UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 28, 1998
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 Number)
8669 COMMODITY CIRCLE
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 August 7, 1998, there were approximately 97,221,362 shares of the
registrant's Class A voting Common Stock outstanding and approximately
11,764,144 shares of the registrant's Class B non-voting Common Stock
outstanding.
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
INDEX
Part I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets - June 28, 1998 and
December 28, 1997. . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations -
Thirteen Weeks and Twenty-six Weeks ended June 28, 1998
and June 29, 1997 . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows - Twenty-
six Weeks ended June 28, 1998 and June 29, 1997 . . . . . 5
Consolidated Statements of Changes in
Stockholders' Equity - Twenty-six Weeks ended
June 28, 1998 and December 28, 1997. . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . 9
Part II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders . . . 14
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PLANET HOLLYWOOD INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
STATED IN THOUSANDS OF U.S. DOLLARS
(UNAUDITED)
JUNE 28, DECEMBER 28,
1998 1997
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 123,506 $ 9,089
Accounts receivable, net 23,715 25,084
Inventories 33,648 42,612
Prepaid expenses 7,563 7,082
Other current assets 16,515 17,143
--------- ---------
Total current assets 204,947 101,010
Property and equipment, net 347,770 322,949
Goodwill, net 29,056 29,922
Investment in affiliated entities 42,870 40,404
Other assets, net 26,014 11,274
--------- ---------
$ 650,657 $ 505,559
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 35,100 $ 69,315
Notes payable - current 1,264 1,264
--------- ---------
Total current liabilities 36,364 70,579
Deferred rentals 11,133 10,798
Notes payable and other 257,385 70,491
Deferred credits 6,496 15,150
--------- ---------
Total liabilities 311,378 167,018
Stockholders' equity:
Common stock - Class A 974 972
Common stock - Class B 118 118
Capital in excess of par value 281,906 279,372
Deferred compensation (3,925) (4,125)
Retained earnings 66,134 66,644
Accumulated other comprehensive income (5,928) (4,440)
--------- ---------
Total stockholders' equity 339,279 338,541
--------- ---------
$ 650,657 $ 505,559
========= =========
The accompanying notes are an integral part
of these condensed financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PLANET HOLLYWOOD INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------- -----------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 105,112 $ 121,892 $ 201,644 $ 223,539
Costs and expenses:
Cost of sales 25,328 31,892 48,957 58,578
Operating expenses 57,973 51,987 112,646 99,033
General and adminstrative expenses 9,931 6,387 18,300 12,661
Depreciation and amortization 8,670 8,476 17,318 16,822
--------- --------- --------- ---------
101,902 98,742 197,221 187,094
Income from operations 3,210 23,150 4,423 36,445
Non-operating expense (income):
Interest expense 6,888 -- 7,304 --
Interest income (1,332) (559) (1,561) (1,021)
Equity in income of unconsolidated affiliates (100) (2,350) (505) (5,450)
--------- --------- --------- ---------
Income (loss) before income taxes (2,246) 26,059 (815) 42,916
Provision for income taxes (842) 9,772 (305) 16,094
--------- --------- --------- ---------
Net income (loss) ($1,404) $ 16,287 ($ 510) $ 26,822
========= ========= ========= =========
Earnings per share:
BASIC ($0.01) $ 0.15 $ 0.00 $ 0.25
========= ========= ========= =========
DILUTED ($0.01) $ 0.15 $ 0.00 $ 0.25
========= ========= ========= =========
BASIC Weighted Average Shares 109,089 108,494 109,056 108,095
========= ========= ========= =========
DILUTED Weighted Average Shares 109,692 109,884 109,787 109,409
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
4
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
STATED IN THOUSANDS OF U.S. DOLLARS
TWENTY-SIX WEEKS ENDED
JUNE 28, JUNE 29,
1998 1997
---------- ----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ($ 20,926) $ 24,391
Cash flows from investing activities:
Additions to property and equipment (39,384) (57,172)
Purchase of restaurant from franchisee (2,635) (8,011)
Sale of joint venture interests 2,250 --
Investment in affiliate (461) (6,378)
Other (767) (346)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (40,997) (71,907)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 19,566
Proceeds from issuance of notes payable 250,000 20,000
