15,262
-------- --------
Total current assets.............................. 94,861 113,873
Property and equipment, net................................. 264,060 246,255
Goodwill.................................................... 31,106 25,779
Investment in affiliated entities........................... 13,211 10,013
Other assets, net........................................... 2,772 5,340
-------- --------
$406,010 $401,260
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 40,792 $ 52,576
Notes payable -- current.................................. 746 746
-------- --------
Total current liabilities......................... 41,538 53,322
Deferred rentals............................................ 10,440 10,329
Notes payable and other..................................... 7,405 8,378
Deferred credits............................................ 23,600 17,100
-------- --------
Total liabilities................................. 82,983 89,129
-------- --------
Stockholders' equity:
Common stock -- Class A................................... 960 960
Common stock -- Class B................................... 115 115
Capital in excess of par value............................ 253,180 252,695
Deferred compensation..................................... (475) (525)
Retained earnings......................................... 68,922 58,386
Cumulative currency translation adjustment................ 325 500
-------- --------
Total stockholders' equity........................ 323,027 312,131
-------- --------
$406,010 $401,260
======== ========
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The accompanying notes are an integral part of these financial statements.
3
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS
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<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
MARCH 30, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Revenues.................................................... $101,647 $ 77,025
-------- --------
Costs and expenses:
Cost of sales............................................. 26,685 20,706
Operating expenses........................................ 47,046 35,167
General and administrative expenses....................... 6,274 4,955
Depreciation and amortization............................. 8,346 6,874
-------- --------
88,351 67,702
-------- --------
Income from operations...................................... 13,296 9,323
-------- --------
Non-operating expense (income):
Interest, net............................................. (462) 4,031
Equity in income of unconsolidated affiliates............. (3,100) (748)
Minority interests........................................ -- 764
-------- --------
(3,562) 4,047
-------- --------
Income before income taxes.................................. 16,858 5,276
Provision for income taxes.................................. 6,322 1,926
-------- --------
Net income.................................................. $ 10,536 $ 3,350
======== ========
Earnings per share:
Net income................................................ $ 0.10 $ 0.04
======== ========
Weighted average shares outstanding......................... 109,655 86,814
======== ========
Supplemental pro forma earnings per share(A):
Earnings per share -- net income.......................... $ 0.06
========
Weighted average shares outstanding......................... 101,532
========
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- ---------------
(A) Supplemental pro forma earnings per share gives effect to the prepayment 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.
The accompanying notes are an integral part of these financial statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
STATED IN THOUSANDS OF U.S. DOLLARS
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<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
MARCH 30, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $ 8,881 $ 11,802
-------- --------
Cash flows from investing activities:
Additions to property and equipment....................... (25,585) (17,466)
Purchase of restaurant from franchisee.................... (8,011) --
Other..................................................... (98) --
-------- --------
NET CASH USED IN INVESTING ACTIVITIES....................... (33,694) (17,466)
-------- --------
Cash flows from financing activities:
Change in restricted cash and investments................. -- 69
IPO costs and financing costs capitalized................. -- (1,050)
Deferred financing costs.................................. -- (162)
Repayment of notes payable................................ (123) (40)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES....................... (123) (1,183)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (24,936) (6,847)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 49,831 14,923
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 24,895 $ 8,076
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<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 Company's Form 10-K for the year ended December 29, 1996. Company management
believes that the disclosures are sufficient for interim financial reporting
purposes.
2. STOCK OFFERING
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.
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 1996 fiscal year.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Three months ended March 30, 1997 compared to three months ended March 31,
1996
Revenues. Total revenues increased to $101.6 million for the three months
ended March 30, 1997 from $77.0 million for the three months ended March 31,
1996, an increase of $24.6 million or 31.9%.
Direct revenues increased 31.1% from $75.2 million for the three months
ended March 31, 1996 to $98.6 million for the three months ended March 30, 1997,
due primarily to the opening of fifteen Company-owned units after the first
quarter of fiscal 1996 (including the acquisition of two franchised units), with
two units opening in the three months ended March 30, 1997. Direct revenues on a
same unit basis decreased 1% from $57.9 million for the three months ended March
31, 1996 to $57.3 million for the three months ended March 30, 1997. As a
percentage of Direct Revenues, merchandise sales for all Company-owned units
increased from 36.4% for the three months ended March 31, 1996 to 37.5% for the
three months ended March 30, 1997, due to the continued worldwide awareness of
the brand and the introduction of new merchandise lines which have been
successful. Franchise fees were $1.0 million for the three months ended March
31, 1996 and $1.5 million for the period ending March 30, 1997. Royalties
increased from $.8 million for the three months ended March 31, 1996 to $1.6
million for the three months ended March 30, 1997, due primarily to the opening
of seventeen franchised Planet Hollywood and All Star units after the first
quarter of fiscal 1996.