Exercise of stock options 61 --
Deferred financing costs (10,455) --
Repayment of notes payable (63,106) (453)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 176,500 39,113
--------- ---------
EFFECT OF EXCHANGE RATES ON CASH (160) (1,012)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 114,417 (9,415)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,089 49,831
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 123,506 $ 40,416
========= =========
The accompanying notes are an integral part
of these condensed financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(000'S OMITTED)
COMMON STOCK COMMON STOCK
----------------------- ----------------------
CLASS A CLASS B
SHARES AMOUNT SHARES AMOUNT
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Balance at December 29, 1996 95,973 $ 960 11,547 $ 115
Net income
Other comprehensive income:
Currency translation
adjustment
Comprehensive income
Celebrity restricted stock
options and awards
Stock issuance 1,087 11
Employee restricted stock awards
-------- -------- ------- --------
Balance at June 29, 1997 97,060 $ 971 11,547 $ 115
======== ======== ======= ========
Balance at December 28, 1997 97,128 $ 972 11,765 $ 118
Net loss
Other comprehensive income:
Currency translation
adjustment
Comprehensive income
Stock issuance 190 2
Celebrity restricted stock
options and awards
Exercise of stock options 8
Employee restricted stock awards
-------- -------- ------- --------
Balance at June 28, 1998 97,326 $ 974 11,765 $ 118
======== ======== ======= ========
</TABLE>
RESTUBBED FROM ABOVE TABLE
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL IN COMPREHENSIVE OTHER TOTAL
EXCESS OF INCOME RETAINED DEFERRED COMPREHENSIVE STOCKHOLDERS'
PAR VALUE EARNINGS COMPENSATION INCOME EQUITY
---------- ------------ -------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 $252,695 $ 58,386 $ (525) $ 500 $312,131
Net income $ 26,822 26,822 26,822
Other comprehensive income:
Currency translation
adjustment (521) (521) (521)
--------
Comprehensive income $ 26,301
--------
Celebrity restricted stock
options and awards 1,013 1,013
Stock issuance 19,555 19,566
Employee restricted stock awards 100 100
-------- -------- -------- -------- --------
Balance at June 29, 1997 $273,263 $ 85,208 $ (425) $ (21) $359,111
======== ======== ======== ======== ========
Balance at December 28, 1997 $279,372 $ 66,644 $ (4,125) $ (4,440) $338,541
Net loss $ (510) (510) (510)
Other comprehensive income:
Currency translation
adjustment (1,488) (1,488) (1,488)
--------
Comprehensive income $ (1,998)
--------
Stock issuance 1,198 1,200
Celebrity restricted stock
options and awards 1,275 100 1,375
Exercise of stock options 61 61
Employee restricted stock awards 100 100
-------- -------- -------- -------- --------
Balance at June 28, 1998 $281,906 $ 66,134 $ (3,925) $ (5,928) $339,279
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
6
<PAGE>
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. (the "Company") 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 28, 1997.
The results for interim periods are not necessarily indicative of trends or
results to be expected for a full year. Certain prior amounts in the
accompanying condensed consolidated financial statements have been reclassified
to conform with current year presentation.
2. RELATED PARTY TRANSACTIONS
In May 1998, the Company canceled the franchise and acquired the Planet
Hollywood restaurant in Zurich, Switzerland for $2.9 million. In June 1998, the
Company entered into a joint venture with a stockholder/franchisee in which the
Company contributed the Zurich Planet Hollywood restaurant and received $2.5
million from the stockholder/franchisee in return for a 50% joint venture
interest. A gain of approximately $1.0 million was recorded in second quarter
1998.
In second quarter 1998, the Company entered into two additional joint
ventures with a stockholder/franchisee for a Planet Hollywood unit in Tokyo,
Japan and an Official All Star Cafe unit in London, England. The Company sold
50% interests in each of these units and recorded a gain in second quarter 1998
of approximately $2.8 million.
3. LONG TERM DEBT
On March 25, 1998 the Company issued $250.0 million of 12% Senior
Subordinated Notes (the "Notes") due in 2005. Interest on the Notes is payable
semi-annually in arrears on April 1 and October 1 of each year, commencing on
October 1, 1998. The Notes agreements contain certain covenants which, among
other things, limit (i) the issuance of additional debt and stock by the
Company, (ii) the payment of dividends, and (iii) the sale of assets.
Concurrent with the Notes offering, the Company replaced its existing
$155.0 million credit facility with a $65.0 million multi-currency revolving
credit facility and a $35.0 million LIBOR-based leveraged lease facility. The
credit agreement fees include an annual facility fee on the utilized revolving
credit and a commitment fee on the unused revolving credit. Interest rates are
variable, with either prime or LIBOR indexes. The credit agreement also provides
for the issuance of up to $10.0 million of letters of credit and up to $25.0
million of multi-currency advances. The revolving credit facility matures on
March 25, 2000 provided, however, that the Company may extend the maturity date
to March 25, 2001 if it meets certain financial criteria set forth in the credit
agreement.
4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings Per
Share," which requires presentation of basic and diluted earnings per share.
Basic earnings per share is computed by dividing income
7
<PAGE>
available to common shareholders by the weighted average number of common shares
outstanding for the reporting period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. As required, the
Company adopted the provisions of SFAS No. 128 in the fourth quarter of fiscal
1997. All prior year weighted average and per share information has been
restated in accordance with SFAS No. 128. Outstanding stock options issued by
the Company represent the only dilutive effect reflected in diluted weighted
average shares.
5. NEW ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting Standards No. 130
("SFAS No. 130"), "Reporting Comprehensive Income," which establishes standards
for the reporting and displaying of comprehensive income and its components. All
items required to be recognized as components of comprehensive income must be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 130 became effective for financial
statements with fiscal years beginning after December 15, 1997. All prior period
information presented has been restated to conform to this pronouncement. The
Company's other comprehensive income consists solely of currency translation
adjustments.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants adopted a Statement of Position (SOP)
entitled "Reporting on the Cost of Start-Up Activities" (the "SOP"). The SOP,
which is effective for fiscal 1999, requires pre-opening costs to be expensed as
incurred. All costs capitalized at the date the SOP is adopted by the Company
will be charged to income as a cumulative effect of a change in accounting
principle. Restatement of previously issued financial statements is not
permitted. Had the SOP been adopted at the beginning of fiscal 1998, income
before the cumulative effect of the change in accounting for the first and
second quarter of fiscal 1998 would have been approximately $0.7 million, net of
tax. The cumulative effect of the change in accounting as of the beginning of
the first quarter of fiscal 1998 would have been a charge of approximately $5.0
million, net of tax. The Company is currently evaluating the timing of the
adoption of the SOP. Total deferred pre-opening costs at June 28, 1998 were
approximately $6.0 million.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
the Company's Condensed Consolidated Financial Statements and Notes thereto
included elsewhere in this Form 10-Q. All statements contained herein that are
not historical facts including, but not limited to, statements regarding the
Company's current business strategy, the Company's projected sources and uses of
cash, and the Company's plans for future development and operations, are based
upon current expectations. Such statements are forward-looking in nature and
involve a number of risks and uncertainties. Consequently, actual results may
differ materially from the forward-looking statements. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plans on
terms satisfactory to the Company; the impact of competitive products and
pricing; changes in labor, equipment, food and capital costs; changes in, or the
failure to comply with, regulations affecting the Company's business; future
acquisitions or strategic partnerships; the availability, locations and terms of
sites for development; the timing and costs associated with new location
openings; acceptance of new guests of the Company's brands and concepts as the
Company continues to expand into new brands and/or regions; success of the
Company's franchisees and licensees and the manner in which they promote,
operate and develop the Company's brands; general business and economic
conditions; and factors described from time to time in the Company's reports
filed with the Securities and Exchange Commission. The Company cautions readers
not to place undue reliance on any such forward-looking statements, which
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED JUNE 28, 1998 COMPARED TO THIRTEEN WEEKS ENDED
JUNE 29, 1997
REVENUES. Total revenues decreased to $105.1 million for the thirteen weeks
ended June 28, 1998 ("second quarter 1998") from $121.9 million for the thirteen
weeks ended June 29, 1997 ("second quarter 1997"), a decrease of $16.8 million
or 13.7%. The decrease in total revenues was primarily attributable to continued
declines in same unit revenues and a decrease in promotional and specialty
retail sales.