Costs and expenses. Food and beverage costs decreased from 22.9% of food
and beverage revenues for the three months ended March 31, 1996 to 22.7% for the
three months ended March 30, 1997, primarily as a result of continued improved
buying power and efficiencies from the greater unit base, allowing for favorable
negotiations with suppliers. Merchandise costs decreased from 35.6% of
merchandise revenues for the three months ended March 31, 1996 to 34.4% for the
three months ended March 30, 1997 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 46.8% of Direct Revenues for the three months ended March 31, 1996 to 47.7%
for the three months ended March 30, 1997, primarily due to the effect of the
opening of Company-owned units in Europe, which generally have higher operating
costs, since the first quarter of 1996.
General and administrative expenses increased from $5.0 million for the
three months ended March 31, 1996 to $6.3 million for the three months ended
March 30, 1997, due primarily to the continued expansion of the Corporate
infrastructure. As a percent of total revenues, general and administrative
expenses decreased from 6.4% for the three months ended March 31, 1996 to 6.2%
for the three months ended March 30, 1997, as a result of the larger number of
units in operation during the first quarter of fiscal 1997. Depreciation and
amortization increased 21.4% from $6.9 million for the three months ended March
31, 1996 to $8.3 million for the three months ended March 30, 1997, due
primarily to the larger number of units in operation during the first quarter of
fiscal 1997. As a percent of total revenues, depreciation and amortization costs
were 8.9% for the three months ended March 31, 1996 and 8.2% for the three
months ended March 30, 1997.
Interest, net. For the three months ended March 31, 1996, net interest
expense was $4.0 million. Due to the repayment of Company debt in the second
quarter of 1996 as a result of the initial public offering and the investment of
excess cash, the Company realized net interest income of $.5 million for the
three months ended March 30, 1997.
Equity in Income of Unconsolidated Affiliates. Equity in income of
unconsolidated affiliates increased from $.7 million for the three months ended
March 31, 1996 to $3.1 million for the three months ended March 30, 1997, which
was attributable to numerous unit openings by the Company's minority investments
in ECE and PH Asia, since the first quarter in 1996.
Other. Minority interests decreased from $.8 million for the three months
ended March 31, 1996 to zero for the three months ended March 30, 1997, due to
the Company's acquisition of all minority interests in the second quarter of
1996.
7
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Provision for Income Taxes. The provision for income taxes was $1.9 million
or 36.5% of pretax income for the three months ended March 31, 1996. For the
three months ended March 30, 1997, the Company recorded a provision for income
taxes of $6.3 million or 37.5% of pretax income.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in investing activities in the first quarter of fiscal 1996
and 1997 was $17.5 million and $33.7 million, respectively. The increase was
primarily the result of the Company purchasing a domestic franchised unit during
the first quarter of fiscal 1997. Capital expenditures for the first quarter of
fiscal 1996 and 1997 were $17.5 million and $25.6 million, respectively.
Net cash used in financing activities in the first quarter of fiscal 1996
and 1997 was $1.2 million and $0.2 million, respectively. First quarter fiscal
1996 was greater due to costs incurred related to the April 1996 initial public
offering of the Company's stock.
Net cash provided by operating activities in the first quarter of fiscal
1996 and 1997 was $11.8 million and $8.9 million, respectively. The reduction
mostly relates to greater working capital requirements in the first quarter of
fiscal 1997.
In March 1997, the Company entered into a strategic alliance with a Saudi
Arabian investor which provides for the development of 34 Planet Hollywood
restaurant-merchandise units in 23 countries throughout the Middle East and
Europe. The franchise agreement provided that the investor pay the Company $8.0
million for six sites in April 1997. Additional franchise fees will be payable
under the terms of the franchise agreement. Additionally, in conjunction with
the alliance, the investor agreed to purchase 1% of the Company's total common
stock outstanding directly from the Company for approximately $20.0 million.
These funds were received by the Company in April 1997.
The Company expects that cash on hand, cash generated from operations and
funds available under the Credit Agreement will be sufficient to meet its
capital requirements.
8
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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
9
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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)
By: /s/ ROBERT EARL
-----------------------------------
Robert Earl
President and Chief Executive
Officer
Date: May 13, 1997
By: /s/ THOMAS AVALLONE
-----------------------------------
Thomas Avallone
Chief Financial Officer
Date: May 13, 1997
10
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PLANET HOLLYWOOD FOR THE THREE MONTHS ENDED MARCH 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<CASH> 24,895
<SECURITIES> 0
<RECEIVABLES> 27,199
<ALLOWANCES> 0
<INVENTORY> 21,029
<CURRENT-ASSETS> 94,861
<PP&E> 291,520
<DEPRECIATION> 27,460
<TOTAL-ASSETS> 406,010
<CURRENT-LIABILITIES> 41,538
<BONDS> 0
0
0
<COMMON> 1,075
<OTHER-SE> 321,952
<TOTAL-LIABILITY-AND-EQUITY> 406,010
<SALES> 98,580
<TOTAL-REVENUES> 101,647
<CGS> 26,685
<TOTAL-COSTS> 88,351
<OTHER-EXPENSES> (3,100)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (462)
<INCOME-PRETAX> 16,858
<INCOME-TAX> 6,322
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,536
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