Direct revenues decreased 19.3% from $118 million for second quarter 1997
to $95.2 million for second quarter 1998. Same unit revenues decreased 17% from
second quarter 1997 to second quarter 1998 (same unit revenues exclude
promotional and specialty retail sales). The decline in same unit revenues was
primarily due to (i) declines in customer traffic attributable principally to
increased competition in the theme-dining sector, (ii) lower average spends in
the restaurants due to reduced liquor sales, and (iii) lower retail average
spends due to product promotions, the absence of a Spring product introduction
as part of the Company's inventory reduction initiatives and the inclusion of
secondary market units in the same store revenue base. Secondary market units
typically generate lower merchandise mixes than those in major tourist markets
and have generally experienced declines in merchandise revenues as more of their
customer base is comprised of local residents. In the near term, the Company
anticipates continued declines in same unit revenues as a result of decreased
customer traffic, and the inclusion of additional secondary market units in
9
<PAGE>
the comparable store base. The decline in revenues was partially offset by
the opening of 13 Company-owned units subsequent to June 29, 1997, including the
two units opened at the end of second quarter 1998. As a percentage of direct
revenues, merchandise sales decreased from 37.7% for second quarter 1997 to
30.5% for second quarter 1998. The decline in merchandise sales is primarily
attributable to the absence of significant promotional and specialty retail
sales in the second quarter of 1998, with the balance of the decline due to the
Company's continued expansion into secondary markets and the expansion of the
Official All Star Cafe concept, which has a lower merchandise sales mix than
Planet Hollywood units.
Franchise fees were $2.0 million for second quarter 1997 compared to $3.0
million for second quarter 1998. The Company recognized revenue for two
franchise units in second quarter 1998 compared to one franchise unit in second
quarter 1997. In second quarter 1998, the Company entered into joint venture
franchise agreements with a stockholder/franchisee whereby the Company sold 50%
interests in three franchised units realizing gains of $3.8 million. Royalties
and other revenues also increased due to additional franchised units and other
licensing agreements entered into by the Company.
COSTS AND EXPENSES. Food and beverage costs increased from 22.3% of food
and beverage revenues in second quarter 1997 to 23.4% in second quarter 1998.
This increase was mainly a result of a decline in higher margin liquor sales as
a percentage of total sales and a decline in vendor rebates from second quarter
1997. Merchandise costs decreased from 34.8% of merchandise revenues in second
quarter 1997 to 33.9% in second quarter 1998 primarily as a result of shifts in
sales composition. Operating expenses, which consist primarily of labor,
occupancy and other direct unit operating costs, increased from 44.1% of direct
revenues in second quarter 1997 to 60.9% in second quarter 1998 principally due
to relatively fixed unit operating costs in relation to lower sales volumes and
increased labor and public relations costs associated with the Company's current
initiatives. These initiatives include increased celebrity appearances at the
units, sponsorship of major events in cities with restaurants and improvement of
service in order to enhance the overall guest experience.
General and administrative expenses increased from $6.4 million in second
quarter 1997 to $9.9 million in second quarter 1998, due primarily to the
expansion of the Company's corporate infrastructure to support unit growth and
joint venture initiatives and increased public relations expenditures associated
with the Company's continued efforts to promote brand awareness, enhance the
guest experience and increase celebrity involvement. As a percent of total
revenues, general and administrative expenses increased from 5.2% in second
quarter 1997 to 9.4% in second quarter 1998.
INTEREST EXPENSE. Interest expense for second quarter 1998 increased to
$6.9 million as a result of the Company's $250.0 million debt offering in March
1998.
INTEREST INCOME. Interest income increased from $0.6 million in second
quarter 1997 to $1.3 million in second quarter 1998. The increase was due to the
investment of funds received from the Company's debt offering in March 1998.
EQUITY IN INCOME OF UNCONSOLIDATED AFFILIATES. Equity in income of
unconsolidated affiliates decreased from $2.4 million in second quarter 1997 to
$0.1 million in second quarter 1998. The decline was the result of the absence
of franchise sales by Planet Hollywood (Asia) Pte. Ltd. ("PH Asia"), an entity
which is 50% owned by the Company, in second quarter 1998 and a decrease in
revenue for PH Asia due to downturns in tourism and the related economic
uncertainties
10
<PAGE>
throughout Asia.
PROVISION FOR INCOME TAXES. The provision for income taxes was $9.8 million
or 37.5% of pretax income in second quarter 1997. In second quarter 1998, the
Company recorded an income tax benefit of ($0.8 million) or 37.5% of pretax
losses.
TWENTY-SIX WEEKS ENDED JUNE 28, 1998 COMPARED TO TWENTY-SIX WEEKS ENDED
JUNE 29, 1997
REVENUES. Total revenues decreased to $201.6 million for the twenty-six
weeks ended June 28, 1998 from $223.5 million for the twenty-six weeks ended
June 29, 1997, a decrease of $21.9 million or 9.7%. The decrease in total
revenues was principally attributable to continued declines in same unit
revenues and a decrease in promotional and specialty retail sales.
Direct revenues decreased 14.5% from $216.6 million for the twenty-six
weeks ended June 29, 1997 to $185.1 million for the twenty-six weeks ended June
28, 1998. Same unit revenues decreased 16% for the twenty-six weeks ended June
29, 1997 as compared to the twenty-six weeks ended June 28, 1998 (same unit
revenues exclude promotional and specialty retail sales). The decline in same
unit revenues was primarily due to (i) declines in customer traffic attributable
principally to increased competition in the theme-dining sector, (ii) lower
average spends in the restaurants due to reduced liquor sales, and (iii) lower
retail average spends due to product promotions, the absence of a Spring product
introduction as part of the Company's inventory reduction initiatives and the
inclusion of secondary market units in the same store revenue base. Secondary
market units typically generate lower merchandise mixes than those in major
tourist markets and have generally experienced declines in merchandise revenues
as more of their customer base is comprised of local residents. In the near
term, the Company anticipates continued declines in same unit revenues as a
result of decreased customer traffic, and the inclusion of additional secondary
market units in the comparable store base. The decline in revenues was partially
offset by the opening of 13 Company-owned units subsequent to June 29, 1997,
including the two units opened at the end of second quarter 1998. As a
percentage of direct revenues, merchandise sales decreased from 37.6% for the
twenty-six weeks ended June 29, 1997 to 30.5% for the twenty-six weeks ended
June 28, 1998 due to the decline of significant promotional and specialty retail
sales in second quarter 1998, with the balance of the decline due to the
Company's expansion into secondary markets and the expansion of the Official All
Star Cafe concept which has a lower merchandise sales mix than Planet Hollywood
units.
Franchise fees were $3.5 million for the twenty-six weeks ended June 29,
1997 compared to $8.0 million for the twenty-six weeks ended June 28, 1998. The
Company recognized revenue for seven franchise units for the twenty-six weeks
ended June 28, 1998 compared to two franchise units for the twenty-six weeks
ended June 29, 1997. In second quarter 1998, the Company also entered into
joint venture franchise agreements with a stockholder/franchisee whereby the
Company sold 50% interests in three franchised units realizing gains of $3.8
million. Royalty and other revenues also increased due to additional franchised
units and licensing agreements entered into by the Company.
COSTS AND EXPENSES. Food and beverage costs increased from 22.5% of food
and beverage revenues for the twenty-six weeks ended June 29, 1997 to 22.8% for
the twenty-six weeks ended June 28, 1998. Merchandise costs increased from 34.6%
of merchandise revenues for the twenty-six
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weeks ended June 29, 1997 to 34.7% for the twenty-six weeks ended June 28, 1998.
Operating expenses, which consist primarily of labor, occupancy and other direct
unit operating costs, increased from 45.7% of direct revenues for the twenty-six
weeks ended June 29, 1997 to 60.8% for the twenty-six weeks ended June 28, 1998
primarily due to relatively fixed unit operating costs in relation to lower
sales volumes and increased labor and public relations costs associated with the
Company's current initiatives. These initiatives include increased celebrity
appearances at the units, sponsorship of major events in cities with restaurants
and improvement of service in order to enhance the overall guest experience.
General and administrative expenses increased from $12.7 million for the
twenty-six weeks ended June 29, 1997 to $18.3 million for the twenty-six weeks
ended June 28, 1998, due primarily to the expansion of the Corporate
infrastructure to support unit growth and joint venture initiatives and
increased public relations expenditures associated with the Company's continued
efforts to promote brand awareness and enhance the guest experience and increase
celebrity involvement. As a percent of total revenues, general and
administrative expenses increased from 5.7% in 1997 to 9.1% in 1998.
INTEREST EXPENSE. Interest expense for the twenty-six weeks ended June 28,
1998 increased to $7.3 million as a result of the Company's $250.0 million debt
offering in March 1998.
INTEREST INCOME. Interest income increased from $1.0 million for the
twenty-six weeks ended June 29, 1997 to $1.6 million for the twenty-six weeks
ended June 28, 1998. The increase was attributable to the investment of funds
received from the Company's debt offering in March 1998.
EQUITY IN INCOME OF UNCONSOLIDATED AFFILIATES. Equity in income of
unconsolidated affiliates decreased from $5.5 million for the twenty-six weeks
ended June 29, 1997 to $0.5 million for the twenty-six weeks ended June 28,
1998. The decline was principally caused by the sale of a franchise by PH Asia
through the second quarter 1997 and the absence of any such sales through the
second quarter 1998 and a decrease in revenue for PH Asia resulting from
downturns in tourism and the related economic uncertainties throughout Asia.
PROVISION FOR INCOME TAXES. The provision for income taxes was $16.1
million or 37.5% of pretax income for the twenty-six weeks ended June 29, 1997.
For the twenty-six weeks ended June 28, 1998, the Company recorded an income
tax benefit of ($0.3 million) or 37.5% of pretax losses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used in) operating activities for the twenty-six
weeks ended June 29, 1997 and June 28, 1998 was $24.4 million and ($20.9
million), respectively. This decrease was primarily due to a decline in net
income and a reduction of trade payables.
Net cash used in investing activities for the twenty-six weeks ended June
29, 1997 and June 28, 1998 was $71.9 million and $41.0 million, respectively.
The decrease was primarily the result of fewer unit openings in 1998. Capital
expenditures for the twenty-six weeks ended June 29, 1997 and June 28, 1998 were
$57.2 million and $39.4 million, respectively.
Net cash provided from financing activities for the twenty-six weeks ended
June 29, 1997 and June 28, 1998 was $39.1 million and $176.5 million,
respectively. The increase was due to the Company's issuance of $250.0 million
of Senior Subordinated Notes in March 1998 (the "Notes"). A portion of the net
proceeds from the Notes was used to repay borrowings under the Company's
12
<PAGE>
credit facility with the remainder expected to be used for capital expenditures
associated with the construction of Company-owned restaurants and the Company's
required capital contributions to its joint venture projects.
Concurrent with the Notes offering, the Company replaced its existing
$155.0 million revolving credit facility with a $100.0 million multi-currency
long-term credit facility. The Company expects cash on hand, cash generated
from operations and funds available under the new credit facility to be
sufficient to meet its anticipated capital requirements for the next twelve
months.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 22, 1998, in New
York, New York. At this meeting, Michael Montague was elected as a director and
Claudio Gonzalez and Ong Beng Seng were re-elected as directors of the Company
to serve three-year terms or until their successors are duly elected and
qualified. The voting was as follows:
Election of directors: AGAINST OR
WITHHOLD
FOR AUTHORITY
Claudio Gonzalez.............................. 76,989,222 193,179
Ong Beng Seng................................. 76,991,853 190,548
Michael Montague.............................. 76,989,541 192,860
ITEM 5. OTHER INFORMATION
The Securities and Exchange Commission recently amended its stockholder
proposal rules. Accordingly, the deadline for stockholder proposals, which are
submitted outside the processes of Rule 14a-8 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), will be March 23, 1999, pursuant to
Rule 14a-4 of the Exchange Act and the Company's By-Laws.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for
which this report is filed.
14
<PAGE>
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.
DATE: August 11, 1998 By: /s/ ROBERT EARL
-------------------------
Name: Robert Earl
Its: Chief Executive Officer
DATE: August 11, 1998 By: /s/ THOMAS AVALLONE
-------------------------
Name: Thomas Avallone
Its: Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF PLANET
HOLLYWOOD INTERNATIONAL, INC. FOR THE TWENTY-SIX WEEKS ENDED JUNE 28, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> DEC-29-1997
<PERIOD-END> JUN-28-1998
<CASH> 123,506
<SECURITIES> 0
<RECEIVABLES> 25,215
<ALLOWANCES> 1,500
<INVENTORY> 33,648
<CURRENT-ASSETS> 204,947
<PP&E> 396,329
<DEPRECIATION> 48,559
<TOTAL-ASSETS> 650,657
<CURRENT-LIABILITIES> 36,365
<BONDS> 0
0
0
<COMMON> 1,092
<OTHER-SE> 338,186
<TOTAL-LIABILITY-AND-EQUITY> 650,657
<SALES> 185,140
<TOTAL-REVENUES> 201,644
<CGS> 48,957
<TOTAL-COSTS> 197,222
<OTHER-EXPENSES> (2,066)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,304
<INCOME-PRETAX> (816)
<INCOME-TAX> (306)
<INCOME-CONTINUING> (510)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (510)
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00
<FN>
<F1>DENOTES BASIC EPS
</FN>
</TABLE>
